Marketing Management

Chapter 1

Effective marketing takes uninteresting product and makes it attention grabbing/exciting

E.g., DFC made milk interesting for young audiences using Get a Load of Milk campaign
o Cool website aimed at young people
o Social Media initiatives
o Campaign went Viral
Good marketing is a result of careful planning and execution; both an art and science

The Importance of Marketing

Financial success depends on marketing ability

Marketing important for society; helped introduce products that help peoples lives
Successful marketing builds demand for products and services creates jobs
o Also allows firms to engage in more socially responsible activities because generates
more money for them
Marketing builds strong brands and a loyal customer base (intangible assets), important for
value of the firm
Hard to make the right marketing decisions
Marketers need to respond swiftly and decisively to issues in an era of connectivity
Marketers need to carefully monitor customers/competitors, continuously improve their value
offerings and marketing strategies, or satisfy employees, stockholders, suppliers, and channel
partners in the process to prevent firm failure.

The Scope of Marketing

What is Marketing?

Marketing: identifying and meeting human/social needs; meeting needs profitably

o Formal Definition: activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large.
Marketing Management: art and science of choosing target markets and getting, keeping, and
growing customers through creating, delivering, and communicating superior customer value
o occurs when at least one party thinks about the means of achieving desired responses
from other parties
Selling is not the most important part of marketing!
The aim of marketing is to know and understand the customer such that the product/service fits
them and sells itself
o Marketing should result in a customer who is ready to buy; just need to make
product/service available

What is Marketed?

Goods: bulk of most countries production/marketing efforts

Services: increasing proportion of economic activity focused on services
 o Many market offerings mix goods and services (ie. Fast food)
Events: time based events ie. Trade shows, art performances, sport events
Experiences: through combining many services/goods, a firm can create, stage and market
experiences (ie. Disney world or customized experiences such as climbing mt. Everest)
Persons: ie. Oprah, david beckham
Places: cities, states, regions, nations compete for tourism, work talent, residents, factories
o Can include economic development specialists, real estate agents, banks, business
associations and advertising and public relations agencies.
Properties: intangible rights of ownership to real property or financial property can be
bought/sold and thus require marketing
Organizations: they want to build strong, favorable and unique image in the minds of their
target publics; ie. Universities, museums, corporations, nonprofits
Information: production, packaging, and distribution of information are major industries
Ideas: every market offering includes a basic idea; ie. Revlon makes cosmetics but sells hope
o Products/Services are platforms for delivering some idea/benefit
o Social Marketers: promote socially desirable behaviors

Who Markets?

Marketer: someone who seeks a response attention, a purchase, a vote etc. from another
party (prospect); if both selling to each other, both are marketers
Marketers responsible for demand management: want to influence the level, timing, and
composition of demand to meet organizations demands.
o Negative Demand: consumer) doesnt like product, may pay to avoid it
o Nonexistent Demand: consumer is either unaware of or uninterested in the product
o Latent Demand: consumer may share a strong need that cannot be satisfied by an
existing product
o Declining Demand: consumer begin to buy product less or not at all
o Irregular Demand: consumer purchases vary on seasonal, monthly etc. basis
o Full Demand: consumer buying all products put into marketplace
o Overfull Demand: more demand than supply
o Unwholesome Demand:
consumer attracted to products
that have undesirable social
consequences
Market: collection of buyers and sellers
who have transactions over a certain
product/product class (ie. Housing
market or grain market); used to be a
physical place
Figure 1.1: Nations economy and Global
economy consist of interacting sets of
markets linked through exchange
processes
 Marketers use market to mean
various groups of customers;
sellers are the industry and
buyers are the market
o Need market (diet-
seeking market),
product market (shoe
market), demographic
market (youth
market), geographic market (Chinese market) but extends to voter, labor, and donor
markets

