中国经济管理大学 Mini-MBA《营销管理学》

Understanding Marketing Management

中国经济管理大学/中國經濟管理大學

Chapter Overview/Objectives/Outline

A.   Overview

Marketing is the organizational function charged with defining customer targets and the best way to satisfy needs and wants competitively and profitably. Since consumers and business buyers face an abundance of suppliers seeking to satisfy their every need, companies and nonprofit organizations cannot survive today by simply doing a good job. They must do an excellent job if they are to remain in the increasingly competitive global marketplace. Many studies have demonstrated that the key to profitable performance is to know and satisfy target customers with competitively superior offers. This process takes place today in an increasingly global, technical, and competitive environment.

Marketing management is the conscious effort to achieve desired exchange outcomes with target markets. The marketer’s basic skill lies in influencing the level, timing, and composition of demand for a product, service, organization, place, person, idea, or some form of information. 

There are several alternative philosophies that can guide organizations in their efforts to carry out their marketing goal(s). The production concept holds that consumers will favor products that are affordable and available, and therefore management’s major task is to improve production and distribution efficiency and bring down prices. The product concept holds that consumers favor quality products that are reasonably priced, and therefore little promotional effort is required. The selling concept holds that consumers will not buy enough of the company’s products unless they are stimulated through a substantial selling and promotion effort.

The marketing concept moves toward a more enlightened view of the role of marketing. The marketing concept holds that the main task of the company is to determine the needs, wants, and preferences of a target group of customers and to deliver the desired satisfactions. The four principles of the marketing concept are: target market, customer needs, integrated marketing, and profitability. The marketing concept places primary focus on the needs and wants of customers who comprise the target market for a particular product. 

Rather than coax customers into purchasing a product they may not find satisfying, the emphasis is on determining the types of markets to be satisfied, and creating the product that achieves this satisfaction objective. Choosing target markets and identifying customer needs is no small task; a marketer must dig beyond a customer’s stated needs. Once this is accomplished, a marketer can offer for sale the products that will lead to the highest satisfaction. This encourages customer retention and profit, which is best achieved when all areas/departments of a company become “customer-focused.”  Beyond the marketing concept, the societal marketing concept holds that the main task of the company is to generate customer satisfaction and long-run consumer and societal well being as the key to satisfying organizational goals and responsibilities.

Interest in marketing continues to intensify as more organizations in the business sector, the nonprofit sector, and the global sector recognize how marketing contributes to improved performance in the marketplace. The result is that marketers are reevaluating various marketing concepts and tools that focus on relationships, databases, communications and channels of distribution, as well as marketing outside and inside the organization.

B.   Learning Objectives

·         Know why marketing is important to contemporary organizations.

·         Understand the core concepts of marketing.

·         Know the basic tasks performed by marketing organizations and managers.

·         Understand the differences between the various orientations to the marketplace.

·         Know the components of the marketing concept and why they are critical to successful marketing practice.

·         Know why marketing is critical to different types of organizations and in different environments.

·         Gain an appreciation for the dynamics in technology related to not only the logistics of marketing but also to the role technology plays in customer and prospect interactions between themselves as well as with organizations

C.   Chapter Outline

Introduction

I      The Importance of Marketing

A.                Most business disciplines are driven by the marketing function, the art of identifying needs and ensuring that organizations are optimally producing goods and services to fulfill those needs. The marketing function is now a critical core competency as witnessed by the creation of a chief marketing officer position     

B.                 Increasing competitiveness and rapidly changing consumer and business needs have created a dynamic marketplace. Organizations are challenged to closely monitor changing consumer needs and must modify, add, or remove current product and service offerings to meet changing needs. Organizations must ensure that short- term sales-driven strategies do not hinder their long term competitive position

C.  Chief Marketing Officer (CMO) a newer and key role in organizations.

        Five key functions of a CMO are: a) strengthen the brand, b)measure

            marketing effectiveness, c) use customer needs to drive product

            development, d) gather meaningful customer insights, e) leverage     new

            marketing technology

II      The Scope of Marketing

A.     What is marketing?

   Marketing Management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.

