M FOUR QUESTION

( On marketing – creating and delivering customer value )

( Guiding Questions What is our competitive landscape  Analyzing the marketing environment How do we get into our customer’s mind  Marketing Research Strategies )

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( Profits - increased sales volume Means – Sales and Market Acceptance Focal Point – Existing Products )

( The Big Marketing Questions - What is our industry What is our business   What is our profit objective   Who is our customer   Who is our competitor   What is our brand ) ( Loyalty Goal – Customer Satisfaction Means – IMC Customer Needs and Desires )

( The Marketing Mix Sales Approach Marketing Approach ) ( Sales – profits through volume Marketing – profits through customer satisfaction )

( 5Ps & 5Cs Product Price Promotion Distribution (place) Position .........Customer Solution ........ Customer Cost ........ Customer Communication .Customer Convenience Customer Mind ) ( The Marketing Standard of Analysis – SWOT Strengths – Internal Issues Weaknesses – Internal Issues Opportunities – External Issues Threats – External Issues )

( Levitt’s Lessons - Marketing Is Strategic Requires Executive Insight The Management of the 4P’s The essential for Positioning Not just controlling – it is knowing what business you are in Is not advertising – it is connecting with your customer ) ( Segment – Target – Position )

( Geography – region Demographic - age psychographic – class behavioral – buyer )

( GI (Veteran) Generation 1901- 1924 “Greatest Generation” Great Depression and WWII defining events “Good Kid” reputation Sharpest rise in schooling ever recorded Raised as increasingly protected youth Formality, uniformity, cooperation, achievement )

( Lost Generation 1883-1900 Came of age during or slightly after WWI May refer to large number of young men killed during WWI Hit hard by the Great Depression Also refers to loss of inherited values in postwar period )

( War Babies 1943-1945   Small group – fathers not at war   Known as ‘ cuspers ’ because between two much larger groups   Mixed characteristics   Chased by Boomers all their lives ) (   Grew up in ‘me’ generation   Reacted against selfishness   Feel invisible Only 46 million Boomers 80 million Millennials 78 million   Defy – and dislike – being defined )

( Will define the 21 st century as fundamentally as the GI or WWII generation defined the 20 th century By the end of the decade, Millennials may well transform the American campus as much as the Boomers did in the 60s but in the opposite (different) direction Only know life with electronic technology as a way of life and not just a tool )

( Effective / Useful Segmentation To be useful for analysis, the segment must be: • Measurable • Accessible • Substantial • Differentiable • Actionable )

( Strategic Market Targeting Mass markets – undifferentiated Differentiated – segmented Concentrated – niche Micro – local )

( The Marketing Mix – the standard   Product attributes Value Proposition Brand image   Value-based pricing   Distribution – convenience   Promotions – savings )

(   Same for Less – Wal Mart   More for Less – Lexus   More for More – Ritz Carlton   More for Same – Lexus positioned against Mercedes ) ( Developing a Positioning Strategy What position, if any, do we already have in the prospect’s mind? What position do we want to own? What companies must be outgunned if we are to establish that position? Do we have enough marketing money to occupy and hold the position? Does our creative approach match our positioning strategy? )

( Marketing Research Process Define the Problem and Research Objectives Develop the Research Plan to Collect Information Implement the Research Plan – collect and analyze the data Interpret and report the findings )

( Buyer behavior buyer decision process product adoption )

( The Influencers of Buyer Behavior  Culture – norms  Social – r elationsh i p s  Personal – needs  Ps y chological – emotions )

( 1. Need recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post-purchase behavior )

( Stages of Product/Innovation/Adoption essentially ‘buying’ into the promise of the ‘brand’   Awareness   Interest   Evaluation   Trial   Adoption   Innovators 2.5%   Early adopters 13.5%   Early majority 34%   Late majority 34%   Laggards 16% ) ( Product Lifecycle )

(   Relative Advantage – innovation’s superiority   Compatibility – fits buyers values/needs   Complexity – actually, rate of simplicity   Divisibility – availability for trial   Communicability – described to others )

( Understanding our Customer Means - • We still think from the ‘inside out’ – finding consumers for products (myopic) • We must ask – why do people buy and what do they REALLY want • ‘Outside in’ thinking – finding products and services for consumers (strategic) • How can the ‘marketing mix’ he lp us ‘understand’ what they really want )

( Strong Brands Excel delivering desired benefits Stay relevant Price on perceived value Effectively positioned Consistent Portfolio and hierarchy make sense Have coordinated support activities Have long term support Monitor sources of equity )

