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Marketing Principles
Dr. Mary Wolfinbarger
Class Info
Syllabus: Find it at my websitewww.csulb.edu/~mwolfin
About Me
Education:Ph.D. 1990, Marketing, University of California, Irvine
M.B.P.A. 1985, Business and Public Administration, University of California, Irvine
B.S. 1983, English, Vanderbilt University
About Me Professional Experience Internal Marketing : Research for DuPont,
Polaroid, Taco Bell, PG&E, Intel, UCIMC Studying online consumer behavior (Center for
Research on Information Technology in Organizations)
Web strategy consulting: Primal Elements (www.primalelements.com)
Present research: Internal Marketing; Senior Internet Usage; email usage for HH decision making for separated spouses (Navy project); Simpsons’ fan sites and discussion groups
Lecture: Why Study Marketing?
How many of you bought something today? How many have seen or heard an ad today? How many of you consumed something today? How many of you engaged in word of mouth
about a product/service today?
Reason #1
Marketing is a fundamental human activity
it’s ubiquitous in daily life it happens around the world we can learn to make better
consumer decisions
Reason #2
Marketing impacts the economy Marketing (broadly conceptualized) is
about 50% of retail sales expenses Healthy marketing systems support economic
advance
Peter Drucker (writing about lesser developed countries)
“…in an economy that is striving to break the age-old bondage of man to misery, want and destitution, marketing is…the catalyst for transmutation of latent resources, of desires into accomplishments, and the development of responsible economic leaders and informed economic citizens.”
Reason #3
Marketing management is essential to organizational success
Build a better mousetrap?
…and the world will beat a path to your doorstep.
Or does it????
80-90% of new products fail Same rate for new businesses
Reason #4
Marketing can contribute to societal well-being
Reason #5
It’s about people (consumers) and it’s fun.
(Well, it’s more fun than accounting and calculus anyway…)
Student Criticisms of Marketing
Marketing communications are not always honest “They can sometimes play on people’s emotions and
fears and can cause them to buy things they really don’t need.”
It can “psychologically manipulate” consumers (they sell the “sizzle,” not the steak).
Youth may be targeted by companies selling adult products (e.g. alcohol)
Marketing sells products that can be harmful Some ads are crude
“[Sex] is not necessary to sell something, and if it is, the product is not worth much!”
Student Criticisms of Marketing
Telemarketers! Spam! Pop-up ads! Adware! “Sometimes I feel like I am being inundated with
information involving every medium of communication, particularly advertising.”
“Marketing is ubiquitous and unrelenting to the point where it is almost inescapable…it exploits and creates stupid holidays, making us feel guilty if we don’t buy presents for our family and friends.”
Sometimes minorities are stereotyped Advertising can be clichéd or corny
“99% of commercials are so boring.” Fashion advertising emphasizes an unattainable body
My criticism of marketing
Exalts the buying and consuming experience (of course)
Encourages us to find meaning in things Preaches that buying things makes you happy Implicitly demeans self-control, gratitude, and
transcendent (non-material) values (e.g. buy now, you deserve it….)
Transforms products into objects of affection and desire through promotions and branding
My criticism of marketing
Sometimes takes advantage of consumer lack of knowledge (let the buyer beware)
Especially true for goods and services with “credence” qualititesExamples: car repair, plumbing, medical
services, pharmaceuticals
One more criticism?:The “Paradox of Choice”
Sociologist Barry Schwartz shows that more choice can make us less happyChoice has increased over time“Maximizers” may get more than “satisficers”
but may be less happy• Choice increases the burdens of making “good
decisions” and regret over suboptimal decisions• Availability of choice raises expectations
What’s the solution?
What’s good about marketing?
Usually seeks to be successful by focusing on satisfying consumer desires (needs?)
Often delivers customers what they want, when they want it, at a price they are willing to pay
(More on customer focus later!) What’s the alternative?
Conceptualizing Marketing
What is marketing anyway?