The aim of marketing is to know and understand the customer so well that the product or service optimally meets the customer’s human and social needs. The value proposition should be so obvious that the product or service sells itself  

 B.   What is marketed? (10 types of entities)

         1.  Physical goods   

             2.  Services - can be customer services or pure services

             3.  Events

             4.  Experiences, a combination of goods and services combined to create                   an experience

             5.  Persons (celebrities)

             6.  Places (geographic destinations)

             7.  Properties (real estate, land, financial instruments)

             8.  Organizations (image)

             9.  Information (the internet has increased efficiency of marketing                           information)

             10. Ideas

C.  Who markets?

         1.  A marketer is someone actively seeking one or more prospects for an

              exchange of values

D.  What is a market? 

         1.  Marketplace - physical

         2.  Metamarket - cluster of complementary goods and services across

              diverse set of industries.  includes metamediaries

         3.  Marketspace – digital

         4. Figure 1.1shows the relationship between the industry and the market

III.  Core marketing concepts

       A.  Needs, wants, and demands

             1.  To need is to be in a state of felt deprivation of some basic satisfaction. five             types of needs: stated, real, unstated, delight, secret

             2.  Wants are desires for specific satisfiers of needs. There is usually one or                  more wants that can fulfill a need. For example, the need for                           nourishment can be fulfilled by eating a cheeseburger or a salad.                        selection of a want to fulfill a need may be influenced by demand or                other factors which in this example would be health restrictions

             3.   Demands are wants for specific products backed by an ability and                           willingness to buy them

     B.  Target markets, positioning, and segmentation

           1.  Every product or service contains features that a marketer must translate into

                benefits for a target market 

              2.  The consumer perceives these benefits to be available in a product and                   directly impacts the perceived ability to meet the consumer need(s) or                   want(s)

              3.  Marketers break down the market into multiple segments. segments are                  groups of customers with similar needs

              4.  Marketers select which segments they will market to, that is which segments         they will target. Companies cannot be all things to all segments and thus   must            choose which segments to target

              5.  Marketers focus on specific product(s) or service features for each segment            based upon that respective segment’s needs, i.e., they position their               features as benefits to match the specific need

   C.   Offerings and brands

          1.  An organization’s value proposition links the features of a product or service to a benefit that can fulfill a specific need

          2.   Brand - an offering from a known source. A strong brand image supports the value proposition

   D.   Value and satisfaction

          1.   Customer value triad - combination of quality, service, and price     (QSP)

          2.   Value is the consumer’s estimate of the product’s overall capacity to satisfy his or her needs

          3.  Marketers respond by changes in the triad

          4.  Satisfaction reflects a person’s comparative judgment resulting from product or service’s perceived performance in relation to an expectation

   E.   Marketing channels 

          1.  Reaching the target market is critical 

          2.  Achieved via two-way communication channels

               (1)  Communication channels to deliver and receive information (media –

                      newspapers through the Internet)

               (2)  Distribution channels to deliver the product or service

               (3)  Service channels to facilitate a transaction 

   F.   Supply chain 

         1.  Refers to the long channel process that reaches from the raw materials and components to the final product/buyers 

         2.  Perceived as a value delivery system

   G.  Competition

   1.  Includes actual and potential rival offerings and substitutes 

   2.  A broad view of competition assists the marketer to recognize the levels of

        competition based on substitutability: brand, industry, form, and generic

   H.  Marketing environment 

   1.  The task environment includes: immediate actors in the production, distribution,

        and promotional environments 

                      2.  The broad environments include: demographic, economic, natural,

                           technological, political-legal, and social-cultural

IV.       The New Marketing Realities

   A.  Major Societal Forces

   1. Network information technology

   2. Globalization  

   3. Deregulation

   4. Incerased competitiveness from domestic and foreign brands

   5. Creation of mega-brands and “category-killers”

   6. Disintermediation – intervening in traditional channels such as Amazon

       bypassing retailers

   7. Reintermediation – Traditional retailers adding online channel

   B.  New Consumer Capabilities

   1. Consumers leveraging the internet to increase their buying power

   2. Social media precipitating user content used by consumers to share information

   3. Internet used by companies to invite consumer to participate in creation of

       product and service offerings.

   4. Decreased levels of product/service differentiation results in lower brand loyalty

   C.  New Company Capabilities

   1. Increased market research and market reach via Internet

   2. Creation of online communities increases brand awareness

   3. “Buzz” marketing enhanced via Internet use by early adopters and advocates

   4. Efficient and cost effective value chain management

   5. Intereactive marketing techniques improves target marketing and facilitates

       permission marketing efforts

V.   Company Orientation Toward the Marketplace

A.  The production concept –

1. Assumes consumers will favor those products that are widely available

    and inexpensive.

