Welcome toMarketing Design & Operationsworkshop v1.3 Samer Yamak Associate Tutor University of Leicester School of Management
Agenda • Overview of Marketing • Relationship Marketing • Marketing Design • Marketing Mix • Strategic Marketing
What is Marketing? There are many definitions of marketing. • Old Definition: Act or practice of advertising and selling a product (house Webster dictionary of American English 1997) • “Marketing is the process and execution of the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals” (American Marketing Association, 2004). • “Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others” • The Simplest Definition is:“Marketing is managing profitable customer relationships” (Kotler, 2011)
What is Marketing? A I D A Attention Interest Desire Action • Get the Attention of the intended buyers within the targeted market segment. • Create and Interest in the product or service. • Capitalize on the Desire of the prospect for the product or service. • Ensure that the prospect takes Action to acquire the product or service
Marketing Overview • A process for enacting exchange to mutually satisfying exchange relationships occurring often in the market environment. • Largely related to the particular needs and wants of the populations of any society. Involves a suitable planning and implementation of a marketing strategy to address a given situation. • The real challenge of marketing is how it can help creating markets and retaining customers in a highly competitive economy • “Marketing Myopia” focused on why companies grow in power and then later on decline due to their increasing focus on their products at the expense of the needs of the customers
Role of Marketing • Marketing is way of creating a strategy to influence (iphone!) • The marketing environment is one you choose - not one that is constrained • Marketing needs to adapt to the market environment (Pepsi cola in Japan) • Marketing role is to create a perceived value that is better than the competition • Marketing is a long term strategy “It’s more important to do what is strategically right then what is immediately profitable”. Discuss !
Examples of Marketing Offers (Marketing Scope) • Goods • Physical goods, products, equipment, tools • Services • Airlines, hotels, Professionals like engineers / doctors / lawyers / management consultants… • Experiences • Walt Disney, Wild Wadi, Hard Rock Café, Planet Hollywood • Events • GITEX / Riyadh, Exhibition, CeBit… • Persons • Tom Cruise, Angelina Jolie, Tiger Woods, Michael Schumacher
Examples of Marketing Offers (Marketing Scope) • Places • Beirut, Dubai, London, Sharm Al-Sheikh… • Properties • Emaar / Dar Al-Arkan / Tatweer etc… • Organizations • Emirates, Aramco P&G / J&J / Philips, STC, Mobily, Zain… • Information • (Fashion magazines / Property Weekly)
Is marketing limited to “meeting needs profitably”? • •Not exactly -but to a certain extent yes • •NPOs–(they may want to realize other objectives) • •Charities ? • •Government agencies ? • •Political parties ? • •Individuals ? • •Other objectives could be: • •Raising awareness of a social cause (Righting Smoking) • •Improving health of a society by change of behavior (H1N1) • •Attracting visitors to a free exhibition at a museum
Consumers’ Needs, Wants & Demands • Wants - form that a human need takes as shaped by culture & individual personality i.e. American & Indian foods. Ex: You may want a Pepsi or Barbican to quench your thirst as a solution other then water • Needs - state of felt deprivation including physical, social, and individual needs i.ehunger. Ex: You may drink water as a need MARKETING should ascertain between NEEDS and WANTS which is crucial to facilitate exchange
Identifying and Meeting human & social needs • •PROCTER & GAMBLE: • OLESTRA is a tasty but less fatty food to fight obesity •IKEA: • Created knock-down furniture for people who wanted good furniture at a substantially lower price and easy to assemble/dismantle and use & move when required •SAP: • “Outrun competition, run SAP”. SAP injected the idea of beating competition as a need to have the SAP system bought by customers These examples show a drive to turn a private or social need into a profitable opportunity
Self Recognition Self Esteem Belonging Security Physiological Needs Physiological needs can be satisfied unlike other needs that are infinite. NEEDS Maslow’s Pyramid Marketing Activity WHY??