Types of Marketing “Offerings”
Goods
are tangible
Types of Marketing “Offerings”
Services an experience provided by the application of
human or mechanical skill
Examples – haircut, dry cleaning, consulting, movies…
How services differ
Can’t inventory Intangible Quality control difficult Often a real time performance Consumer participation
A third marketing “offering”
Ideas -- the most intangible of all at worst, “spin” at best, worthy social causes are
promoted Is marketing persuasion? (MOTL)
Marketing as Selling Ideas
“Social marketing has been with us for a long time. The Greeks and Romans launched campaigns to free slaves. During the Industrial Revolution, campaigns were mounted to abolish debtor prisons and child labor and grant voting rights to women. In the past century social reform campaigns in
Selling ideas/Social Marketing
America have spoken for abolition, temperance and prohibition, and women’s suffrage movements.”
--James Mintz, Marketing News
Common Social Marketing Concerns
Health Environment Education Safety
The Marketing of Ideas/ Causes
“Charitable causes and social services campaigns for funds and donations are everywhere: on TV and radio, in newspapers and magazines, in point of purchase material, in public service announcements between the coming attractions and the main feature at the local movie theater…”
Cause-related marketing
Supporting causes as part of marketing program
Matching: e.g. Coors and clean water
Pro bono work
Advertising and media do free work Example: Partnership for a Drug-free
America
Goods, Services, Ideas and...
You can market yourself!
Marketing Yourself!
“Starting today you are a brand. You’re every bit as much a brand as Nike, Coke, Pepsi, or the Body Shop…start thinking like your favorite brand manager and ask yourself…What is it that my product or service does that makes it different?…Start by identifying the qualities or characteristics that make you distinctive from your competitors or your colleagues…What would your colleagues…say is your greatest and clearest strength? Your most noteworthy personal trait?” -- Tom Peters “The Brand Called You,’ In Fast Company, Sept. 1997
Profit vs. Not-for Profit
Have “customers” AND donors Customers may not want product Donors may want to be involved in
decisions No bottom line
Profit vs. Not-for Profit
Lack of marketing sophistication
Marketing as Exchange
The goal of marketing is to facilitate exchanges
Alternatives to Exchange
Origination Force Transfer
Requirements for exchange
Two or more parties Parties have unsatisfied wants/needs Parties have something of value to exchange Each party has something other party wants Means of Communication & delivery
(marketing!)
Requirements for Market Exchange
A “marketplace” A medium of exchange Specialization of labor Marketing management/coordination
Concepts of Marketing
The Marketing Concept
Achieve success by focussing on consumer needs
Adapt the business to deliver what consumers want
Be profitable
The most important principle of marketing? “I would say the most important principle of
marketing is to know your audience.” (audience=customer)
Keys to Implementing the Marketing Concept
Research
Departmental Integration
Commitment to “consumer sovereignty”
On Research
“More companies are increasing their research activities to pay closer attention to what consumers want. To them, the mission of marketing isn’t just persuasion, but learning how to satisfy consumer wants. Among other things, the customer demand for quality and reliability…has taught companies that it’s easier to sell products that meet the true need of consumers.” Wall Street Journal
The Marketing Mix
4 traditional P’s: Product Price Promotion Place (Distribution)
2 more: Preparedness Personnel
Definition of Marketing (until last year)
“Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals.”
American Marketing Association Definition of Marketing, www.marketingpower.com
New AMA Definition (late 2004)
“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 organization and its stakeholders.”
Key new ideas: “value,” “customer relationships,” (the “new era orientation”), “stakeholders” (note: your text explains the “value chain”)
What’s gone? “Create exchanges,” the listing of the 4 P’s, “satisfying individual and organizational goals”
Creating value rather than satisfaction; benefiting stakeholders rather than indivs and organs.
The Marketing Concept?
