BUAD 307—MARKETING FUNDAMENTALS

MARKETING OVERVIEW
BUAD 307 MARKETING OVERVIEW Perner 2
 Available on the
“Exams” page of the
course web site.

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Learning Objectives

• Identifying
– The scope and basic objectives of the
marketing function
– Customer value
– Obstacles to delivering the value to
the customer
– Benefits of and opportunities for
relationship marketing

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Usage and Reach of Marketing

• Who markets? • Who buys?

– Businesses – Ultimate consumers
– Government units – Organizational buyers
– Non-profit and • For internal use
cause related • For resale
organizations (wholesalers,
retailers)
• What is • Manufacturers
marketed? (components)
– “Offerings” may • Customer benefits?
come in the forms of – Utility
• Goods
• Services • Consumption
• Ideas • Convenience

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 2013 American Marketing Association
(AMA) Definition

Marketing: “The (1) activity, (2) set of

institutions, and (3) processes for (4)
creating, (5) capturing, (6)
communicating, (7) delivering, (8) and
exchanging (9) offerings that have (10)
value for (11) customers, (12) clients,
(13) partners, and (14) society at no t
n
io the
large.” (Numbering added.) i t
e fin for
D de d !
nee exam
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 ACTIVITY INSTITUTIONS PROCESSES

MARKETING

CREATION COMMUNICATION DELIVERY EXCHANGE

CUSTOMERS

VALUE CLIENTS
OFFERINGS

PARTNERS

SOCIETY
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Marketing As an Exchange

• Each side receives something more valuable than what it

gave up  “win-win” deal and customer value
– In a free market, for a deal to take place, both sides should prefer
the trade.
• Part of the value may be assurance of continued quality
over time (value of the brand)
• In principle, money does not have to be exchanged.
– For goods and services, this is usually the most convenient way of
trade.
– For ideas, there may be no monetary exchange as such. E.g.,
• Voting for a candidate
• Engaging in recycling

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Creating, Communicating, and Capturing
Customer Value
AVAILABILITY EASE OF USE
DELIVERY:
DISTRIBUTION,
EXECUTION OF
SERVICES UTILITY CONVENIENCE

OFFERINGS: COMMUNICATION
VALUE: EXCHAGE
PRODUCTS,
CUSTOMER
SERVICES, AND BENEFITS
IDEAS
CAPTURE
SECURITY EFFECTIVENESS BY SELLER
CREATION:
RESEARCH, DESIGN,
MANUFACTURING
PLEASURE
MONEY,
BEHAVIOR
Exact model is NOT needed for exam!
FROM BUYER
Please focus on the general ideas.
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Customer Benefits and Value

IS THE CUSTOMER
CUSTOMER BENEFIT RECEIVED
BENEFIT GREATER THAN THE
SACRIFICE (COST)?

YES
NO

POTENTIAL
POOR VALUE GOOD VALUE

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Products vs. Solutions
NETFLIX STARTED
ABILITY TO WATCH
OUT SHIPPING DVDs
MOVIES
TO CUSTOMERS

ORIGINAL ACTUAL
PRACTIVE OF
PRODUCT CUSTOMER
CUSTOMER
OFFERING BENEFIT
RATINGS
BROUGHT

NOW MOST MOVIES

RECOMMENDATION
ARE OFFERED
DATA BASE
THROUGH
STREAMING
EXISTING CUSTOMER
BENEFIT BROUGHT ALONG ENHANCED WAY OF
TO NEW FORM PROVIDING THE CUSTOMER
(COMPETITIVE ADVANTAGE) BENEFIT
(SOLUTION)
You will NOT be asked to reproduce this
specific model on the exam!

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Myth vs. Reality
• Imitating successful competitors is usually NOT an
effective strategy
• Selling things online is usually MORE expensive than
selling through conventional retailers
– Products with high value-to-bulk ratio and high absolute (dollar)
margins tend to be better suited for online sale
• Having a great product does NOT necessarily mean you
will be successful—you also need
– Awareness by customers (that the product exists and what it
does)
– Access to distribution (conveniently located retailers and/or
conveniently accessible online ordering)

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Sources of Profitability for Amazon

• Electronic content (e-books, e-periodicals,

music, online video content)
• Brokering of used merchandise (e.g.,
books, CDs, DVDs) sold by consumers to
other consumers
• Server services (e.g., hosting web sites)
• Data processing services (e.g., assessing
and disbursing sales tax for other online
merchants)
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Communicating value to customers

• Customers must know that the product exists

– Awareness through advertising requires a very
elaborate, lengthy, and expensive campaign
– Social media and “guerilla” marketing
– Exposure through retail setting
• Retailers must carry the product—for every new one they take on,
they generally must sacrifice an existing one
• Even if carried, a product may “drown” among the “sea” of other
products
– For some products, the customer must see what the
product actually does in order to recognize value (e.g.,
a Pillow Pet is not just “another stuffed animal.”

