MANAGEMENT-MARKETING.pdf

MANAGEMENT MARKETING refrigerators, televisions, machines, and other mainstays of a modern economy. LESSON1 Importance of Marketing SERVICES...

MANAGEMENT MARKETING refrigerators, televisions, machines, and other mainstays of a modern economy. LESSON1 Importance of Marketing SERVICES As economies advance, a growing The first decade of the 21st century proportion of their activities focuses on challenged firms to prosper financially and the production of services. The U.S. even survive in the face of an unforgiving economy today produces a 70–30 economic environment. services-to-goods mix. Services include Marketing is playing a key role in the work of airlines, hotels, car addressing those challenges. Finance, rental firms, barbers and beauticians, operations, accounting, and other maintenance and repair people, and business functions won’t really matter accountants, bankers, lawyers, without sufficient demand for products and engineers, doctors, software services so the firm can make a profit. In programmers, and management other words, there must be a top line for consultants. Many market offerings mix there to be a bottom line. Thus financial goods success often depends on marketing and services, such as a fast-food meal. ability. EVENTS What is Marketing? Marketers promote time-based events, The American Marketing Association offers the such as major trade shows, artistic following formal definition: Marketing is the performances, and company anniversaries. Global sporting events activity, set of institutions, and processes for such as the Olympics and the World Cup creating, communicating, delivering, and exchanging offerings that have value for are promoted aggressively to customers, clients, partners, and society at large. both companies and fans. Marketing management takes place when at EXPERIENCES least one party to a potential exchange thinks By orchestrating several services and about the means of achieving desired responses goods, a firm can create, stage, from other parties. Thus we see marketing and market experiences. Walt Disney management as the art and science of choosing World’s Magic Kingdom allows target markets and getting, keeping, and growing customers to visit a fairy kingdom, a customers through creating, delivering, and pirate ship, or a haunted house. communicating superior customer value. There is also a market for customized What is Marketed? experiences, such as a week at a baseball camp with retired baseball GOODS greats, a four-day rock and roll fantasy Physical goods constitute the bulk of most countries’ production and PERSONS marketing efforts. Each year, U.S. Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, companies market billions of fresh, and other professionals all get help from canned, bagged, and frozen food celebrity marketers. Some products and millions of cars, people have done a masterful job of  marketing themselves—David distribution of information are major Beckham, Oprah Winfrey, and the industries. Information is essentially Rolling Stones. Management what books, schools, and universities consultant Tom Peters, a master at self- produce, market, branding, has advised each and distribute at a price to parents, person to become a “brand.” students, and communities. PLACES IDEAS Cities, states, regions, and whole nations Every market offering includes a basic compete to attract tourists, idea. Charles Revson of Revlon once residents, factories, and company observed: “In the factory we make headquarters. Place marketers include cosmetics; in the drugstore we sell economic development specialists, real hope.” Products and services are estate agents, commercial banks, platforms for delivering some idea or local business associations, and benefit. Social advertising and public relations marketers are busy promoting such ideas agencies as “Friends Don’t Let Friends Drive PROPERTIES Drunk” Properties are intangible rights of and “A Mind Is a Terrible Thing to ownership to either real property (real Waste. estate) or They seek to influence the level, timing, and financial property (stocks and bonds). composition of demand to meet the They are bought and sold, and these organization’s objectives. exchanges require marketing. Real estate agents work for property owners EIGHT DEMAND STATES: or sellers, or they buy and sell residential 1. Negative demand—Consumers dislike the or commercial real estate. Investment product and may even pay to companies and banks market securities avoid it. to both institutional and individual 2. Nonexistent demand—Consumers may be investors. unaware of or uninterested in the product. ORGANIZATIONS 3. Latent demand—Consumers may share a Organizations work to build a strong, strong need that cannot be favorable, and unique image in the satisfied by an existing product. minds of 4. Declining demand—Consumers begin to buy their target publics. In the United the product less frequently or Kingdom, Tesco’s “Every Little Helps” not at all. marketing 5. Irregular demand—Consumer purchases program reflects the food marketer’s vary on a seasonal, monthly, attention to detail in everything it does, weekly, daily, or even hourly basis. within 6. Full demand—Consumers are adequately the store and in the community and buying all products put into the environment. marketplace. 