Session 6 Marketing Exercise Consumer Behavior What were

Session 6: Marketing

Exercise: Consumer Behavior • What were your two most recent purchases? • Why did you choose these brands?

Definition of Marketing • Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. • “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. ” - Peter Drucker

Types of Marketing • Product – creating exchanges for tangible goods (ex. : Dial soap) • Service – creating exchanges for intangible goods (ex. : Prudential life plan) • Person – designed to create favorable actions toward persons (ex. : Erap for President Movement)

Types of Marketing • Place – designed to attract people to places (ex. : Wow Philippines campaign) • Cause – designed to create support for ideas, causes, or issues or to get people to change undesirable behaviors (ex. : “Get street children off the streets” campaign) • Organization – designed to attract donors, members, participants, or volunteers (ex. : World Wildlife Fund, Ateneo de Manila University)

Types of Marketing • Experiences – By orchestrating several services and goods, a firm can create, stage and market experiences. Ex. : Walt Disney World’s Magic Kingdom

Types of Marketing • Events – Marketers promote time-based events, like the World Cup, anniversaries, trade shows, sports fests, artistic performances.

Types of Marketing • Properties – Intangible rights of ownership of either real property (real estate) or financial property (stocks and bonds) • Information – Packaged knowledge or capability can be produced and marketed as a product. Ex. Software, CDs, Internet

Go: The 3 Cs of Marketing 3 C Element Key Objectives Customers To satisfy the needs, wants and expectations of target customers Competition To outperform competition Company To ensure corporate health and profit

3 Cs: Key Result Areas • Sales – result from satisfying customers’ needs and wants. These presuppose that demand has been created, as more sales will come when more demand is created. – New users: Who uses the product or service? Who can we add? Ex. : Red Bull formulated for both blue collar workers and those on the night shift – Extended users: Who can still use the product or service? Ex. : Coke Zero formulated to cater to people who do not like or cannot take the sugar content of regular Coke – New usage: For what purpose is the product or service used? Ex. : Swatch promotes various designs of the watches instead of the traditional function (to tell time). Arm & Hammer repositioned its baking soda as a new way to deodorize refrigerators. Glutatione was originally intended to boost liver function until its whitening side effect was discovered. Viagra was originally intended for angina pectoris (chest pain) before it was used for treating erectile dysfunction. – More usage: When and in what occasions is the product used? Ex. : Del Monte comes out with recipes to encourage more usage of its products. Conzace soft gel vitamin not just a multivitamin; anti-acne med too.

3 Cs: Key Result Areas • Market share – ratio of your brand’s sales versus the total sales in your market - While companies would naturally define its target competitors, it is actually the consumers themselves who ultimately decide the competitive frame, or the list of related products or services that consumers consider when exercising their purchasing power. - Marketers must understand the competitive frame of their target consumers, and strive to have a more attractive product value compared to their direct competition as well as those providing strong substitutes.

3 Cs: Key Result Areas • Profit – indispensable component for a firm to continuously satisfy its customers. Profit must always go hand-in-hand with honor. - Companies must be a force for good and require their suppliers to be aligned with them. Ex. : Wal-Mart launched a green revolution in 2009 by requiring all its suppliers to comply with environmentally-friendly packaging and processes or else. . .

Marketing Effectiveness • “Better than before” – must be the norm for evaluating the company’s sales vs. the industry’s growth rate and its year-ago figure. • “Better than others” – must be demanded by the company in improving market share which reflects how they fare against competition and substitutes. The key is in knowing the source of competitive advantage. • “Better than expected” – must be practiced in evaluating profit performance, especially when a corporate budget is prepared. Key is maximizing revenues while avoiding non-strategic expenses that do not contribute to business-building.

Marketing’s Core Concepts • Target markets and segmentation – market segments are identified by examining demographic, psychographic, and behavioral differences among buyers. The segments that present the greatest opportunity are the target markets. For these chosen target markets, the firm develops a market offering. • Marketplace/marketspace – Marketplace is the physical market, i. e. , where goods and services are physically exchanged. Marketspace is a digital space where one goes shopping on the Internet.