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( Traditional Positioning Tactics Define the market space – who are your customers? Identify the attributes that define the product 'space' Ask prospects about what the product means Determine each product' s measure of awareness Determine target market's preferred attributes Examine the fit between: The position of your product The position of the preferred attributes Now – position )

( POSITIONING AN AIRLINE Air France Virgin Atlantic United Airlines Current American British Airways United Airlines 1990 ) ( Brand Power Positioning Strategies Features and Attributes – Snuggie Benefits – Goldline Problem/Solution – State Farm Competition – Audi / Mercedes Corporate Credentials/Identity – Coca Cola Usage occasions / time – Martinelli’s Target user – Nike Aspiration – Rolex Causes and Ethics – Chevron Value – Virgin )

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( The Knowledge Worker – Peter Drucker , 1954 Marketing Mix – Neil Borden, 1953 Four “Ps” – Jerome McCarthy, 1960 Structure Follows Strategy – Alfred Chandler, 1962 Corporate Social Responsibility – Archie Carroll, 1979 Globalization of Markets – Theodore Levitt, 1983 ) ( Brand Vision Business Strategy Marketing Strategy )

( Businesses Drive Brands – old Finding Customers for Products – old ) ( Anthropology – study of human life in society Ethnography – close study of cultural groups )

( New Paradigms – New Era Brands Drive Marketing – New Brands Drive Business Models – New Outside-In Thinking – New ) ( Recall - Strong Brands 1. Maintain clarity of brand promise Excel delivering desired benefits Stay relevant through time Price on perceived value Effectively positioned 6. Consistent within marketing mix 7. Portfolio and hierarchy make sense 8. Have coordinated support activities 9. Have long term support 10. Monitor sources of equity )

( The Brand Drives Marketing Power Brands are Emotionally Focused ) ( The affective state of consciousness whereby we feel differentiated from The cognitive state of consciousness wh ere we know )

( The Emotional Brand Relationship Ladder Togetherness Partnership Awareness Information Respect Friendship Trust Loyalty )

( Powerful Brand Visions The Goodness of Children The Teacher as Mentor ) ( BRAND VISION )

( BRAND VISION ) ( The collection of qualities of a Being – is a brand a person? How would you describe your brand as an animal? )

( Aspirational destination for the life of the promise of the story never fully told )

( BRAND VISION )

( The Power-Positioning Strategies )

( Brand Power Positioning Strategies 1. Features and Attributes – Snuggie Benefits – Goldline Problem/Solution – State Farm 4. Competition – Audi / Mercedes Corporate Credentials/Identity – Coca Cola Usage occasions / time – Martinelli’s Target user – Nike Aspiration – Rolex Causes and Ethics – Chevron Value – Virgin ) ( BRAND VISION )

( BrandZ ) ( Brand Communications Strategy – Linking Brand Strategy to Communications Activities )

( Brand Touch Point Wheel – Traditional )

( Brand Touch Point Wheel – Digital Age ) ( “Competition is one of society’s most powerful forces for making things better in many fields of human endeavor Competition is pervasive, whether it involves companies contesting markets, countries coping with globalization, or social organizations respond ing to societal needs. Every organization needs a strategy in order to deliver superior value to its customers” - Michael Porter )

( PRICING GOALS   Understanding the economics of pricing   Understanding the importance of value – based pricing and the reality of cost – based pricing   Making a pricing decision   Pricing as a competitive advantage ) (  Skimming versus Pen e tr a t ing  Common Practice (dumb)  Cost – B ased  Proactive Practice (winnin g )  V alue – B ased  Strategic, entrepreneurial PRICING NEW PRODUCTS )

( THE BIG QUESTIONS Can you authoritatively explain the methods used in the pricing of your products? Do you simply price to cover your costs? How often do you measure your pricing results? Do you price to maximize profit for the company in conjunction with pricing to maximize value for your customers? Why is effective pricing strategy so complex? ) ( A JASSONIAN CONTRIBUTION TO THE FIELD )

( PRICING FUNDAMENTALS   Laws of Demand and Supply   Price Elasticity of Demand   Price Elasticity of Supply   Understanding Costs   Fixed, Variable, Total   Understanding Value   Customer satisfaction   Profit goals ) ( 1. Understand Your Business Model What are your revenue and cost drivers? How do changes in these drivers affect your company’s financial benchmarks, e.g. sales, contribution, and net profit margins? What pains are you solving for your future and current customers? )