Key Customer Markets

Consumer Markets: companies selling mass consumer goods/services (ie. Juice, cosmetics etc.)
o Want strong brand image by making superior product/packaging, ensuring availability,
and backing it with engaging communications and reliable service
Business Markets: companies selling business goods and services; they face well-informed
professional buyers who can evaluate competitive offerings
o Business buyers buy goods to make or resell to others at a profit so business marketers
need to show how their product will improve revenue or lower costs
o Advertising important but sales force, price and reputation may be more important
Global Markets: companies must decide which countries to enter; how to enter (ie. Exporter,
licenser, joint venture, contract manufacturer, or solo manufacturer); how to adapt
product/service to each country; how to price product in various countries; how to design
communications for different cultures
o There are different requirements for buying/disposing of property; cultural, language,
legal and political differences; and currency fluctuations.
o Payoff can be huge
Nonprofit and Governmental Markets: companies selling to nonprofit organizations with
limited purchasing power (ie. Churches, uni, charitable organizations, government agencies)
have to price carefully but price affects features/quality in the offering
o A lot of government purchasing calls for bids and buyers focus on practical solutions and
favor the lowest bid (disregarding extenuating factors)
Marketplace is physical; Marketspace is digital (internet); Metamarket is a cluster of
complementary products and services closely related in the minds of consumers but spread
across a diverse of industries
Metamarket is the result of marketers packaging a system that simplifies carrying out related
product/service activities
o Auto market made of manufacturers, new/old car dealers, financing companies,
insurance, mechanics etc.
Metamediaries assist buyer to move seamlessly through metamarkets (ie. Edmunds helps car
buyers find features and prices of cars and click to other sites to search for lowest price dealer
for financing, etc.)
o Metamediaries in home ownership, parenting, baby care, and weddings
Core Marketing Concepts

Needs, Wants and Demands

Needs: basic human requirement (food, water, clothing, shelter)

Needs become wants when they are directed to specific objects that might satisfy the need;
wants are shaped by our society
Demands are wants for specific products backed by an ability to pay
o Companies need to know how many people want the product but how many can buy it
and are willing to
Marketers do not create needs, needs preexist marketers; they just influence wants (along with
other societal factors)
Stated Needs: ie. Customer wants inexpensive car
Real Needs: ie. Customer wants a car with low operating cost, not low initial cost
Unstated Needs: ie. Customer expects good service from the dealer
Delight Needs: ie. Customer would like the dealer to include GPS
Secret Needs: ie. Customer wants friends to see him/her as a savvy customer
Responding to only stated needs can shortchange customer; to gain an edge, companies should
help customers learn what they want

Target Markets, Positioning, and Segmentation

Divide the market into segments; identify and profile distinct groups of buyers that might
want/require varying product and service mixes
o Do this by looking at demographic, psychographic, and behavioral differences among
buyers
Then decide on which segments present the best opportunities target markets
o For each target market, the marketer makes a market offering that it positions in the
minds of the target buyers as offering some central benefit (ie. Volvo cars for safety-
conscious, position as safest car)

Offerings and Brands

Companies address customer needs by putting forth a value proposition: a set of benefits that
satisfy those needs; intangible value proposition is made physical by an offering
Brand is an offering from a known source; companies strive to build a brand image with as many
strong, favorable, and unique brand associations as possible

Value and Satisfaction

Buyer chooses the offering they think provides the most value: the sum of tangible benefits,
intangible benefits and costs to her
Value: a combination of quality, service, and price (qsp); called customer value triad
o Value perceptions increase with quality and service but decrease with price
Marketing is the identification, creation, communication, delivery, and monitoring of customer
value
 Satisfaction: reflects a persons judgment of a products perceived performance in relationship
to expectations; performance falls short of expectations, you get disappointment, matches
expectations, you get satisfaction and exceeds expectations you get delight

Marketing Channels

Communication channels: deliver and receive messages from target buyers (ie. Newspapers,
magazines, radio, television, mail, telephone, billboards, posters etc.)
o Firms also communicate through the look of their retail stores, web sites etc.
Distribution Channels: used to display, sell, deliver product/service to buyer/user
o Can be direct (via Internet, mail, mobile phone etc) or indirect (distributors, wholesalers,
retailers etc.)
Service Channels: used to carry out transactions with potential buyers
o Warehouses, transportation companies, banks, insurance companies etc.
Need to choose the right mix of channels for offerings

