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Today’s Topic:

The Marketing Function

What it is;
why it matters;
and how technologists can
interact with, support, and
add value to it
Today’s Agenda
 The marketing function and
marketing decisions, including
R&D’s role
 Return graded mid-term exams
 The R&D-marketing interface: the
good, the bad, and the ugly
 Readings/assignment for next
week: sales channels
Marketing

Responsibilities, Roles,
Relevance
Marketing is responsible
for
“marketing mix”
decisions
(C + 4P’s)
 Customers/needs to be targeted
Customers/needs to be targeted
(segments)
 Product (definition of the “whole
product”)
 Price (levels and strategies)
 Promotion (communication)
 Place (sales/distribution methods)
If that’s what
marketing does…

who’s responsible
for revenues and
profits?
The only choices are…
….
 Senior mgmt (CEO/president, group head,
...)
 Marketing
 R&D
 Sales
 Operations (manuf, service ops, logistics)
 Support: IT, Finance, HR, Legal,
Investor Relations, Public/Media
Relations (PR), etc
What is Marketing’s
“true north” in making
mix decisions?
What is Marketing’s “true
north”
in making mix decisions?
Market and financial
objectives,

based on corporate
strategy/objectives (if
available),

guided by the competitive


Mix elements:
Customers
 Customer segments targeted
(industry, size, demographics,
psychographics, ….), and/or

 Needs addressed (customer


problems, particular features needed,
price sensitivity, service needs, ….)

 Specificity here simplifies other


mix decisions!
Mix elements: Product
 Product design/features
 Cost target (or profit target)
 Competitive positioning
 Name, and fit with branding
 Packaging
 Customer service
 Breadth and depth of product
line (versions)
Mix elements: Price
 Prices: manufacturer,
wholesaler, distributor
 Payment terms and conditions
 Warranty
 Discount policies
 Price strategy vs. competitors
 Bidding tactics
Mix elements: Place
 Channel choice: direct and/or
indirect
 Channel length and breadth
 Channel partner selection
 Franchising policies
 Channel coordination and control
 Channel competencies
 Channel training (sales and
Mix elements: Promotion
 Branding
 Advertising
 Direct marketing (mail, catalog,
telemarketing, internet)
 Public relations and industry
relations
 Trade shows and events
 Price promotions
The mix should “fit”
with…..

 Needs/desires of the target market


 The company’s competencies and
“image”
 Competitors and their
strategies/programs
 Channel partners’ needs and
competencies
Consider the HP-MPD
situation…...

What should the role


of R&D be in making
the decisions MPD
faces?
HP-MPD Decisions
 Competitive advantage(s)?
 Target customers?
 Product features and price?
 Customization focus?
 Precision Architecture and Unix?
 Resolving sales issues?
 Pricing?
R&D’s Role in MPD’s
Business Decisions
Provide information,
ask questions,
pose relevant considerations,
provide opinions,
vote,
or decide…...???
How can R&D assist in
mix decisions?

Information, knowledge,
perspective, questions,
challenges, proposals,
opinions, votes………or not at
all !!
Mid-term exam grading
 Each paper reviewed 3 separate
times (scan, grade, re-look for
consistency)

 Each question scored in 1/2 point


intervals

 Points scored out of 25 determined


grade
Class participation
grade
 Grade depends on both quality (more
important) and frequency (less
important) of comments, questions and
answers to class assignments

 Second half of semester will count for


2/3 of participation grade !!
R&D-Marketing
Integration
 What it’s important to “integrate,”
and why
 R&D/marketing: respective desires
for integration
 Perceptions of actual integration
 Areas of greatest dissatisfaction
 Barriers to integration
Why is “Integration”
an Issue?
 Product ideas come from joint
analysis of markets and technologies
 Product planning requires
market/marketing and technical
inputs
 Market tracking (and feedback) of
customer needs is critical to future
products/revs
 R&D-marketing communication is
Here’s what engineers and
marketing people have to
say…
 Survey taken in 1985
 109 marketing managers and 107
R&D managers involved in new
product development in small- and
medium-sized ($20M to $1B
revenue) “research-intensive” firms
 source: J. Prod Innov Manag
1985:2:12-24
Your main conclusions
from the survey data…
…?
Agreed Areas of “Most
Importance” (top 5)

