CHEMICAL ENGINEERING

ECONOMICS

6th Semester,
B.Sc. Chemical Engineering
Session 2015

Delivered by:
Dr Usman Ali

Department of Chemical Engineering

University of Engineering & Technology, Lahore
 Engineers in Marketing and Service Activities
Advanced Organizer

Managing Engineering and Technology

Management Functions Managing Technology Personal Technology

Planning Research Time Management

Design Ethics
Decision Making
Production Career
Organizing
Quality
Leading
Marketing
Controlling
Project Management
 Marketing
Identifying customers
Studying customer’s needs
Obtaining opportunity to make an offer
Closing a deal
 Introduction
Basic functions of an enterprise: Marketing
and Innovation - special roles for engineers!
Marketing: Provide products/services meeting
the needs and wants of customers, Focusing
on basic marketing concepts and applications
Innovation: Strengthen the firm’s competitive
marketing position and sustain profitability by
technology, supply chains, product design, etc.
 Marketing Function

Information
(Advertising,
Promotion)

Suppliers Customers
Firm

Purchase
(Response, Vote, Attitude)
Information
(Market Research,
Wants/needs Preferences)
 Marketing Process

Define Evaluate Improve

Problem Program Program

Analyze Develop
Market Marketing
(Environment,
Competition, Program
Select Segment (s): (Set strategies
Strength,
Profitability, Fit with
Weakness, for Product,
Company/Product/Market
Needs/Interests Pricing,
of Defining Promotion and
Segments Distribution)
 Marketing Orientation
Customer Focus - Understand needs, create
value, and serve to assure customer
satisfaction, with inter-functional teamwork
Competitor Focus - Seek advantages relative
to competitors, monitor behavior and respond
to strategic moves (foes or friends)
Profit Focus - Manage to assure short- and
long-term profitability
 Levels of Marketing Strategy
• Corporate Level: Set future direction of what
businesses to pursue (product, service, total
solution, etc.) and what value to be
emphasized
• Business Level: Bring products/services to the
marketplace and achieve/maintain
competitive advantages
• Operational Level: Plan marketing program
and implement/control marketing efforts
Marketing Effectiveness Diagram

High
Customer Attractiveness

Low
Low Customer Retention High
 Marketing Effectiveness
Total Success: High profitability at maximum
possible rate
Partial Success: New customers replace lost
customers
Partial Failure: Sales slow or fall due to a lack
of new customers
Total Failure: Sales fall as customers leave
 Key Elements in Marketing
• Market (size, growth rate, location)
• Environment (competition, entry barriers,
constraints)
• Customers (who, why, when, where how,
what)
• Marketing Mix
 Market Forecast
Demand forecast is critically important
Define the market
Conduct sensitivity analyses - assess risks and
check assumptions
 Environment
Market study is needed to assess:
Competition (market share distribution,
technology, brand strength, marketing
position, customer loyalty, etc.)
Barriers of entry (capital, technology, supply
chains, distribution channels, governmental
regulations, etc.)
 Customers
Who (Profile, who buy from competitors, who
does the buying, for whom is the buying done)
Why (Reasons for product preference: price,
product performance, convenience, product
styling, service, packaging)
What (What for, what value benefit, what
they really want? what needed in the future?)
 Customers
Where (where to get product information,
where is buying decision made, where to buy
from: Retail store, mail order, via internet,
department store, discount store )
How (How to decide, how to compare)
When (When to buy, weekly, monthly, special
occasions, etc.)
 Types of Marketing Relationships
(Length of Relationship, and Commitment)

