MM1- Pgpwe-Handouts - Lecture notes 1-20 PDF

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Marketing Management - 1

Course Delivery/Pedagogy

• Theory and Concepts – PPT – Videos

• Cases and/or Exercises – Class discussion

1

Session – 1

Introduction

A Simple Marketing System

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Things a Firm Producing and Selling Bikes Should Do Analyze Needs Predict Wants Estimate Demand Predict When

Determine Where Estimate Price Decide Promotion Estimate Competition Provide Service

Marketing—What’s It All About? More than Selling or Advertising

More than Selling and Advertising?

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Marketing—What’s It All About?

• Is Marketing same as Selling? • Is it Different? – If no, why not? – If yes, how?

Selling is only the tip of the iceberg

“There will always be a need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed is to make the product or service available.”

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Production vs. Marketing

Marketing Makes sure right goods & services are produced

Production • Making Goods • Performing services

Creates Customer Satisfaction

Macro vs Micro View of Marketing

Micro View • Set of activities • Performed by individual organizations

Macro View and

• Matches supply with demand

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Macro-Marketing

Emphasis on Whole System

Every Economy Needs It

Key Characteristics

Matches Producers and Consumers

Who Performs Marketing Functions?

Producers

Wholesalers

Transport Firms

Retailers Ad Agencies

ISP's Product Testing Firms

Other Specialists

Research Firms

Consumers

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Marketing’s Role Has Changed Over Time Simple Trade Era

Focus: Sell Surplus

Production Era

Focus: Increase Supply

Sales Era

Focus: Beat Competition

Marketing Department Era

Focus: Coordinate and Control

Marketing Company Era

Focus: Long-Run Customer Satisfaction

Company Orientations

Production

Product

Selling

Marketing

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Marketing Orientation vs. Other Orientation Dimension of organisation

Production

Technology / Product

Selling

Marketing

R&D

Sales Transactions

Customer

Market Customer bondage

Focus

Effective utilisation of Machines

Goal

Optimal Capacity utilisation

Stay ahead through technology

Sale

Strategy

Economies of Scale and Scope

State of the Art technology

Price Promotion

Structure

Functional

Task Force

Functional

Control Systems

Conventional (P&L & Budget)

Profit Centre

Skills

Manufacturing

Research

Selling and Conversational

Analytical

Styles

Task-oriented

Task-oriented

People-oriented

Team-oriented

Mind Set

We need to push production volumes

Push for best product

Hook the customer

Sale and collection of outstandings

Customer bonding through integration of organisation with the customer needs Matrix Customer Satisfaction Index and Market share

What is it that we can make here or source from outside to satisfy needs of target customer

Concepts and Terms The Need, Want, Demand and Value –

Needs are basic human requirements •

–

Wants are needs directed towards a product •

–

I am hungry and I want to eat burger

Demand is want accompanied by buyer’s willingness and ability to pay •

–

State of deprivation

I want a burger and I can pay for it

Value = Benefits / Cost •

Subjective, Relational and Perceived

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Concept of Need : Maslow’s Hierarchy

Concepts and Terms • When one is Thirsty – It is state of Deprivation • Need – one needs to quench thirst

– Ways to overcome this state of deprivation (thirst) • Water, Juice, Any other Soft Drink • Want – directed to one of the specific product

– Demand • A want backed by : Willingness + Ability

• The crux of Marketing Process is the identification and serving of consumer needs.

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Concepts and Terms • What is Value ? – The relationship between the consumer's perceived benefits in relation to the perceived costs of receiving these benefits – It can be expressed as the equation • Value = Benefits / Cost

Concepts and Terms

• Value is subjective and relational

– a function of consumers' estimation/perception – both benefits and cost must be positive values

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Video-2 • Customer Value

Concepts and Terms

Customer perceived value is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.

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Concepts and Terms • Market – is a set of existing & potential buyers for a defined product or service. Limits of the market are often defined by geography and is invariably time specific.

• Market Place – is a place where one goes for shopping

• Virtual market – is digital in nature

Demand and its types • Negative Demand – The market is in a state of negative demand if a major part of the market dislikes the product and may even pay a price to avoid it • Example: Vaccination; smoking rooms in hotels • Analyze why the market dislikes the products

• No Demand – Target consumers may be uninterested in the product • Engineering College students may not be interested in a foreign language course. • Arouse interest in the product or service

• Latent Demand – Many consumers share a strong need that cannot be satisfied by any existing products • Latent demand for harmless cigarettes (Example – Nirdosh) • Identifying the latent needs and developing products to satisfy them

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Demand and its types • Declining Demand – A substantial drop in the demand for products. • Hockey tournaments in India

– Find the cause of decline and address the cause. Creative marketing of the product. E.g. revival of FM Radio

• Irregular Demand – Demand that varies on a seasonal, daily or even hourly basis, causing problems of idle capacity or under capacity • Markets/Malls :- visited on weekends, not on weekdays. • Happy hours in hotels, multiplexes etc.