( Establish Strategic Objective What are your pricing objectives with this product? Are you maximizing market share by penetration pricing or current profits by price skimming? ) ( 5. Price with Integrity but test as you go 1. Now, price your product Communicate the value of the product Measure sales, contribution, and net profit margins Adjust pricing strategy to maximize profit contribution of the product and reduce incremental and avoidable costs 5. Should sales not reach your target, reevaluate your value proposition to the customer, re- examine the product offering, consult with your customer, and then make necessary adjustments to your price )

( 3. Identify the Value of the Product or Service Who is your customer and who is your competitor’s customer? What is the current marketing landscape such as opportunity size, and what is your competition’s positioning? What price do you think the customer would pay? Would the customer pay more? ) ( 6. Make Pricing Part of the Culture Obtain regular pricing feedback from customers Evaluate pricing regularly (monthly/quarterly) Develop standard pricing policies that promote proactive and strategic thinking among staff Don’t forget value – for the customer and the company )

( Position Your Pricing Strategy Is the pricing strategy aligned with the other elements in the marketing mix?   For example, a high price skimming strategy will be incongruent with an undifferentiated commodity product distributed through mass channels ) ( Managing Marketing Channels – the value delivery system )

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( Strategic Issues – Conventional v. Vertical Channels Conventional – independent firms each seeking revenues and profits for its own stakeholder environment   Polo Brand via Macy’s and Nordstrom Vertical – a unified channel based on shared ownership, contract, or dependence from producer, wholesaler, to retailer Goodyear tire brand via producer, wholesaler, and retailer )

( Efficiencies vs. Ownership )

( Strategic Issues – Managing Marketing Channels Distribution – ‘place’ How the customer perceives convenience Who are ‘our’ customers Often a complex ‘supply chain’   Upstream and Downstream partners – intermediaries who help make distribution efficient or a nightmare Marketing Channels – the interdependent firms/orgs who move product from producer to consumer Each is often a unique business with its own business model pursuing profit like everyone within the distribution stream )

( What do we pay for – what do we really want image – status quality – defect-free prestige – power speed – convenience brand - the promise ) ( The Leveraged Sales Force )

( How do we ensure that our customers get what they want, when and how they want it, at the right price? The Sales force can be (must be) a highly effective tool The challenge – traditional vs. leveraged   Forthcoming . ) ( Remembering our purpose – Mission – corporate purpose Goals – long-term financial sustainability Objectives – competitive advantages Method – marketing as connectedness Tools – 4Ps Product – promise of the brand Price – exchange value Distribution – efficiencies and revenues Promotion – communicating the value )

( What is it and How do we do it? ) ( Traditional Model Key Accts 30% of selling time General Business 50% of sales time Small Customers 20% )

( Go after every opportunity Regardless of transaction profitability ) ( Focus on large, complex accounts Leave smaller opportunities to other channels )

( Key Accts 100% focused General Business Other channels Small Customers Other Channels ) ( Frees up time, energy and resources to focus on the largest and most important and most profitable market opportunities – period. )

(  Internet   zero to $10  T elesale s   $30-50  Partners   $200-300  Field Sales   $500 ) ( Five Principles for Building a Leveraged Sales Force Focus sales force activity on large account acquisition Use other channels to offload ‘low value’ selling tasks Provide more extensive technology support to field reps Redesign sales force skill development programs Align performance measurement and compensation with large account focus )

( Now – recalling our positioning strategy )

( Traditional Positioning Tactics Define the market space – who are your customers? Identify the attributes that define the product 'space ' Ask prospects about what the produce means Determine each product's measure of awareness Determine target market's preferred attributes Examine the fit between: The position of your product The position of the preferred attributes Now – position )

( To The Finish Line Promotion Strategy Brand Strategy Globalization of Markets )

( The 4 th ‘P’ – Communicating Value to Customers and Creating Loyalty )

( The Promotion Mix sales promotion personal sales advertising public relations direct marketing ) ( Paid, impersonal communication to prospective and current customers )

