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02/18/15 [email protected] 2
Some Perspective
Marketing and History
“In well-ordered states, storekeepers and salesmen are commonly those who are weakest in bodily strength and, therefore, of little use for any other purpose.” - Plato
“Merchants are to be accounted vulgar; for they can make no profit except by a certain amount of falsehood.” - Cicero
“Advertising ... is a meretricious endeavor in which psychological appeals to ‘fear’ and ‘shame’ are developed to bamboozle the public into purchasing essentially worthless packaged goods at bloated prices.” - Thorstein Veblen
02/18/15 [email protected] 3
Some Perspective
A Modern View
“Corporate leaders nationwide are discovering that their most powerful competitive weapon is marketing -- the development, pricing, distribution, and promotion of products.” - Newsweek
“Marketing is now central to success at any company in any business, and it is going to make the difference between winners and losers.” - Stephen Greyser, Harvard Business School
“Stop being a company with its face towards the CEO and back towards the customer” -Jack Welch, CEO, G.E.
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Marketing challenges
1. Destabilization due entrepreneurial freedom2. The MNC onslaught3. The all pervasive competition4. The exacting demands of a buyer’s market5. Compulsions to go global6. Challenges on technology front7. Need for quick product innovations8. Challenges of achieving marketing excellence under
conditions of discontinuity
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Key Issues in the Business Environment
Customer Satisfaction - markets are saturated and we cannot rely on pent up demand to make profits. Must provide greater quality and value to smarter shoppers. From mass marketing to segments of one. Increase speed of innovation, diffusion and distribution.
Globalization Global brands, different positioning or similar positioning in
different countries? New ideas developed in country A, designed in country B,
manufactured in country C and sold in country D. Environmental and Health Care Concerns
Must address concerns of better educated and better informed consumers.
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Misconceptions of MarketingMisconceptions of Marketing
Marketer create needs, manipulate people to buy something they don't want
Marketing = selling = advertising Marketing = shoes polishing Customer will favour those products that offer the most
quality, performance & innovative feature
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Marketing Is Important!
Marketing impacts all of us in our lives as consumers Gives us choices Stimulates innovation and economic growth
There are many good job opportunities in marketing Regardless of what career path you take, no firm (or non-
profit organization) survives for long if it can’t satisfy some group of customers.
1-5
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What is Marketing ? (1)
A social & managerial process by which individuals & groups obtain what they need & want through creating & exchanging values with others
Marketing ( management ) is the process of planning & executing the production, pricing, promotion & distribution of ideas, goods & services to create exchange that satisfy individual & organizational goals. ( integrated marketing activities)
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What is Marketing ? (2)
Key function of management : provide MR inputs & guiding philosophy on company
mission & strategic planning
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Customer Management Footprint
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Why the change over the ages?
Changing approaches to business over time the production concept the product concept the sales concept the marketing concept
Why is Marketing one of the most critical components of modern
business?
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Production concept
Based on •Cost benefit
•Mass distribution
Product concept Based on•Quality
•Performance•Innovation •Focus on
•Product •Marketing myopia
Selling concept
Based on •Consumer inertia and resistance
•Aggressive selling and
promotions to stimulate more
buying
Marketing concept 1950 shift from
make and sell to “sense and respond”Based on•Creating •Delivering
•Communicating Superior customer value to
chosen target markets
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FactoryExistingProducts
Sellingand
Promoting
ProfitsthroughVolume
MarketCustomer
NeedsIntegratedMarketing
Profitsthrough
Satisfaction
The Selling ConceptThe Selling Concept
The Marketing ConceptThe Marketing Concept
StartingPoint
Focus Means Ends
Marketing & Sales Concept Contrasted
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Society(Human Welfare)
Society(Human Welfare)
Consumers(Satisfaction)
Consumers(Satisfaction)
Company(Profits)
Company(Profits)
SocietalMarketingConcept
SocietalMarketingConcept
The Societal Marketing Concept
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ProductsNeeds, wants,and demands
Exchange, transactions,and relationships
Markets
CoreMarketingConcepts
CoreMarketingConcepts
Value, satisfaction,and quality
Core Concepts
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Needs Wants Demands Transactions/Exchange/Relationships Market
Marketing Problem: Needs & Wants
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customer
•To understand the customer –basic is to know that s/he is buying / using the products as a means to solve or address their own problem, reason and strategy and not yours and therefore unless marketer is customer specific in terms of marketing mix elements, success is usually evasive.
•Customer does not buy a brand s/he buys their perception, and choose a brand which offers the best solution to their problem
•Marketers only brief is to synergize the capabilities of the organization so as to address customer’s specific needs.
