Understanding Marketing Management

Definition of Marketing

The American Marketing Association (October 2007): Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

The shortest definition: Marketing is meeting needs profitably.

Peter Drucker’s Perspective on Marketing

There will always, one can assume, be 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 services fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.

Definition of 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.

What is Marketed?

GoodsGoods

ServicesServices

Events & ExperiencesEvents & Experiences

PersonsPersons

Places & PropertiesPlaces & Properties

OrganizationsOrganizations

InformationInformation

IdeasIdeas

Case: 日本宮崎縣 (Miyazaki) 知事：東國原英夫（ 2007 年 1 月 23 日就任） 東國原英夫一年 365 天要上 400 多個電視通告。日本廣告公司電

通估計，以他曾於一個星期內在 182 個節目中露臉，出現時間為22 小時 30 分鐘來看，換算成廣告價值高達 165 億日圓。

大方開放肖像權讓宮崎業者用來促銷產品。走在宮崎的街上，可以看到許多以東國原英夫卡通造型當招牌的商店。隨便走進一家超市，貨架上琳琅滿目的商品，包括土雞料理、拉麵、酒、甜點、水果等，東國原英夫都在包裝上對你笑咪咪。

日本財經雜誌《 Trendy 》評選 2007 年日本十大熱門商品，「宮崎」高居第六名。日本版《 GQ 》雜誌評選六位「 2007 年度風雲人物」，名列第一的就是東國原英夫。

中華航空自 2008 年起，增闢台北直飛宮崎的班機。

National Milk Processors Education Program

Core Marketing Concepts

Needs, wants and demands Target markets, positioning, and

segmentation Offerings and brands Value and satisfaction Marketing channels: consist of

communication channels, distribution channels, and service channels.

Core Marketing Concepts

Supply chain: a longer channel stretching from raw materials to components to final products that are carried to final buyers.

Competition Marketing environment: consist of the task

environment and the broad environment

Needs, Wants and Demands

Needs ( 需要 ): the basic human requirements. Physical: food, clothing, shelter, safety Social: belonging, affection Individual: learning, knowledge, self-expression

Wants ( 慾望 ): when needs are directed to specific objects that might satisfy the need.

Demands ( 需求 ): wants for specific products backed by an ability to pay.

Does Marketing Create or Satisfy Does Marketing Create or Satisfy Needs? Needs?

Take a position: Marketing shapes Take a position: Marketing shapes consumer needs and wants versus consumer needs and wants versus Marketing merely reflects Marketing merely reflects the needs and wants of the needs and wants of consumers.consumers.

Responsive, Anticipative, and Creative Marketing

A responsive marketer finds a stated need and fills it.

An anticipative marketer looks ahead into what needs customers may have in the near future.

A creative marketer discovers and produces solutions customers did not ask for but to which they enthusiastically respond. Akio Morita ( 盛田昭夫 ) once proclaimed that Sony doesn’t

serve markets; Sony creates markets. The Walkman is a classic example.

3M: “Our goal is to lead customers where they want to go before they know where want to go.”

Demand States and Marketing Tasks

Marketing managers are responsible for demand management. Negative demand → counter marketing, e.g.

insurance. Non-existent demand → stimulus, e.g.

encyclopedias. Latent demand → developing, e.g. solar energy,

Kindle. Declining demand → remarketing, e.g.

Arm & Hammer and Listerine ( 李施德霖 ).

Demand States and Marketing Tasks

Marketing managers are responsible for demand management. Irregular demand → synchromarketing ( 同步行

銷 ), e.g. 黑松沙士, happy hour.

Full demand → maintain marketing Overfull demand → demarketing ( 低行銷 ), e.g.

Mister Donut, 王師父金月娘 . Unwholesome demand → social marketing, e.g.

cigarettes, drunk-driving, seat belt, and anorexia.

Can you name a category of products Can you name a category of products for which your negative feelings have for which your negative feelings have softened? softened? What precipitated this change?What precipitated this change?

Company Orientations Toward the Marketplace

The production concept The product concept The selling concept The marketing concept The holistic marketing concept

The Production Concept

The idea that consumers will prefer products that are widely available and inexpensive.

Focus: high production efficiency, low costs, and mass distribution.

It is useful when (1) the demand for a product exceeds the supply (e.g., developing countries such as China); (2) the product’s cost is too high.

Examples: Ford’s Model-T, standard raw materials and components, CD, LCD.

The Product Concept

The idea that consumers will prefer products that offer the most quality, performance, or innovative features.