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Delivering value to the customer in a convenient
and cost effective manner
• Brick-and-mortar stores
– Existing stores must generally drop an existing product to make room for a new
one (and retailers may have relationships with existing brands)
– Some stores—e.g., convenience stores—have room for few brands in each
category. Stores in many foreign countries are smaller than typical U.S. stores
– The customer must be able to find the product
• Online
– Delivery to customer must be cost effective
– The customer must know where to order (easier if carried at major sites such as
Amazon)
– The product must be findable at the site
• Showing up in customer search
– Specific brand (requires awareness)
– General category
• Featured product
• Suggested--e.g.,
– “Customers who bought this also bought…”
– Individualized recommendation based on prior purchases

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Relationship Marketing
• Selling (selling existing products
with whatever methods are
necessary) vs. marketing
orientation (serving customer
needs whether in current or new
forms)
• Maintaining a relationship with
the customer over time rather
than just focusing on immediate
sales
– Anticipating customer needs
– Providing solutions
– Investing in products and services
optimized for the customer

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BUAD 307 MARKETING OVERVIEW Perner 17
Value

• Benefits—perceived by the • Sacrifices—examples

customer (may not be
– Money
objectively accurate)
– Time
– Convenience
– Risk
• In delivery
• In usage
– Reliability
– Durability
– Performance
– Style/aesthetics
– Prestige
– Service component

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Value: Recap

• A low quality, low price

product represents poor
value for many customers
• A very high benefit product
at a high price can represent
value for some segments
• Customer segments differ in
what they find valuable

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BUAD 307—MARKETING FUNDAMENTALS

MARKETING
STRATEGY
 Learning Objectives
• Identify
– Identify firm and/or market
business models
– Organizational missions
– The scope of strategic
decisions
– Tradeoffs that firms must
make in their decisions
– Cumulative and “spill-over”
effects of strategic decisions
and the need for consistency
– The need for industry balance
and firm unit cash flow
balance

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Business Model

• A representation of how a firm intends to

achieve desired objectives (usually
eventual profitability) over time
– E.g., “freemium” products: Some customers get the
basic product for free as a means of developing
awareness and preference; money is made directly
only on those customers who buy a more advanced
version
– E.g., ride sharing (Uber and Lyft): A commission is
earned as the firm creates value by connecting
customers and service providers

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Organizational Mission
• Brief statement of the “big picture” of what the
organization exists to do
– E.g., for Apple, to produce elegant, user
friendly consumer technology
• Focus on enduring strategy and contributions
over time rather than on specific products at
specific times
• Subject to reconsideration over time technology,
values, competitors, and customer needs change
over time

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 Strategy
• Plan
– To achieve desired
objectives (e.g., profit,
market share)
– Based on available
resources (e.g., financial,
patents, trademarks,
people, brand name/
image , distribution
channels)
– Subject to choices made
(e.g., willingness to take
risk, short run vs. long run
goals)

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 MARKETING STRATEGY

RESOURCES ENVIRONMENT

STRATEGY

PRIORITIES/
EXPERIMENTATION/ OPPORTUNITY
EXPRIENCE COSTS

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 Market Balance

• Different firms A WELL BALANCED

should attempt to GADGET INDUSTRY
offer different
forms of value, EASYTECH, LTD.
appealing to EASE OF
different USE
customer
segments— TROJAN CREATIONS, BRUIN PRIDE, INC.

otherwise, INC. LOW

PERFORMANCE PRICE
competition is
likely to
degenerate into MICROGEEKS, LTD. PATIENCE-IS-STUPID,
SMALL INC.
price competition SPEED
SIZE

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Core Competencies

• Broad, fundamental capabilities—not

readily imitated by competitors— in which
an organization excels
• Deployable across a variety of products
and situations
– E.g., stylish design of electronics (Apple)
– E.g., economies of scale and broad assortment
of online and supermarket merchandise
(Amazon)