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Changes in customer perceptions
1950-60 60’s early 70’s Late 70’s early 80 Late 89’s –90’s
Mass market
Segmentedperception Sub segments niche
Customer perceived as
As a mass audienceGeneral/similar needsLimited product offering
Limited No. of Needs-price featureLimited tiring of products
Growing no. of needsPrimarily in lower
SegmentsMore market offerings
Portfolio of nicheproducts
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Perspective (A mental view of a scene)
SET OF PERSPECTIVES IN CONSUMER BEHAVIOR
MARKETER CONSUMER PUBLIC POLICY
MAKETERS AND CONSUMERS ARE ACTIVE ON DAILY BASIS
MARKETING DECISIONS
CONTROLLABLE (4P’s) UNCONTROLABLE (5C’s)
Marketing mixelements
Customers Channels Conditions Competitors
Company,
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Realistic view
This realistic view is important to the marketer because ,
1. It gives an external view of th e cus tomer.
2. An agg regate view of the cus tomer
3. A p roduc t s pecific view of the cus tom er
4. A b rand preferenc e /purch as e point of view
5. A b eh avioral influenc e orientation
• who does or does not us e th e p roduc t
• Who uses th e c om petitors Brand
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Comparison of two perspectives
Perspective Perspective characteristicscharacteristics
Marketer’s Marketer’s perspective perspective
Customer’s Customer’s perspectiveperspective
Point of view Point of view External External (buyers)(buyers)
InternalInternal(me)(me)
Level of interestLevel of interest AggregateAggregate(markets)(markets)
IndividualIndividual(myself)(myself)
Scope of interestScope of interest Product specificProduct specific(what I make)(what I make)
Across productsAcross products(what I buy)(what I buy)
correct choice correct choice Brand specificBrand specific(my brand)(my brand)
Best alternativeBest alternative(best brand for me)(best brand for me)
Role of influenceRole of influence Influence Influence behaviorbehavior
Handle behavioralHandle behavioralinfluencesinfluences
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Perspectives-contd. customercustomer marketermarketerMost behaviors are internally focused –we Most behaviors are internally focused –we think silently-observe privately-& evaluate think silently-observe privately-& evaluate according to our own dictatesaccording to our own dictates
Marketer can only have an external view.Marketer can only have an external view.
Focus on themselves as individualsFocus on themselves as individuals Market segmentation as a process of Market segmentation as a process of comprehending markets. Marketers try to comprehending markets. Marketers try to find sub markets within the total markets find sub markets within the total markets for economic viability.for economic viability.
Not an expert for many of their purchasesNot an expert for many of their purchases An expert for his brand / categoryAn expert for his brand / category
Choose only one brand from a given set, Choose only one brand from a given set, meaning , making a wrong choice from the meaning , making a wrong choice from the point of view of every marketer but, one.point of view of every marketer but, one.(branding helps)(branding helps)
Best brand is the one that we make Best brand is the one that we make (building brand equity helps)(building brand equity helps)
someTime and effort required to react to someTime and effort required to react to stimuli. (only if it is interest to me stimuli. (only if it is interest to me otherwise ignored)otherwise ignored)
Targeting markets of interest. Targeting markets of interest. Creating stimuli-intrinsically interesting to Creating stimuli-intrinsically interesting to consumers consumers stimuli are simple and easy on consumersstimuli are simple and easy on consumers
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Black box/CIP models
Consumer’sMind
Black box
Consumer”s Mind
CIP
inputs outputs
outputinputs
Externalworld
Externalworld
Externalworld
Externalworld
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INTERNAL WORLDSINTERNAL WORLDSEXTERNALWORLD
SENSORYREGISTER
SHORT TERM MEMORY(STM) ORWORKING MEMOTY
LONG TERM
MEMORY (ltm)STIMULI
Short and long term memory
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The 5 stage process
1:Problem recognition• The internal recognition by the consumer that their current needs are not being met• Discrepancy between actual & desired state• Leads to motivation• Could be real or imagined, physical or psychological• Implications? Construction of advertising; penetration pricing strategies for new products; importance of peers; social construction of desire.
2:Information SearchNext we ask ourselves the question of how do we solve our problem?•May already be familiar with options available•May consult people whose opinions we respect•May browse around the shops•May consult independent experts•Amount of information required dependent on risk attached•Implications? Role of marketing communications
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The 5 stage process (continued)
3:Evaluation of alternatives•In deciding which product to buy we have to weigh up which
product best suits our needs•We construct criteria upon which to base our choice•We already may have a list of criteria or we may form one
during the information search•Compensatory vs. non compensatory evaluation
4: Product choice•Having weighed up the pros and cons between alternatives
eventually we have to make a choice•Could be as a result of the outcome of our evaluation process
against important criteria – best fit.•Choice could be affected by availability, payment options etc.•Implications? Make it easy!
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The 5 stage process (continued)
5: Post purchase evaluationOnce we have made our purchase we decide whether its met our expectation
•If it does great positive brand associations and visa versa•Implications? After sales service, marketing communications
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Value Creation
02/18/15 [email protected] 29
Reference Group Influences A reference group is the
group whose perspective an individual takes on in forming values, beliefs, attitudes, opinions, and overt behaviors. They set levels of
aspiration They help define the
actual items/services considered acceptable for displaying those aspirations.