Transaction-based relationships
More Sustained relationships
Highly Committed relationships
 Marketing Functions
Consumer products
▪ Mass production
▪ Major purpose of purchase: Consumption
▪ Uniform requirements (high substitutability)
▪ Small quantity
Industrial products
 Engineering Involvement
(Industrial products)
Installation
▪ Large, durable custom construction
▪ Selling/design/cost estimation/supervision
Accessories
▪ Short-lived capital goods (equipment)
▪ Designing for general customer
▪ Raw materials
▪ Extractive & agricultural products
▪ Assessment of quality
 Engineering Involvement
(Industrial products)
Process materials
▪ Goods that change form in production
▪ Specifications
Component parts
▪ Goods that do not lose identity in production
▪ Eng. Design / Introduction to Users
Fabricated items
▪ Custom-made items
▪ Eng. Design/ Specifications
▪ Bids
 Engineering Involvement
(Industrial products)
Maintenance/Repair/Operating
▪ Consumed in process of production or use
▪ Parts/Schedule/Procedure/Methods
Services
▪ Incidental use
▪ Sell / Perform
 After-Sales Service
Installation
Warranty
Field service
Documentation
Training
Provisioning & providing repair facilities
Providing retrofit, rebuild, & overhaul
Supplying spares & supplies
 The 22 Immutable Laws of Marketing

1. The Law of Leadership

– It’s better to be first than it is to be better.
– Hertz, IBM, Coca-Cola, Heineken, Times
2. The Law of the Category
– If you can’t be first in a category, set up a new
category you can be first in.
– Miller Lite, Dell, Charles Schwab
3. The Law of the Mind
– It’s better to be first in the mind than to be first in
the marketplace.
– IBM (Remington Rand)
 The 22 Immutable Laws of Marketing

4. The Law of Perception

– Marketing is not a battle of products, it’s a battle of
perceptions.
– Honda, Campbell’s soup, New - classic Coca-Cola
5. The Law of Focus
– The most powerful concept in marketing is owning a
word in the prospect’s mind.
– Google, IBM, FedEx, Xerox, Coke, Kleenex
6. The Law of Exclusivity
– Two companies cannot own the same word in the
prospect’s mind.
– DHL (worldwide)
 The 22 Immutable Laws of Marketing

7. The Law of the Ladder

– The strategy to use depends on which rung you
occupy on the ladder.
– Hertz/Avis/National, AT&T/MCI/Sprint
8. The Law of Duality
– In the long run, every market becomes a 2-horse
race.
– Eveready/Duracell, Kodak/Fuji, Hertz/Avis,
McDonald’s/Burger King, Nike/Reebok
9. The Law of the Opposite
– If you’re shooting for 2nd place, your strategy is
determined by the leader.
– Coca-Cola/Pepsi, McDonald’s/Burger King
 The 22 Immutable Laws of Marketing

10. The Law of Division

– Over time, a category will divide and become two or
more categories.
– Computer: PC, Workstations, Mainframe
11. The Law of Perspective
– Marketing effects take place over an extended
period of time.
– “Sales”, (short-term vs. long-term effects)
12. The Law of Line Extension
– There’s an irresistible pressure to extend the equity
of the brand.
– IBM: copiers, satellite, prodigy, OS/2, Lotus/WP
 The 22 Immutable Laws of Marketing

13. The Law of Sacrifice

– You have to give up something in order to get
something. (Product line, target market, constant
change)
– Dept. stores vs. Toys “R” Us, Limited, The Gap
14. The Law of Attributes
– For every attribute, there is an opposite, effective
attribute.
– Coke-classic, Pepsi-younger generations
– McDonald’s-young kids, Burger King-teens
15. The Law of Candor
– When you admit a negative, the prospect will give you a
positive.
– “Avis is No.2 in rent-a-car”, “Joy, the most expensive
perfume”
 The 22 Immutable Laws of Marketing
16. The Law of Singularity
– In each situation, only one move will produce
substantial results.
– New Coke vs. Classic Coke
17. The Law of Unpredictability
– Unless you write your competitors’ plans, you can’t
predict the future.
– IBM: Micro-channel
18. The Law of Success
– Success often leads to arrogance, and arrogance to
failure.
– DEC: PC, Open System, RISC
 The 22 Immutable Laws of Marketing