2. Frequently used to expand the market

3. Strategy used by developing countries

B.  The product concept - assumes consumers will favor those products that offer  the

      best combination of quality, performance, or innovative features

C.  The selling concept - assumes organizations must undertake aggressive selling and

      promotion efforts to enact exchanges with otherwise passive consumers

D.  The marketing concept - assumes the key to achieving organizational goals consists

      of being more effective than competitors in integrating marketing activities toward

      determining and satisfying the needs and wants of target markets

 E.  The holistic marketing concept (four dimensions) illustrated in Figure 1.2

       1.  Relationship marketing

  a.  Relationship marketing seeks long-term, “win-win” transactions between

                 marketers and key parties (customers, employees, marketing partners, and

                  financial community members)

            b. The ultimate outcome of relationship marketing is a unique company asset

                called a marketing network of mutually profitable business relationships

  c. Companies are focusing on more profitable customers using Life-Time-Value

                as one method of profitability measurement (these activities are also CRM

                strategies)

  d. Related to non-consumers, Partner Relationship Management focuses on

                building and sustaining relationships with business partners

       2.  Integrated marketing

 a.  When all of a firm’s marketing activities, internal to the organization and

                             external within the value chain, are optimally coordinated to achieve specific

                             objective

                        b.  Manage and coordinate communication efforts across all channels.

                    3.  Internal marketing

                         a.  Occurs at two levels, marketing specific activity such as sales, advertising,

                              customer research, and customer service while the other level is somewhat

                              removed from the direct marketing activities which include finance,

                              accounting, operations, and human resources

                         b.  Each within the organization should know how his or her activity relates to

                               the customer, thus the organization should change their business model to

                               become more customer-centric.

                         c.  Another dimension to internal marketing is the method of marketing to and

                              serving the internal customer

                         d.  Internal marketing is successful when upper-level management

                              demonstrates their buy in on a continual basis

                         e.  Organized resistance - some departments see marketing as a threat to their

                              power in the organization

                          f.  Slow learning - despite efforts by management, learning comes slowly

                          g.  Fast forgetting - there is a strong tendency to forget marketing principles

                    4.  Performance Marketing...................................................................

 a)  Financial accountability while building the brand and managing the

             customer relationship using creative metrics and placing value on intangible

             assets

 b) Socially responsible marketing (refer to Table 1.1 for initiatives)

      (1)  Marketers must understand their role in social welfare.

             Societal marketing concept calls on them to build social and

             ethical considerations into their marketing practices. Examples:

             use bio-degradable containers, avoid deceptive advertising,

             adhere to current and pending privacy laws and regulations, use

             ethnic marketing strategies appropriately

      (2)  Cause related marketing, linking an organization’s activity

             with a specific cause perceived as important to the consumer,

             practices can increase revenue and profits while establishing a

             relationship or partnership with societal groups which have a

 common cause. Examples: tobacco company promoting

 nonsmoking practices, company employees spending their day

              off cleaning the environment, sponsoring a cancer prevention race

VI.  Updating the 4 P’s

             A. Originally the Four Ps represented the seller’s view of marketing approaches

                  leveraged in an effort to influence the buyer. (Refer to figure 1.3)

       B. Adapting to complexities of current marketing environments, original approaches

                 using the logic of  a 4 P’s strategy have been replaced with new strategies resulting

                 in new definitions of the 4 P’s definition in tandem with a holistic marketing

                 approach. These new 4 P’s are identified as people, processes, programs and

                 performance. An elaboration of these new 4P’s is present in Table 1.2.

VII. Marketing management tasks

       A.  There is a shift in marketing efforts to one of using a more holistic approach

       B.  In accordance with these shifts marketers must:

            1.  Develop marketing strategies and plans, covered in chapter 2

            2.  Capture marketing insights by monitoring  the marketing environment and

                      conducting market research, covered in chapter 3

            3.  Connect with customers by creating value propositions in order to build

                      long-term relationships with customers, covered in chapter 4. Chapters 5 and 6

                      explore the analysis of consumer and business markets. Identify major market

                      segments and target optimal segments, covered in chapter 7.

            4.  Build the brand and use as part of positioning strategy, covered in chapters 8 and

                 9.

            5.  Shape the market offerings by creating a product or service strategy including

                      pricing strategy, covered in chapters 10, 11, and 12

        6.  Create channel strategies, covered in chapter 13. Identify channel entities

                 (e.g. retail, wholesale, distributon) and their decision process methods in

                         chapter 14.

            7.  Communicate vale to the target market  by designing the appropriate marketing

                      communication and integration strategies. Chapter 15 covers integrated

                      communications. Chapter 16 discusses mass communications (advertising and

                      PR). Chapter 17 analyzes personal communications.

            8.  Develop a long-term strategy which includes implementation and control as well

                  as global issues, covered in chapter 18

VII.             Summary

II.   Lectures

A.    “Marketing Enters the 21^st Century”

The focus in this discussion is on the increasingly important role of the marketing process in the ever-changing domestic and global business environment.

Teaching Objectives      

• To explain the concepts related to understanding the role and      potential of marketing in the larger business environment.

• To provide students a new and possibly different perspective on      the role of marketing in business and society. 

• To indicate areas where the marketing process and concept will      be useful to the student in assessing business developments.