Supply Chain

Longer channel stretching from raw materials to components to finished products carried to
final buyers
Ie. Coffee from farmers sold to wholesalers or fair trade cooperative (if fair trade), coffee
packaged by alternative trading organization (ATO) which then transports coffee to developing
world to be sold directly or via retail channels
A company captures only a certain percentage of the total value generated by the supply chains
value delivery system; when a company acquires competitors or expands
(upstream/downstream), its aim is to get a higher percentage of supply chain value

Competition

Includes all actual and potential rival offerings/substitutes a buyer might consider

Marketing Environment

Marketing environment consists of the task environment and the broad environment
Task environment: includes actors involved in producing, distributing, and promoting the
offering (ie. Company, supplies, distributors, dealers, and target customers)
Broad environment: demographic environment, economic environment, social-cultural
environment, natural environment, technological environment, political-legal environment

The New Marketing Realities

Major Societal Forces

Network Information technology: Information age more accurate production, more target
communications, more relevant pricing
Globalization: easier for companies to market in, consumers to buy from any country in world
Deregulation: many countries deregulated industries to have more competition and growth
opportunity
Privatization: many countries converted public companies to private to increase efficiency
 Heightened Competition: competition (domestic & foreign) raises marketing costs, shrinks
profit margins
o Brand manufactures are further buffeted by powerful retailers that market their own
brands become megabrands and extended to related product categories
competitive threat
Industry convergence: industry boundries blurring; more opportunities at intersection of 2+
industries convergence (ie. Apple, Sony releasing TV, mp3, video recorders etc.)
Retail transformation: store-based retailers facing competition from catalog houses, direct mail
firms, newspaper, magazine, TV, e-commerce
o So they try to build entertainment into stores (ie. Dicks sporting goods) to make
shopping an experience
Disintermediation: removal of intermediaries in distribution channels (ie. Amazon)
o Traditional companies engaged in reintermediation (brick and click) adding online
services to their offerings; could beat pure-click firms because more resources and
established brand names
Consumer buying power: partly to disintermediation, consumers have more buying power
Consumer information: consumers can collect info with more breadth/depth about anything
(ie. Imdb, wiki)
Consumer participation: consumers have an amplified voice to influence peer/public opinion so
companies invite consumers to participate in designing and marketing offerings to increase
sense of connection and ownership
Consumer resistance: customers feel there are less real product differences so less brand
loyalty instead more price/quality-sensitive in search for value and therefore less tolerant
about undesired marketing (aversion from over marketing)

New Company Capabilities

Societal forces introduce challenges but also created a new set of capabilities to help companies
cope/respond
Marketrs can use the Internet as powerful information and sales channel
o Increases ability to inform customers and promote products worldwide
Marketers can collect fuller and richer information about markets, customers, prospects and
competitors
o Can conduct fresh marketing research via Internet (arrange focus gps, questionnaires,
gather primary data in other ways)
o Can assemble info about customers puchases, preferences, demographics, and
profitability
Markets can tap into social media to amplify their brand message
o Blog/other postings/online support communities help improve brand image
Marketers can facilitate and speed external communication among customers
o Can create or benefit from online/offline buzz through brand advocates and user
communities
Marketers can send ads, coupons, samples, and information to customers who have
requested them or given the company permission to send them
 o Micro-target marketing and two-way communication is easier through TV, internet,
special-interest magazines
o Extranets linking supplier/distributor allow firms to send/receive info, place orders,
make payments more efficiently
o Can even interact with each customer individually to personalize messages, service,
relationship
Marketers can reach consumers on the move with mobile marketing
o Marketers can pinpoint consumers exact location, send them messages/coupons via
GPS technology; this is attractive because it reaches customer closer to the point of sale
Companies can make and sell individually differentiated goods
o Advances in factory customization, computer tech, database marketing etc. allows
customer to customize products (M&M w/ name on it, BMW user to design own car
models from variations)
Companies can improve purchasing, recruiting, training, and internal and external
communications
Companies can facilitate and speed up internal communication among their employees by
using the Internet as a private Intranet
o Employees can query each other, seek advice, download relevant info from and to
companys main computer
Companies can improve their cost efficiency by skillful use of the Internet
o Corporate buyers can get savings by using Internet to compare sellers prices and
purchase materials at auctions or posting their own items at reverse auctions
o Companies can improve logistics/operations while improving accuracy/service quality