From a Physiologic Need to a need of Self Esteem and Self Accomplishment! GILLETTE Which need?
MASS MARKETING Not differentiated SEGMENTED MARKETING ONE to ONE MARKETING + + Marketing Evolution MASS MARKETING Not differentiated Before the 70th … SEGMENTED MARKETING 70th and 80th ONE to ONE MARKETING 90th and 2000 Nowadays: all marketing forms are coexisting:
Marketing is becoming more and more diverse Service Marketing Operational Marketing Development Marketing Marketing and Operations Management (MOM) Trade Marketing Telemarketing Customer Marketing Marketing and Resources Management (MRM) Marketing B to C Relationship Marketing Marketing B to B to C Street Marketing Channel Marketing Direct Marketing Marketing B to B Different kinds of Marketing for many definitions of marketing
Organizational process to create value Customer Company Listen Needs / Expected Value Targeted Value Communication Company Performance Satisfaction Perceived Value Proposed Value Experience Ex: by closely monitoring market needs, Cirque du soleil redefined market standards by creating a new perceived value in the cirque business . 7 months after their launching, they achieve more then 60% market share in US
Organizational process to create value Possible defaults Customer Company Wrong listening Needs / Expected Value Targeted Value Too many promises Bad implementation In-Satisfaction Perceived Value Proposed Value Wrong interaction
What’s a perceived value? Re-purchase • Perceived product • Principal Product • Performances • Quality • Associated services • brand… Satisfaction Perceived Value Experience • Perceived cost • Price • Efforts (Lurpak) • Time • Risk • Switch cost… No Satisfaction Value of competition offers Customer run away
Consumer CUSTOMER ≠ CONSUMER ? For example, a store that sells primarily toys would have the adult, or purchasing unit, as the “customer” and the children as “consumers” or “end user”. Identifying and servicing the needs of BOTH the customer / purchasing Unit and the consumer / end user are crucial to sustaining competitive advantage!
Consumer What is Consumer Behavior? • The behavior that consumers display in seeking, purchasing, using, evaluating and disposing of products that they expect will satisfy their needs. • • Customer Behavior is the study of how individuals make decisions to spend their resources on need satisfying goods and services.
The Buyer Decision Process • Need Recognition • Information Search • Evaluation of Alternatives • Purchase Decision • Post purchase behavior
Relationship Marketing Perspective Sales Sales Operational Marketing Relationship Marketing Retaining customers is 3 to 10 times Less expensive than attracting new ones!
Relationship Marketing • Unlike managerial marketing measuring success through market share, RM concentrates on efficient attraction and development of long-term relations between organization and its stakeholders to realize a financial benefit. • Buttle (1996): It is cheaper to retain a customer then to attract new one • Czepiel (1990): It is 5 to 10 times more expensive to attract a new customer then to retain an existing one. • RM is a major part of a larger movement generated by the increasing need to get closer to customer
Relationship Marketing • RM fails in consumer markets due to lack of interest real relationship, persistence of aggressive advertising and sale promotion-driven strategies (hit & run). • Yet, RM was still used in consumer market (i.e. loyalty cards, retail clubs, helplines, direct mail…) • Gillette / Head & Shoulders road show • Red bull competition of cars, bikes, motorcycles • Dell international hotlines and Same-Business-Day visit • Sony’s 10% rebate for every SR 5,000+ purchase. • RM is often customized by practitioners who tailor marketing theories only to enhance firms performance
Measurement of Marketing • Marketers should prove their contribution to shareholder value by: • generating profits, • reducing costs, • developing markets, • ensuring close relationships with customers, • ensuring that the organization has enough resources to maintain and enhance market position • Being responsive to the market
Measurement of Marketing • While marketers rely on financial indicators (sales income, sales growth…), it is difficult to isolate marketing activities from other internal activities. • The solution was to use Brand equity to allow brand owner to monitor the evolution of the brand and compare the effectiveness of marketing performance • Brand equity is the confidence a customer group has in a product/service & their willingness to purchase that brand relative to competing brands. • BE can be measured by customer loyalty, market share, customer awareness, customer preference and intent to purchase (BE = Tangible assets – Financial value of firm)
Marketing Stages • Know the market • using market researches and systematic and objectives studies • Adapt to Market • creating an offer with an attractive perceived added value that is different • Influence the Market • communicating strong promises
Marketing Functions • Research Marketing • Market study (surveys) • Competition positioning (Nielsen, Gartner in IT, etc.) • Control of the marketing efficacy • Strategic Marketing • Choosing a targeted market • Define the positioning of the company or the brand positioning • 4P (Product concept + services, Price strategy, distribution channels • Communication strategy • Relationship strategy • Operational Marketing • Building communicational and promotional campaign • Actions with selling people • Direct marketing • Distribution and merchandising • Customer service
Market Segmentation • Marketing Segmentation: is “Dividing a market into distinct groups of buyers who have distinct needs, characteristic, or behavior and who might require separate products or marketing mix” (Kotler & Keller, 2011).