• Identify changes in the way consumers and businesses interact      and how organizations must adapt to changes both in behavior as well as      technology.

• Explore new consumer expectations with regards to organization      compliance with social mores.

Discussion

Introduction

Many observers argue that all new or important directions in management thought and practice are marketing oriented. Marketing is no longer something done when a company has extra revenue to invest. It must be implemented for a business to survive.

The marketing concept has changed dramatically over the last several decades, and recently the focus increasingly has moved to customers (versus products and selling), marketing globally, and the various technology issues that impact the market. In addition, there is renewed emphasis in marketing on creating and innovating with new and better products and services rather than just competing against other firms and following the marketing patterns established by competitors. 

The marketing concept is a matter of increased marketing activity, but it also implies better marketing programs and implementation efforts.  In addition, the internal market in every company (marketing your company and products to and with the employees of the company) has become as challenging as the external marketplace due to diversity and many other social/cultural issues. 

Changes in Consumer Behavior

There have been many major marketing shifts during the last few decades that have shaped marketing in the 21^st century. There is a view among professional marketers that there is no longer the substantial product loyalty that existed over the last few decades.  Product and brand loyalty, many argue, has been replaced by something more akin to a consumer decision that is based on the absence of a better product or service.  In addition, there are major changes in the way customers look at market offerings. During the 1980s customers were optimistic, and in the early 1990s they were pessimistic.  Later in the 1990s, consumers appeared rather optimistic, but still cautious at times. Many consumer segments have started to understand the value proposition concept and have learned how to use it to their advantage via permission marketing quid-pro-quo strategies. Extensive airline loyalty program use and compensation in the gambling industry are examples of the consumer understanding and using marketing strategies to their advantage. The following chart demonstrates some of the major shifts that have occurred to the present:

Increasingly it is clear that while the 4 Ps (product, price, promotion, and place) have value for the consumer, the marketing strategies of the 21^st century will use a revised set of 4 P’s (people, processes, programs, performance). With advances in technology and more kwoledgeable companies, it is not as difficult to create the same market offering. To help differentiate a product or service, companies should evaluate their interpretations of the old versus new definition of the 4 P’s.

Optionally, another view of approaches can incorporate the concept of the four “4 Cs” as added critical marketing variables:

1.      Care: It has replaced service in importance. Marketers must really care about the way they treat customers, meaning that customers are really everything.

2.      Choice: Marketers need to reassess the diversity and breadth of their offerings into a manageable good-better-best selection.

3.      Community: Even national marketers must be affiliated, attached to neighborhoods wherever they operate stores.

4.      Challenge: The task of dealing with the ongoing reality of demographic change.

End of the Mass Market

During the late 1990s and through the early 2000’s, we witnessed the death of the concept of mass market. It is now widely accepted that communicating with users by e-mail, Web sites, telephone and to a lesser extent mail and fax will bring not only measurable cost reductions, but also an increase in customer satisfaction as messages are more targeted to their specific needs. But there are also those organizations that feel if most of their competitors focus on more direct communications, there will be less competition in the mass communication market and thus they may achieve a louder voice. Additionally, mass marketing does contribute to brand awareness and brand reinforcement. However, the success of the Internet provides considerable evidence that one-to-one marketing is and will be appropriate for many packaged goods and other high- and low-involvement products and services that in the past sold almost exclusively with brand advertising. It is even applicable to

         high-involvement products and services as consumers may “experience” the good first

         but then use one-to-one channels for purchase.

Through the 1970s, only high-end retailers, cataloguers, and personal-service firms could afford to practice one-to-one marketing. For the most part, they did it the old-fashioned way with personal selling and index-card files. In the 1980s, as the mainframe computer became more practical, airlines got into the act with a proliferation of frequent flyer programs. Frequency marketing programs such as these relied on monthly statement mailings and large, batch-processed databases of customer records.

During the 1990s, bookstore chains, supermarkets, warehouse clubs, and even restaurants began to track individual purchase transactions to build their “share of the customer.” Many of these programs now run on PC platforms or workstation environments much more powerful than the most capable mainframes of the 1970s. They also are being executed in or close to real-time environments. It is possible today to track 5 or 6 million customers for the same real cost as tracking a single customer in 1950. With Internet-based databases and remote access, this capability literally has exploded in the last few years.

In the 2000’s the situation has become even more interesting as one-to-one marketing has become increasingly pervasive. With an increasingly powerful array of much more efficient, individually interactive vehicles, the options are virtually unlimited, including on-site interactivity, Web site connections, fax-response, e-mail, and interactive television.