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Strategic Objectives

• Desired (1) outcomes (2) to

be achieved within a given
time period
• Will vary between firms
based on differences in
mission and readiness to
tackle particular challenges
(e.g., awareness of a brand is
needed before an
improvement in image can
be pursued)

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 Examples of Objectives
• Profit level • Percentage of products sold
• Profit growth at full price
• Total unit sales • Percentage of revenue from
• Growth in unit sales new products
• Growth in dollar sales • Affordability of product
• Total dollar sales • Elimination of unsafe
• Brand perception by product ingredients
customers
– Value
– Quality
– Innovativeness
– Reliability
• Brand name
recognition
• Brand name
recognition by product
category
• For the exam, you should be able to identify
Product availability
– Availability across examples of objectives as such—i.e., something
retailers and that the firm sets out to accomplish, usually within
other distributors a certain time frame. You do NOT need to
– Store placement memorize this list!

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Notes on Objectives
• Certain objectives must be accomplished (e.g., brand
awareness, distribution coverage) before others can be
effectively attempted (e.g., profit level)
• Although a certain level of profit would be an objective
for most firms, many firms may not be able to focus on
this until they have addressed prerequisite objectives
(e.g., brand awareness, sales volumes, perceived brand
quality)
• Objectives are usually sought over a specified time period
(e.g., next quarter, year, or ten year period)
– Plan can specify the amount of time designated for
various stages of objectives
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 An Example of Objectives Over Time
PAID STORE IN-STORE
ADVERTISING PLACEMENT DEMONSTRATIONS

ABILITY TO CHARGE
BRAND PREMIUM PRICE
AWARENESS
WIDER
DISTRIBUTION INCREASED
QUALITY VOLUME
SALES

RESEARCH & INCREASED

DEVELOPMENT PROFITS

INPUTS OBJECTIVES
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Strengths, Weaknesses, Opportunities, and Threats
(SWOT) Analysis

STRENGTHS
INTERNAL
TO FIRM
WEAKNESSES STRATEGY

OPPORTUNITIES Note that merely listing each

factor has limited use. We need to
analyze:
EXTERNAL • How to take advantage of strengths
TO FIRM and opportunities

THREATS • How to address weaknesses and

threats
• How to use strengths and
opportunities to counter weaknesses
and threats

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Compensating for Weaknesses
and Threats
WEAKNESSES
STRENGTHS
Direct effect of
weaknesses
Direct effect of strengths
and opportunities OPPORTUNITIES
Using strengths and oppor-
tunities to compensate for
weaknesses

PERFORMANCE

STRENGTHS

THREATS OPPORTUNITIES
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SWOT

• Deciding where to concentrate resources

• Taking advantage of strengths and
opportunities
• Addressing weaknesses and threats
• Using strengths and opportunities to
compensate for weaknesses and threats

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 SWOT—Apple
• Strengths • Opportunities
– Some vertical integration—content and – ApplePay
devices – Wearable devices
– Market leading/dominating position – Potential global opportunities for
– Strong brand name sales of the iPhone
– High selling prices across iPhones,
iPads, and computers
• Threats
– Trade dispute between the U.S. and
China, resulting in high tariffs
• Weaknesses – Currency exchange rate fluctuations
– Heavily dependent on the iPhone and – Greater reluctance of customers to
iPad lines pay the high prices of iPhones and
– other Apple products.
No major recent new product
innovations for several years (and none – Android devices (free operating
announced) system)
– Dependence on the legacy of Steve Jobs – Counterfeiting and industrial
for brand image espionage
– Competition—both on low cost and
on innovative features
– Declining desktop and laptop markets
Source: “Apple,” Global Markets Direct SWOT in developed countries
Reports (from Business Essentials), November, 2018 – Unstable world economy
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SWOT—Apple—Applications
• Using strengths to
compensate for
weaknesses and threats
– Developing “must have”
apps only available for iOS
(taken advantage of cash
reserves and in-house
talent)
– Campaign to “convert”
Windows users who own
iPhones and/or iPads to
Apple computers
BUAD 307 MARKETING OVERVIEW
• Using opportunities to
compensate for
weaknesses and threats:
– Heavy investments in
building retailer
infrastructure to use
ApplePay
– Having iPhone X featured
in “hot” movies or TV
series
Perner 36
THE MARKETING
ENVIRONMENT
Learning Objectives

• Identify forces that are beyond the control

of the firm and may require it to adapt its
strategies

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THE MARKETING ENVIRONMENT

• Culture (covered
under International
Marketing)
• Demographics
• Social
• Technology
• Economic
• Political and Legal
Factors
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Some Things That Have Changed In Our
Lifetime…
• Widespread use of high speed, high bandwidth and wi-fi
Internet access
• Online shopping by mainstream consumers and individualized
product recommendations
• Movies streamed online rather than DVDs mailed or rented in
stores
• Spread of digital photography, “selfies”
• Widespread use of cell phones
• Smart phones replacing more limited scope cell phones
• Emergence of social networking sites
• GPS technology becoming available to consumers
• Increased concerns about security (especially since 9/11/2001)

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“In 1989, a new
Blockbuster was
opening every
17 hours.”
Washington Post, April
26, 2017.

