PART 1. ~ UNDERSTANDING MARKETING MANAGEMENT Peas eer eee ec RUC Aaa ee Joaded on the phone. They turn to the laptop and get Pee RRL Bye et ae a Pen es alata Psa mer ep POPS oun ON LC etl ‘will occupy most of our attention in this book, but we will also describe how Die ROPE ROME EDOR ee a a the foundation for our study by reviewing a number of important marketing pene en en a eeu ttt The Importance of Marketing Financial success often depends on marketing ability Finance, operations, accounting, and Finer business functions will not really mater if there init sufficient demand for products ch services so the company can make a profit. There must be a top line for there to be & tottont line. Many companies have now created a Chief Marketing Officer, or CMO, position to put marketing on a more equal footing with other C-level executives, such as the Chet Hetutive Officer (CEO) and Chief Financial Officer (CFO). Press releases from organizations renal kinds—from consumer goods makers to health care insurers and from nonprofit Grganizations to industrial product manufacturers—trumpet thelr latest marketing achieve oretits on their Web sites. Inthe business press, countless articles are devoted to marketing strategies and tactics. Th tating their business priorities, CEOs acknowledge the importance of marketing, One survey of the top 10 challenges CEOs face around the world in 2006 revealed that among the top 5 were both “sustained and steady top line growth’ and “customer loyalty/retention capilenges whose achievement depends heavily on marketing.! CEOs also recognize the fmportance of marketing to building brands and a loyal customer base, intangible assets that make up a large percentage of the value of a fim. Marketing is tricky, however, and thas been the Achilles’ heel of many formerly prosperous companies. ears, Levis, General Motors, Kodak, Sony, and Xerox all have confronted newly Gipometed customers and nev competitors and have had to rethink thelr business models \Bven market leaders such as Intel, Microsoft, and Wal-Mart recognize that they cannot afford to relax as theit leadership is challenged. Jack Welch, GE's former CEO, repeatedly warned his company: “Change or die.” XEROX | Xerox has haé to become more than just a copier company. Now the blue-chip Icon withthe name tha | became a ver sports the broadest ray o maging products inthe world and dominates the market for ah | end printing systems. And its making a huge product tansiton as t moves away from te oe ne “ia | ane technology to digital systems. Xerox is preparing for a world that Is no longer black and white, andi which most pages are printed in color (which, not incidentally, ganerates fe times the revenue of black a vat) n adltion to revamping its machines, Yeroxis beefing up sales by providing annuty-ke product an service that are ordered again and again: document management, ik, and toners. Having been sow at on time to respond tothe emergence of Canon and the small copier market, Xerox's doing everything t cant ‘mstay ahead ofthe game? mt by Kotte kelee, Koby £Tha; feithon \yDEFINING MARKETING FOR THE 21ST CENTURY < CHAPTER 1 ‘Making the right decisions about change isn't always easy. Marketing managers must decide what features to design into a new product, what prices to offer customers, where to sell products, and how much to spend on advertising, sales, or the Internet. They must also decide on details such as the exact wording or color for new packaging. The companies at greatest risk are those that fail to carefully monitor their customers and competitors and to continuously improve their value offerings. They take a short-term, sales-driven view of their business and ultimately they fail to satisfy their stockholders, employees, suppliers, and channel partners. Skiliful marketing is a never-ending pursuit NIRMA WASHING POWDER With the introduction of rma washing powder, the complexion ofthe detergent market in India underwent a transformation. During the intial years, the brand was not advertised. Customer franchise and sales volume increased due tothe attractive vale propositon—a detergent that performed the basic function of washing clothes at a price affordable to even low-income families. An attractive “value for money” propesiton, supported by astrbution penetration, retailer relationship, and word-of-mouth publicity sure the demand during the ii- tial period ofthe bran's introduction. Subsequenty, the company inated extensive media campaigns forthe ‘rand. Nirma’s television advertisement, wih the memorable jingle, “doodh si sated Nirma se aaye,rangeen ape Kl kil jaaye, sabi pasand Nim,” has helped the brand become one of te mast powerul brands in the country. The company has been using the same tune in its advertisement consistent over the years, ‘making the tune an integral pat ofthe brand. Today, Nima isa wel-ecognized brand in nda, ares one of the leaders inthe detergent market. The company has introduced several otver produc in the fast-moving con- sumer products category under the Nirma brand. The company has aso integrated backward by seting up facl- ties to manufacture chemicals needed for the detergent industry. The