Transcript LEAD2009 - Duke University`s Fuqua School of Business

Introduction to Marketing
LEAD Program
Professor Julie Edell Britton
Duke University
June 30, 2009
Who am I?
Education: Ph.D., M.S., Graduate School of
Industrial Administration, Carnegie-Mellon University;
B.A. University of Nebraska in math
Teaching: Fuqua in 1980, CRM, Mkting Research,
Consumer Behavior, Statistics, Marketing Mngt
Research: Consumer cognitive and emotional
response to marketing communications
Favorite Sports: Duke Basketball, Nebraska
Football (American), Soccer
Family: Married with 6 children, aged 20 – 29; 3
boys, 3 girls, 2 grandchildren and 2 cats
Agenda
• What is marketing?
• Marketing management
– Analysis & Planning (The 3 C’s)
– Implementation (The 4 P’s)
• Conclusions
What is Marketing?
• Marketing is the process of planning and
executing the conception, pricing, promotion,
and distribution of ideas, goods, and services
to create exchanges that satisfy individual and
organizational objectives. (American
Marketing Association)
• Marketing is the art of creating and satisfying
customers at a profit
Marketing Sugar and Water
Marketing Sodium Hypochlorite
Selling vs.. Marketing
• The seller’s aim is to sell what they can
make, the marketer’s aim is to make
what they can sell
Selling Is Only the Tip of the
Iceberg
“There will always be a need for
some selling. But the aim of marketing is
to make selling superfluous. The aim of
marketing is to know and understand the
customer so well that the product or
service fits him and sells itself. Ideally,
marketing should result in a customer
who is ready to buy. All that should be
needed is to make the product or service
available.” Peter Drucker
Marketing Management Is ...
• The process of planning and executing
the creation, pricing, promotion, and
distribution of value in order to satisfy
customer and organizational objectives
Marketing Management is…
• Analysis
– The 3 C’s: customers, competitors,
company
• Planning
– The 4 P’s: product, price, promotion, place
(distribution)
• Implementation: organization, action
1st “C” is Customer Analysis
• Who buys and why?
• How many customers are there? will there be?
What are the growth rates?
• How is the buying done?
– Where do they obtain information and buy ? How are
decisions made (decision making process)?
• What are and will be their under-served needs
and wants?
• Are there relevant segments?
• Who are the customers that purchase the greatest
amount ?
A Customer Orientation:
The Marketing Concept
• The marketing concept holds that the key to achieving
organizational goals consists of determining the needs
and wants of target markets and delivering the desired
satisfactions more effectively and efficiently than
competitors.
• Concentrate on the needs of the buyer, not the needs of
the seller.
• The industry's approach used to be: “Here's what we have
--- buy it!” Now the customer is the most important product
... because if the customer doesn't like what we've got,
they can go elsewhere. --- U.S. Steel
• We were so arrogant then, we thought people would buy
Coors if they had to open it with their teeth. -- Coors
Brewery
Examples of Successful Ventures
• Perdue Chicken
Benefits: Tenderness
Price: 10 percent premium
Target market: Quality-conscious consumers of
chicken
V
• Volvo Station Wagon
o
Benefits: Durability and safetyl
Price: 20 percent premium v
o
Target market:
S
Safety-conscious
t
“upscale” families
a
t
Breakdowns in Customer Orientation
Can Be Very Expensive....
• The RCA Videodisc ($580 million loss)
 Limited number of titles available
 Unlike tape formats, could not record programs
• Federal Express Zap Mail ($400 million loss)
 2-hour delivery delay vs. fax machines
 Machines broke down
 Copy quality poor
 Faulty transmissions common
The Value Proposition
Value to
Target
Market
Benefits
to
Target
Market
Price
to
Target
Market
Pillsbury’s Oven Lovin’ Cookie Dough
•




•


•
•



Seeking to expand sales in the refrigerated, ready-to-bake cookie
dough category, Pillsbury introduces Oven Lovin’ in September 1991.
Flavors filled with Hershey's chocolate chips, Reese's pieces, or Brach’s
candies
Resealable tub
Priced 20 cents higher than conventional tube package
Tub contains 18 ounces (tube contains 20 ounces)
Early Results (December 1991)
Sales soar to $6 million per month
Oven Lovin’ is available in 90 percent of all supermarkets
But as of early 1993...
Monthly sales have dropped to less than $1 million
Available in only one-third of supermarkets
Pillsbury now selling only one flavor (chocolate chip)
Oven Lovin’ Diagnosis (Cont’d)

Were the benefits important to customers?
–Pillsbury subsequently learns that most customers bake all
of the dough at one time, eliminating the need for a
resealable package.
•
Were customers willing to pay the price premium?
–Families with young children account for most of the market
for refrigerated dough (singles and couples bake less often).
–Tight budgets make these families more sensitive to price
and reluctant to pay the premium charged.
•
Could better customer analysis have helped?
–Pillsbury chose to conduct only limited market research
before launching the product and did not run a test market.
–Pillsbury needed to ask consumers: How many cookies do
you bake at one time?
Ways to Deliver Customer Value
Price
Value
"A great deal"
"Best price"
"Trouble free basic service"
Performance
Value
"Always at cutting edge"
"High price but worth it"
"Constantly renewing and creative"
Relational
Value
"Really understands my business"
"Exactly what I need"
“Close business partner"
Key Principles of a Successful Venture
• A successful venture entails designing
products, services, and programs that
emphasize features which are both:
 Important
 Provide
to customers and...
a sustainable differential advantage
over competitors.
2nd “C” is Competitor Analysis
• Who are the competitors?
– Who do customers buy from now?
– Who might become interested in the future?
• What are the competitors’ …
–
–
–
–
–
Goals
Strategy
Assumptions
Capabilities
Strengths, Weaknesses
The Case of 7-Up
• Background
Launched in 1929
 Originally promoted as:
•
- Cure for 7 kinds of hangovers
•
- Good mixer
 In 1942, J.W. Thompson takes over account and promotes brand as
fresh and clean tasting.