Most households today either have direct Internet access, or with TV sets that also provide real-time interactivity through the Internet.  We are closing rapidly on the time where individuals will interact with their television and/or computer simply by speaking to it.  Via various Web sites, computers work for us to enable us to remember transactions and preferences and find just the right entertainment, information, products, and services .  Likewise, online capabilities enable providers to anticipate what a consumer might want today or in the future. Unfortunately, the system has been slower to protect consumers from commercial intrusions that they may not find relevant or interesting.

The increasing level of market definition and refinement (and resulting opportunities for marketers) is possible through the massive social, economic, and technological changes of the past three decades. There is no longer a U.S. mass market because lifestyles have changed so dramatically. Some of the important demographic shifts have been:

·         Increasing diversity of the population. The United States has always been an immigrant nation. However, large numbers of immigrants from Latin America and Asia have increased the proportion of minorities in the country to one in three, up from one in five in 1980. This diversity is even more noticeable in the younger market.

·         Changing family and living patterns. There has been a substantial rise in the divorce rate, cohabitation, non-marital births, and increased female participation in the labor force. In addition, married couples with one earner make up only 15 percent of all households. Dual-earner households have become much more

               common—the additional income is often necessary for the family to pay their bills. Thus, the stereotypical family of the 1950s has been replaced by two older and harried, working parents with much less time available. There is also an emergence of nontraditional households such as same sex parents, single parents and multi-generation. The first set of baby boomers are entering retirement. They are more active, have a greater awareness of health maintenance, and have a higher disposable income, which is presenting new and greater marketing opportunities. They will also live longer than prior generations due to advances in medical research.

·         Emergence of a new children’s market. Minorities are over-represented in the younger age brackets due to the higher fertility and the younger population structure of many recent immigrants. The result is that one in three children in the United States is black, Hispanic, or Asian. In addition, nearly all of today’s children grow up in a world of divorce and working mothers. Many are doing the family shopping and have tremendous influence over household purchases. In addition, they may simply know more than their elders about products involving new technology such as computers.

·         Income and education increases are two other important demographic factors impacting the marketing management arena. Generally, income increases with age, as people are promoted and reach their peak earning years, and the level of education generally has increased over the last few decades. Family units today often have higher incomes because they may have two earners. Accordingly, there is an increased need for products and services because they likely have children and are homeowners.

In sum, the need for market analysis and marketing decision-making, and managers to perform those tasks has never been greater. But, as the course will demonstrate, the complexities of, and analytical tools required for, these activities have never been greater. Be prepared for a challenging experience.

B.    “The Changing Image of Marketing”

Focus: the changing perceptions of marketing in the contemporary business environment.

Teaching Objectives

·         To explain the concepts related to understanding the role and potential of marketing in the larger business environment.

·         To provide students a new and possibly different perspective on the role of marketing in business and society. 

·         To indicate areas where the marketing process and concept will be useful to the student in assessing business developments.

Discussion

Introduction

What image comes to mind when you hear the word “marketing”? Some people think of advertisements or brochures, while others think of public relations (for instance, arranging for clients to appear on TV talk shows). The truth is, all of these—and many more things—make up the field of marketing. The Knowledge Exchange Business Encyclopedia defines marketing as “planning and executing the strategy involved in moving a good or service from producer to consumer.”

With this definition in mind, it’s apparent that marketing and many other business activities are related in some ways. In simplified terms, marketers and others help move goods and services through the creation and production process; at that point, marketers help move the goods and services to consumers. But the connection goes even further: Marketing can have a significant impact on all areas of the business and vice versa. In its true form, an organization can be described as a marketing-centric firm when all disciplines within the organization understand how they have an impact on the marketing effort and where they fit in the marketing strategy.

Marketing Basics

In introductory marketing you learned some basics—first the four P’s, and then the seven P’s:

·         Product—What are you selling? (It might be a product or a service.)

·         Price—What is your pricing strategy?

·         Place or distribution—How are you distributing your product to get it into the marketplace?

·         Promotion—How are you telling consumers in your target group about your product?

Services add three more “P” considerations, that of people, process, and physical evidence, their service difference

§  People deliver the service.

§  The  process is the method of delivering a service.

§  Physical evidence is the environment surrounding the service.

All are critical core competencies that an organization can leverage in their service differentiation efforts.

The sum of the above is called the marketing mix. It is important to have as varied a mix as possible in marketing efforts, since each piece plays a vital role and boosts the overall impact.

Let’s take a closer look at the basic P’s of marketing and particularly at how they might affect what you do in business.

• Product

Marketers identify a consumer need and then provide the product or service to fill that need. The marketer’s job is to pinpoint and understand existing needs, expand upon them, and identify new ones. For example, because there are more singles and small families these days than in years past, marketers might see a need for products to be sold in smaller quantities and offered in smaller packages.