success of Nima is one ofthe most remarkable stories In inda’s mader business history, and Karsanbnal Patel, who started it all, has inspired ‘many entrepreneurs ofthe country Celebrating 50 years of Independence with every Indian household NIRMA Better Products. Better Value. Better Living. Corporate advertisement of Ninna, The brand icon ofthe young of has adorned the package of Nira was ing powder for yrs The jingle that accompanies televsion cvertsement has come one ofthe mast enduring tunes inte y of indan averting,PART 1» UNDERSTANDING MARKETING MANAGEMENT t The Scope of Marketing ‘To prepare to be a marketer, you need to understand what marketing is, how it works, what is marketed, and who does the marketing, What Is Marketing? Marketing s about identifying and meetinghuman and social needs. One ofthe shortest good definitions of marketingis “meeting needs profitabl;” When eBay recognized that people were tunable to locate some of the items they desired most, it created an online auetion clearing- hhouse. When IKEA noticed that people wanted good furniture ata substantially lower price, it created knockdown furniture. These two firms demonstrated marketing savvy and turned a private or social need into a profitable business opportunity ‘The American Marketing Association offers the following formal 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 organi zation and its stakeholders3 Coping with these exchange processes cals for a considerable amount of work and skill. Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other par- ties. Thus we see marketing management asthe art and science of choasing target markets and getting, keeping, and growing customers through creating, delivering, and communtcat- ing superior customer value. ‘We can distinguish between a social and a managerial definition of marketing. A social definition shows the role marketing play in society for example, one marketer has sad that marketing’ role is to “deliver a higher standard of living.” Here isa social definition that serves our purpose: Marketing i a societal process by which individuals and groups obtain ‘what they need and want through creating, offering, and frely exchanging products and serv- ices of value with others. BREAKTHROUGH MARKETING | “The resounding sucoess ofthe Tata Ac, a min-ruck with he engine ‘capacty of less than one ton launched by Tata Motors in 2006, was, ‘due to a deep understanding ofthe market needs and customer requirements. The company reaized tat, asthe Idan economy was ‘rowing, there would be a demand fr smal vehicles that can na- ‘gate trough the narow roads and by lanes of cies, smal towns and ‘ages to sorvce the feeder routes, However, n order to compete cfetvely withthe three-nheeler majors who dominated the market {or small payoad vehices the company needed to ote a batter solu- tionto the customers. The solution layin the mare, and thats where ‘he engineers wen—to tak to the transporters, the smal radrs and the farmers—to lam what they wanted Discussions with potential customers and a detailed market ‘esearch nccated that potential customers needed vehicios for tho lastmile cisrbton for carving es than one-ton load oer short is- tances, Suc a vice shoud have low maiterance and operating cass, higher deer safety, and better ding comfort. Customers were ling to pay a marginally higher rice for such a product. But what came out more strongly was the soil status associated wth four ‘wheel vehicle, Based on customer insight the company decided to Inyoduce a vehicle postoned asa Tata truck in mil size wih a com ative price tag while maintsining high quality standards. The cost TATA ACE ‘eduction was achieved through using and modifying parts already ‘developed fo the veticlesin the Tata stable as wel as through au sourcing, witch constitutes as much as 82% ofthe product. In order to meet te customer requirement of rapid tureround time, te company designed te vehicle o active higher op speeds ‘han that of the other thre-whaeies. The cargo bed was also made bigger. The product was designed with lw turing radus to easy navigate the narow lanes and bfanes of towns and vilages, The sporty, cathe features ancured comfort in ride and handing, The eral design, i and finish ctferentated te vehice from te tree- wheelers and atthe same time, bestowed soca prestige to the ner ‘as wal asthe der of the vehicle. The veice was advertised using ‘te symbol ofa beby elephant with the tagine “smal s big Tata Ace ‘was launched witha 18% to 20% higher pie tag than hat of com- ‘parable model of a tree-heeler. AS the vice cperted ont win limited radius, the serdce pints had tobe closer to the vehicles’ ‘perating rues. Fo this purpose, the cornpany augmented the ser- oe network by training automobile garages that were branded 2s “Tata-cattied service points. Within 22 months ofthe launch ofthe vehicle, the company relied ou the 1,00,000tn Ace, surpassing the company’s optimist targets. Besides the Incan mart, Tata Ace was ‘aso launched in the markets in Si Larka and Nepal Sores Tats ACE Seto Create a New W-ruck Sogmet nna” pres else y Tata Mobs, hepa ca. vata_mo/eate/20050605.m, May 7,205: Prasad Sargrestaran, "Tila