Chapter 6
Marketing
Why Should I Care?
• Goal of the firm is to maximize • Marketing is focused on
firm value generating revenue
• This involves future cash flows • Building brand awareness:
realized by the firm, which result Advertising campaigns and
from sales/revenues generated promotional strategies
from marketing activities • Giving customers what they want:
Consumer behavior
• Developing pricing strategies:
Marketing analytics and price
elasticity
Chapter Topics
• What is marketing • Defining and sizing a market
• What do marketers do?
• Additional content (see slides • Ignore the section on “Quant
and videos)
in Marketing” (pg. 282 thru
pg. 286)
Marketing Basics
• 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 products or services sold need to provide value to the customers.
• Value represents the perceived benefits, both monetary and
nonmonetary, that a customer receives from a product compared with
the cost of obtaining it.
Marketing Basics Cont’d
• Customers buy products or services to satisfy their wants and needs.
• A want is the form that human needs take as they are shaped by personality,
culture, and buying situation.
• A need is a state of felt deprivation.
• Marketing seeks to match needs with wants.
The Primary Functions of Marketing
1. Create value: Organizations today are constantly looking for new
ways to create value for customers. If the benefit of the product or
service equals or exceeds its cost, the organization has created value.
2. Communicate value: A firm must communicate not only what its
product is but what value that product brings to potential customers.
3. Deliver value: The firm will deliver value by optimizing its supply
chain. A firm’s supply chain is a set of multiple companies directly
linked by one or more of the upstream and downstream flows of
products, services, finances, and information from a source to a
customer.
Market Segmentation
• Segmentation is the process of dividing a larger market into smaller
groups, or market segments, based on meaningfully shared
characteristics.
• Market segmentation has three primary functions:
1. Define needs and wants of customers.
2. Design specific marketing strategies.
3. Decide how to allocate marketing resources.
Market Segmentation – Five Guys
• Thoughtful market segmentation allows Five Guys to enjoy success
serving only a limited number of menu choices that it knows will
satisfy its target market.
Criteria for Effective Segmentation
1. Substantial: It must be large enough for firm to make a profit.
2. Measurable: It must be able to identity size and purchasing power.
3. Differentiable: It must be able to differentiate from competitors.
4. Accessible: It must be able to reach and serve.
5. Actionable: It must be able to attract certain segments.
The Four Bases of Segmentation
Targeting
• Targeting occurs when marketers evaluate each market segment and
determine which segments present the most attractive opportunity to
maximize sales.
• The segments selected are the firm’s target markets.
• A target market is the group of customers toward which an
organization has decided to direct its marketing efforts.
Factors in Selecting Target Markets
• Firms should consider three main factors during the targeting process:
1. Growth potential: The higher the future growth rate, the more attractive the
market segment is.
2. Level of competition: The more intense the competition within the market
segment, the less attractive it is to marketers.
3. Strategic fit: Marketers should work to ensure that the target markets
selected fit with what the organization is and wants to be, as defined in its
mission statement.
• The SWOT analysis provides an excellent framework to determine if a firm will be
successful targeting a specific segment.
• The SWOT analysis is composed of the internal business environment (Strengths and
Weaknesses) and the external business environment (Opportunities and Threats).
Positioning
• Positioning consists of the activities a firm undertakes to create a
certain perception of its product in the eyes of the target market.
• It assumes that consumers compare goods and services on the basis of
their benefits.
• Positioning often takes into account the identity of the organization
and where it fits relative to the competition.
• Successful positioning involves all of the marketing mix elements
(price, product, place, and promotion).
Steps in Market Positioning
• Marketers should follow three major steps to decide how to best
position their product:
1. Analyze competitors’ positions.
2. Clearly define your competitive advantage.
3. Evaluate feedback.
Positioning – Perceptual Map for Cell Phone Carriers
The Marketing Mix: The Four P’s
• The marketing mix is made up the four Ps: product, price, place, and
promotion.
1. Product contains many tangible and intangible characteristics. It can also take the
form of services or ideas.
2. Price relates to the value consumers place on the product. It is the easiest
marketing-mix element to change. Price affects revenue, which is the amount
earned from selling products to customers.
3. Place is important because firms must distribute products to where customers can
buy and consume them without difficulty. It relates to locations, transportation,
logistics, and supply chain management.
4. Promotion includes advertising, sales promotion, personal selling, and public
relations. Social media allow firms to communicate quickly and directly with
customers.
The Marketing Mix: Summary
Consumer Behavior
• Consumer Behavior is the study of individuals, groups, or organizations
and all the activities associated with the purchase, use and disposal of
goods and services.
• As marketing seeks to understand the consumer it has a lot in common
with social psychology and behavioral economics.
Rational and Nonrational (Emotional) Appeals
• Rational appeals seek to use logic and reason to stimulate consumers’
buying decisions.
• Ex. Showing the factual benefits of a products during a product demonstration.
• Nonrational (emotional) appeals seek to use emotional state, needs,
and aspirations to stimulate consumers’ buying decisions.
• Ex. A grocery store commercial that shows a happy family sitting around the
table at Thanksgiving.
ABC and AIDA
• Always Be Closing (ABC) is a motivational phrase used to describe a
sales strategy. It implies that a salesperson following the regimen should
continuously look for new prospects, pitch products or services to those
prospects, and ultimately complete a sale.
• Attention, Interest, Decision, and Action (AIDA) is a model designed
to illustrate the hierarchy of effects in the context of customer response
to marketing communications.
Defining “Market” in Marketing
Marketing Economics and Finance
• A market refers solely to buyers, • A market refers to a collection of
that is a firm’s current or both buyers and sellers of good,
potential customers service or financial asset
• Market scope is related to the
definition of the product/service
being marketed and the relevant
geographical area
Market: Geographic
• How broad is the geographic range you care about?
• How broad is the product definition?
Narrow Broad
The market for The market for
children’s DVD’s children’s entertainment
in Atlanta in the Southeast
Calculating the Size of a Market
• Interpreting “market size”: How much money do customers spend
annually or could they spend annually?
• Example: “The market for children’s DVDs in Atlanta is $X million.”
• How do you get to “$X million”?
Market for Children’s DVDs in Atlanta ×
Estimating the Number of Customers
• Let’s break up the right side of the equation by household (HH)
• Terms on the right-side of the equation are estimated using
assumptions
= 200,000 households in Atlanta
Estimating Annual Spending
• Now let’s break up the annual spending per household:
= $150 per household per year
Calculating Market Size
= $30 million
Another Approach to Estimate Number of
Customers
# of Customers = Population Base x Example: Examining demand for a pickle-
Adoption% ball facility in Memphis, TN
• Population Base = # of buyers in market Population of Memphis metropolitan area is
segment 1.34M
• Adoption % = proportion of buyers in the % of U.S. population that plays pickle-ball is
market segment that are likely to adopt 1.50%
the product/service
# of Customers = 1,340,000*0.015 = 20,100
What is Market Share?
• Portion of the market controlled
by a particular company or
product
• Ex. If your market share is 10%
then you're selling $3 million of
these children’s DVDs to the
Atlanta Market.
End of Chapter 6
End of Chapter 6