“Selling is not marketing. Selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product…[selling] does not, as marketing invariably does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse and satisfy customer needs.” – Theodore Levitt, “Marketing Myopia” 1960
Other Marketing Philosophies
Production Concept Product Concept Selling Concept Societal or Social Marketing Concept
Production Concept
Mass production Lower prices Example: Ford’s Model T
Production Concept
Assumption : consumers will buy it if it’s cheap Makes sense when little differentiation is
demanded Makes sense for price sensitive segments
The Production Concept
Why did Henry Ford’s production concept finally fail?
Product Concept
Customers want bells and whistles and will pay “The Engineering Fallacy” May result in unwanted products -- e.g. clear whiskey May make sense for some segments -- e.g. hobbyists Some segments and markets are novelty-driven
Product Concept
May overlook segments wanting simpler products
Selling Concept
Company relies on sales talent May result in high pressure sales tactics Makes more sense when new product’s
benefits are hard to understood
Selling Concept
Can be fall-back position of marketers without enough product development
More likely when salespeople feel they have one opportunity
Societal (Social) Marketing Concept
Deliver consumers desired satisfactions effectively and efficiently AND serve societal well-being
Societal (social) Marketing Concept
Four considerations consumer needs and wants consumer best interests profit society’s best interest
(Whew!)
Societal (social) Marketing Concept
Any problems with this? Consumers can want what isn’t good
for them Are businesses qualified to determine
what is good for society? Doing social good works can make it
more difficult to be profitable
Internal and External Environment
Internal Environment
Increasing emphasis on internal departmental integration AND teamwork
Marketing conflicts
Selected Conflicts
Selected Conflicts
R & D Basic Research Functional
Features
Marketing Applied Research Sales Features
Selected Conflicts
Engineering Few Models Long Lead Design
Time
Marketing Many Models Short Lead Time
Selected Conflicts
Finance Strict spending
rationales Strict budgets
Marketing Intuitive spending
rationales Flexible budgets
Selected Conflicts
Accounting Standard
Transactions
Marketing Special Terms &
Discounts
Selected Conflicts
Credit Low Credit Risks Tough Credit
Terms
Marketing Medium Risks Easy Terms
How to Resolve Conflicts
Market Orientation
What is Market Oriented?
Market information shared across the company
Interfunctional decisions Result: well-coordinated decisions executed
with commitment
What is Market Oriented?
“Serial communication, when one function passes an idea or request to another routinely without interaction -- like tossing a brick with a message tied to it over a wall -- can’t build the commitment needed in a customer-driven company…”
What is Market Oriented?
“…joint opportunity analysis, in which functional and divisional people share ideas and discuss alternative solutions and approaches, leverages the different strengths of each party.”
--Benson Shapiro, Harvard Business Review
What is Market-Oriented?
“Marketing…is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.”
--Peter Drucker
Empirical Study, Marketing Science Institute
Compared R&D, cost-cutting and market orientation ( “customer focus”)
Included new biz ventures in Japan and U. S. Market oriented co’s were more profitable R&D oriented co’s add features customers may not
want Cost-cutting strategy often easy to copy
External Environment
Channel: Set of firms that cooperate to make the product available
Markets consumer markets business markets government markets international markets secondary markets
The External Environment
Competitors Publics Financial Publics
Media Publics
Citizen Action Publics
The General Public
The External Environment
Citizen Action Publics
“Most boycott groups…don’t expect or even hope to gut a company’s sales with their protests. Nor do companies fear it. Still, even a small decline can have an effect…a boycott that affects sales by 5% is considered cause for concern by companies.