How can this impact other professionals in the business/marketing process? Let’s say your company has developed a new product that generates enormous consumer demand. Your marketing department may ask you to find a way to speed up the workflow in order to crank out more products faster. A year after the product is introduced, however, the market might be flooded with cheap imitations. Since one marketing strategy is to keep products price-competitive, a marketer may then ask you to find a way to make the product less expensively.

This relationship works both ways. There may be production and industrial engineers who may see a way to change the work process that would create additional options for consumers. Those engineers will also be instrumental in design and development of products for which human factors and ergonomics are important considerations. Maybe there’s room to add another product line. For instance, that product X is still blue but new product Y is red. You can suggest this to your marketing department; it, in turn, would do research to gauge potential consumer demand for the new line.

• Price

Ideally, a marketer wants to be proactive in setting price rather than simply react to the marketplace. To that end, the marketer researches the market and competition and plots possible price points, looking for gaps that indicate opportunities. When introducing a new product, the marketer needs to be sure that the price is competitive with that of similar products or, if the price is higher, that the consumers perceive they’re getting more value for their money. Perceived value also varies by segment. Two different segments may perceive different value in the same product or service which presents an opportunity for price variation with the same product or service.

Various other technical professionals can have an important impact on marketers’ pricing decisions. Again, you may be asked to determine if productivity can be enhanced so that the product can be manufactured and then sold—for a lower price.

• Place or      distribution

What good is a product if you can’t get it to people who want to purchase it? When marketers tackle this issue, they try to figure out what the optimum distribution channels would be. For example, should the company sell the product to distributors who then wholesale it to retailers or should the company have its own direct sales force?

Marketers also look at where the product is placed geographically. Is it sold locally, regionally, nationally, and internationally? Will the product be sold only in high-end stores or strictly to discounters? Does the product serve a niche market? The answers to all of these questions also help shape how a product can be distributed in the best way.

Such distribution questions are potentially of great significance to many professionals, including industrial and other types of engineers in a company. For instance, whether a product will be marketed regionally or internationally can have enormous implications for package design as well as obvious areas of the supply chain: logistics, transportation, distribution, and warehousing.

• Promotion

Promotion encompasses the various ways marketers get the word out about a product—most notably through sales promotions, advertising, and public relations.

Sales promotions are special offers designed to entice people to purchase a product or service or make them aware of a product or service. These can include coupons, rebate offers, two-for-one deals, free samples or trial, and contests.

Advertising encompasses paid messages that are intended to get people to notice a product. This can include magazine ads, billboards, TV and radio commercials, Web site ads, event sponsorships, and so forth. Perhaps the most important factor in advertising success is repetition. We’re all bombarded with an enormous number of media messages every day, so the first few times a prospective customer sees an ad, it usually barely makes a dent. Seeing the ad over and over is what burns the message into people’s minds. That’s why it’s good to run ads as frequently as possible.

Public relations refers to any non-paid communication designed to plant a positive image of a company or product in consumers’ minds. One way to accomplish this is by getting the company or product name in the news. This is known as media relations, and it’s an important aspect of public relations.

As with price, changes in demand created by promotions can have a direct impact on the work of many other professionals.

• Process

How difficult or easy is it for the customer or prospect to interact with a company. “Your call is very important to us and your wait time is 30 minutes” may be an oxymoron. A potential customer leaves a website due to long wait time for a response or poor site navigation design. Fairness of “wait lines”, inconvenient locations, poor computer telephony utilization, incompetent or untrained outsourced telemarketers, are but a small list of examples that are in direct conflict with an optimal customer focused marketing strategy. Companies need to experience the process they put through their customers through to gain insight to the effectiveness of their strategy. 

• People

People are heterogeneous and thus a customer will never quite receive the same experience from different employees and may not receive the same expected service from the same employee as that employee’s behavior will vary over time. Usage of hard standards ensures policy adherence but leaves little room for managing the customer experience, as it is impossible to plan for every potential issue coming out of an interaction. Therefore soft standards while placing boundaries also allows provides flexibility to the employee in managing a specific customer interaction. High margin retailers may allow employees to provide upt to $75 worth of value to satisfy a customer. This does not mean a discount but rather a=some appropriate response which may cost the company up to $75.

• Physical      evidence

The environment encapsulating the customer as they interact with a company impacts their perception and experience. Attention to detail on what the customer sees and feels may be a reason why they are customers. Strategy should fit the target segment. Examples are loud versus soft music, light versus bright lighting, size of parking lot and/or space, cleanliness, presence of restrooms, achievements/awards posted in medical; professional offices as well as other services.

All are critical core competencies that an organization can leverage in their service differentiation efforts.

Marketing, engineering, and many other professional activities are interrelated and interdependent disciplines. By understanding the role that marketers play in moving a good or service to consumers, others can operate more effectively, for the present and the future.