Marketing’s Core Concepts • Marketers and prospects – marketer is the one seeking a response (attention, sale, vote, etc. ) from another party, called a prospect. • Product, offering, brand – needs are addressed by a value proposition, a set of benefits offered to customers. An offering is an intangible value proposition made physical (which is a combination of products, services, information and experiences).

Marketing’s Core Concepts • Value and satisfaction – Value is a combination of quality, service and price (QSP), called the customer value triad. Value = Benefits/Costs = Functional benefits + Emotional benefits --------------------------------Monetary costs + Time costs + Energy costs + Psychic costs

Before We Get Lost in the Marketing Hoopla. . . • What does knowing about Marketing have to do with the effective and efficient running of HR? • How can HR professionals help Marketing people do their jobs better?

Marketing’s Core Concepts • Marketing channels – communication channels deliver and receive messages from target buyers; distribution channels display, sell or deliver the physical product or services to the buyer or user. • Supply chain – describes a longer channel stretching from raw materials to components to final products that are carried to final buyers.

Marketing’s Core Concepts • Competition – includes all actual and potential rival offerings and substitutes that a buyer might consider. Types: brand competition, industry competition, form competition, and generic competition. • Marketing environment – consists not only of the competition but also of the task environment (production, distribution, etc. ) and the broad environment (demographic, economic, natural, technological, politico-legal, and socio-cultural).

Marketing’s Core Concepts • Marketing program – consists of numerous decisions on the mix of marketing tools to use. Marketing mix can be divided into the following: product, price, place and promotion.

Marketing Objectives • Awareness Before a customer buys your product or service they must become aware of it. Awareness is particularly important if you have a new product or service, if your product or service is only bought occasionally or if your market has many competitors and you need to maintain awareness amongst your target market.

Marketing Objectives • Purchase This relates to the initial purchase and the purchase of specific products or services in your range. • Purchase frequency This relates to how often your customers buy your product or service. • Usage This is different from purchase as the person who buys your product or service may not be the one who actually uses or consumes it.

Marketing Objectives • Usage frequency This relates to how often your customers use/consume your product or service. By getting your customers to use a little more of your product or service can actually translate into more sales over the year. Big business marketers often do this by introducing larger pack sizes. • Average transaction value This relates to the average amount each of your customers spends per transaction with your business. A simple way of improving the profitability of your business is to encourage your existing customers to increase their average transaction value i. e. purchase slightly more each time.

Marketing Objectives • Distribution As distribution channels available to customers grow, it is important that you ensure your products or services are available in the most important distribution channels for your market so that your customers don’t switch to your competitors. • Customers For your small business to grow you may decide to focus on gaining new customers for your business or to retain your most profitable ones.

The Four P’s of Marketing • • Product Price Place Promotions

4 P’s: Product • Product – anything that can be offered to a market to satisfy a want or a need. These can include physical goods, services, events, experiences, persons, places, properties, organizations, information and ideas.

Product Levels Core benefit: the fundamental product or service that the buyer is really buying. Ex. In a hotel room, core benefit is “rest and sleep. ” Basic product: Ex. : hotel room includes a bed, bathroom, towels, desk, and closet Expected product: set of attributes and conditions buyers normally expect when they buy the product. Ex. : clean bed, fresh towels, working lamps, and a relative degree of quiet Augmented product: attributes that exceed customer expectations. Ex. : sunshine-and-surgery packages, including full medical check-ups, to attract medical tourists from abroad Potential product: this encompasses all possible augmentations and transformations that the product may undergo in the future. Ex. : Singapore airlines adding a shopping mall in its planes.