7. Overfull demand—More consumers would like to buy the product than can INFORMATION be satisfied. The production, packaging, and 8. Unwholesome demand—Consumers may be Companies address customer needs by putting attracted to products that forth a value proposition, a set have undesirable social consequences. of benefits that satisfy those needs. The intangible value proposition is made physical by an offering, which can be a Core Marketing Concepts combination of products, services, To understand the marketing function, we need information, and experiences. to understand the following core set of concepts: A brand is an offering from a known source. Needs are the basic human requirements such as for air, food, water, clothing, and shelter. Value and Satisfaction Humans also have strong needs for recreation, The buyer chooses the offerings he or she education, and entertainment. perceives to deliver the most value, the sum of the tangible and intangible benefits and costs to Demands are wants for specific products backed her. by an ability to pay. Value, a central marketing concept, is primarily We can distinguish five types of needs: a combination of quality, service, and price 1. Stated needs (The customer wants an (qsp), called the customer value triad. inexpensive car.) 2. Real needs (The customer wants a car whose Value perceptions increase with quality and operating cost, not initial price, is low.) service but decrease with price. We can think of 3. Unstated needs (The customer expects good marketing as the identification, creation, service from the dealer.) communication, delivery, 4. Delight needs (The customer would like the and monitoring of customer value. dealer to include an onboard GPS navigation Satisfaction reflects a person’s judgment of a system.) product’s perceived performance in relationship 5. Secret needs (The customer wants friends to to expectations. If the performance falls short of see him or her as a savvy consumer.) expectations, the customer is disappointed. If it Target Markets, Positioning, and matches expectations, the customer is satisfied. Segmentation If it exceeds them, the customer is delighted -marketers start by dividing the market into segments. They identify and profile Marketing Channels distinct groups of buyers who might prefer or To reach a target market, the marketer uses three require varying product and kinds of marketing channels. service mixes by examining demographic, Communication channels deliver and receive psychographic, and behavioral messages from target buyers and include differences among buyers. After identifying newspapers, magazines, radio, television, mail, market segments, the marketer telephone, billboards, posters, fliers, CDs, decides which present the greatest audiotapes, and the Internet. Beyond these, firms opportunities— which are its target communicate markets. For each, the firm develops a market through the look of their retail stores and Web offering that it positions in the sites and other media. minds of the target buyers as delivering some central benefit(s). Marketers are increasingly adding dialogue channels such as e-mail, blogs, and Offerings and Brands toll-free numbers to familiar monologue channels such as ads. technological environment political-legal environment The marketer uses distribution channels to Marketers must pay close attention to the trends display, sell, or deliver the physical product or and developments in these and adjust their service(s) to the marketing strategies as needed. New buyer or user. opportunities are constantly emerging that await the right marketing savvy Marketers clearly face a design challenge in and ingenuity. choosing the best mix of communication, distribution, and service channels for their offerings. Supply Chain The supply chain is a longer channel stretching from raw materials to components to finished products carried to final buyers. Competition Competition includes all the actual and potential rival offerings and substitutes a buyer might consider. The New Marketing Realities Marketing Environment Network information technology. The digital The marketing environment consists of the task revolution has created environment and the broad environment. an Information Age that promises to lead to more accurate levels of production, more The task environment includes the actors targeted communications, and more relevant engaged in producing, distributing, and pricing. promoting the offering. These are the Globalization. Technological advances in company, suppliers, distributors, dealers, and transportation, shipping, and communication target customers. In the supplier group are have made it easier for companies to market in, material suppliers and service suppliers, such as and consumers to buy from, almost any country marketing research agencies, advertising in the world. agencies, banking and insurance Deregulation. Many countries have deregulated companies, transportation companies, and industries to create greater competition and telecommunications companies. growth opportunities. Privatization. Many countries have converted Distributors and dealers include agents, public companies to private ownership and brokers, manufacturer representatives, and management to others who facilitate increase their efficiency. Heightened finding and selling to customers. competition. Intense competition among The broad environment consists of six domestic and foreign brands raises marketing components: costs and shrinks profit margins. presenting a demographic environment significant competitive threat. economic environment social-cultural environment natural environment  Industry convergence. Industry boundaries are substantially increased their buying power. From blurring as companies recognize new the home, office, or mobile phone, they can opportunities at the compare intersection of two or more industries. product prices and features and order goods online from anywhere in the world 24 hours a Retail transformation. Store-based retailers day, 7 days a week, bypassing limited local face competition from catalog