Focus: making superior products and improving them over time.

Examples: digital camera, CPU. Better mousetrap fallacy Marketing myopia (Theodoes Levitt, 1960)

Product-Oriented vs. Market-Oriented Definitions of a Business

The Selling Concept

The idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort.

The selling concept assumes that customers who are coaxed into buying the product will like it. Or, if they don’t like it, they will possibly forget their disappointment and buy it again later.

The Selling Concept

Sergio Zyman (Coca-Cola’s former vice president of marketing): the purpose of marketing is to sell more stuff to more people more often for more money to make more profit.

Focus: undertake an aggressive selling and promotion effort.

Practiced most aggressively with unsought goods (e.g., insurance, encyclopedias, and funeral plots).

The Marketing Concept

The idea that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets.

The marketing concept emerged in the mid-1950s. Slogans: “Find wants and fill them”, “Love the

customer, not the product”, and “We do it all for you” (Toyota).

Three hurdles: organized resistance, slow learning, and fast forgetting.

Marketing Concept vs. Selling Concept

Selling concept Marketing concept

Focus on the needs of the seller (Theodore Levitt, 1960)

Focus on the needs of the buyer (Theodore Levitt, 1960)

The manufacturer: “This is what I make, won’t you please buy it”

The consumer: “This is what I want, won’t you please make it”

Inside-out perspective Outside-in perspective

Contrast between the Selling Concept and the Marketing Concept

The Extreme of the Marketing Concept – The Customer Concept

The Holistic Marketing Concept

Based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies.

An approach to marketing that attempts to recognize and reconcile the scope and complexities of marketing activities.

Holistic Marketing Dimensions

Integrated Marketing

The marketer’s task is to devise marketing activities and assemble fully integrated marketing programs to create, communicate, and deliver value for consumers.

McCarthy’s four P’s (the seller’s point of view) Product Price Place Promotion

Integrated Marketing

From a buyer’s point of view, each marketing tool is designed to deliver a customer benefit. Solution: How can I solve my problem? Information: Where can I learn more about it? Value: What is my total sacrifice to get this

solution? Access: Where can I find it?

The Four P Components of the Marketing Mix

Marketing-Mix Strategy

Internal Marketing

The task of hiring, training, and motivating able employees who want to serve customers well.

Marketing must be embraced by the other departments (e.g. production, finance, and human resource); they must also “think customer.”

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Question: What would you do if you were the VP of marketing in this airline? How would internal marketing be of help? Show specific examples

An Example of a Coordination Problem that Requires Effective Internal Marketing

Socially Responsible Marketing – The Societal Marketing Concept

The idea that holds that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests.

Examples: Body Shop, HSBC, Dell Asia in Malaysia, Bata Indonesia.

Johnson & Johnson’s Tylenol ($240 million), 保力達蠻牛 (NT 120 million), 金車毒奶事件 .

An Example of the Social Marketing Concept – Earth Tree

將來自第三世界國家的手工製作品，經由較進步的國家像歐美、日本等國負責設計與商品化流程，然後銷售出口。

因為堅持 Fair Trade 的基本精神，讓第三世界國家的工錢不被剝削，保有合理的利潤，因此多販售出一樣商品也就能夠讓他們靠自己的努力改善困窘的生活，甚至也因為這樣可以學到新的謀生技能，即便在不穩定的環境中也能靠他們自己的力量感到榮耀和成就。

Cause-related Marketing ( 公益行銷 , 善因行銷 )

Link the firm’s contributions to a designated cause to customers’ engaging directly or indirectly in revenue-producing transactions with the firm

The creation of the term "cause-related marketing" is attributed to American Express.

Some experts believe that the positive impact on a brand from cause-related marketing may be lessened by sporadic involvement with numerous causes.

Branding: self-branded, co-branded, and jointly-branded.

Customer Relationship Management (CRM)

The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

The ultimate outcome of relationship marketing is a unique company asset called a marketing network.

A marketing network consists of the company and its supporting stakeholders – customers, employees, suppliers, distributors, retailers, ad agencies, university scientists, and others – with whom it has built mutually profitable business relationships.

Some Facts that Bear on Customer Retention

Acquiring new customers can cost 5 to 10 times more than the costs involved in satisfying and retaining current customers.

The average company loses 10% of its customers each year.

A 5%reduction in the customer defection rate can increase profits by 25% to 85%, depending on the industry.

The customer profit rate tends to increase over the life of the retained customer.