III.   Background Article

Issue:  New Approaches to Marketing

Source: “New Economy Calls for New Marketing,” Computerworld (Philippines), January 5, 2001.

Discussion

Intelligent management of information and the use of technology-supported customer interactions are among the e-marketing rules for the New Economy, according to Dr. Philip Kotler.  Kotler made this point at a seminar in the Philippines for marketing managers and sales personnel.

Kotler noted that future marketers must understand technology to respond to the new forces of today’s economy where digitalization and the Internet are becoming major sources of efficiency and profitability among companies.

The Internet, according to Kotler, paves the way for high competition, proliferation of channels and different media, globalization, and the lowering of prices of goods and services through e-commerce. Kotler noted that companies should be aware of the challenges that the Internet poses to their profitability.  “Hundreds of dot.coms have closed their doors or suffered substantial declines in value, while several admired multinationals have suffered huge losses and are engaged in layoffs. Marketing, the engine that drives growth, is in desperate need of an overhaul.”

The marketer should exploit e-business to his company’s advantage. “Go electronic and paperless. Partner with your employees, customers, suppliers, and distributors for co- prosperity,” he said.  The global economic slowdown is also making companies reevaluate their strategies and current resource allocations to cope with falling prices and a shortage of customers. “But you can win by getting real time information about your customers and your customers’ customers,” suggested Kotler. He added that having real time information systems could help companies adjust fast enough to the downward trend of the economy.

“Companies are setting up separate Web portals for customers, partners, and employees. 7-11’s fifth generation information system connects stores, headquarters, and suppliers,” according to Kotler. He also cited Procter & Gamble’s market planning dashboard to promote technology use in the marketing of its products. “By setting up a dashboard for its marketing managers that allows them to access templated processes, best practices, testing tools, scripts, industry news, and project dates, P&G is able to cope with the hard times.”

Beyond  the Web Site

 Companies need to beyond the static web sites of a few years ago  by featuring online buying and selling, recruitment, and e-learning, said Kotler.  “. . .  utilizing the Internet goes beyond the company’s Web site.” An organization should also develop its intranet/extranet, enterprise resource planning (ERP), supply chain management (SCM), and customer relationship management (CRM) systems.

Kotler also pointed out that marketers should “…keep in mind though that e-marketing doesn’t negate marketing fundamentals such as segmentation, targeting, positioning, the marketing mix, customer satisfaction, and value as well as customer relationship.”  Instead, the Internet creates some new challenges for the marketer, ranging from the operation of both online direct selling and reseller channels, the effectiveness of online banner advertisements, to the creation of active customer communities on the Web, and to building brand recognition on the Internet.

Electronic marketplaces have significantly reduced search and transaction costs for finding the lowest price on a global scale, noted Kotler. “With the use of e-procurement, companies can offset the price fall and save on operating expenses in the long term.”

On CRM, Kotler noted that the two best defenses against lower prices brought about by the global economic slowdown and the onset of e-commerce are CRM and stronger branding. He said that CRM is an old idea practiced by mom and pop stores and salespeople. “Companies are now trying to integrate different channels like sales force, branches, call centers, and Web sites using CRM software so that they can get a complete view of the customer across channels.”

CRM requires building a customer database by collecting all the pertinent information about individual customers and prospects, noted Kotler. “But not every business needs CRM since it is a high investment and operating expense,” he said. “But it can pay in certain situations for companies such as banks, insurance, credit card, and telephone companies that collect a lot of data.”

CRM will also be beneficial to companies that do a lot of cross selling and up selling like Amazon.com and to organizations that have customers with highly differentiated needs. “CRM is more than equipping salespeople with sales automation tools,” said Kotler. “The marketing department must centralize information about customers and prospects and develop campaigns around it.”

IV.   Case 

SendWine.com     

       HBS Case: 800-211        TN: 801-198

Teaching Perspectives

The SendWine.com case focuses on understanding and evaluating Internet business models and growth strategies. The case encourages students to consider the trade­offs that exist between two frequently contrasted strategies for growth: “get big fast” (GBF) and “get it right first” (GIRF).

How should SendWine.com spend the venture capital money it attracted? Should the company consolidate its niche position in wine gift-giving? Or should it aggressively expand into new gift-giving categories under the “Send.com” name? In July 1999, the CEO of SendWine.com faced some critical decisions. The company, an online service that enabled gift-givers to send bottles of premium wine to distant recipients, had earned revenue totaling almost $1 million in 1998 and had proven that its business model could be profitable. Following this success, SendWine had raised $10 million in venture capital (VC) financing in early 1999, and the CEO felt that he could easily raise an additional $20 to $30 million. The question was, how best to spend this money?