Marketing in Practice

Marketing planning consists of analyzing marketing opportunities, selecting target markets,

designing marketing strategies, developing marketing programs, and managing the marketing
effort
o In practice, marketing planning is more fluid and continually refreshed; company must
always be innovating products/services, moving forward with marketing programs,
keeping in touch with customer needs, seeking new adv instead of relying on past
strengths
o Need to balance increased spending on social advertising, social media, SMS marketing
with appropriate spending on traditional marketing communications

Marketing in an Age of Turbulence

Secure your market share from core customer segments

Push aggressively for greater market share from competitors
o Slashing marketing budgets is buckling under pressure; push aggressively to add core
customer segments at expense of weakened competitors
Research customers more now, because their needs and wants are in flux
o Customers change during times of turbulence and chaos; research them more now
Minimally maintain, but seek to increase your marketing budget
Focus on all thats safe and emphasize core values
 o Customers flee to safety in times of distress; they need to feel safe and secure in your
company and products/services do whatever it takes to make them feel this way
Drop programs that arent working for you quickly
Dont discount your best brands
o Discounting established/successful brands tells market your price was too high before
and products wont be worth the price in the future once the discounts are gone
o Better to create another brand with lower costs; lets value-conscious customers stay
close but dont lose customers for higher-priced brands
Save the strong; lose the weak
o In turbulent markets, strongest brands and products must become stronger; no
time/money to be wasted on marginal brands/products that lack strong value
propositions/customer base

The New CMO

More pressure on marketing executives; tenure of CMO is 28 mo compared to 54 of CEO

o One explanation is that role of marketing differs widely among firms; therefore
management expectations differ
Another challenge for CMO is that success factors for top marketers are many and varied
o Need strong quantitative but good qualitative skills; independent entrepreneurial
attitude but also work well with other departments (ie. Sales)
Most important role for any CMO is to infuse a customer perspective and orientation in business
decisions affect any customer touch point
o Touch point: where a customer directly or indirectly interacts with the company in some
form

Marketing in the Organization

Marketing is not done by just marketing division; because marketing must affect every aspect of
customer experience, marketers must properly manage all possible touch points (store layouts,
package designs, product functions, employee training, logistics)
Marketing must be influential in key general management activities (product innovation, new-
business development)
Customer is source of companys prosperity; need to emphasize interdepartmental teamwork to
manage key processes

Company Orientation toward the Marketplace

Production Concept (oldest concept)

o Holds that Consumers prefer products that are widely available and inexpensive
o Managers concentrate on high production efficiency, low costs, mas distribution
o Makes sense in developing countries; marketers use this when they want to expand the
market
Product Concept
o Holds that Consumers favor products with most quality, performance, or innovative
features
 o better-mousetrap fallacy: believing a better product will itself lead people to buy the
product; a new/improved product will not necessarily be successful unless its priced,
distributed, advertised and sold properly
Selling Concept
o Holds that Consumers and businesses, if left alone, wont buy enough of the
organizations products
o Practiced most aggressively with unsought goods (funeral, insurance etc.)
o Assumes customers coaxed into buying wont have negative feelings/bad-mouth but
might even buy it again
o Focuses on needs of the seller; selling preoccupied with sellers need to convert product
into cash
Marketing Concept
o Customer-centered, sense-and-respond philosophy
o Job is to find the right products for customers, not right customers for your products
o Holds that key to achieving organizational goals is being more effective in competitiors
in creating, delivering, and communication superior value to your target markets
o Focuses on the needs of the buyer; contrast with selling concept
o Marketing concept better than selling concept
Holistic Marketing Concept
o Based on development, design, and implementation of marketing programs, processes
and activities that recognize their breadth and interdependencies
o Acknowledges that everything matters in marketing; broad, integrated perspective is
necessary