 Marketing provides info on customer


product reqmts, feedback on product
performance, and info on
competitors
 Marketing involved in setting product
goals and priorities
 R&D involved in designing products
according to market needs
Areas of “Medium-
Importance” (middle 4)
 Marketing involvement in screening
new product ideas
 Marketing shares test-marketing
results with R&D
 Marketing finds commercial
applications of new product ideas
and/or technologies
 R&D modifies products according to
marketing’s recommendations
Areas of “Lesser
Importance” (bottom 4)
 Marketing involved in generating
new product ideas
 R&D involvement in screening new
product ideas
 R&D involvement in analyzing
customer needs
 Marketing involvement in product
development schedules
Desired Integration……
Marketing Wants More Than
R&D
 In 4 out of the 5 “most important”
 In 2 of the 4 “middle important”
 In 3 of the 4 “least important”
 In only one category of 13 did R&D
want more integration than
marketing: “involvement with
marketing in analyzing customer
needs”
Actual Integration…...
 Marketing thinks R&D is under-involved
in developing/modifying products to
market needs and to marketing’s
recommendations (R&D does not
perceive as high a need for their
involvement)

 R&D thinks marketing provides


insufficient info on customer needs,
customer feedback, and competitors
(marketing somewhat, but not
completely, disagrees)
Actual Integration
(cont’d)
 Marketing thinks it’s more involved
in generating new product ideas,
and finding commercial
applications for R&D’s ideas (than
R&D thinks it is)

 Overall: both groups are


dissatisfied with current
integration, but with different
things
Barriers to Integration
(per the authors)
 Role definitions
 Communication barriers
 Insensitivity to others’ capabilities
and perspectives
 Lack of senior mgmt
support/leadership
 Personality and cultural differences
 Lack of market knowledge (on both
sides)

Other Barriers
 “soft” marketing vs. “hard”
engineering

 perspectives on “how hard it is”

 different potential for “correctness”

 de jure vs. defacto “power”

 short- vs. long-term focus


Consider the HP-MPD
case….
 How is R&D measured?

 How is Marketing measured?

 Who is responsible for overall


success (profits)?

 Are there more appropriate


measurements?
Topic for Next Class:
Sales (Distribution
Channels)
 How companies reach their
customers: types of sales channels
available
 Rationale for choosing which sales
channel(s) to use
 Issues in “managing” and serving
sales channels
 Impacts of channel choice on the
design of the “whole product”
Readings for Next Class

 Going to Market - read to understand


types of sales channels and the reasons
for choosing them

 Lotus Development Corporation:


Channel Choice (case)
Lotus’ Channel Decision
 Lotus 1-2-3 is the spreadsheet market
leader
 Lotus sells through distributors/dealers
(d/d)
 D/d will continue to be the primary
channel for most of Lotus’ customers,
but…..
 Lotus is concerned that d/d may not be
successful with large customers
 Lotus is considering serving large
customers directly, bypassing the d/d
Direct and Indirect
Selling

Lotus distributors dealers Large


customers
Assignment Questions
 Should Lotus establish a direct sales
channel? If so, to which
customers? (be sure you are clear on the
functions a direct channel would perform)

 Would direct selling have impacts on


the “whole product” design of 1-2-3?
Before you start…...
 Evaluate Lotus’ financial
performance; do they have the
financial capability to launch new
efforts?
 How big is Lotus’ market? What is
Lotus’ market share?
 What amount of revenue ($) is at
issue in this decision?
Guidance for Question 1…
 How are large customers currently
served? Who does selling? Who “fulfills”
orders?
 How much money do the dealers make,
and how? (do some price-margin
calculations)
 Why is Lotus considering this change?
Are there reasons other than those
stated?
 What do the customers want?
 Can Lotus make money selling directly
Guidance for Question 2…

 Are there changes in “what business


Lotus is in” if it sells direct?
 Are there new functions Lotus must now
perform?
 What does Lotus need to do to make
money going direct?
 Finally…..what impacts are there on the
product and “whole product”?