houses; directmail offerings and realizing significant price savings. firms; Even business buyers can run a reverse auction newspaper, magazine, and TV direct-to- in which sellers compete to capture their customer ads; home shopping TV; and e- business. They can readily join others to commerce. In response, aggregate their purchases and achieve deeper entrepreneurial retailers are building volume discounts. entertainment into their stores with coffee bars, demonstrations, and performances, marketing an “experience” rather Consumer information. Consumers can collect than a product assortment. Dick’s Sporting information in as much breadth and depth as Goods has they want about practically anything. They can grown from a single bait-andtackle store in access online encyclopedias, dictionaries, Binghamton, New York, into a 300-store medical information, movie ratings, consumer sporting goods retailer reports, newspapers, and other information in 30 states. Part of its success springs from the sources in many languages from interactive features of its stores. Customers can anywhere in the world. test golf Consumer participation. Consumers have clubs in indoor ranges, sample shoes on its found an amplified voice to influence peer and footwear track, and shoot bows in its archery public opinion. range. In recognition, companies are inviting them to participate in designing and even marketing Disintermediation. The amazing success of offerings to early dot-coms such as AOL, Amazon.com, heighten their sense of connection and Yahoo!, eBay, ownership. Consumers see their favorite E*TRADE, and others created disintermediation companies as workshops in the delivery of products and services by from which they can draw out the offerings they intervening in want. the traditional flow of goods through distribution Consumer resistance. Many customers today channels. These firms struck terror into the feel there are fewer real product differences, so hearts of established manufacturers and retailers. they show In response, traditional companies engaged in less brand loyalty and become more price- and reintermediation and became “brick-and-click” quality-sensitive in their search for value, and retailers, adding online services to their less tolerant offerings. Some became stronger about undesired marketing. contenders than pure-click firms, because they had a larger pool of resources to work with and established brand names. The Product Concept The product concept proposes that consumers Consumer buying power. In part, due to favor products offering the most quality, disintermediation via the Internet, consumers performance, or innovative features. However, have managers are sometimes caught in a love affair with their products. They might commit the acknowledges that everything matters in “better-mousetrap” fallacy, believing a better marketing—and that a broad, integrated product will by perspective is often necessary. itself lead people to beat a path to their door. A new or improved product will not necessarily be successful unless it’s priced, distributed, Relationship Marketing advertised, and sold properly. Increasingly, a key goal of marketing is to develop deep, enduring relationships with people and organizations that directly or indirectly The Selling Concept affect the success of the firm’s marketing The selling concept holds that consumers and activities. Relationship marketing aims to build businesses, if left alone, won’t buy enough of the mutually satisfying long-term relationships with organization’s products. It is practiced most key constituents in order to earn and retain their aggressively with unsought goods—goods business. buyers don’t normally think of buying such as insurance and cemetery plots—and when firms with overcapacity Integrated Marketing aim to sell what they make, rather than make Integrated marketing occurs when the marketer what the market wants. Marketing based on hard devises marketing activities and assembles selling is risky. It assumes customers coaxed into marketing programs to create, communicate, and buying a product not only won’t return or bad- deliver value for consumers such that “the whole mouth it or complain to consumer organizations is greater than the sum of its parts.” Two key but might even buy it again. themes are that (1) many different marketing activities can create, communicate, and deliver value and (2) marketers should design and The Marketing Concept implement anyone marketing activity with all The marketing concept emerged in the mid- other activities in mind. 1950s41 as a customer-centered, sense-and- respond philosophy. The job is to find not the right customers for your products, but the right Internal Marketing products for your customers. Dell doesn’t Internal marketing, an element of holistic prepare a perfect computer for its target market. marketing, is the task of hiring, training, and Rather, it provides product platforms on which motivating able employees who want to serve each person customizes the features he or she customers well. It ensures that everyone in the desires in the computer. organization embraces appropriate marketing principles, The Holistic Marketing Concept especially senior management. Smart marketers “Marketing Memo: Marketing Right and recognize that marketing activities within the Wrong” suggests where companies go wrong— company can be as important—or even more and how they can get it right—in their important— than those directed outside the marketing. company. It makes no sense to promise excellent service before the company’s staff is ready to provide it. The holistic marketing concept is based on the development, design, and implementation of Performance Marketing