Mo's Hs an Ae up Seeve” Ret News, p/n ref omrrey/2006ray/ at. May 13, 2008; Kar, Tala ify, ne 8, 2007; Suen, Tata Mots Aca Busesswo, May 23,2008. a=Managers sometimes think of marketing as “the art of selling products,” but many people are sur- prised when they hear that selling is not the most Important part of marketing! Selling is only the tip of the marketing iceberg. Peter Drucker, a leading man- agement theorist, puts it this way: ‘There will always, one can assume, be need for some selling, But the aim of marketingis 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 then is to make the product or service available. When Sony designed its Play Station 3 game system, when Apple launched its iPod Nano digital music player, and when Toyota introduced its Prius hybrid ‘automobile, these manufacturers were swamped with orders because they had designed the “right” product, based on doing careful marketing homework. ‘Breakthrough Marketing: Tata Ace” describes how Tata Motors, based on an assessment of consumer needs, introduced a sub-one-ton truck to cater to the “last- mile” distribution requirements of traders and farmers in India and other neighboring countries. What Is Marketed? Marketing people market 10 types of entities: goods, services, events, experiences, persons, places, prop trties, organizations, information, and ideas, Let's take a quick look at these categories. GOODS Physical goods constitute the bulk of most ‘countries’ production and marketing efforts. Each year, Indian companies market cars, trucks, television Sets, machine tools, machines, industrial chemicals, ‘watches, cosmetics, and various other mainstays of a ‘modem economy. SERVICES As economies advance, a growing propor production of services. Services include the work of a and beauticians, maintenance and neers, doctors, software programmers, tomer consumes both a product and a service. EVENTS Marketets promote time-based events, such ances, and company anniversaries. Global sporting ‘World Cup are promoted aggressively to both compan EXPERIENCES By orchestrating several services an DEFINING MARKETING FOR THE 21ST CENTURY < CHAPTER 1 frei) Rien eas os ‘ig on technology Small in size. Tata Ace is a suc ui naw product asa result of caret marketing homework tion of theit activities focuses on the inlines, hotels, car rental firms, barbers repair people, and accountants, bankers, lawyers, engi- rand management consultants. Many market offerings Consist ofa variable mix of goods and services. Ata fast-food J restaurant, for example, the cus as major trade shows, artistic perform. ‘events such as the Olympics and the nies and fans. \d goods, a firm can create, stage, and. fnurket experiences. An amusement park or a water park represents experiential marketing ‘customers, by taking different thrill provided by these experiences. So does a of a village in Rajasthan or Gujarat.+ PERSONS Celebrity marketing isa major busi profile lawyers and financiers, and o Some people have done a masterful job of marketing “rides” in the amusemer ‘theme restaurant” that creates the ambience ther professionals all get help fr unt park or the water park, enjoy the iness. Artists, musicians, CEOs, physicians, high: ‘om celebrity marketers ® cham, themselves—think of David Beck!a PART 1 > UNDERSTANDING MARKETING MANAGEMENT Oprah Winfrey, and the Rolling Stones. Celebrities such as Amitabh Bachchan, Sachin Tendulkar, Shah Rukh Khan, Aish- arya Rai, and Souray Ganguly are big brands themselves. Management consultant Tom Peters, himself a master at self-branding, has advised each person to become a"brand.” PLACES Cities, states, regions, and whole nations compete actively to attract tourists, factories, company headquarters, and new residents.’ Place marketers include eco nomic development specialists, real estate agents, commercial banks, local business associations, and advertising and public re- lations agencies. In the software industry, Bangalore is positioned as the “Silicon Val ley” of India. In the tourism industry, Kerala is marketed as “God's own country” and has become one of the hot spots for tourism. HN ET ‘The government of India is marketing India i ‘asa tourist destination through the “Incred- ible India” advertisement campaign. Mareting apace: The cree la averting caalgn promoting Inca asa tours destin. “PROPERTIES Properties are intangible rights of ownership of either real property (real estate) or financial property (stocks and bonds). Properties are bought and sold, and these exchanges require marketing, Real estate agents work for property owners or sell ers, or they buy and sell residential or commercial real estate. Investment companies and. banks market securities to both institutional and individual investors. ORGANIZATIONS Organizations actively work to build strong, favorable, and unique image in the minds oftheir target publics. In the United Kingdom, Tesco's “Every Lite Helps" ‘marketing program reflects the food marketer's attention todetalin everything it does, within aswell as ouside the stor in the community and the environment. The campaign has vaulted ‘Tesco tothe top ofthe UK supermarket chain industry. Universities, museums, performing