Relationship Marketing

Key goal is to develop deep,

enduring relationships with people
and organizations that directly or
indirectly affect the success of the
firms marketing activities
Relationship marketing: aims to
build mutually satisfying long-term
relationships with key constituents
in order to earn and retain their
business
Four key constituents: customers,
employees, marketing partners
(channels, suppliers, distributors,
dealers, agencies) and members of the financial community (shareholders, investors, analysts)
o Need to understand their capabilities and resources, needs, goals, desires to build
strong relationships
Ultimate outcome is marketing network: consists of company and its supporting stakeholders
customers, employees, suppliers, distributors, retailers, others; all whom it has built
profitable business relationships with
 o build an effective network of relationships with key stakeholders and profits will
follow
o More companies choosing to own brands rather than assets; subcontracting activities to
firms that do them better and more cheaply while retaining core activities at home
Companies also shaping separate offers, services, messages to individual customers based on
their info (demo, psycho, transaction history, media/distribution preferences)
o Estimate customer lifetime value and design offerings/prices to make profit over the
customers lifetime
o customer centricity
Relationship marketing emphasizes retention over acquisition (more costly); build customer
share by offering a larger variety of goods to existing customers, training employees in cross-
selling and up-selling
Need to conduct CRM and partner relationship management (PRM)

Integrated Marketing

Occurs when marketer creates marketing activities and assembles marketing programs to
create, communicate and deliver value for consumers such that the whole is greater than the
sum of its parts.
Two key themes:
o Many different marketing activities can create, communicate, and deliver value
o Marketers should design and implement any one marketing activity with other activities
in mind (ie. Buying MRI comes with expectation of good installation, maintenance, and
training services with purchase)
Company communications also must be integrated; using integrated communication strategy
means choosing communication options that reinforce and complement each other (ie. Tv,
radio, print advertising, public relations, web site communications so each contributes on its
own but also improves effectiveness of others)
Company must also develop an integrated channel strategy; should asses each channel option
for its direct effect on product sales and brand equity as well as indirect effect through
interactions with other channel options
o Must weigh trade-off between too many channels (conflict among channel
members/lack of support) and too few (losing out on market opportunities)

Internal marketing

Internal marketing: the task of hiring, training, and motivating able employees who want to
serve customers well
Ensures that everyone in organization embraces appropriate marketing principles (esp. senior
management)
Marketing within company is as or more important that marketing outside company; company
staff needs to be able to provide excellent service before promising it
Marketing is a company wide undertaking; not just one departments duty
o Drives companys vision, mission, and strategic planning
o Succeeds only when all departments work together to achieve customer goals
 o Departments only harmonize when management clearly communicates a vision of how
the companys marketing orientation and philosophy serve customers
Requires vertical alignment with senior management and horizontal alignment with other
departments; so everyone understands, appreciates, and supports the marketing effort

Performance Marketing

Performance Marketing: requires understanding the financial/non-financial returns to business

and society from marketing activities and programs
Analyze market share customer loss rate, customer satisfaction, product quality, other
measures; legal, ethical, social environmental effects of marketing activities and programs also
considered
Financial Accountability
o Marketers asked to justify investments in financial/profitability terms and in terms of
building the brand/growing the customer base
o Using more financial measures to assess direct and indirect value their marketing efforts
create and recognizing that much of their firms market value comes from intangible
assets (specifically brands, customer base, employees, distributor/supplier relations,
intellectual property)
o Metrics help firms quantify and compare marketing performance along broad set of
dimensions; firms use data to employ processes/systems to make sure they maximize
the value
Social Responsibility Marketing
o Because marketing effects go beyond company and customer to society as a whole,
need to consider ethical, environmental, legal, societal context of their role/activities
o Organizations task is to determine needs wants, interests of target markets and satisfy
them more effectively and efficiently than competitors while preserving or enhancing
consumers and societys long-term well-being. (ie. Electronic recycling programs with
prepaid postage to return old items for PC companies)
o As consumers grow more socially conscious, can incorporate social responsibility as a
way to differentiate company from competitors, build consumer preference and gain
sales/profit