marketing programs, processes, and activities Performance marketing requires understanding that recognize their breadth and the financial and nonfinancial returns to business interdependencies. Holistic marketing and society from marketing activities and programs. Top marketers are increasingly going be integrated such that their whole is greater beyond than the sum of their parts and they accomplish sales revenue to examine the marketing multiple objectives for the firm. scorecard and interpret what is happening to market share, customer loss rate, customer We define performance as in holistic marketing, satisfaction, product quality, and other measures. to capture the range of possible outcome They are also considering the legal, ethical, measures that have financial and nonfinancial social, and environmental effects of marketing implications (profitability as well as brand and activities and customer equity), and implications beyond the programs. company itself (social responsibility, legal, Updating The Four Ps ethical, McCarthy classified various marketing activities and community related). Finally, these new four into marketing-mix tools of four broad kinds, Ps actually apply to all disciplines within the which company, and by thinking this way, managers he called the four Ps of marketing: product, grow more closely aligned with the rest of the price, place, and promotion. company. LESSON2 People reflects, in part, internal marketing and Developing Marketing Strategies and Plans the fact that employees are critical to marketing success. Marketing will only be as good as the Marketing and Customer Value people inside the organization. It also reflects the fact that marketers must view consumers as The task of any business is to deliver customer people to understand their lives more broadly, value at a profit. In a hypercompetitive economy and not just as they shop for and consume with increasingly informed buyers faced with products and services. abundant choices, a company can win only by fine- tuning the value delivery process and Processes reflects all the creativity, discipline, choosing, providing, and communicating and structure brought to marketing management. superior value. Marketers must avoid ad hoc planning and decision making and ensure that state-of-the-art The Value Delivery Process marketing ideas and concepts play an We can divide the value creation and delivery appropriate role in all they do. Only by sequence into three phases. instituting the right set of processes to guide activities and programs can a firm engage in mutually beneficial long-term relationships. 1. Choosing the value represents the Another important set of processes guides the “homework” marketing must do before any firm in imaginatively generating insights and product exists. Marketers must segment the breakthrough products, services, and marketing market, select the appropriate target, and activities. develop the offering’s value positioning. The formula “segmentation, targeting, positioning Programs reflects all the firm’s consumer- (STP)” is the essence of strategic marketing. directed activities. It encompasses the old four Ps as well as a range of other marketing activities that might not fit as neatly into the old 2. Providing the value. Marketing must view of marketing. Regardless of whether they determine specific product features, prices, and are online or offline, traditional or distribution. nontraditional, these activities must 3. Communicating the value by utilizing the sales force, Internet, advertising, and any other communication tools to announce and promote the product. The value delivery process begins before there is a product and continues through development and after launch. Each phase has cost implications. The Value Chain A Holistic Marketing Orientation and Harvard’s Michael Porter has proposed the value Customer Value chain as a tool for identifying ways to create One view of holistic marketing sees it as more customer value. According to this model, “integrating the value exploration, value every firm is a synthesis of activities performed creation, and value delivery activities with the to design, produce, market, deliver, and support purpose of building long-term, mutually its product. satisfying relationships and co prosperity among key stakeholders.” The primary activities are Holistic marketers address three key (1) inbound logistics, or bringing materials into management questions: the business; 1. Value exploration—How a company (2) operations, or converting materials into final identifies new value opportunities products; 2. Value creation—How a company efficiently (3) outbound logistics, or shipping out final creates more promising new value offerings products; 3. Value delivery—How a company uses its (4) marketing, which includes sales; and capabilities and infrastructure to deliver the new value offerings more efficiently (5) service. The Central Role of Strategic Planning Specialized departments handle the support The marketing plan is the central instrument activities— for directing and coordinating the marketing effort. It operates at two levels: strategic and (1) procurement, tactical. (2) technology development, The strategic marketing plan lays out the target markets and the firm’s value proposition, based (3) human resource management, and on an analysis of the best market opportunities. (4) firm infrastructure. (Infrastructure covers the The tactical marketing plan specifies the costs of general management, planning, finance, marketing tactics, including product features, accounting, legal, and government affairs.) promotion, merchandising, pricing, sales channels, and service Corporate and Division Strategic