• The Situation in 1967
7-Up third in industry sales behind Coke and Pepsi
 7-Up faces competition from new lemon-lime brands:
•
-Sprite and Fresca by Coca-Cola
•
-Teem by Pepsi
•
- Wink by Canada Dry
 7-Up at a resource disadvantage versus other major brands

Advertising and Promotion Budgets
by Brand (1967)
60
55
50
44
40
30
20
12
10
9
Sprite
Teem
10
0
Pepsi
Coca
Cola
7-Up
NEW BRANDS
Soft Drink Attitudes Study
(Conducted by J. Walter Thompson)

Consumers equated soft drinks with colas

To consumers, 7-Up not perceived as a soft
drink
–- Extremely low top-of-mind awareness of 7-Up as a
soft drink
–- Brand profiles showed that all attributes typically
associated with soft drinks were possessed by Coke
and Pepsi, but not by 7-Up.
7-Up (Cont’d) - Brand Profiles
•
ATTRIBUTE
Good for snacks
Good with meals
For active, vital people
A drink my friends like
A good buy
A big bottle
Thirst quenching
Good tasting
For mixing
Good for indigestion
% OF CONSUMERS
THAT BELIEVE BRAND
POSSESSES
ATTRIBUTE
7-UP
COKE PEPSI
39
62
61
32
47
44
38
60
66
30
55
53
28
38
50
16
39
58
60
30
28
58
62
59
66
18
4
60
17
8
7-UP (Cont’d) - Strategy
• Objective 1: Convince consumers 7-Up is a soft
drink



Store 7-Up under the “soft drink” address in memory
View 7-Up as an alternative to colas
How? Tell consumers 7-Up possesses all attributes
traditionally associated with soft drinks.
• Objective 2: Convince consumers 7-Up is a
superior soft drink
Need a point of difference over competitors emphasize
attributes where 7-Up has a differential advantage:
• - Thirst quenching (no after taste, never too sweet)
• - Tastes good, but different (fresh, clean taste)

7-UP (Cont’d)
Sales Response % Change
30%
25%
20%
7-UP
Industry
15%
10%
5%
0%
1968
1969
1970
Achieved with no increase in marketing expenditures
Analyzing Industry Attractiveness
Potential competitors
Suppliers
Competitors
Customers
Laws
Identify desirable opportunities
Identify threats to successful entry
Substitutes
What Makes an Entry Opportunity
Desirable?
Suppliers
• Suppliers have few
other options
Potential competitors
• Difficult for others
to enter
Competitors
• Few competitors
Laws & regulations
• Few constraints
Customers
• Many customers
• Growing market
Substitutes
• You sell specialized products
• New products not emerging
3rd “C” - Company Analysis
• Objectives
– Corporate
– Business unit
• Strengths and weaknesses
–
–
–
–
Reputation
Costs
Expertise
Culture and orientation
Combining the 3 C’s: The
Situation Assessment
• What customer needs and wants can we
meet?
– What is profit potential?
• What do we need to do to meet the
customers’ needs?
• Can we do it better than anyone else?
– What advantages/disadvantages do we have?
– How will competitors be likely to respond? What
does that mean for profits?
• How sustainable are our advantages?
Marketing Management is…
• Analysis
– The 3 C’s: customers, competitors,
company
• Planning
– The 4 P’s: product, price, promotion, place
(distribution)
• Implementation: organization, action
• Use 4P’s overhead here
Product
• A set of benefits from which customers
derive value
– Not just a set of features (tangible things that it is)
– Not just a set of performances (things that it does)
• Important to note that key customer benefits
may be unrelated to features and
performance
Five Product Levels
Price
• The issues
– What is the value to customers of the benefits
the product provides?
– How much does it cost to deliver these benefits?
– How much do or will customers have to pay to
get these same or substitute benefits elsewhere
(i.e., from competitors)?
• The objective
– choose price to maximize long-run profit
Promotion
• Advertising, sales incentives, events, public
relations, publicity, direct marketing and
personal selling
– What is the objective?
• Awareness
• Reminder
• Persuasion
– What is the appropriate vehicle?
– What is the appropriate message?
What is the message of this ad?
Place (Distribution)
• The issues
– Which channels to use
• Integrated or third party intermediaries (depth)
• Selective or intensive coverage (breadth)
– How to motivate the trade (intermediaries)
to give favorable treatment
Place (Distribution)
Direct to Consumer
Marketing Management
• Is about understanding your customers
and what value they are looking for
• Is about understanding your competitors
and why they are successful
• Is about understanding your companies
strengths and weaknesses
• And translating that knowledge into a
product with a price, promotion and
distribution strategy that makes it meet
the needs of your target customers!