Understanding Marketing Management

1. Chapter 1 Understanding Marketing Management

2. Definition of Marketing • The American Marketing Association (Approved July 2013): Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. • The shortest definition: Marketing is meeting needs profitably.

3. Peter Drucker’s Perspective on Marketing • There will always, one can assume, be 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 services fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.

4. Definition of Marketing Management • 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.

5. Goods Services Events & Experiences Persons Places & Properties Organizations Information Ideas What is Marketed?

6. Case: 日本宮崎縣 (Miyazaki) • 知事：東國原英夫（2007年1月23日就任） • 東國原英夫一年365天要上400多個電視通告。日本廣告公司電通估計，以他曾於一個星期內在182個節目中露臉，出現時間為22小時30分鐘來看，換算成廣告價值高達165億日圓。 • 大方開放肖像權讓宮崎業者用來促銷產品。走在宮崎的街上，可以看到許多以東國原英夫卡通造型當招牌的商店。隨便走進一家超市，貨架上琳琅滿目的商品，包括土雞料理、拉麵、酒、甜點、水果等，東國原英夫都在包裝上對你笑咪咪。 • 日本財經雜誌《Trendy》評選2007年日本十大熱門商品，「宮崎」高居第六名。日本版《GQ》雜誌評選六位「2007年度風雲人物」，名列第一的就是東國原英夫。 • 中華航空自2008年起，增闢台北直飛宮崎的班機。

7. National Milk Processors Education Program

8. Core Marketing Concepts • Needs, wants and demands • Target markets, positioning, and segmentation • Offerings and brands • Value and satisfaction • Marketing channels: consist of communication channels, distribution channels, and service channels.

9. Core Marketing Concepts • Supply chain: a longer channel stretching from raw materials to components to final products that are carried to final buyers. • Competition • Marketing environment: consist of the task environment and the broad environment

10. Needs, Wants and Demands • Needs (需要): the basic human requirements. • Physical: food, clothing, shelter, safety • Social: belonging, affection • Individual: learning, knowledge, self-expression • Wants (慾望): when needs are directed to specific objects that might satisfy the need. • Demands (需求): wants for specific products backed by an ability to pay.

11. Marketing Debate 福特（Henry Ford）曾說，如果當年他問消費者想要什麼，他們會說要一匹跑得更快的馬，而不是一部奔馳的汽車。 福特的話帶給你什麼啟示？

12. Responsive, Anticipative, and Creative Marketing • A responsive marketer finds a stated need and fills it. • An anticipative marketer looks ahead into what needs customers may have in the near future. • A creative marketer discovers and produces solutions customers did not ask for but to which they enthusiastically respond. • Akio Morita (盛田昭夫) once proclaimed that Sony doesn’t serve markets; Sony creates markets. The Walkman is a classic example. • 3M: “Our goal is to lead customers where they want to go before they know where want to go.”

13. Demand States and Marketing Tasks • Marketing managers are responsible for demand management. • Negative demand → counter marketing, e.g. insurance. • Non-existent demand → stimulus, e.g. encyclopedias. • Latent demand → developing, e.g. solar energy, Kindle. • Declining demand → remarketing, e.g. Arm & Hammer, Listerine, and 嬌生嬰兒洗髮精.

14. Demand States and Marketing Tasks • Marketing managers are responsible for demand management. • Irregular demand → synchromarketing (同步行銷), e.g. 黑松沙士, happy hour. • Full demand → maintain marketing • Overfull demand → demarketing (低行銷), e.g. Mister Donut, 王師父金月娘. • Unwholesome demand → social marketing, e.g. cigarettes, drunk-driving, anorexia, and 讓座.

15. Discussion Question Can you name a category of products for which your negative feelings have softened? What precipitated this change?

16. Company Orientations Toward the Marketplace • The production concept • The product concept • The selling concept • The marketing concept • The holistic marketing concept

17. The Production Concept • The idea that consumers will prefer products that are widely available and inexpensive. • Focus: high production efficiency, low costs, and mass distribution. • It is useful when (1) the demand for a product exceeds the supply (e.g., developing countries such as China); (2) the product’s cost is too high. • Examples: Ford’s Model-T, standard raw materials and components, CD, LCD.

18. The Product Concept • The idea that consumers will prefer products that offer the most quality, performance, or innovative features. • Focus: making superior products and improving them over time. • Examples: digital camera, CPU. • Better mousetrap fallacy • Marketing myopia (Theodoes Levitt, 1960)

19. Product-Oriented vs. Market-Oriented Definitions of a Business

20. The Selling Concept • The idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort. • The selling concept assumes that customers who are coaxed into buying the product will like it. Or, if they don’t like it, they will possibly forget their disappointment and buy it again later.

21. The Selling Concept • Sergio Zyman (Coca-Cola’s former vice president of marketing): the purpose of marketing is to sell more stuff to more people more often for more money to make more profit. • Focus: undertake an aggressive selling and promotion effort. • Practiced most aggressively with unsought goods (e.g., insurance, encyclopedias, and funeral plots).

22. The Marketing Concept • The idea that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets. • The marketing concept emerged in the mid-1950s. • Slogans: “Find wants and fill them”, “Love the customer, not the product”, and “We do it all for you” (Toyota). • Three hurdles: organized resistance, slow learning, and fast forgetting.