Planning Some corporations give their business units freedom to set their own sales and profit goals and strategies. Others set goals for their business units but let them develop their own strategies. INTENSIVE GROWTH Still others set the goals and participate in Corporate management’s first course of action developing individual business unit strategies. should be a review of opportunities for All corporate headquarters undertake four improving existing businesses. One useful planning activities: framework for detecting new intensive- growth opportunities is a “product-market expansion 1. Defining the corporate mission grid.” It considers the strategic growth To define its mission, a company should address opportunities for a firm in terms of current and Peter Drucker’s classic questions: What is our new products and markets. business? Who is the customer? What is of value INTEGRATIVE GROWTH What should our business be? These simple- sounding questions are among the most difficult A business can increase sales and profits through a company will ever have to answer. Successful backward, forward, or horizontal integration companies continuously raise and answer them. within its industry. Merck has gone beyond developing and selling prescription pharmaceuticals. 2. Establishing strategic business units DIVERSIFICATION GROWTH Companies often define themselves in terms of products: They are in the “auto business” or the Diversification growth makes sense when good “clothing business.” Market definitions of a opportunities exist outside the present business, however, describe the business as a businesses—the industry is highly attractive and customer- satisfying process. Products are the company has the right mix of business transient; basic needs and customer groups strengths to succeed. From its origins as an endure forever. Transportation is a need: the animated film producer, The Walt Disney horse and carriage, automobile, railroad, airline, Company has moved into licensing characters ship, and truck are products that meet that need. for merchandised goods, publishing general interest fiction books under the Hyperion imprint, entering the broadcast industry with its 3. Assigning resources to each strategic business own Disney Channel as well as ABC and ESPN, unit Assessing growth opportunities developing theme parks and vacation and resort Once it has defined SBUs, management must prop- erties, and offering cruise and commercial decide how to allocate corporate resources to theatre experiences. each. Several portfolio-planning models provide DOWNSIZING AND DIVESTING OLDER ways to make investment decisions. The BUSINESSES GE/McKinsey Matrix classifies each SBU by the extent of its competitive advantage and the Companies must carefully prune, harvest, or attractiveness of its industry. divest tired old businesses to release needed resources for other uses and reduce costs. To Assessing Growth Opportunities focus on its travel and credit card operations, Assessing growth opportunities includes American Express in 2005 spun off American planning new businesses, downsizing, and Express Financial Advisors, which provided terminating older businesses. If there is a gap insurance, mutual funds, investment advice, and between future desired sales and projected sales, brokerage and asset management services (it was corporate management will need to develop or renamed Ameriprise Financial). acquire new businesses to fill it.  EXTERNAL ENVIRONMENT Organization and Organizational Culture (OPPORTUNITY AND THREAT) ANALYSIS Strategic planning happens within the context of the organization. A company’s organization con- A business unit must monitor key sists of its structures, policies, and corporate macroenvironment forces and significant culture, all of which can become dysfunctional microenvironment factors that affect its ability to in a rapidly changing business environment. earn profits. It should set up a marketing Whereas managers can change structures and intelligence system to track trends and important policies (though with difficulty), the company’s developments and any related opportunities and culture is very hard to change. Yet adapting the threats. culture is often the key to successfully implementing a new strategy. INTERNAL ENVIRONMENT Marketing Innovation (STRENGTHS AND WEAKNESSES) ANALYSIS Innovation in marketing is critical. Imaginative ideas on strategy exist in many places within a It’s one thing to find attractive opportunities, and company. Senior management should identify another to be able to take advantage of them. and encourage fresh ideas from three Each business needs to evaluate its internal underrepresented groups: employees with strengths and weaknesses. youthful or diverse perspectives, employees far PORTER’S GENERIC STRATEGIES removed from company headquarters, and employees new to the industry. Each group can Michael Porter has pro- posed three generic challenge company orthodoxy and stimulate new strategies that provide a good starting point for ideas. strategic thinking: overall cost leadership, differentiation, and focus. The Business Mission Overall cost leadership. Firms work to Each business unit needs to define its specific achieve the lowest production and distribution mission within the broader company mission. costs so they can underprice competitors and Thus, a television-studio-lighting-equipment win market share. They need less skill in company might define its mission as, “To target marketing. The problem is that other firms will major television studios and become their usually compete with still-lower costs and hurt vendor of choice for lighting technologies that the firm that rested its whole future on