Example of Segmentation Demographic: - Gender - Age - Physical characteristics (eye color, height, etc.) - How many people live under the same roof - Family structure (married, divorced, etc.) - etc. Behavioral: - Occasions - User status - Loyalty status - etc. Geographic: - Continent - Region of the world - Size of the city - Climate - etc. Psychographic: - Interests - Activities - Opinions - etc.
Target Marketing • Target Marketing: “The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter” (Kotler & Keller, 2011).
Targeting – Different strategic options • Due to low competition • Because of undifferentiated products • To keep a competitive cost structure (ex: easyJet) Undifferentiated Marketing • To cover all segments with adapted assortment (ex: L’Oreal, P&G, Harrods. Etc.) • to cover only selected segments highly profitable (ex: the “Big Four” Deloitte & Touch, Ernest & Young, KPMG, Price Waterhouse Cooper working only with big companies) Differentiated Marketing Concentrate Marketing • Concentration on main segments • Concentration on a niche • 1-1 marketing • more and more common (ex: Direct Marketing) Customized Marketing
Market Positioning • Market Positioning: “Arranging for a products to occupy a clear, distinctive and desirable place relative to competing products in the mind of target consumers” (Keller, 2011).
Positioning - 6 criteria for a good Positioning - • Your POSITIONING has to be: • Clear • Attractive • Credible • Different • Profitable • Long-lasting
Positioning – Crucial for your Marketing Strategy The chosen POSITIONING will influence your strategy Product strategy Communication strategy Price strategy Distribution strategy ! The positioning has to be constant through time! (if you change your positioning too often, you will lose your customers)
BRAND Definition A brand is a collection of symbols, experiences and associations connected with a product, a service, a person or any other artifact or entity. Is Barack Obama a brand?
Marketing Mix • Marketing Mix: “The set of controllable tactical marketing tools – product, price, place and promotion – that the firm blend to produce the response it wants in the target market” (Kotler& Armstrong, 2011).
4 Ps Product • Here are some questions to assess the competitiveness and ‘fit’ of your • product: • Does the product has the right positioning in the market? • Does it serve a particular segment of the market? • Is it a mass market or a niche product? • Is it differentiated enough to stand out against the competition? • What kind of brand equity does the product uphold? • What are some of the issues/risks associated with the “image” or “perception” of the brand relative to other brand in the market? • What are some of the features that can be added to the product that would add to the value or the perception of the value to the consumer? • What are some of the packaging issue that might present an opportunity or impediment to increased sales? • Does my packaging reflects the positioning of the product? If mass market, does it have mass market appeal? • How does the product achieving in the overall strategy of the company? • How does the product relate to other products produced by the company? • What kind of financial role is the product playing (ie. Cash cow, long term profit potential, etc.)