ars organizations, and nonprofits all use marketing to boost thei public images and to com pete for audiences and funds. Corporate identity campaigns are the result of intensive market research programs. This is certainly the case with Philips “Sense and Simplicity” campaign. ROYAL PHILIPS Philips researchers asked 1,650 consumers and 180 customers in dazens of in-depth and quantitative interviews and focus groups what was most important fo tem in using technology. Respondents trom the United Kingdom, Unted tats, France, Germany, the Netherands, Hong Kong, China, and Brazil agreed on one thing: they wanted ‘he benefits of technology without the hassle, With Is “Sense and Simploty” advertising campaign and focus, Philips believes “our brand row elects cur bee that simply can bea goal of technology. just makes sense." ‘The campaign consists of print, onine, and television advertising directed by five experts from the words of heath ‘= care lfesyle, and technology whose oes to provide “acktional utside perspectives onthe journey to simplciy.”* INFORMATION Information is essentially what books, schools, and universities produce, mar- ket, and distribute ata price to parents, students, and communities. The production, packaging, and distribution of information are some of our society's major industries® Even companies that sell physical products attempt to add value through the use of information. For example, the CEO of Siemens Medical Systems, Tom McCausland, says, “our product] is not necessarily an X-ray oran MRI butinformation. Our business is really health care information technology, and. ‘our end product is really an electronic patient record: information on lab tests, pathology, and. drugs as well as voice dictation.”DEFINING MARKETING FOR THE 21ST CENTURY < CHAPTER Marketing can help promote powertl ideas: Campaign against smoking— IDEAS Every market offering includes a basic idea. Charles Revson of Revion once observed: a the factory, we make cosmetics; in the store we sell hope.” Products and services are plat forms for delivering some idea or benefit. Social marketers are busy promoting such ideas by creating awareness about AIDS, encouraging family planning, and discouraging smoking Which fll in the realm of social marketing. Who Markets? MARKETERS AND PROSPECTS A marketer is someone who seeks a response—attention, a purchase, a vote, a donation—from another party, called the prospect. If two parties are seeking to sell something to each other, we call them both marketers.310 PART 1. > UNDERSTANDING MARKETING MANAGEMENT Jc. | Sucre ot Fomsin a Nod Exchange Economy Marketers are indeed skilled at stimulating demand for their company's products, but that's 100 limited a view of the tasks they perform. Just as production and logistics profes- sionals are responsible for supply management, marketers are responsible for demand man~ agement, Marketing managers seek to influence the level, timing, and composition of demand to meet the organization's objectives. Fight demand states are possible: 1, Negative demand —Consumers dislike the product and may even pay a price to avoid it. 2. Nonexistent demand —Consumers may be unaware of or uninterested in the product. 3. Latent demand—Consumers may share a strong need that cannot be satisfied by an existing product. 4, Declining demand —Consumers begin to buy the product less frequently or not at al. 5. Irregular demand —Consumer purchases vary on a seasonal, monthly, weekly, daily, or ‘even hourly basis. 6. Full demand —Consumers are adequately buying all products put into the marketplace. 7. Overfull demand—More consumers would like to buy the product than can be satisfied. 8. Unwholesome demand —Consumers may be attracted to products that have undesirable social consequences. In each case, marketers must identify the underlying cause(s) of the demand state and then determine a plan of action to shift the demand to a more desired state. MARKETS Traditionally a “market” was a physical place where buyers and sellers gathered to buy and sell goods. Economists describe a market asa collection of buyers and sellers who transact over a particular product or product class (such as the housing market or the grain market). Modern economies abound in such markets. Five basic markets and their connecting flows are shown in Figure 1.1. Manufacturers go to resource markets (raw material markets, labor markets, money markets), buy resources and tur them into goods and services, and then sell finished products to intermediaries, ‘who sell them to consumers. Consumers sell their labor and receive money with which they pay for goods and services. The government collects tax revenues to buy goods from resource, manufacturer, and intermediary markets and uses these goods and services to provide public services. Each nation’s economy, and the global economy, consists of com- plex interacting sets of markets linked through exchange processes. “Marketers often use the term market to cover various groupings of customers. They view sellers as constituting the industry and buyers as constituting the market. They talk about need markets (the diet-seeking market), product markets (the shoe market), demographic markets (the youth marked) and geographic markets (the French market); or they extend the ‘concept to cover other markets, such as voter markets, labor markets, and donor markets. Figure 1.2 shows the relationship between the industry and the market. Sellers and buy- ers are connected by four flows. The sellers send goods and services and communications such as ads and direct mail to the market; in return they receive money and information ‘such as customer attitudes and sales data. The inner loop shows an exchange of money for goods and services; the outer loop shows an exchange of information. Goods and servicesy, DEFINING MARKETING FOR THE 21ST CENTURY Twernaton KEY CUSTOMER MARKETS Consider the following key customer markets: consumer, bus\- ness, global, and nonprofit Consumer Markets Companies sellingmass consumer goods and services such fs soft drinks, cosmetics, air travel, and athletic shoes and equipment spend a great deal bftime tying to establish a superior brand image. Much of a brand's strength depends on dlveloping a superior product and packaging, ensuring its avallablity, and backing it with ‘engaging communications and reliable service. Business Markets Companies selling business goods and services often face ‘well-trained and well-informed professional buyers who are skilled at evaluating competitive biferings Business buyers buy goods in order to make or resell aproduict to others ata profit Business marketers must demonstrate how their products will help these buyers achieve higher revenue or lower costs. Advertising can play a role, but the sales force, price, and the company’s reputation for reliability and quality may play a stronger one. Global Markets Companies selling goods and services in the global marketplace face additional decisions and challenges. They must decide which countries to enter; how to enter each (as an exporter, license, joint venture partner, contract manufacturer, or solo franufacturer); how to adapt their product and service features to each country; how to price their products in different countries; and how to adapt their communications to fit different tultures, They make these decisions in the face of different requirements for buying, negot ting, owning, and disposing of property, different culture, language, ane legal and politcal systems; and currencies that might fluctuate in value. Nonprofit and Governmental Markets Companies selling their goods to nonprofit organizations such as churches, universities, charitable organiza- fons, and government agencies need to price carefully, because these buyers have lim jted purchasing power. Lower selling prices affect the features and quality the seller can “full into the offering. Much government purchasing calls for bids, and buyers often {avor the lowest bid in the absence of extenuating factors. See “Marketing Memo: Rural Marketing” for a discussion about the special features and importance of rural markets ‘in South Asia. CHAPTER 1 | Fic.1.2] ‘A Simple Marketing System "The Marketing Mix Page 1 of 3 QuickMBA Marketing QuickMBA / Marketing / Marketing Mix Copyright © 1999-2010 QuickMBA.com The Marketing Mix (The 4 P's of Marketing) The major marketing management decisions can be classified in one of the following four categories: + Product « Price + Place (distribution) * Promotion ‘These variables are known as the marketing mix or the 4 P’s of marketing. They are the variables that marketing managers can control in order to best satisfy customers in the target market. The marketing mix is portrayed in the following diagram. The Marketing Mix Product Target Market Promotion hitp://www.quickmba.com/marketing/mix/ 3/15/2011‘The Marketing Mix Page 2 of 3 'he tirm attempts to generate a positive response in the target market by bienaing these four marketing mix variables in an optimal manner. Product The product is the physical product or service offered to the consumer. In the case of physical products, it also refers to any services or conveniences that are part of the offering Product decisions include aspects such as function, appearance, packaging, service, warranty, ete. Price Pricing decisions should take into account profit margins and the probable pricing response of competitors. Pricing includes not only the list price, but also discounts, financing, and other options such as leasing Place Place (or placement) decisions are those associated with channels of distribution that serve as the means for getting the product to the target customers. The distribution system performs transactional, logistical, and facilitating functions. Distribution decisions include market coverage, channel member selection, logistics, and levels of service. Promotion Promotion decisions are those related to communicating and selling to potential consumers. Since these costs can be large in proportion to the product price, a break-even analysis should be performed when making promotion decisions. It is useful to know the value of a customer in order to determine whether additional customers are worth the cost of acquiring them. Promotion decisions involve advertising, public relations, media types, ete.