cost. represent the most advanced and reliable studio lighting arrangements.” Notice this mission does Differentiation. The business concentrates on not attempt to win business from smaller achieving superior performance in an important television studios, offer the lowest price, or customer benefit area valued by a large part of venture into non-lighting products. the market. The firm seeking quality leadership, for example, must make products with the best SWOT Analysis components, put them together expertly, inspect The overall evaluation of a company’s strengths, them carefully, and effectively communicate weaknesses, opportunities, and threats is called their quality. SWOT analysis. It’s a way of monitoring the Focus. The business focuses on one or more external and internal marketing environment. narrow market segments, gets to know them intimately, and pursues either cost leadership or differentiation within the target segment.  must strengthen its R&D department, gather technological intelligence, develop leading-edge products, train its technical sales force, and STRATEGIC ALLIANCES communicate its technological leadership. Even giant companies—AT&T, Philips, and Nokia—often cannot achieve leadership, either Feedback and Control nationally or globally, without forming alliances A company’s strategic fit with the environment with domestic or multi- national companies that will inevitably erode, because the market complement or leverage their capabilities and environment changes faster than the company’s resources. seven Ss. Thus, a company might remain 1. Product or service alliances—One efficient yet lose effective- ness. Peter Drucker company licenses another to produce its pointed out that it is more important to “do the product, or two companies jointly right thing”—to be effective—than “to do things market their complementary products or right”—to be efficient. The most successful a new product. The credit card industry companies, however, excel at both. is a complicated combination of cards Product Planning: The Nature and Contents jointly marketed by banks such as Bank of a Marketing Plan of America, credit card companies such as Visa, and affinity companies such as Working within the plans set by the levels above Alaska Airlines. them, product managers come up with a market- ing plan for individual products, lines, brands, 2. Promotional alliances—One company agrees channels, or customer groups. Each product to carry a promotion for another company’s level, whether product line or brand, must product or service. McDonald’s teamed up with develop a marketing plan for achieving its goals. Disney for 10 years to offer products related to A marketing plan is a written document that current Disney films as part of its meals for summarizes what the marketer has learned about children. the marketplace and indicates how the firm plans 3. Logistics alliances—One company offers to reach its marketing objectives.43 It contains logistical services for another company’s tactical guidelines for the marketing programs product. Warner Music Group and Sub Pop and financial allocations over the planning Records created the Alternative Distribution period. Alliance (ADA) in 1993 as a joint venture to distribute and manufacture records owned by Executive summary and table of contents. The independent labels. ADA is the leading “indie” marketing plan should open with a table of distribution company in the United States for contents and brief summary for senior both physical and digital product. management of the main goals and 4. Pricing collaborations—One or more recommendations. companies join in a special pricing collaboration. Hotel and rental car companies Situation analysis. This section presents often offer mutual price discounts. relevant background data on sales, costs, the Program Formulation and Implementation market, competitors, and the various forces in the macroenvironment. How do we define the Even a great marketing strategy can be market, how big is it, and how fast is it growing? sabotaged by poor implementation. If the unit What are the relevant trends and critical issues? has decided to attain technological leadership, it Firms will use all this information to carry out a To develop innovative products, successful SWOT analysis. strategies, and action programs, marketers need up-to-date information about the environment, the competition, and the selected market Marketing strategy. Here the marketing segments. Often, analysis of internal data is the manager defines the mission, marketing and starting point for assessing the current marketing financial objectives, and needs the market situation, supplemented by marketing offering is intended to satisfy as well as its intelligence and research investigating the competitive positioning. All this requires inputs overall market, the competition, key issues, from other areas, such as purchasing, threats, and opportunities. As the plan is put into manufacturing, sales, finance, and human effect, marketers use research to measure resources. progress toward objectives and identify areas for Financial projections. Financial projections improvement. include a sales forecast, an expense forecast, and The Role of Relationships a break-even analysis. On the revenue side is forecasted sales volume by month and product Although the marketing plan shows how the category, and on the expense side the expected company will establish and maintain profitable costs of marketing, broken down into finer customer relationships, it also affects both categories. The break-even analysis estimates internal and external relationships. First, it how many units the firm must sell monthly (or influences how marketing personnel