The CEO began to explore the business idea in 1995, when he learned that it was illegal to ship wine to consumers across most state borders. In 1997, The CEO (Lannon) established a company called “The Wine Line,” and assembled an FTD-like network to make sending gifts of wine legal. The Wine Line took gift orders over a toll-free telephone number. About 100 licensed fine wine retailers filled these orders with wine purchased from licensed wholesalers. The retailers used Lannon’s elegant gift packaging and delivered the wine to local recipients. In early 1998, Lannon took The Wine Line online and renamed it “SendWine.com.” That year, he also bought the URL “Send.com” to clear the way for diversification beyond wine into other premium specialty gifts.

By early 1999, SendWine faced competition. Au Internet, a wine retailer, raised $46 million from VC firms that also backed Amazon.com, and a marketing agreement with Amazon seemed likely. Well-known portals like Yahoo! were hosting gift retailers, providing them with software templates to create web sites. Amazon itself was offering gifts other than books. Lannon considered his site the leader in premium online specialty gifts, and he had ideas for gift offerings that he thought were unique. However, he had not yet worked out all the necessary details involved in diversification, growth, funding, and marketing. The question was not so much whether to diversify beyond wines, but when and how. Should he adopt a “get big fast” (GBF) approach, and diversify before the next  Christmas holiday? Should he rethink his target consumer base? How could he best spend his VC money to accelerate growth, boost revenues, and preempt competition? While debating these strategy issues, Lannon also wondered how to deal with the stresses that rapid growth was already placing upon his young organization.

The primary teaching objective for this case is to explore the “Get Big Fast” (GBF) strategy employed by many Internet companies, which involves aggressive upfront spending on customer acquisition and brand building. GBF strategies may be contrasted with the “Get It Right First” (GIRF) approach that Lannon employed in launching “The Wine Line.” GIRF implies moving at a pace that raises the odds that a business will meet customers’ needs. A GBF strategy is generally assumed to raise the odds of making mistakes on this front, while reducing the probability of preemption by competitors. GBF and GIRF strategies are usually incompatible: a GIRF strategy typically involves a process of exploring customer needs, then fine-tuning a value proposition (often through trial-and-error) to meet those needs. If a value proposition that is in flux (due to GIRF experiments) is promoted aggressively through a GBF strategy, consumers are likely to become confused about what a brand promises to deliver. In the context of exploring the payoffs and risks associated with GBF and GIRF strategies, other teaching goals include:

·         Studying the tradeoffs involved in targeting a tightly focused set of customer segments, versus a more “promiscuous” positioning strategy that seeks to serve many different types of customers; understanding how a broader positioning approach complicates a company’s branding and marketing communications strategy.

·         Analyzing the challenges a Web site confronts when diversifying into related segments, e.g., Will diversification “make sense” to customers, given the brand’s image? Will diversification increase the risk of failures of execution?

·         Learning how to deal with organizational challenges faced by young, rapidly growing and changing organizations, such as hiring, acculturation, retention, communications, and contending with senior executives’ limited “bandwidth.”

A secondary teaching objective for the case is to help students understand how a venture capitalist might evaluate an Internet startup. To put themselves in the shoes of a VC trying to decide whether to invest in SendWine.com in July 1999, students may have to put aside memories of April 2000, when dot.com valuations—especially those for retail sites—dropped dramatically. During 1999, venture capital had flowed freely to such businesses, whether they had demonstrated the viability of their business models, like SendWine, or not. Some students may protest that there is no point in reconstructing the investment criteria that a VC might have applied during 1999, because “the bubble has burst and the rules have changed.” These students should be reminded that while valuations have declined sharply for Internet retailers, VCs still have billions of dollars to invest and many have simply shifted their focus to new segments.

As of the Fall of 2000, VCs were bidding up the valuations of wireless Web startups, application service providers, and optical networking firms; they were encouraging startups in these fields to “get big fast.” If students can be sold on the “old wine in new bottles” notion, they should agree that there are lessons to be learned from studying a vintage 1999 online retailer.

Questions

1. Imagine you are a venture capitalist in July 1999, and you have been asked to invest in a $30 million “B” round for Sendwine.com. Would you invest? What criteria would you use to assess this opportunity? How is SendWine positioned against those criteria?

2. Would you seek to diversify into additional gift categories in time for the 1999 holiday season? Would you pursue the categories the CEO (Lannon) is considering?

3. What would you recommend as a marketing plan for SendWine.com for the 1999 holiday season? How should they reach their target consumer base? How much would you spend? (Assume Sendwine can raise additional capital if needed.)

4. What challenges does Lannon face in building the SendWine organization? How should he respond to issues of recruitment, acculturation, and communication?

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