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Social Norms and Conformity
Social norm – any rule or behavior for meeting societal expectations normative system
Conformity pressures – actions taken to encourage or force members to act, think and/or express themselves in certain ways.
The more important a group is in our lives, the greater our desire to accept and conform to its norms
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Homan’s Equation
The difference between the “price” we pay for conformity and the rewards obtained for doing so determines for each of us whether we wil l conform to group expectations and to what
extent. Price:•Loss of freedoms•Time commitment•Financial commitment•Etc.
Rewards:•Levels of acceptance•Advancement within the group•Prestige gained•Etc.
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Reference Group Types
Primary reference group: one with which the individual has frequent face-to-face contact and in which members are close-knit. Examples: families, households, study groups, work teams,
roommates, etc. Secondary reference group: one in which interaction with
other members is less frequent Formal group: one in which there is some sort of structure
and/or for which there are specific membership requirements.
Informal group: one that has no special membership or attendance requirements, other than common interests.
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Reference Group Types (continued)
Membership group: one to which a person currently belongs.
Aspirational group: a group that a person would like to be part of, but to which he or she does not currently/ may never belong
Dissociative group: a group that an individual avoids or denies connection with.
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Reference Group Influences
Reference groups as part of the socialization process setters of roles information sources normative influences an expression of self-value
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Conformity Pressure and Marketplace behavior
The influence of reference groups varies Groups tend to be more influential on product
decisions than they are on either brand or outlet choices Conspicuousness “based on exclusivity” -- product
decisions (bikers and black leather jackets) Conspicuousness “associated with the individual” --
brand decisions possible within product class, “allowed personal expression”
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Social Power
Power of reward – praise, approval, acceptance, status, recognition, etc.
Coercive power – unacceptable behavior strongly discouraged
Expert power – informational attraction Referent power – closer the match between
person and group, more willingness to conform
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Defining Customer Value
-
=
Total CustomerValue
Total CustomerCost
(Product, Service,Personnel, &
Image Values)
(Monetary, Time,Energy, &
Psychic Costs)
CustomerDelivered Value
(Profit to theConsumer)
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Customer Satisfaction
Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations.
Buyer’s Expectations Are Based On:
Customer’s Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises
Pro
du
ct’s
Act
ua
l Per
form
anc
e Performance Exceeds Expectations- Customer is Delighted
Performance Below Expectations - Customer is Dissatisfied
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Total Customer Satisfaction
Highly satisfied (delighted) customers produce benefits:Highly satisfied (delighted) customers produce benefits: They are less price sensitive, They remain customers longer, They talk favorably about the company and products to others.
Delighted customers have emotional and rational preferences for Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty. products, and this creates high customer loyalty.
Therefore, the purpose of Marketing is to generate customer value Therefore, the purpose of Marketing is to generate customer value profitably.profitably.
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The Need for Customer Retention
NewCustomer
Costs
LostCustomer
Costs
CustomerLifetime
Value
The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider:
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Building Customer Satisfaction and Loyalty by Relationship Marketing
StructuralTies
StructuralTies
SocialBenefits
SocialBenefits
Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with
Customers and Other Stakeholders.
Methods for Building Relationships Include Offering:
FinancialBenefits
FinancialBenefits
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Value Chain Analysis
The term value chain describes a way of looking at a business as a chain of activities that transform inputs into outputs that customers value.
Customer value derives from three basic sources:activities that differentiate the product
activities that lower its cost
activities that meet the customer’s need quickly.
Value chain analysis views the organization as a sequential process of value-creating activities, and attempts to understand how a business creates customer value by examining the contributions of different activities within the business to that value.
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The Value Chain
Primary Activities
Sec
on
dar
y A
ctiv
itie
s
General administration
Human resource management
Research, technology, and systems development
Procurement
Inboundlogistics
Operations Outboundlogistics
Marketingandsales
Service
Mar
gin
Margin
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Conducting a Value Chain Analysis
Step 1. Divide the firm’s operations into specific activities or business processes, usually grouping them according to primary and support activities. Within each category, a firm typically performs a number of discrete activities that may represent key strengths or weaknesses.
Step 2. Next, attach costs to each discrete activity. Step 3. Recognize the difficulty in activity-based accounting. Step 4. Identify the activities that differentiate the firm from
their competitors.
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Conducting a Value Chain Analysis
Step 5. After documenting the value chain, managers need to identify the activities that are critical to buyer satisfaction and market success. These are the activities that deserve major scrutiny in an internal analysis. The mission should influence managers’ choice of the activities they
examine in detail. The nature of value chains and the relative importance of the activities
within them vary by industry. The relative importance of value activities can vary by a company’s
position in a broader value system that includes the value chains of its upstream suppliers and downstream customers or partners involved in providing products or services.
Step 6. Compare to competitors.