work with how many years it will take) to offset its each other and with other departments to deliver monthly fixed costs and average per-unit value and satisfy customers. Second, it affects variable costs. how the company works with suppliers, distributors, and partners to achieve the plan’s A more complex method of estimating profit is objectives. Third, it influences the company’s risk analysis. Here we obtain three estimates dealings with other stakeholders, including (optimistic, pessimistic, and most likely) for government regulators, the media, and the each uncertain variable affecting profitability, community at large. Marketers must consider all under an assumed marketing environment and these relationships when developing a marketing marketing strategy for the planning period. The plan. computer simulates possible outcomes and computes a distribution showing the range of From Marketing Plan to Marketing Action possible rates of returns and their probabilities. Most companies create yearly marketing plans. Marketers start planning well in advance of the Implementation controls. The last section implementation date to allow time for marketing outlines the controls for monitoring and research, analysis, management review, and adjusting coordination between departments. As each action program begins, they monitor ongoing implementation of the plan. Typically, it spells results, investigate any deviation from plans, and out the goals and budget for each month or take corrective steps as needed. Some prepare quarter, so management can review each contingency plans; marketers must be ready to period’s results and take corrective action as update and adapt marketing plans at any time. needed. Some organizations include contingency plans. LESSON3 The Role of Research Making marketing decisions in a fast- changing world is both an art and a science. To provide context, insight, and inspiration for marketing decision making, companies must #ItsMoreFunInThePhilippines erupted on possess comprehensive, up-to-date information Twitter, and the campaign went viral. about macro trends, as well as about micro Internal Records effects particular to their business. Holistic marketers recognize that the marketing To spot important opportunities and potential environment is constantly presenting new problems, marketing managers rely on internal opportunities and threats, and they understand reports of orders, sales, prices, costs, inventory the importance of continuously monitoring, levels, receivables, and payables. forecasting, and adapting to that environment. 1. The Order-to-Payment Cycle Components of a Modern Marketing Information System 2. Databases, Data Warehousing, and Data Mining The major responsibility for identifying significant marketplace changes falls to the Marketing Intelligence company’s marketers. Marketers have two 1. The Marketing Intelligence System advantages for the task: disciplined methods for collecting information, and time spent A marketing intelligence system is a set of interacting with customers and observing procedures and sources that managers use to competitors and other outside groups. Some obtain everyday information about developments firms have marketing information systems that in the marketing environment. provide rich detail about buyer wants, -Train and motivate the sales force to spot and preferences, and behavior. report new developments. Companies with superior information can - Motivate distributors, retailers, and other choose their markets better, develop better intermediaries to pass along important offerings, and execute better marketing intelligence. planning. - Hire external experts to collect intelligence. The Philippines’ abundant offerings on a modest budget - Network internally and externally. In 2012, they launched a campaign that branded - Set up a customer advisory panel. the Philippines as the perfect destination, accompanied by the catchy slogan, “It’s More - Take advantage of government-related data Fun in the Philippines.” This campaign proved resources. highly successful on social media, making it a - Purchase information from outside research valuable case study for other Destination firms and vendors Marketing Organisations (DMOs) worldwide. Analyzing the Macroenvironment The power of crowdsourcing 1. Needs and Trends One of the key drivers of the #ItsMoreFunInThePhilippines campaign’s Enterprising individuals and companies manage success was the Philippines’ substantial social to create new solutions to unmet needs. media presence, boasting 27 million Facebook - A fad is “unpredictable, short-lived, and users at the time. The DOT initiated the without social, economic, and political campaign by inviting social media users in the significance.” country to create their advertisements using an online tool. Within hours, the hashtag e.g. A company can cash in on a fad such as - CONSUMER PSYCHOLOGY Crocs clogs, Elmo TMX dolls, and Pokémon - INCOME DISTRIBUTION gifts and toys, but getting it right requires luck and good timing. - INCOME, SAVINGS, DEBT, AND CREDIT - a trend is more predictable and durable than a The Sociocultural Environment fad; trends reveal the shape of the future and can provide strategic direction. From our sociocultural environment we absorb, almost unconsciously, a world view that defines e.g. A trend toward health and nutrition our relationships to ourselves, others, awareness has brought increased government organizations, society, nature, and the universe. regulation and negative publicity for firms seen as peddling unhealthy food. The Natural Environment - A megatrend is a “large social, economic, In Western Europe, “green” parties have pressed political, and