Customer Lifetime Value and Equity

Customer lifetime value: the value of the entire stream of purchases that the customer would make over a lifetime of patronage. Lexus: $600,000; Taco Bell: $12,000;

Supermarket: $50,000. Customer equity: the total combined

customer lifetime values of all of the company’s customers. Cadillac vs. BMW

Selective Relationship Management

Weed out losing customers and target winning ones for pampering.

Examples: Citibank, First Chicago Bank, and Fidelity Investment.

Risk: future profits are hard to predict.

An Example of Selective Relationship Management

西南航空 (Southwest Airlines) 流傳一個故事，有一名對公司抱怨不休的顧客，每回搭機後，一定寫信到公司總部抗議，她在每封信結語中都發誓再也不搭西南航空的飛機了，但抗議信還是不斷寄來。最後，有個顧客溝通人員火大了，把整疊信拿去給創辦人 Herb Kelleher 。 Kelleher 看過後，拿出一張印有公司名稱的信紙，寫道：「瓊斯太太：我們會想念妳的！」

節錄自哈佛商業評論 全球繁體中文版 (p. 42, December 2007)

Customer Relationship Groups

Projected loyalty

High

Low

Long-term customers

Short-term customers

Good fit between company’s offerings and customer’s needs; high

profit potential

Limited fit between company’s offerings and customer’s needs; low

profit potential

Little fit between company’s offerings and customer’s

needs; lowest profit potential

Good fit between company’s offerings and

customer’s needs; highest profit potential

Strangers

Butterflies True Friends

BarnaclesProfitability

Share of Customer

The portion of the customer’s purchasing in its product categories that a company gets.

Methods to increase share of customer Offer greater variety to current consumers Train employees to cross-sell and up-sell in order

to market more products and services to existing customers.

Amazon: books, music, videos, gifts, toys, consumer electronics, office products, and so on.

Customer Satisfaction

The extent to which a product’s perceived performance matches a buyer’s expectation.

Smart companies aim to delight customers by promising only what they can deliver, then delivering more than they promise.

Examples: Lexus; Southwest Airlines; Seasons Hotels; Nordstrom department store.

Satisfying Customer Complaints

Rate of dissatisfaction: 25%; rate of complaint in dissatisfaction: 5%.

50% of complaints report a satisfactory problem resolution.

Examples: Williams-Sonoma; Enterprise Rent-A-Car.

On average, satisfied → 3 people, and dissatisfied → 11 people.

顧客價值 直接終身價值：即 customer lifetime value 。 間接終身價值：顧客口碑會影響別人與公司的交易，因而為公司增加或減少利潤。

對新產品來說，一名顧客的口碑價值可能是他的直接價值的兩倍以上。

不滿的顧客散播負面評語，因而減損的銷售量也是直接價值的兩倍以上。

節錄自哈佛商業評論 全球繁體中文版 (p. 44, December 2007)

Satisfying Customer Complaints

Rate of complainant repurchase

Resolved Resolved quickly

Major complaints

34% 52%

Minor complaints

52% 95%

What is your strategy to deal with an What is your strategy to deal with an unsatisfied customer?unsatisfied customer?

Customer Relationship Levels and Tools

Level of relationship: basic ＜ reactive (e.g. P&G) ＜ accountable ＜ proactive ＜partnership (e.g. Boeing).

Tools: Add financial benefits, e.g. frequent-flier program. Add social benefits, e.g. club marketing program. Add structural ties, e.g. McKesson; FedEx.

Levels of Relationship Marketing

High margin Medium margin

Low Margin

Many customers/ distributors

Accountable Reactive Basic or reactive

Medium number of customers/ distributors

Proactive Accountable Reactive

Few customers/ distributors

Partnership Proactive Accountable

Case: Harley-Davidson

Harley Owners Group (H.O.G.) H.O.G. benefits include Hog Tales, a touring

handbook, emergency road service, a specially designed insurance program, theft reward service, discount hotel rates, and a Fly & Ride program.

The company also maintains an extensive Web site devoted to H.O.G., which includes information on club chapters, events, and a special members-only section.

In 1981, American Airlines first introduced the AADVANTAGE frequent-flier program. When other airlines copy this strategy, do they engage in the prisoner’s dilemma?

Prisoner’s Dilemma

Player 1 Player 2╲Cooperate Fink

Cooperate 2, 2 -3, 3

Fink 3, -3 -2, -2

How can the firms escape from the prisoner’s dilemma?