( ECONOMIC THEORY – monopolistic competitor easy entrance / easy exit many buyers and sellers short term – firm can shape industry (monopoly) price searchers – non price competition differentiated products forced to promote – added inefficiency to cost structure ) ( Average Advertising Costs • Newspapers – $1,300 per week for 2” x 2” ad • Television – $200,000 for one 30-second commercial (during prime-time) • Direct Mail - $1,500 for 1,000 4x6 postcards (includes postage ) • Radio - $1000 for 30 seconds (LA market) • Magazines - $1,200 to $5,000 per month or per issue ( depends on ad size and demographics) • Outdoor (billboard) - $3,000 to do artwork and install media on billboard; rates depend on impress level, ranges from $5 ,000 to $500,000 (the higher the qualify of the artwork and the larger the demographic group, the higher the price); minimum contract is 16 weeks • Online - $0.60 pay-per-click or $1,200 - $1,800 a month for aggressive campaigns (does not include search engine optimization) or $200 to $1,200 per year per banner ad on websites )

( Advertising Personal selling Sales promotion Public relations Awareness Knowledge Liking Preference Conviction Purchase Very effective Somewhat effective Either not effective or inefficient When Elements of Promotion Are Most Useful ) ( E ff ec t ive n ess )

( AIDA and the Hierarchy of Effects Purchase Conviction Preference Liking Knowledge Awareness Attention rest Action Desire Inte ) ( Tools – understanding our Position – then maximize promotion )

( Guiding ‘Positioning’ Strategic Questions What position, if any, do we already have in the prospect’s mind? What position do we want to own? What companies must be outgunned if we are to establish that position? Do we have enough marketing money to occupy and hold the position? Does our creative approach match our positioning strategy? )

( Marketing Management’s Responsibility to the Firm Generate a return on investment of all marketing endeavors )

( ADVERTISING VS. PR ) ( Advertising vs. PR  Advertising is Funny  PR is Serious  Advertising is Uncreative PR is Creative  Advertising is in credible  PR is Credible  Advertising likes Old names  PR likes new names  Advertising is Brand Maintenance  PR is Brand Building )

( Advertising vs. PR   Advertising is the Wind PR is the sun   Advertising is Spatial PR is Linear   Advertising uses the Big Bang PR uses the Slow Buildup   Advertising is Visual PR is Verbal ) ( Low budget, high impact ‘Buzz’ )

( Advertising vs. PR  Advertising Reaches Everybody PR Reaches Somebody  Advertising Is Self-Directed  PR is Other-Directed  Advertising Dies  PR Lives  Advertising is Expensive  PR is Inexpensive  Advertising Favors Line Extensions  PR favors New Brands ) ( New Trends in Promotion – “Buzz” Marketing   The Power of Networks – why we talk We are programmed to talk We talk to connect We talk to make sense of the world We talk to reduce risk, cost, and uncertainty We talk because it makes economic sense )

( The Power of Network “Hubs” Regular hubs – just a few – local info Mega hubs – the masses – Oprah, news, etc. Expert Hubs – specialized groups Social hubs –selected – friends, industry colleagues )

( Globalization – central themes   What is the strategic imperative for international business   How do we sell our products in international markets   What are the best products to sell   What are the new global realities )

( Globalization and the Corporation Evolving Mentality of the MNC and International Trade I • nt e r n a ti ona l v e l o p ed f or t h e d ome s t i c m ar k et an d o nl y subseque n t l y s o l d ab r o ad Knowledge and technology are transferred from the parent company to the overseas Products de Offshore ma operators nufacturing is seen as a means to protect the company’s home market Managers begin to recognize and emphasize the difference among national markets Multinational Modifications begin to emerg and operating environments practices country by country market preferences e for products, strategies, and even management Independence from headquart Become sensitive to national customized of efficiencies surface due to lack of standardization ers emerges and local foreign markets become Challenges India Company – ‘first’ MNC 50 MNCs ha Dutch East ve higher GDP than 150 nations )

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( Globalization and the Corporation Global Creating of products for a worldwide marketplace and manufacturers them on a global scale in a few highly efficient plants, often at the corporation’s center ‘ global’ – the ‘world’ is the company’s unit of analysis Assumptions – national tastes and preferences are more similar than different OR they can be made similar by providing customers with standardized products with adequate costs Transnational Key activities are neither centralized in the parent company nor decentralized Each subsidiary can carry out its own tasks on a local‐for‐local basis Resources and activities are dispersed, but specialized so as to achieve efficiencies and flexibility Dispersed resources are integrated into an interdependent network of worldwide operations * return of the word ‘national’ into the mentality – sensitivity toward national preferences and culture * ‘ trans’ implies coordination of operations to retain competitive effectiveness and economic efficiency ) ( Globalization and its Consequences Globalization and Culture ‐ enduring realities (volatile, less favorable) Markets produce winners and losers Diminishment of state power to the MNC Invisible beneficiaries – previous slide Visible losers – constant sourcing of low cost labor Hegemonic nations – US, EU, China, India, etc Unbalanced quota policies – US free to export yet minimize imports to all markets Political Economy of the Era – push for a level playing field Labor – shift from union to non‐union Current Trade – old institutions Activists – social justice; mutual aid; solidarity; direct democracy Globalization – does not cause direct poverty – but makes people more aware Markets – must be fair to the bottom if markets are to work in the developing world Requirements – strong institutions; access to capital Markets – ‘justice’ of markets will be judged on how well they connect to the poor Yet “political and economic risk” is the true measure )