4 Ps Product POSITIONING MAP This is a helpful framework to analyze where the product is positioned against competitors and consumer segments and to help you to determine if there is any untapped opportunity in the market. High Branded Commodities Premium Price Under Priced? Commodities Low Value Low High
4 Ps Price Getting the right price for the product is extremely important for the success of a company. However, the right price is not easy to determine. Depending on the price elasticity of the product, 1% increase in price could drive to -20% or +25% in sales! • Factors that determine the price • Customer’s perceived value • The cost to produce COGS • Low cost = bigger profit margin • The price paid previously = the expected price: • if consumer are used to pay a certain price for the product, it is very difficult to convince them to pay $20 more. However, if the perceived value of the value is higher than what they paid in the past, then there’s room to capture some consumer surplus. • The price of substitutes: • the price of a product is driven down if the product can be easily substituted by another that serves the same function. “There are two fools in every market. One charges too little; One charges too much.” (Russian proverb)
4 Ps Price Perceived value to consumer Competition pushes price down Surplus value created for the conusmer Price of a substitute Set price here! Expected price Profit margin: Value created for the seller Cost of goods sold Marketing pushes price up 0$
Price ElasticityImpact of price changes on sales volume Demand is inelastic ifa price increase haslittle or no impact on sales volume. Demand is elastic ifa price increase has alarge negative impacton sales volume.
4 Ps Place The distribution channel that is selected and the outlets at which the product is sold MUST be aligned with the positioning of the product and focused customer segment. (McDonalds corner locations) • Here are a few questions you should ask yourself: • Which channels are most closely aligned with the company's strategy? • Does the company need to build new channels or eliminate existing one? • What functions does the company want the channels to serve? • Does it make more sense to go direct to the end user or deliver the product through intermediaries? • What are the economics of the channel? • Who needs to capture what margin? • Does it fit in the intended selling price of the product? • How much control is the company willing to give up on the delivery of the product? • Is the company willing to work in conjunction with the distribution channel, by monitoring its timeliness and service, or by placing most of the weight on the channels in meeting customer needs? • What would be the relationship of the company's sales force in this arrangement? • How would the company address any potential shifts in power to the channel?
4 Ps Promotion Promoting and developing a specific brand for the product captures the most value not only by the supplier in being able to increase the sales volume and per unit margin, but also by the consumer in developing a certain perception of the product. • Promotion and branding can consist of a number of elements such as traditional advertising (mass and niche), or no advertising to maintain certain perception of exclusivity, word of mouth, direct mail, etc. • What messages are we trying to communicate? What is the objective? • Is the goal to achieve a household name? Build loyalty? Defend the product’s positioning? • Does the message portray the total customer experience? • What are some of the barriers to communicate the desired message? • Does the promotion/branding focus on the long term view of relationship-building with the consumer? • Does it encourage repeat purchasing? Focus on customer retention? • How is the marketing strategy different from the competition? • How will the competition react? • Which vehicle will you use to influence the decision making process? • Pull strategy (direct at end user): use of advertising, direct mail, telemarketing, word of mouth, consumer promotions • Push strategy: use the trade promotion, sales aids and/or sales training programs • How much money is allocated to marketing?
Marketing Environment • Includes: • Micro-environment: actors close to the company that affect its ability to serve its customers. • Macro-environment: larger societal forces that affect the microenvironment. • Considered to be beyond the control of the organization.
PESTLE - Actors in the Macroenvironment • Political • Tax Policies • International Trade regulations • Contract Enforcement law • Employment Laws • Government Organization • Competition Regulation • Political Stability • Safety Regulations • Economic • Interest rates & monetary policies • Government spending • Unemployment Policy • Taxation • Exchange rates • Inflation • Social • Income Distribution • Demographics, Population • Labor / Social mobility • Lifestyle changes • Work/career and leisure attitudes • Education • Fashion • Health consciousness • Living conditions