Introduction to Marketing Strategy

Part C

Initial Marketing Frameworks and a Model

Abel JeulandUniversity of ChicagoBUS 37000-Spring 2014

Slide1

Marketing is an integrating function: Good marketing requires a balance of skills.

- Understanding the consumer experience, for example the interface consumer behavior/technology (user-friendliness)

- Decision orientation: in particular dealing with incomplete information

- Implementation: of marketing plan

Slide2

Initial Marketing Frameworks

Since Levitt, many frameworks have been developed to make marketing not just a business philosophy but a critical function with specific responsibilities and tasks within the company or institution (including non-profit organizations*)

*Churches, political parties, foundations, etc. all extensively engage in marketing today.

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Initial Marketing Frameworks To implement Levitt’s philosophy (Marketing Myopia), marketers use frameworks

such as the MMP (Marketing Management Process with the 5Cs, SWOT analysis, 4 Ps) and the NPDP (New Product Development Process).

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The Marketing Management Process

Examines the situation and identify problems and opportunities: 5 C’s (Customer, Competitor, Company, Collaborators, Context)

Establishes objectives: operations objectives (supply), market objectives (demand)

Formulates strategy: 4 P’s = Product, Price, Place (distribution), Promotion (communication)

Implements and monitors the strategy (the marketing plan)

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The 5 C’s

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Analysis of First C : Consumer

Understanding the consumer, the consumer experience

Recognizing consumer heterogeneity: market segmentation

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Model of the Consumer Developing a Model of the Consumer Experience. The consumer experience is a process. It may be a shared experience (This sharing is

greatly facilitated by the Internet). The Household Production Function of Gary Becker* is a related concept.

Consumers often choose not directly from the commodities that they purchase but from commodities they transform into goods through a household production function.

It is these goods that they value. The idea was proposed by Gary Becker and Kelvin Lancaster in the mid 1960s. A simple illustration is the baking a cake: The consumer purchases flour, eggs, and

sugar and then uses some labor, time and equipment to produce a cake. The consumer did not really want the flour or sugar but purchased them to produce the

cake consumed.

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What is the product from the marketing point of view?

Example 1: What is the sling box?

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• -Watch live TV on a laptop or smart phone anywhere with Internet access• -Watch and control DVR anywhere with Internet access• -Freedom to watch TV programs however and wherever one wants• “Convergence of media” product/service categories: TV, laptop, tablet, smart phone• -Built-in TV tuner• -Connects to the Internet• -Connects to audio/video sources including TV, cable, satellite, or DVR• -Small size• -Supports current technology standards • -Picture quality• -Ease of use of user interface• -Ease of installation• -Never separated from favorite programs• -I am an innovator• -Seen as tech-savvy• -Feeling of power• -Control over entertainment• -Coolness factor• -Comfort and pleasure of instant gratification• -Impress others• The product is multi-dimensional as are the underlying consumers needs and wants

What is the sling box?

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To adopt the point of view of the consumer experience, we need to organize these product elements

What is the sling box?

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The means-ends framework has been found to be useful in organizing the product components

What is the sling box?

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What is the Chicago Booth MBA product?

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The MBA education and experience• -Classrooms• -Communication networks• -Lectures • -Packets• -Assignments • -Meet new people• -Gain experience• -Learn new things (leading edge)• -Networking• -Expand career options• -Large knowledge base• -Gain exposure• -Make more money• -Get promoted• -Meet lifelong friends• -Feel smarter• -Feel more powerful• -Feel more well rounded• -Feel more personally and professionally satisfied• -Others see me as part of elite group• -Others impressed by my abilities• -Others see me as a leader• -Increase self esteem• -EmpowermentThe product is multidimensional as are the consumer needs and wants Slide15

Slide16

VibRAMFIVE FINGERED FOOTWEAR

Means-End Chain

Attributes Consequences Values

Concrete Abstract Functional Psychosocial Instrumental Terminal

• Form fitting• Light weight• Antimicrobial

Fiber• Machine

washable• Good traction

• Barefoot simulated

• Innovative• Convenient• Fashionable• Trendy

• I will be in shape

• Fewer injuries• Balance• Redevelop

muscle groups• Better

performance

• I will be self-confident

• I will have knowledge of new products

• I will feel better about myself

• People see me as an athlete

• People respect me

• Reconnected to nature

• Independence• Strength

Roger’s Factors of Innovations and Segmentation Trend Setters appear to be target for the product, at

least initially. Avid Runners and Cross Trainers will need to see

some evidence of benefits.– Reviews (Runners World), High-Profile runners, Word-of-

mouth

Trend Setters

Avid Runners

Cross Trainers

Relative Advantage High Medium Medium

Compatibility High High HighComplexity Low Low LowTrailability Medium Medium Medium