Product Mix • Also known as product assortment, this is the set of all products and items that a particular seller has for sale. • Ex. : 3 M product mix consists of abrasives and adhesives; Procter & Gamble product mix used to consist of detergents (Tide, Ariel, Mr. Clean), bath soaps (Ivory, Safeguard, Camay), cookies (Duncan Hines), diapers (Pampers), paper tissue (Charmin), shortening (Crisco), shampoos (Head & Shoulders, Rejoice, Pantene, Vidal Sassoon), coffee (Folger’s), toothpaste (Crest), and medicine (Pepto-Bismol).

Product Mix • A product mix may have a certain depth, width, length, and consistency. • The width of a product mix refers to how many different product lines the company carries. • The length of a product mix refers to the total number of items in the mix. • The depth of a product mix refers to how many variants are offered of each product in the line. • The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

Mad About Ads! • What is this particular ad saying about the product? • Who are its target markets? • Why do you think the ad was structured that way?

Product Line Decisions • In offering a product line, companies normally develop a basic platform and modules that can be added to meet different customer requirements. Car manufacturers build their cars around a basic platform. Homebuilders show a model home to which additional features can be added. This modular approach enables the company to offer variety while lowering production costs.

Product Line Analysis • Product-line managers need to know the sales and profits of each item in their line to determine which to build, maintain, harvest, and divest. They also need to understand each product’s market profile. • Every company’s product portfolio contains products with different margins. Every product should have a strategic purpose that defines why it should stay in the portfolio.

4 P’s: Price • Price is the only P of the marketing mix that produces revenue. The others produce costs. • This is the easiest marketing mix element to adjust. • Price communicates to the market the company’s intended value positioning of its product or brand. • Key problems in pricing: how to respond to aggressive price cutters, how to price the same product when it goes through different channels, how to price the same product in different countries.

Setting the Price • A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographical area, and when it enters bids on a contract work. • The firm must decide where to position its product on quality and price.

Price Segment Example: Car Industry Segment Example Ultimate Rolls Royce Gold standard Mercedes Benz Luxury Lexus Special needs Volvo Middle Toyota Ease/convenience Ford Fiesta Me Too, but Cheaper Hyundai Price Alone Geely

Price-Quality Strategies Price Product Quality High Medium Low 2. High-Value Strategy 3. Super. Value Strategy High 1. Premium Strategy Medium 4. Overcharging strategy 5. Mediumvalue strategy 6. Goodvalue strategy 7. Rip-off strategy 8. False economy strategy 9. Economy strategy Low

4 P’s: Place • Channels of Distribution • Location • Strategic Alliances • Market Entry • Learning • Logistics 37 Systems that link manufacturers to customers

Place: Channels and Marketing Decisions • A push strategy uses the manufacturer’s sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users. • A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries.

What Does a Channel Do? Sales contact Shipping and delivery Inventory holding Order processing Invoicing Collecting information on customers/competitors • Financing/Credit terms • Customer support • • • 39

Manufacturer Direct Sales MS 1 Distributor Network MS 2 Direct Marketing MS 3 Licensing MS 4 Private Label MS 5 Retail Outlets Dealers Brokers Agents Computer to 40 Computer MS 6 MS 7 MS 8 MS 9 MS 10 Multi-tentacled matrix approaches • use portfolio of - traditional, - joint arrangements, and - unconventional outlets to fully support all market segments/ customer niches.

Channel Design • Indirect Sales Force • Direct Sales Force Smaller market size Geographically limited Homogeneous target High education needs Non-standardized products High knowledge of customer • Need more control • Need flexibility • • • (Distributors) Larger market size Geographically diverse Heterogeneous targets Lower education needs Standardized products Lower knowledge of customer • Less control • Less flexibility • • •

Why are there Changes in Distribution Channel Design? • Proliferation of information technology • Polarization of customers – Consolidation and fragmentation • Mfg. systems that can mass-customize • Quick shipment distribution logistics

So, what’s new? • Old Way: – Choose intermediaries that can reach (a. k. a push it out to) the customer • New Way: – How can customers’ channel requirements be efficiently addressed? Shift in focus – customer-centric 43

Discussion – Individually sketch what you think the channel structure looks like for your company/organization. – Be prepared to share it with the class – Where do you think HR’s place is in all of this? 44

4 P’s: Promotion Communication and Promotion Policy and Advertising • • • Establish image Change image Generate sales Send messages to public Inform, Persuade, Remind customers about products

Integrated Marketing Communications Advertising Personal selling Sales promotion Public relations Direct marketing

Steps in Developing Effective Communication Step 1. Identifying the Target Audience Step 2. Determining the Communication Objectives Buyer Readiness Stages Awareness Knowledge Liking Preference Conviction Purchase 47

Steps in Developing Effective Communication Step 3. Designing a Message Content Rational Appeals Emotional Appeals Moral Appeals Message Structure Draw Conclusions Argument Type Argument Order Message Format Headline, Illustration, Copy, & Color Body Language

Steps in Developing Effective Communication Step 4. Select the Communication Channels Personal Communication Channels Face to Face, Telephone, Presentation Non Personal Communication Channels Print, Broadcast and Display Media Step 5. Selecting the Message Source Step 6. Measure the Communication’s Results

Factors in Setting Promotion Mix (cont’d) • Buyer Readiness State – Awareness – Liking, Preferences, and Conviction – Purchase • Product-Life-Cycle Stage – – Introduction Growth Mature Decline 50

Definition of Positioning • All marketing strategy is built on STP -segmentation, targeting, and positioning. • Positioning = act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market. End result of positioning is the successful creation of a customer-focused value proposition, a cogent reason why the target market should buy your product.

Ries and Trout on Positioning: • Positioning starts with a product. A piece of merchandise, a service, a company, an institution, or even a person. . . But positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect.

Positioning Options • Strengthen the product’s current position in the consumer’s mind. Ex. : 7 -Up capitalized on not being a cola drink by advertising itself as the “Uncola”. • Grab an unoccupied position. Ex. : Pink Dolphin, a brand of calcium-enriched mineral water, advertised itself as the only water with calcium, which is essential for strong bones and teeth.

Positioning Options • De-position or re-position the competition in the customer’s mind. Ex. : BMW wants to deposition Mercedes Benz with the comparison: “The ultimate sitting machine versus the ultimate driving machine. ”

Remember This? Operational Excellence It’s also a positioning tool! Choose Which One to Develop Most Product Leadership Customer Intimacy

Positioning: How Many Ideas to Promote? • Many marketers advocate promoting only one central benefit – a unique selling proposition (USP). Ex. : Colgate – anti-cavity protection; “number one”, “best”, “safest”, “lowest price”, etc. • Double-benefit positioning may also be distinctive. Ex. : Volvo positions its automobiles as both “safest” and “most durable”.

Major Positioning Errors • Underpositioning – customers having only a vague idea of the brand. • Overpositioning – buyers may have too narrow an image of the brand. • Confused positioning – buyers might have confusion resulting from the company’s making too many claims or changing the brand’s positioning too frequently. • Doubtful positioning – buyers may find it hard to believe the brand claims in view of the product’s features, price, or manufacturer.

P 64 M Questions • How can you as HR professional help the company’s marketers? • What facets of Marketing can you as HR professional use to improve your and your department’s performance? How? • What concepts in Marketing do you need to understand in order to become more vital as a member of the strategic management team?

Exercise • How would you position your company vis-àvis its major competitors? • Compare this vs. the perceived positioning of these competitors. • How would you position your HR department within the company?

Group Report • Download the latest stockholders’ report of Globe Telecom or PLDT/Smart. (Optional: interview corporate and/or marketing people at these companies) • Analyze the products, target markets, and the corporate personas. • What were the opportunities and threats within the industry? • What were the strategies employed? What were the marketing programs that were done? • Evaluate the effectiveness of the corporate strategies and the marketing programs.