Updating the Four Ps

Original marketing mix: product, place, price, promotion

Updated mix reflecting holistic marketing concept: people, processes, programs, performance
People: reflects internal marketing; fact that employees are critical to marketing success;
marketing only as good as people in the organization, marketers must view consumers as people
to understand their lives (not just as they shop/consume products)
Processes: reflects creativity, discipline, structure brought by marketing management
o Marketers avoid ad hoc planning and decision making and ensure innovative
ideas/concepts play a role in all they do
o Through right set of processes to guide activities/programs, firm can engage in mutually
beneficial long-term relationships
 Programs: reflects firms consumer-
directed activities; encompasses old
4 Ps and other marketing activities
that might not fit within old
framework
o Activities integrated such
that their whole is greater
than the sum of their parts
and they accomplish
multiple objectives for the
firm
Performance: defined as in holistic
marketing, to capture the range of
possible outcome measures that
have financial/nonfinancial
implications (profitability,
brand/customer equity etc.) and
implications beyond the company
itself (social responsibility, legal,
ethical, community related)
Four new Ps apply to all disciplines
within company; by thinking this
way, managers grow more closely
aligned to rest of company

Marketing Management Tasks

Developing Marketing Strategies and Plans

o Identify potential long-run opportunities given its market experience and core
compentencies
o Develop concrete marketing plans that specific the marketing strategy and tactics
Capturing Marketing Insights
o Generate a reliable marketing information system to monitor micro/macro
environments to assess market potential and forecast demand
Microenvironment: suppliers, marketing intermediaries, customers, competitors
Macroenvironment: demographic, economic, physical, technological, political-
legal, social-cultural
o Generate a dependable marketing research system
To transform strategy into programs, need to make decisions on expenditures,
activities, budget; sales-response functions that show how the amount of
money spent in each application will affect sales and profits is beneficial
Connecting with Customers
o Must consider how to best create value for chosen target market and develop strong,
profitable, long-term relationships with customers
 Requires understanding consumer markets: who buys what, why do they buy it,
what features/prices they want, where do they buy
o Need a full understanding of how buyers buy (whether consumer or organizational
buyer); need sales force trained in presenting product benefits
o Must divide market into major market segments, evaluate the best one and choose that
as target; do not want to market to all possible customers
Building Strong Brands
o Must understand strengths and weakness of brand as customers see it
o Must pay close attention to competitors, anticipating their moves and knowing how to
reach quickly and decisively; may want to initiate surprise moves itself (requires
anticipation of how competitors respond to these moves)
Shaping the Market Offerings
o To gain a competitive adv., company may provide additional services/features as part of
product offering
o Must decide on price; price should match well with offers perceived value or else
consumers will go to competitors product
Delivering Value
o Must determine how to properly deliver to the target market the value embodied in
products and services
o Channel activities: those the company undertakes to make the product accessible and
available to target customers
o Must identify, recruit, and link marketing facilitators to supply companys
products/services efficiently to target market
Requires understanding of distributors, wholesalers and how they make their
decisions
Communicating Value
o Must adequately communicate to the target market the value embodied by its products
and services
o Requires integrated marketing communication program that maximizes individual and
collective contribution of all communication activities
o Need mass communication programs and personal communications
o Need to hire, train, motivate salespeople as well
Creating Successful Long-Term Growth
o Must-initiate new-product development, testing, and launching as part of its long-term
view; strategy should take into account changing global opportunities and challenges
o Must build a marketing organization capable of implementing the marketing plan; need
feedback/control to understand efficiency and effectiveness of its marketing activities
and how to improve them