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BUAD 307 MARKETING OVERVIEW Perner 42
Japan: Actual and Projected Population
Figures

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China: Actual and Projected Population
Figures

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Social Factors

• Values—tensions
– Value of privacy and
security vs.
convenience
– “Green” products vs.
• Cost
• Convenience
• Performance
• Later ages of
marriage
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Case: Hostess (Twinkies)
• In 2011, Hostess, the manufacturer of
Twinkies, was unable to negotiate a cost
effective deal with its main union
• This happened on top of a “triple whammy”
that had hit packaged goods manufacturers:
– Costs of ingredients had gone up due to increased
costs of petroleum (needed for fertilizer,
transportation, and processing)
– A consolidation in the supermarket industry and the
entry of Walmart’s supercenters had put downward
pressure on wholesale prices
– The recession had caused a number of customers
who in the past bought national brand items to
switch to store brands and lower tier brands.
• In 2013, Hostess entered bankruptcy. The firm was
sold off.

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 Case: Boeing
• Possible increase in trade
barriers
• Political developments affect
opportunities to sell to
different countries (e.g., Iran)
• Political changes in export
assistance
• Uncertainty about long term
fuel prices
– Under high fuel prices, the
Boeing 787 can reduce costs
– Under lower fuel costs, the
A380 can reduce labor costs
BUAD 307 MARKETING OVERVIEW
• Boeing 747-8 never got
significant orders
– Modest update from older
version could not compete
with A380.
• Very long lead time in
developing the next
generation of planes
• Fluctuating World economy
can dramatically affect
demand for new aircraft with
very short notice
– “Glut” of nearly new planes
available during global
recessions
– Long backlog in orders during
prosperity
Perner 47
ETHICS AND SOCIAL
RESPONSIBILITY
Some Ethical Issues
• Misleading advertisements and
marketing in general
• Taking advantage of consumer
ignorance
• Marketing of harmful products
– Physically dangerous
– Over-consumption; marketing to people living
above their means
• Marketing of products banned or not
marketed in the U.S. to other
countries

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One Approach to Evaluating Ethics of
Marketing Activities
IS THE ACT
DECEPTIVE, YES
Yes IS THERE A
MANIPULATIVE SUFFICIENTLY
OR REDEEMING
PURPOSE?
MISLEADING?
NO YES
No NO
No

DOES THE ACT MORE LIKELY TO LESS LIKELY TO

PREY ON Yes BE ETHICALLY
YES BE ETHICALLY
PERSONAL
INSECURITIES? PROBLEMATIC PROBLEMATIC

YES
Yes
NO
IS A
HARMFUL DO BENEFITS
NO Yes APPEAR TO NO
OR YES No
DANGEROUS OUTWEIGH
PRODUCT RISKS TO THE
INVOLVED? USER?

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“Win-Win” Deals and Social Responsibility
• By pooling resources, different
organizations may each get
more than what they put in
– Firms may be able to contribute
not only cash but also relevant
expertise
– Favorable publicity may be
worth more than the same
amount spent on advertising
– Charitable groups may provide
access to potential customers
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Promotional Events
• A large retail chain might
sponsor a concert series by
paying all expenses in return for
considerable publicity
• Triple “win-win-win” deal:
– The charity receives the proceeds without
having to pay costs
– The sponsor receives publicity. Tickets are
bought in the store or on its web site.
– An aging artist—whose fans are now in their
prime earning years—gets an opportunity to
revive a career or promote a new venture
(e.g., movie role)
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 INFLUENCES ON THE
CULTURE
FIRM AND ITS
CHOICES
DEMOGRAPHICS

SOCIAL

ENVIRONMENT ECONOMIC
RESOURCES
TECHNOLOGY

LEGAL/POLITICAL

PROFIT
PRESSURE
FIRM

SOCIAL OPPORTUNITIES
RESPONSIBILITY

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