Observeability High Medium MediumCompetition Puma / Crocs Nike / NB / Asics Nike / Reebok

Analysis of 2nd C: Company

-Core Competencies of the Corporation-Sustainable Advantages of the Corporation-Differentiation from Competition-Relative Positioning of Company, its

offerings (which products/services for which markets)

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Analysis of 3rd C: Competition

Nature of Competition (definition of the category, of the relevant set)

Number of CompetitorsRelative Positionings of Competitors

(differentiation)

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Analysis of 4th C: Collaborators

Firms do not perform all functions. Important market participants include: suppliers,

manufacturers, resellers (wholesalers, retailers)Suppliers Manufacturers Resellers End-users There may be conflict between the objectives of

these interdependent market participants (channel coordination is critical): Apple acts as channel captain in the app market for its mobile devices (iPhone, iPad)

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Analysis of 5th C: Context (Environment) Socio-economic, demographic, cultural,

life-style Political (deregulation, privatization) Technological (innovation) Globalization, outsourcing

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Integrating the 5 Cs: SWOT analysis (Strengths, Weaknesses, Opportunities, Threats)

CompanyCollaborators

ConsumerCompetitionContext

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Integrating the 5 Cs via SWOT analysis Given one’s objective, a strategy to achieve

it is developed by answering the questions: -How can we use and capitalize on each of our strengths? -How can we improve each of our weaknesses?

-How can we exploit and benefit from each opportunity?

-How can we mitigate each threat?

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Where are wetoday(our offering) ?

Where is theconsumer(unmet needs) ?

Where are ourcompetitors(others' offerings) ?

Where can we (do we want to)be at what time horizon?

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Marketing Management Process Review-Examines the situation and identify problems and

opportunities: 5 C’s (Analyses of Customer, Competitor, Company, Collaborators, Context); SWOT analysis of the business

-Establishes objectives: supply (costs, differentiation) , consumers(markets)

-Formulates strategy: Marketing Plan with 4 P’s (product, price, place (distribution), promotion)-Implements and monitors

Slide27

The Marketing Mix: the 4 P’s

The marketer needs answers to 4 fundamental questions about the chosen customer base:

What do they need (want)? ProductHow, when will they get informed about their options and persuaded to make a choice? PromotionHow much will they pay? PriceWhere will they want to buy? Place

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The Marketing Mix (4P’s)

P

P P

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Framework of the New Product Development Process* (NPDP) 1-Generating new ideas 2-Screening new ideas for consistency with our business definition 3-Concept development and testing (to make new idea relevant to

consumer) 4-Marketing strategy (target market, marketing plan: 4 Ps) 5-Business analysis (economics of the marketing plan) 6-Product development (producing a prototype) 7-Testing (alpha and beta testing, market tests) 8-Commercialization

*Tasks 1-7 are not performed in the exact sequential order but they need to be performed prior to 8. Often these tasks will be repeated as product and strategy revisions are made. The NPDP should thus be viewed as an iterative process.

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Example of models in marketing: diffusion of innovation-Three parameters: market size m, coefficient of

innovation p and coefficient of imitation q

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Parameters CSt-1 St m 20000.000 0.0 400.00 p 0.020 400.0 588.00 q 0.500 988.0 849.84 1837.8 1197.72 3035.6 1626.70 4662.3 2094.47 6756.7 2501.89 9258.6 2701.09 11959.7 2564.79 14524.5 2097.73 16622.2 1471.21 18093.4 900.54 18994.0 497.83 19491.8 257.80 19749.6 128.64

Example of Bass Model:St=(20,000-CSt-1)(2%+50%(CSt-1/20,000) St=(m-CSt-1)(p+q x CSt-1/20,000)

151413121110987654321

3000

2500

2000

1500

1000

500

0

Index

St

Time Series Plot of St

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