• Full Demand – When the business is satisfied with the demand and business volumes • Maintaining the current level of demand

– Eg: Hero Honda, Maruti, Amul etc.

Demand and its types • Overfull Demand • A demand level that is higher then a company can or want to handle. – De-marketing is required • finding ways to reduce the demand temporarily or permanently – Raise price, reduce promotion/service » No/Low discount on Ford Ecosport – even though car sales in general low

• Unwholesome Demand – Some products that attracts organized effort to discourage their consumption – cigarettes, alcohols, drugs, handguns and pirated movies

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Marketing Mix - The Four P’s

Marketing Mix - The Four P’s Trade Behaviour Expectations SocioEconomic Factors

PLACE

TARGET CUSTOMER

Competition

Political Ideology of Major Parties

PRICE Elements of Marketing Mix

Taxes and Tariffs

Government Policy

External envt.

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• What is Marketing?

Good Marketing is No Accident

The roaring success of four-wheeler Tata Ace, in a market earlier dominated by threewheeler load carriers, was due to a deep understanding of the market needs and customer requirements.

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Examples

• The giant wheel vs. the giant clock

Detergent Market

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Indian Detergent Market • 12000 cr. detergent market of India • 3 big players and their strategies – Wheel (17%) – price and value

– Ghari (13.5%) – value and quality – Nirma (7.9% - down from 35% during its peak)

• Some classic Advertisements – Not very catchy – mostly family or tradition based • Wheel • Nirma • Ghadi

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Value for Money – Detergent War • Wheel – HUL

• Ghari – Rohit Surfactants Pvt Ltd – 1980s

• Nirma – 1969

Nirma • 1960s and ‘70s – the domestic detergent market had only premium segment – very few players and dominated by MNCs.

• 1969 – Karsanbhai Patel started door-to-door selling of his detergent powder – Priced at an astonishing Rs. 3 per kg • when the available cheapest brand in the market was Rs. 13 per kg.

– It was innovative, quality product – with indigenous process, packaging and low-profiled marketing, which changed the habit of Indian housewives’ for washing their clothes. • In a short span, Nirma created an entirely new market segment in domestic marketplace

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Nirma • The performance of Nirma during the decade of 1980s – ‘Marketing Miracle’ – During this period, the brand surged well ahead its nearest rival – Surf, which was well-established detergent product by Hindustan Lever – Nirma captured the market share by offering valuebased marketing mix of four P’s • product, price, place and promotion

Wheel

• Nirma was 7 Rs./Kg and Surf was 21 Rs./Kg • Low cost detergents had grown to 80% of the total market for detergents

• Stung by falling market share, HUL needed a new marketing strategy against Nirma • Launched Wheel in 1987

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Wheel

• One of the largest selling detergent brand in India. • Sales of around Rs. 2500 crores for the year • Famous for using Bollywood stars as its Brand Ambassadors – Recently, Salman Khan has become the new brand ambassador for wheel

Ghari Detergent • Launched in 1987 • Rs. 2000 crore sales for the year 2011 • Second largest in the home and personal care segment – Next only to Wheel

• Doesn’t use celebrities to promote its ‘Ghari’ brand

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So ….

So, what is marketing ?

What is 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.

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What Is Marketing?  AMA DEFINITION – Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders

Video – 3 • CCDVTP – Create, Communicate, Deliver Value to a Target Market at a Profit

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CCDVTP • Creating Value – Product Management • In-house and outsourced – Open innovation – Co-creation of value

– Functional and Economic Value

CCDVTP • Communicating Value – Brand Management • Mind Share • Heart Share

– Emotional Value

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CCDVTP • Delivering Value – Customer Management • More than database marketing • Understanding the customer

CCDVTP • To a Target Market at a Profit – Not everyone in the market – Target Market • Focus on customers who need your product/service • Not everyone in the market is a target customer for your product/service

– At a Profit • Ultimate long term objective of a commercial organization

• What about Marketing for non-profit organizations?

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CCDVTP • So what about NGOs and NPOs ?

– NGO (non-governmental organization) • Its funds are raised by the government, but it maintains a non-governmental position, with no need for a government council. • They are also known as civil society organizations.