( Globalization’s New Realities Markets Borderless Single markets Produce where it is most cost effective Sell where it is most profitable Source capital from various sources worldwide Without worrying about national boundaries Looser immigration standards – continuous movement of human capital Immediacy of capital flow (until recently) Interdependence – the great pro and con of ‘one world’ (global recession) ) ( Globalization’s Burning Issues The Culture of Prosperity – universalism of capitalism (under fire, but persistent) Capitalism – ownership and access to capital The tool for poor people to prosper – capital Eradication of poverty – not accomplished by redistributing existing wealth, rather the creation of new wealth At all levels – from the top to the bottom / from the bottom to the top Capitalist system – a system of ‘representation’ Identification of one’s ‘property’ and ‘identity’ ID cards, passports, credit cards, birth certificates, diplomas, title to land, simple receipts of purchase, anything with value Property Rights – the rules and values that govern a society Must be institutionalized for prosperity to be legitimate and sustainable Poor people – have been locked out of the capitalistic system Usually by politics and not markets All people are capitalists by nature – prosperity of mind, soul, person, home, talent )

( Globalization and its Consequences The Sensitivity of the Term Culture – shared and integrated beliefs, traditions, values, organizations, institutions Globalization and Culture ‐ enduring realities (favorable) National sovereignty – minus isolationism and protectionism Tolerance and peace – international trade even among bitter enemies Life Expectancy – access to competitive markets Prosperity – measured growth with access to markets Poor country growth rates – continuous growth Poverty – measured decline Global equity – modest increase Wages – among globalized countries – rising Prices – remain competitive Role of MNC – central initiator of free flow of capital realizing these gains ) ( Interdependence – necessary ingredient of globalization Defined – all entities (economic, social, political) are connected for the purpose of mutual growth, protection, accountability, responsibility, and prosperity – in essence globalization – the unification of society Guiding Assumptions Globalization is ethical – the ideas by which people live (universal) Reaching the open world – prosperity is a universal goal Social Justice – competitive markets yield social value Burning Issues Clarification of terms ‘Governing’ – hierarchical authority of a single state • Governance or shared values – ‘democracy’ or ‘markets’ ‘Governance’ – horizontal interaction of multiple stakeholders   D  emoc r acy – a cc es s t o powe r ( i ssue ) n   globalization without representatio Checks and balances   M  ar k e ts (unde r se i z e ) i s …? odu ct s , an d se r vic es   Exploitation of the nameless and ‘plentiful labor’   Age‐old arena of ideas, pr oduction , prices, and output   Competitive – innovation, entrepreneurship, profit‐centered, value added Results – efficiencies in pr )

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( Interdependence – political reality Political, Economic, Regional governance of ‘trade’ Andean Community, CAN Asia Pacific Economic Cooperation, APEC Association of Southeast Asia Nations, ASEAN Australia New Zealand Closer Economic Relations Trade Agreement, ANZCERTA Caribbean Community, CARICOM Central American Common Market, CACM Central American – Dominican Republic Free Trade Agreement, CAFTA‐DR Common market of the South, MERCOSUR Common Market for Eastern and Southern Africa, COMESA Commonwealth of Independent States, CIS Council of Arab Economic Unity, CAEU East African Community, EAC Economic Community of Central African States, ECCAS Franc Zone Gulf Cooperation Council, GCC International Monetary Fund, IMF Latin American Integration Association, LAIA Latin American Free Trade Agreement, LAFTA League of Arab States, LAS European Economic Community, EEC Economic Community of West African States, ECOWAS Southern African Development Community, SADC South Asian Association for Regional Cooperation, SAARC Economic Community of the Great Lakes States, CEPGL European Union, EU Organization for Economic Cooperation and Development, OECD North American Free Trade Agreement, NAFTA WTO )

( Marketing & Distribution Management Lecture Series SEAN D. JASSO, PHD © 2016 UCR – Summer 2016 )