23. Marketing Concept vs. Selling Concept

24. Contrast between the Selling Concept and the Marketing Concept

25. The Extreme of the Marketing Concept – The Customer Concept

26. The Holistic Marketing Concept • Based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies. • An approach to marketing that attempts to recognize and reconcile the scope and complexities of marketing activities.

27. Holistic Marketing Dimensions

28. Integrated Marketing • The marketer’s task is to devise marketing activities and assemble fully integrated marketing programs to create, communicate, and deliver value for consumers. • McCarthy’s four P’s (the seller’s point of view) • Product • Price • Place • Promotion

29. Integrated Marketing • From a buyer’s point of view, each marketing tool is designed to deliver a customer benefit. • Solution: How can I solve my problem? • Information: Where can I learn more about it? • Value: What is my total sacrifice to get this solution? • Access: Where can I find it?

30. The Four P Components of the Marketing Mix

31. Marketing-Mix Strategy

32. Internal Marketing • The task of hiring, training, and motivating able employees who want to serve customers well. • Marketing must be embraced by the other departments (e.g. production, finance, and human resource); they must also “think customer.”

33. An Example of a Coordination Problem that Requires Effective Internal Marketing Question: What would you do if you were the VP of marketing in this airline? How would internal marketing be of help? Show specific examples 33

35. Socially Responsible Marketing – The Societal Marketing Concept • The idea that holds that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests. • Examples: Body Shop, HSBC, Dell Asia in Malaysia, Bata Indonesia. • Johnson & Johnson’s Tylenol ($240 million), 保力達蠻牛 (NT 120 million), 金車毒奶事件.

36. An Example of the Social Marketing Concept – Earth Tree • 將來自第三世界國家的手工製作品，經由較進步的國家像歐美、日本等國負責設計與商品化流程，然後銷售出口。 • 因為堅持Fair Trade的基本精神，讓第三世界國家的工錢不被剝削，保有合理的利潤，因此多販售出一樣商品也就能夠讓他們靠自己的努力改善困窘的生活，甚至也因為這樣可以學到新的謀生技能，即便在不穩定的環境中也能靠他們自己的力量感到榮耀和成就。

37. Cause-related Marketing (公益行銷, 善因行銷) • Link the firm’s contributions to a designated cause to customers’ engaging directly or indirectly in revenue-producing transactions with the firm • The creation of the term "cause-related marketing" is attributed to American Express. • Some experts believe that the positive impact on a brand from cause-related marketing may be lessened by sporadic involvement with numerous causes. • Branding: self-branded, co-branded, and jointly-branded.

38. Customer Relationship Management (CRM) • The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. • The ultimate outcome of relationship marketing is a unique company asset called a marketing network. • A marketing network consists of the company and its supporting stakeholders – customers, employees, suppliers, distributors, retailers, ad agencies, university scientists, and others – with whom it has built mutually profitable business relationships.

39. Some Facts that Bear on Customer Retention • Acquiring new customers can cost 5 to 10 times more than the costs involved in satisfying and retaining current customers. • The average company loses 10% of its customers each year. • A 5%reduction in the customer defection rate can increase profits by 25% to 85%, depending on the industry. • The customer profit rate tends to increase over the life of the retained customer.

40. Profitability at 75% Customer Retention

41. Profitability at 80% Customer Retention

42. Customer Lifetime Value and Equity • Customer lifetime value: the value of the entire stream of purchases that the customer would make over a lifetime of patronage. • Lexus: $600,000; Taco Bell: $12,000; Supermarket: $50,000. • Customer equity: the total combined customer lifetime values of all of the company’s customers. • Cadillac vs. BMW

43. Relationship between Customer Life and Customer Retention

44. Customer Lifetime Value – Finite Time Horizon

45. A Hypothetical Example to Illustrate CLV Calculations

46. Customer Lifetime Value – Infinite Time Horizon • In the case of an infinite time horizon, if margins and retention rates stay constant over time, CLV simply becomes margin (m) times a margin multiple r/(1+i-r).

47. Margin Multiple

48. Selective Relationship Management • Weed out losing customers and target winning ones for pampering. • Examples: Citibank, First Chicago Bank, and Fidelity Investment. • Risk: future profits are hard to predict.

49. An Example of Selective Relationship Management • 西南航空(Southwest Airlines)流傳一個故事，有一名對公司抱怨不休的顧客，每回搭機後，一定寫信到公司總部抗議，她在每封信結語中都發誓再也不搭西南航空的飛機了，但抗議信還是不斷寄來。最後，有個顧客溝通人員火大了，把整疊信拿去給創辦人Herb Kelleher。Kelleher看過後，拿出一張印有公司名稱的信紙，寫道：「瓊斯太太：我們會想念妳的！」 節錄自哈佛商業評論 全球繁體中文版 (p. 42, December 2007)

50. Butterflies True Friends Good fit between company’s offerings and customer’s needs; high profit potential Good fit between company’s offerings and customer’s needs; highest profit potential High Strangers Barnacles Little fit between company’s offerings and customer’s needs; lowest profit potential Limited fit between company’s offerings and customer’s needs; low profit potential Low Long-term customers Short-term customers Projected loyalty Customer Relationship Groups Profitability