– NPO (non-profit organization) • Uses its extra funds for the purpose of the organization, rather than dividing it between the shareholders and the owners of the organization. • Examples: public arts organizations, trade unions and charitable organizations

• CCDVTP – Create, Communicate, Deliver Value to a Target Market at a Profit

• Value is the Key

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Traditional vs. Value Based View of Marketing •

Traditional – Make and Sell the product

•

Value Creation and Delivery Process – Choose the value •

STP

– Provide the value •

Product design and development, pricing and distribution

– Communicate the value •

Advertising, sale promotion, sales

Video – 4 • Value Proposition – Promise of a value – For a specific target market – Which is compelling – Differentiated from alternatives – Backed up by evidences – It is contextual

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Marketing as a “Process” • Marketing involves an exchange transaction between the buyer and the seller • Marketing emphasises on the mutual satisfaction of both – the buyer and the seller

• Development of a long-term relationship between them

Video – 5

• Seven Core Marketing Processes

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Marketing as a Managerial Function a) Understanding consumer needs b) Environmental scanning and market opportunity analysis c) Development of competitive marketing plan and strategy such that an organisation is able to satisfy not only the consumer needs but also achieve its objectives d) Implementation of marketing plan and development of tactical plans to overcome problems at the market place; and e) Development of control mechanisms

What is Marketing - Putting It All Together Total Company Effort to Satisfy Customers Build Profitable Customer Relationships

Offer Superior Customer Value

Increase Sales to Customers

Attract Customers

Retain Customers

Satisfy Customers

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The Marketing Concept

Total company effort

Customer satisfaction The Marketing Concept

Profit (or another measure of long-term success) as an objective

Expanding The Horizons Of Marketing

• Internal Customer – Who is an internal customer??

• Internal marketing is the task of hiring, training, and motivating able employees who want to serve customers well.

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Holistic Marketing Dimensions

What is Holistic Marketing?

Holistic marketing sees itself as integrating the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co-prosperity among key stakeholders.

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Framework of Marketing

Nirdosh

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Nirdosh • Biri/Cigarette like Smoking Device – Containing a herbal mixture – No tobacco or Nicotine – Herbal mix is beneficial in respiratory problems as well – http://www.nirdosh.co.in/index.html

The Company • Family owned proprietary organization – Father and Sons – Social connections with financial institutions and local politicians

• Turnover – Around Rs. 10 lakh – Rs. 5 lakh sales turnover from Nirdosh • Increase from 1.5 lakh in 1988 to 5 lakhs in 1989

• Resources – Shop, Vehicle (2 scooters), – Manufacturing Premises • 30-40 workers • Machinery

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Marketing Strategies and Plan

Planning Activities

• Define the corporate mission • Establish strategic business units (SBUs) • Assign resources to each SBU • Assess growth opportunities

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The Business Unit Strategic Planning Process

Marketing Plan?

• Marketing plan is the central instrument for directing and coordinating the marketing effort – operates at a strategic and tactical level

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Levels of a Marketing Plan

Tactical in Nature

Strategic in Nature

– Product features

– Target market decisions

– Promotion

– Merchandising

– Value proposition

– Pricing – Service

– Analysis of marketing opportunities

Elements of a Firm’s Marketing Program

Target Market

+ Marketing Mix

=

Marketing Strategy

+ TimeRelated Details

=

Marketing Plan

+ Other Marketing Plans

=

A Firm’s Marketing Program

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Mission Statement – What is our business? – Who is the customer? – What is of value to customer? – What will our business be? – What should our business be? » Peter Drucker on defining company’s Mission

Good Mission Statements Focus on limited number of goals Stress major policies and values Define major competitive spheres Take a long-term view Short, memorable, meaningful

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Concept of Value Chain

What is the Value Chain?

The value chain is a tool for identifying ways to create more customer value because every firm is a synthesis of primary and support activities performed to design, produce, market, deliver, and support its product.

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What is the Value Chain?

Value Chain

– Primary Activities • Inbound logistics, operations, outbound logistics, marketing and sales, service

– Support Activities • HR • Procurement • Technology • Infrastructure

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Core Competence & Competitive Advantage

Characteristics of Core Competence

• Provide access to a wide variety of markets • Contribute significantly to end product benefit • Be difficult for competitors to imitate

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Core Competencies

• A source of competitive advantage

– Relative advantage one business has over another

that is sustainable and translates into a benefit that is important to target customers

Core competencies to end products

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Example • Honda – Core competence • Engineering

– Core Product • Gasoline Engine

– Business Units • Cars, Generator Sets etc

– End Products • Cars/Motorcycles of different sizes and capacities

Porter’s Generic Strategies – Competitive Advantage • A relative advantage one business has over another that is sustainable and translates into a benefit that is important to target customers • Companies can achieve competitive advantages through – differentiating their products and services from those of competitors; and

– low costs

– Competitive Scope • Firms can target their products by – covering most of the marketplace- a broad target – focusing on a narrow target in the market

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Porter’s Generic Strategies
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