19. The Law of Failure

– Failure is to be expected and accepted.
– Wal-Mart (Ready, fire, aim), 3M (Champion system)
20. The Law of Hype
– The situation is often the opposite of the way it
appears in the press.
– New coke, USA Today, NeXt computer
21. The Law of Acceleration
– Successful programs are not built on fads, they’re
built on trends.
– Cabbage Patch Kids vs. Barbie doll
 The 22 Immutable Laws of Marketing

22. The Law of Resources

– Without adequate funding, an idea won’t get off the
ground.
 Market Research vs Marketing Research
 Market Research Researching the immediate competitive
environment of the marketplace, including
customers, competitors, suppliers,
distributors and retailers
 Marketing Research Includes all the above plus:
- companies and their strategies for products
and markets
- the wider environment within which the firm
operates (e.g. political, social, etc)
 Market(ing) Research: Definition

The systematic design, collection, analysis

and reporting of data and findings relevant
to a specific marketing situation facing the
organisation
 Ten Common Market Research Activities
➢ Determination of market characteristics
➢ Measurement of market potential
➢ Market share analysis
➢ Sales analysis
➢ Studies of business trends
➢ Short range forecasting
➢ Competitive product studies
➢ Long range forecasting
➢ Pricing studies
➢ Testing existing products
 Market Research in New Product Development

 The product must appeal to the customer, (however

widely defined)
 Timely market research can help you mould the product
to the consumer’s need/wants
 Market research tend to point out successes and failures
before products are launched “for real”
 As a result, it can save you money and time
 Types of Market Research
 By Source
▪ Primary
▪ Secondary
 By Methodology
▪ Qualitative
▪ Quantitative
 By Objectives
▪ Exploratory
▪ Descriptive
▪ Causal (or experimental)
 Types of Market Research: By Source

Primary - Collection of data specifically for

the problem or project in hand
Secondary - Based on data previously
collected for purposes other than the
research in hand (e.g. published articles,
government stats, etc)
Types of Market Research: By Methodology
Benefits of Qualitative Market Research vs Quantitative
 Types of Market Research: By Objective

 Exploratory - Preliminary data needed to develop an idea

further. Eg outline concepts, gather insights, formulate
hypotheses
 Descriptive - Describe an element of an ideas precisely.
Eg who is the target market, how large is it, how will it
develop
 Causal - Test a cause and effect relationship, e.g. price
elasticity. Done through experiment
Market Research Process
 Sample Airline Questionnaire
✓ What is your total income to the nearest hundred
pounds?
✓ Are you an occasional or frequent flyer?
✓ Do you like this airline?
✓ How many airline ads did you see last spring
compared to this spring?
✓ What are the most salient and determinant attributes
in your evaluation of airlines?
✓ Do you think it is right for the government to tax air
tickets and deprive a lot of people of the chance to fly?
 Sample Airline Questionnaire
✓ What is your total income to the nearest hundred
pounds?
▪ the respondent probably doesn’t know the answer with this degree of
accuracy
▪ the firm doesn’t need to know the answer with this degree of accuracy
▪ people are not keen to reveal income that accurately
▪ a questionnaire should never begin with such a personal question
✓ Are you an occasional or frequent flyer?
▪ how do you define occasional versus frequent: everyone will define it
differently
✓ Do you like this airline?
▪ ‘like’ is a relative term
▪ will people answer it honestly when phrased so blatantly?
 Sample Airline Questionnaire
✓ How many airline ads did you see last spring compared
to this spring?
▪ Who can remember?
▪ What do you call ‘spring’?
▪ What is an ad? Is it TV, magazine, poster or what?
✓ What are the most salient and determinant attributes in
your evaluation of airlines?
▪ What’s meant by ‘salient’ and ‘determinant’?
▪ This sounds pompous and arrogant even if people do understand
✓ Do you think it is right for the government to tax air
tickets and deprive a lot of people of the chance to fly?
▪ All objectivity is out of the window
▪ Why ask if you’ve already made your mind up of the effects?