“Further, those likely to boycott are often the most valuable demographic group…two income families, holding college degrees and hailing from the big-spending thirty-something crowd.” Wall Street Journal
The External Environment
The Macro Environment Demographics Cultural Forces Economic Forces-disposable income, foreign economies Technological Forces The Regulatory/Legal Environment Government: Federal Trade Commission Non-Government: BBB, NARB, Business and Trade Associations
Trends in the Macroenvironment
Demographics
Info from www.census.gov
Trends in the Macroenvironment
Estimated U. S. Population: About 295,000,000
One birth every 8 seconds One death every 12 seconds
Demographics
Estimated World Population
Over 6 billion! (6.4 billion) 4.2 births/second 1.7 deaths/second
Changing face of U. S. (2000 Census)White 77.1%Black/African American 12.9American Indian or Alaska Native 1.5Asian 4.2Native Hawaiian/other Pacific Islander .3Some other race* 6.6*Adds to more than 100% because 2.4% of people reported 2 or more races
Hispanic (of any race**) 12.5%**(69% of Hispanics are classified as “white”)
Seniors
15% of population is currently 65+ Estimate for 2050: One in four!
Demographics
Median Income (2000)U. S. $42, 148California 46,802Maryland 51,695West Va 29,052Colorado 48,506Texas 39,842Alabama 33,105
Demographics
*75% of jobs in services
*Marrieds just over 50% of households
*Nearly 1/4 of households are of single people
Education (25+)
*H. S. degree or higher 80.4%
*B. S. or higher 24.4
*Grad school 15.5
Technology B2C Commerce: ~$125 billion (including travel) Current retail percentage: 3.5% -5% (and growing) Eventual consumer %? 10%? 15% 25%? About 2/3s of Americans have Internet connections at
home About 30% of Americans don’t use the Internet (yet) Broadband connections growing (50% of Internet HH)
Marketing Ethics
American Marketing Association Code of Ethics
AMA Code of Ethics
Page 67 It is signed by everyone who joins the
American Marketing Association
AMA Code of Ethics
Marketers’ professional conduct must be guided by The basic rule of professional ethics; not knowingly to do harm The adherence to all applicable laws and regulations The accurate representation of their education training and
experience; and The active support, practice and promotion of this Code of
Ethics.
AMA Code of EthicsHonesty and Fairness. Marketers shall uphold and
advance the integrity, honor, and dignity of the marketing profession by
Being honest in serving consumers, clients, employees, suppliers, distributors and the public
Not knowingly participating in conflict of interest without prior notice to all parties involved; and
Establishing equitable fee schedules...
AMA Code of Ethics
Rights and Duties of Parties. Participants in the marketing exchange process should be able to expect that:
Products and services offered are safe and fit for their intended uses;
Communications about offered products and services are not deceptive;
All parties intend to discharge their obligations, financial and otherwise in good faith…..
AMA Code of Ethics
In the area of product development management:
Disclosure of all substantial risks associated with product or service usage….
AMA Code of Ethics
In the area of promotions:
Avoidance of false and misleading advertising
Rejection of high pressure manipulations, or misleading sales tactics
Avoidance of sales promotions that use deception or manipulation
AMA Code of Ethics
In the area of distribution:
…Not using coercion in the marketing channel
Not using undue influence over the resellers’ choice to handle a product
AMA Code of Ethics
In the area of pricing:
Not engaging in price fixing
Not practicing predatory pricing
Disclosing the full price associated with any purchase
AMA Code of Ethics
In the area of marketing research:
Prohibiting selling or fund raising under the guise of doing marketing research
Maintaining research integrity by avoiding misrepresentation and omission of pertinent research data
Treating outside clients and suppliers fairly
AMA Code of EthicsOrganizational Relationships ….Apply confidentiality and anonymity in professional
relationships with regard to privileged information Meet obligations and responsibilities in contracts and
mutual agreements in a timely manner Avoid taking the work of others, in whole, or in part, and
represent this work as their own or directly benefit from it without compensation or consent of the originator or owner
AMA Code of Ethics
Organizational Relationships (continued) Avoid manipulation to take advantage of situations to
maximize personal welfare in a way that unfairly deprives or damages the organization or others
Any AMA members found to be in violation of this Code of Ethics may have his or her Association membership suspended or revoked.