Module one of Marketing Management

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Information about Module one of Marketing Management

Published on March 8, 2014

Author: rahul9288



Marketing management Marketing management is ―the art and science of choosing target markets and building profitable relationships with them. Marketing Marketing is to identify the need of customer and providing them accordingly to satisfy them.

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. - Philip Kotler

Needs ,Wants and Demands The marketer must try to understand the target market’s needs, wants and demands. Needs are the basic human requirements. People need food, air, water, clothing and shelter to survive. People also have strong needs for education, recreation and other services. These needs are not created by society or by marketers. They exist in the very texture of human biology and the human condition. These needs become wants when they are directed to specific objects that might satisfy the given need. A country (sri lanka, us) need food but wants a rice and curry, noodles etc. although people’s need are few ,their wants are shaped and reshaped by social forces and institutions including families, temples ,schools and business organizations.


Marketing Environment The Micro environment  Company’s Internal Environment- functional areas such as top management, finance, and manufacturing, etc.  Suppliers - provide the resources needed to produce goods and services.  Marketing Intermediaries distribute its goods to final buyers. help the company to promote, sell, and

 Customers - five types of markets that purchase a company’s goods and services.  Competitors - those who serve a target market with similar products and services.  Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives. The Macro environment  Demographic -  Economic - factors that affect consumer buying power and patterns.  Natural - monitors population in terms of age, sex, race, occupation, location and other statistics. natural resources needed as inputs by marketers or that are affected by marketing activities.

More Government Intervention Higher Pollution Levels Factors Affecting the Natural Environment Shortages of Raw Material Increased Costs of Energy  Technological - forces that create new product and market opportunities.

 Political - laws, agencies and groups that influence or limit marketing actions.  Cultural - forces that affect a society’s basic values, perceptions, preferences, and behaviors. Value chain And Value delivery process • Marketing involves satisfying consumers' needs and wants. • The task of any business is to deliver customer value at a profit.

• In a hypercompetitive economy with increasingly rational buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value. • The traditional view of marketing is that the firm makes something and then sells it. In this view, marketing takes place in the second half of the process. • The company knows what to make and the market will buy enough units to produce profits. Companies that subscribe to this view have the best chance of succeeding in economies marked by goods shortages where consumers are not fussy about quality, features, or style—for example, with basic staple goods in developing markets. The Value Chain Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm has combination of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine value-creating activities consist of five primary activities and four support activities.

The primary activities cover the sequence of: 1) Bringing materials into the business (inbound logistics), 2) Converting them into final products (operations), 3) Shipping out final products (outbound logistics), 4) Marketing them (marketing and sales), and 5) Servicing them (service). The support activities: 1) Technology development, 2) Human resource management, 3) Firm infrastructure—are handled in certain specialized departments, as well as elsewhere. 4) Procurement and hiring The value delivery process • The traditional view of the business process, however, will not work in economies where people face abundant choices. • The smart competitor must design and deliver offerings for well-defined target markets. This belief is at the core of the new view of business processes, which places marketing at the beginning of planning. The Japanese have further refined this view with the following concepts:

• Zero customer feedback time. Customer feedback should be collected continuously after purchase to learn how to improve the product and its marketing. • Zero product improvement time. The company should evaluate all improvement ideas and introduce the most valued and feasible improvements as soon as possible. • Zero purchasing time. The company should receive the required parts and supplies continuously through just-in-time arrangements with suppliers. By lowering its inventories, the company can reduce its costs. • Zero setup time. The company should be able to manufacture any of its products as soon as they are ordered, without facing high setup time or costs. • Zero defects. The products should be of high quality and free of flaws. Holistic Marketing Holistic marketing sees itself as integrating the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co prosperity among key stakeholders. A Holistic Marketing Orientation And Customer Value The holistic marketing framework is designed to address three key management questions:

1. Value exploration - How can a company identify new value opportunities? 2. Value creation- flow can a company efficiently create more promising new value offerings? 3. Value delivery- How can a company use its capabilities and infrastructure to deliver the new value offerings more efficiently? VALUE EXPLORATION VALUE EXPLORATION Because value flows within and across markets that are themselves dynamic and competitive, companies need a well-defined strategy for value exploration. Developing such a strategy requires an understanding of the relationships and interactions among three spaces: (1) The customer's cognitive space; (2) The company's competence space; and (3) The collaborator's resource space. The customer's cognitive space reflects existing and latent needs and includes dimensions such as the need for participation, stability, freedom, and change. VALUE CREATION To exploit a value opportunity, the company needs value-creation skills. Marketers need to: 1) identify new customer benefits from the customer's view; 2) utilize core competencies from its business domain; and 3) select and manage business partners from its collaborative networks. • To craft new customer benefits, marketers must understand what the customer thinks about, wants, does, and worries about. • Marketers must also observe who customers admire, who they interact with, and who influences them. VALUE DELIVERY • Delivering value often means substantial investment in infrastructure and capabilities. • The company must become proficient at customer relationship management, internal resource management, and business partnership management.

• Customer relationship management fallows the company to discover who its customers are, how they behave, and what they need or want. It also enables the company to respond appropriately, coherently, and quickly to different customer opportunities. Marketing Research and Information Systems Marketing Information System Consists of people, equipment, and procedures to gather, sort, analyze, evaluate and distribute needed, timely, and accurate information to marketing decision makers.

The Marketing Information System Marketing Decisions and Communications Marketing Managers Marketing Information System Distributing Information Assessing Information Needs Developing Information Decision Support System Internal Data Marketing Research Marketing Intelligence Marketing Environment Designing an MIS 1) Identification of required Information 2) Classification the requirements of information 3) Evaluating the cost 4) Compare Cost vs. Benefits 5) Determining the frequency and timing of Collection of the information 6) Identification of Sources of information 7) Designing the mechanism/ procedures 8) Analyzing & interpreting 9) Monitoring, Maintaining, reviewing and improving the system.

1- Internal Records System This system records reports on orders, sales prices, Inventory levels, receivables, Payables and so on. By analyzing this information , marketing managers can spot important opportunities and problems. 2- Marketing Intelligence System A Marketing Intelligence System is a set of Procedures and sources managers use to obtain everyday information about developments in the Marketing Environment.

Steps for Improvement  To train & motivate the sales force to spot and report new developments.  Motivate distributors, retailers, and other intermediaries to pass along important intelligence.  Network Externally  Set up a Customer advisory Panel  Take advantage of Government data resources  Purchase Information from outsider Suppliers  Use Online customer feedback system to collect Competitive Intelligence 3- Decision Support System DDS are integrated systems including hardware, communication network, databases, model base, software base, and the DSS user (decision maker) that collect and interpret information for decision making. Features Of MIS : Scientifically Collection of Information  Determine the required Data  Use of Computer System  It is a Continuous Process  It creates Coordination

Functions of a MIS: Assessing Information Needs Conduct Interviews and Determine What Information is Desired, Needed, and Feasible to Obtain. Monitors Environment for Information Managers Should Have Examine Cost/ Benefit of Desired Information Functions of a MIS: Developing Information Obtains Needed Information for Marketing Managers From the Following Sources Internal Data Collection of Information from Data Sources Within the Company From: Accounting, Sales Force, Marketing, Manufacturing, Sales Marketing Intelligence Collection and Analysis of Publicly Available Information about Competitors and the Marketing Environment From: Employees, Suppliers, Customers, Competitors, Marketing Research Companies Marketing Research Design, Collection, Analysis, and Reporting of Data about a Situation Functions of a MIS: Distributing Information Information Must be Distributed to the Right Managers at the Right Time. Distributes Routine Information for Decision Making Distributes Non routine Information for Special Situations

MARKETING RESEARCH MR is the systematic and objective identification, collection, analysis, dissemination, and use of information for the purpose of improving decision making related to the identification and solution of problem and opportunities in marketing. The Marketing Research Process

Marketing Research Process Step 2. Develop the Research Plan Determine the Specific Information Needed Secondary Primary Information that has been previously collected. Both Must Be: Relevant Accurate Current Impartial Information collected for the specific purpose at hand.

Primary Data Collection Process Step 1. Research Approaches Observational Research Gathering data by observing people, actions and situations (Exploratory) Survey Research Asking individuals about attitudes, preferences or buying behaviors (Descriptive) Experimental Research Using groups of people to determine cause-and-effect relationships (Causal) Step 2. Contact Methods Mail Telephone Personal Online Flexibility Poor Good Excellent Good Quantity of Data Collected Good Fair Excellent Good Control of Excellent Fair Poor Fair Fair Excellent Fair Poor Poor Excellent Good Excellent Response Rate Fair Good Good Good Cost Good Fair Poor Excellent Interviewer Control of Sample Speed of Data Collection

Step 3. Developing a Sampling Plan Step 4. Research Instruments

Implementing the Research Plan Interpreting and Reporting Findings

Developing Marketing Strategies and Plans A strategy is a theory about how to gain competitive advantages. A good strategy is a strategy that actually generates such advantages. Strategic management is the process of specifying an organizations objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. Strategic planning is the managerial process that helps to develop a strategic and viable fit between the firm’s objectives, skills, resources with the market opportunities available. It helps the firm deliver its targeted profits and growth through its businesses and products. Strategic Planning calls for Action in three key areas • Managing a company's businesses as an investment portfolio. • Assessing each business's strength by considering the market's growth rate and the company's position and fit in that market. • Establishing a strategy For each business. To understand marketing management, we must understand strategic planning. Most large companies consist of four organizational levels: 1. The corporate level- Corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise; it makes decisions on the amount of resources to allocate to each division, as well as on which businesses to start or eliminate. 2. The division level- Each division establishes a plan covering the allocation of funds to each business unit within the division. 3. The business unit level- Each business unit develops a strategic plan to carry that business unit into a profitable future. 4. The product level- Finally, each product level (product line, brand) within a business unit develops a marketing plan for achieving its objectives in its product market.

Levels of Goals/Plans & Their Importance Strategic Goals and Plans Strategic Goals • Where the organization wants to be in the future • Pertain to the organization as a whole Strategic Plans • Action Steps used to attain strategic goals • Blueprint that defines the organizational activities and resource allocations • Tends to be long term A marketing plan is the central instrument for directing and coordinating the marketing effort. It operates at a strategic and tactical level.

Levels of a Marketing Plan Planning, implementation, and control cycle Core Competency To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers. To carry out its core business processes, a company needs resources.

In the past companies controlled most of the resources Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network also called a supply chain. To carry out its core business processes, a company needs resources—labor power, materials, machines, information, and energy. Traditionally, companies owned and controlled most of the resources that entered their businesses, but this situation is changing. Many companies today outsource less critical resources if they can be obtained at better quality or lower cost. Frequently, outsourced resources include cleaning services, landscaping, and auto fleet management. Kodak even turned over the management of its data processing department to IBM. Corporate and Division Strategic Planning 1. Defining the corporate mission 2. Defining the business 3. Assessing growth opportunities 4. Organization and organizational culture 1. Defining the corporate missionThis seeks to embody the entire goals of the organization and the objective of its existence. It seeks to provide a sense of purpose, direction and opportunity. According to Peter Drucker, it is time to ask some fundamental questions. 12345- What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? Successful companies continuously raise these questions and answer them thoughtfully and thoroughly. Organizations develop mission statements to share with managers, employees, and (in many cases) customers. A clear, thoughtful mission statement provides employees with a shared sense of purpose, direction, and opportunity. The

statement guides geographically dispersed employees to work independently and yet collectively toward realizing the organization's goals. Good mission Statements 1. Mission statements are at their best when they reflect a vision, an almost "impossible dream" that provides a direction for the company for the next 10 to 20 years. 2. Focus on a limited number of goals- The statement, "We want to produce the highest-quality products, offer the most service, achieve the widest distribution, and sell at the lowest prices" claims too much. 3. Stress the company's major policies and values. 4. Define the major competitive spheres within which the company will operate Major Competitive Spheres • Industry • Products • Competence • Market segment • Vertical channels (Ford) • Geographic Eg.- Fred Smith wanted to deliver mail anywhere in the United States before 10:30 A.M. the next day, so he created FedEx. Eg- Rubbermaid Commercial Products, Inc. ―Our vision is to be the Global Market Share Leader in each of the markets we serve. We will earn this leadership position by providing to our distributor and enduser customers innovative, high-quality, cost- effective and environmentally responsible products. We will add value to these products by providing legendary customer service Satisfaction.‖ through our Uncompromising Commitment to Customer

Eg.- Motorola ―The purpose of Motorola is to honorably serve the needs of the community by providing products and services of superior quality at a fair price to our customers; to do this so as to earn an adequate profit which is required for the total enterprise to grow; and by doing so, provide the opportunity for our employees and shareholders to achieve their personal objectives.‖ Eg. eBay ―We help people trade anything on earth. We will continue to enhance the online trading experiences of all—collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.‖ Defining the Business Companies often define their businesses in terms of products: They are in the "auto business" or the "clothing business." A business must be viewed as a customer-satisfying process, not a goods-producing process. Products are transient; basic needs and customer groups endure forever. Transportation is a need: the horse and carriage, the automobile, the railroad, the airline, and the truck are products that meet that need. Dimensions that Define a Business • Customer groups • Customer needs • Technology

Product Orientation vs. Market Orientation Company Product Market Missouri-Pacific We run a railroad We are a people-and-goods Railroad mover Xerox We make copying equipment We improve productivity Standard Oil We sell gasoline We supply energy Columbia Pictures We make movies We entertain people Strategic Business Units The purpose of identifying the company's strategic business units is to develop separate strategies and assign appropriate funding. SBU has three characteristics • It is a single business or collection of related businesses that can be planned separately from the rest of the company. • It has its own set of competitors. • It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit. Assessing Growth Opportunities • Planning new businesses, • Downsizing, or • Terminating older businesses. office

• INTENSIVE GROWTH • Integrative Growth • Diversification Growth • Downsizing and Divesting Older Business Ansoff Growth Matrix

1- Market-penetration strategy- The company first considers whether it could gain more market share with its current products in their current markets. 2- Market-development strategy- The company considers whether it can find or develop new markets for its current products. 3- Product-development strategy- The company considers whether it can develop new products of potential interest to its current markets. 4- Diversification strategy - The company will also review opportunities to develop new products for new markets. Types of Diversification Horizontal Diversification Acquiring or developing new products or offering new services that could appeal to the company´s current customer groups. In this case the company relies on sales and technological relations to the existing product lines. For example a dairy, producing cheese adds a new type of cheese to its products. Vertical Diversification Occurs when the company goes back to previous stages of its production cycle or moves forward to subsequent stages of the same cycle - production of raw materials or distribution of the final product. For example, if you have a company that does reconstruction of houses and offices and you start selling paints and other construction materials for use in this business. This kind of diversification may also guarantee a regular supply of materials with better quality and lower prices. Concentric Diversification Enlarging the production portfolio by adding new products with the aim of fully utilizing the potential of the existing technologies and marketing system. The concentric diversification can be a lot more financially efficient as a strategy, since the business

may benefit from some synergies in this diversification model. It may enforce some investments related to modernizing or upgrading the existing processes or systems. This type of diversification is often used by small producers of consumer goods, e.g. a bakery starts producing pastries or dough products. Heterogeneous (conglomerate) diversification Is moving to new products or services that have no technological or commercial relation with current products, equipment, distribution channels, but which may appeal to new groups of customers. The major motive behind this kind of diversification is the high return on investments in the new industry. Furthermore, the decision to go for this kind of diversification can lead to additional opportunities indirectly related to further developing the main company business - access to new technologies, opportunities for strategic partnerships, etc. Four market-product strategies: alternative ways to expand sales revenues for Ben & Jerry’s

Success Probability for each of the 4 basic strategies: Diversification strategy 1 in 20 Market-development Strategy is 1 in 4 Product-development strategy 50-50 Market-penetration is the highest Business Unit Strategic Planning  Strategic planning:  Developing a strategic fit between  organizational goals and capabilities, and  changing marketing opportunities

Ben & Jerry’s: A SWOT analysis to get it growing again Business Portfolio Analysis- BCG Matrix

• Cash Cows – SBU’s that have a high market share of a low sales growth market. • Stars – SBU’s that have a high market share of a high sales growth market. • Question marks – SBU’s that have a low market share of a high sales growth market. • Dogs – SBU’s that have a low market share of a low sales growth market. Strategic Marketing Process Process whereby an organization allocates it marketing mix resources to reach its target markets. Planning Phase – Situation Analysis • This is a complete analysis of the firm’s situation which assesses internal strengths and weaknesses and external threats and opportunities (SWOT) • Internal analysis (controllable factors) – assess the firm itself to identify strengths and weaknesses • External analysis (uncontrollable factors) – assess the firm’s external environment to identify opportunities and threats Planning Phase – Marketing Objectives • Specific levels of performance desired for a product or product line to be achieved by a given date. • Stated in terms of market share, sales, profit • Should be measureable, attainable, specific, and consistent with organizational objectives Planning Phase: Product Positioning - The process where marketers try to create a product image or identity in the minds of their target market relative to competitive products.

Implementation PhaseProcess of putting the marketing plan into action. Involves great attention to detail Evaluation- Involves measuring the results of the actions from the implementation phase and comparing them with goals set in the planning phase. 1- Sales analysis 2- Market share analysis 3- Expense to sales analysis SBU- Strategic Business Unit Establishing Strategic Business Units A business can be defined in terms of three dimensions: customer groups, customer needs, and technology.  It is a company within a company  The business is differentiated from the rest of the company  It has its own set of competitors  It is a separate profit centre Characteristics of SBUs• It is a single business or collection of related businesses • It has its own set of competitors • It has a leader responsible for strategic planning and profitability Assigning Resources to SBUs The purpose of identifying the company’s strategic business units is to develop separate strategies and assign appropriate funding to the entire business portfolio.

Senior managers generally apply analytical tools to classify all of their SBUs according to profit potential. Two of the best-known business portfolio evaluation models are the Boston Consulting Group model and the General Electric model. Strategic Formulation Porter’s Generic Strategies

Overall cost leadership- The cost leadership strategy advocates gaining competitive advantage due to the lowest cost of production of a product or service. Lowest cost need not mean lowest price. Costs are removed from every link of the value chain- including production, marketing, and wastages and so on. The product could still be priced at competitive parity (same prices as others), but because of the lower cost of production, the company would be able to sustain itself even through lean times and invest more into the business all throughout. Examples are the TPS system developed by the Toyota Motor Company. The TPS system aims to cut costs throughout the company, but Toyota cars are still priced at almost the same levels as American or other Japanese cars. Differentiation- The 'differentiation' strategy involves creation of differentiated products for different segments. A variety of products, each branded and promoted differently with levels of function, allows a company to 'desensitize' prices, and on the basis of being different, charge premium or higher prices. This strategy also provides a hedge against different markets and product life cycles, allowing cash flow to come in even if a few products decline, while others grow or mature. A prime example of this strategy is Hindustan Lever, which, while focused on FMCG, has a range of products even within the soaps category for different segments. Such a strategy needs strong segmentation, marketing and branding skills. Focus- The 'focus' strategy involves focusing on a narrow, defined segment of the market, also called a 'niche' segment. For example, Porche markets to the particular segment that likes fast and expensive cars and can afford it. A company in a niche market has customers who understand, appreciate and can pay a premium for their indulgence. Competitive advantage - either by cost or differentiation- is created especially for the niche. But the risks are that the niche may not grow, or it may disappear with time and change.

Strategic Alliances There are four forms of MDS1. Exporting- to ship (commodities) to other countries or places for sale, exchange, etc 2. Licensing- A document, plate, or tag that is issued as proof of official or legal permission 3. Joint Venture- A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it. However, the venture is its own entity, separate and apart from the participants' other business interests. 4. Direct Investment- The purchase or acquisition of a controlling interest in a foreign business by means other than the outright purchase of shares. In domestic finance, the purchase or acquisition of a controlling interest or a smaller interest that would still permit active control of the company.

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