technological change [that] is slow for public action to reduce industrial pollution. to form, and once in place, influences us for In the United States, experts have documented some time—between seven and ten years, or ecological deterioration, and watchdog groups longer.” such as the Sierra Club and Friends of the Earth carry these concerns into political and social e.g. The Yankelovich Monitor interviews 2,500 action. people nationally each year and has tracked 35 social value and lifestyle trends since 1971, such The Technological Environment as “anti-bigness,” “mysticism,” “living for It is the essence of market capitalism to be today,” “away from possessions,” and dynamic and tolerate the creative destructiveness “sensuousness.” of technology as the price of progress. The Demographic Environment The Political-Legal Environment Demographic developments often move at a The political and legal environment consists of fairly predictable pace. The main one marketers laws, government agencies, and pres- sure monitor is population, including the size and groups that influence various organizations and growth rate of population in cities, regions, and individuals. Sometimes these laws create new nations; age distribution and ethnic mix; business opportunities. educational levels; household patterns; and regional characteristics and movements. Forecasting and Demand Measurement - WORLDWIDE POPULATION GROWTH The company must then measure and forecast the size, growth, and profit potential of each new - POPULATION AGE MIX opportunity. - ETHNIC AND OTHER MARKETS There are many productive ways to break down - EDUCATIONAL GROUPS the market: - HOUSEHOLD PATTERNS The potential market is the set of consumers with a sufficient level of interest in a market The Economic Environment offer. However, their interest is not enough to define a market unless they also have sufficient The available purchasing power in an economy income and access to the product. depends on current income, prices, savings, debt, and credit availability. The available market is the set of consumers MARKET POTENTIAL The market forecast who have interest, income, and access to a shows expected market demand, not maximum particular offer. The company or government market demand. For the latter, we need to may restrict sales to certain groups; a particular visualize the level of market demand resulting state might ban motorcycle sales to anyone from a very high level of industry marketing under 21 years of age. Eligible adults constitute expenditure, where further increases in the qualified available market—the set of marketing effort would have little effect. consumers who have interest, income, access, CHAIN-RATIO METHOD and qualifications for the market offer. which multiplies a base number by several The target market is the part of the qualified adjusting percentages. Suppose a brewery is available market the company decides to pursue. interested in estimating the market potential for The company might concentrate its marketing a new light beer especially designed to and distribution effort on the East Coast. accompany food. It can make an estimate with The penetrated market is the set of consumers the following calculation: who are buying the company’s product. There are many productive ways to break down the market: The potential market is the set of consumers The upper limit of market demand for a product with a sufficient level of interest in a market is sales offer. However, their interest is not enough to define a market unless they also have sufficient potential. If we estimate the same quantity for a income and access to the product. brand, the estimate is called sales potential for a brand. The available market is the set of consumers who have interest, income, and access to a Sales potential for a brand: Q = n x q x m x p particular offer. Where: The target market is the part of the qualified Q = Sales potential for a brand (in dollars) available market the company decides to pursue. n = Total number of buyers The penetrated market is the set of consumers who are buying the company’s product. q = quantity purchased by an average buyer per year MARKET DEMAND The marketer’s first step in evaluating marketing opportunities is to m = expected market share of the brand estimate total market demand. Market demand for a product is the total volume that would be p = price of the brand per unit bought by a defined customer group in a defined When we define buyers, we need to be careful. geographical area in a defined time period in a Depending on the product/service, our target defined marketing environment under a defined segment may be made up of “households” or marketing program. “individuals”. For example, targeting Generation MARKET FORECAST Only one level of X families for lawn mowers requires the industry marketing expenditure will actually marketer to focus on households. Targeting occur. The market demand corresponding to this teenagers for marketing toothpaste requires the level is called the market forecast. marketer to focus on individuals. Another very critical point is that when we try to estimate the total number of buyers, we need to keep in mind the detailed description of the target market we would like to serve. Especially the demographic bases that you used to specify your target market will be very useful in this regard. For example, suppose that you are planning to introduce a smartphone application and you are interested in “Smart Phone Owners”, “25-35 years old”, “university graduate”. If you can find the following percentages in various databases, you can compute the total number of potential buyers as follows. Let us assume that you found the following statistic: