Chapter 1

CH 1
Introduction to Managing Marketing

Copyright, Wessex Inc., 2009 www.axcesscapon.com www.wessex21c.com
What is Marketing?
Marketing is advertising?
Marketing is give-aways? Marketings job is to Support the salesforce? Marketing is what consumers do at the supermarket?
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The Changing View

Old Way
Organizational survival is major firm objective Accounting profit is critical Shareholder value is an issue for finance Firm operates to suit managers goals Marketing is one of the firms functions Internal orientations are acceptable The firm must manage the status quo Customers are a necessary evil The supplier chooses options Seller power dominates Marketing is done by the marketing department The core of the marketing job is the marketing mix
New Way
Shareholder value is major firm objective Shareholder value is critical Shareholder value is an issue for marketing Firm operates to deliver value to customers Marketing is a philosophy as well as a function An external orientation is critical for success The firm must manage change Customers as key firm assets The customer chooses options Customer power dominates All firm employees have a marketing orientation The marketing job is six marketing imperatives
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Key Ideas: Chapter Overview
Marketing is a guiding philosophy for the firm as a whole. Marketing is a set of six imperatives the must dos of marketing. Four marketing principles guide execution of the six imperatives.
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The Purpose of Marketing

Shareholder Value Organizational Survival and Growth Current and Potential Profits Attract, Retain, and Grow Customers Customer Value
Company
The Purpose of Marketing

Shareholder Value Organizational Survival and Growth Current and Potential Profits Competitors Attract, Retain, and Grow Customers Customer Value Competitors
Company
What They say:

Lou Gerstner:
Everything starts with the customer.
Tracy and Wiersema:

Creating shareholder wealth is not the purpose of the business. It is the reward for creating customer value.
Peter Drucker:
If we want to know what a business is we have to start with its purpose. There is only one valid definition of business purpose: to create a customer. It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or service, converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance -- especially not to the future of the business and its success. What the customer thinks he is buying, what he considers value is decisive ... Because it is [the purpose of a business] to create a customer, [the] business enterprise has twoand only these twobasic functions: marketing and innovation.
Key Ideas: Fundamentals of Marketing
The firms major task is to attract and retain customers by developing and delivering valued offers. The firm enhances shareholder value by successfully attracting and retaining customers. The firm has two basic functions -- marketing and innovation. Marketing is critical for firm success in todays increasingly complex and fast changing environment.
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The Key Meanings of Marketing Marketing as six imperatives

A systematic task -- to attract and retain customers
Four principles guide execution of the six imperatives

Guidelines for executing the six imperatives
Marketing as a philosophy
Concerns the entire organization, regardless of function Everybodys business requires commitment of all firm employees Encompasses the way the firm interfaces with its various environments notably customers and competitors
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Key Ideas: Customers and the Financial Perspective
The shareholder-value perspective is increasingly widespread around the world. Customers are the sole source of firm revenues, and all firm activities are costs. Customers are the firms core assets, yet they do not appear on the balance sheet. Some balance-sheet assets act as strategic liabilities. Customers are the critical source of cash inflows.
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Value that Customers Receive and Value the Firm Receives
High Value that Customers Receive
Low
Low Value the Firm Receives

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High
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Two Sides to Value
When the firm delivers high customer value, it attracts and retains customers. When the firm attracts and retains customer, it earns high value for shareholders.
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Marketing Roadmap: A Philosophy of External Orientation

Integration
Monitor & Control Execution & Performance
Determine & Recommend Which Markets to Address
Selectivity & Concentration
Customer Competitor Market
Secure Support From Other Functions
External Orientation
INSIGHT
Identify & Target Market Segments
Customer Value
Design the Marketing Offer
4. OFFER
Set Strategic Direction and Positioning
Differential Advantage
Marketing as a Philosophy
External orientation: the extent to which the firm focuses its attention on customers, competitors, markets, and environmental forces
Internal Orientation
A Selection of Key Issues Do you view customers as assets? How responsive are you to customers? How focused are you on beating competitors? How quickly can your organization react to external changes? How well do your functional departments and business units work together?
A Contrast of Orientations
Dimension
Focus Know-How Process Priorities Measurement Customer Perspective Organizational Philosophy
Internal
Products inherent in patents, plant Mass production Efficiency and productivity Profit, margin, volume Transactional Bureaucracy
External
Markets Inherent in people, processes Mass customization Flexibility and responsiveness Value, satisfaction, retention Relational Adhocracy
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Marketing Roadmap: Six Imperatives for Market Strategy

Integration
INSIGHT
Customer Value
4. OFFER
Marketing Imperatives
Imperative 1: Determine and Recommend which Markets to Address Imperative 2: Identify and Target Market Segments Imperative 3: Set Strategic Direction and Positioning Imperative 4: Design the Marketing Offer Imperative 5: Secure Support from Other Functions Imperative 6: Monitor and Control Execution and Performance
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Marketing Imperative 1: Determine and recommend which markets to address

In which new businesses and markets should the firm invest? From which businesses and markets should the firm withdraw? Which current businesses and markets should continue to receive investment? How much investment should these various businesses and markets receive?
Roles for Marketing

Identify Opportunities Advise on Proposed Strategic Actions
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Marketing Imperative 2: Identify and Target Market Segments
Target Segment
B A E C D
Two very different tasks Creative and analytic Decision focused
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Marketing Imperative 3: Set the Strategic Direction What should be our performance objectives? How should we position our products to serve customers and beat competitors?
Target customers Target competitors Value proposition Reason to believe
How should we address markets in different developmental stages? How should we approach branding decisions? Do we have a profitable business model?
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Marketing Imperative 4: Design the Marketing Offer How should we design the marketing offer for customers? What does the value proposition imply for the marketing mix?
Design
Product? Promotion? Distribution? Service? Price?
Variations by segment? Implications for other functions?
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Marketing Imperative 5: Secure Support from Other Functions

Support for design? Support for implementation?
Marketings key responsibility is to keep the firm focused on the customers needs
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Marketing Imperative 6: Monitor and Control Execution and Performance Are the firms various functions and departments implementing the marketing offer? Is the firms market and financial performance reaching planned objectives? Based on the current environment, are the firms objectives, strategies, and implementation plans on track, or should the firm make changes?
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Key Ideas: Marketing Imperatives 1, 2, and 3

MI1. Marketing should identify market opportunities and advise top management on potential strategic actions. MI2. Marketing must identify market segments groups of customers with similar needs that value similar benefits, with similar priority levels. MI2. The firm should target those market segments that best use its strengths, and exploit competitors weaknesses. MI3. Decisions about the firms strategic direction set the stage for designing the marketing offer.
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Key Ideas Marketing Imperatives 4, 5, and 6

MI4. The marketing mix comprises:
Product Promotion Distribution (or Place) Service Price
MI5. Marketing must keep the firm focused on customers needs, regardless of current feasibility. MI5. Marketing must exercise leadership to encourage cooperation across multiple functions. MI6. Marketing must monitor and control the firms actions and performance to keep it on track.
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Marketing Roadmap: Four Principles

Integration
INSIGHT
Customer Value
4. OFFER
The Principles of Strategic Marketing Selectivity and Concentration Customer Value Differential Advantage Integration
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The Principle of Selectivity and Concentration
Selectivity: Marketing must carefully choose targets for the firms efforts
Concentration: The firm should concentrate its resources against those targets
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The Principle of Customer Value
Success in target market segments depends on the firms ability to provide value to customers.
Customers dont want your products. They only perceive value in the benefits that your products and services provide Customer value should drive product and investment decisions The firms market and financial performance depends on its ability to deliver value to customers
The Principle of Differential Advantage
A net benefit or cluster of benefits, offered to a sizable group of customers, which they value and are willing to pay for, but cannot get, or believe they cannot get, elsewhere.
Emphasizes competition: offering customer value is not enough Some advantages are better than others All differential advantages eventually erode -- the firm must continually renew its differential advantage The firm must be willing to cannibalize its own differential advantage A difference is not a differential advantage
Differential Advantage is Key
Innovation Commodity Differential advantage
Imitation
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The Principle of Integration
The firm must carefully integrate all elements in the design and execution of the marketing offer
Integration is crucial to create and deliver customer value, and secure differential advantage The firm must secure integration at the customer, and integration at the firm Different functions and management levels must agree on priorities A shared value of serving customers, via a corporate-wide external orientation, promotes a common purpose Those involved in designing and implementing the marketing offer must develop close and cooperative working relationships
Key Ideas Marketing Principles I and 2 Selectivity focuses on the choice of market or market segment target. Concentration refers to concentrating resources so as to deliver value to that target.
The firm earns marketplace success by providing value to customers. The firm develops, produces, and delivers products and services, but customers only perceive value in the benefits these products and services provide
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Key Ideas Marketing Principles 3 and 4
To secure a differential advantage, customers must perceive greater value in the firms offer than in competitors offers.
The firm achieves integration by agreeing on priorities those involved in designing and implementing the offer develop close and cooperative working relationships.
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Key Messages from Chapter 1: Introduction to Managing Marketing

Firms that deliver greater customer value than their competitors are more successful in attracting, retaining, and growing customers. All things equal, firms that successfully attract, retain, and grow customers earn profits today and promise profits tomorrow. They are more likely to survive and grow and enhance shareholder value. Enhancing shareholder value is an increasingly important objective for companies. Value has two sides. When firms deliver high levels of customer value, they attract, retain, and grow customers. When firms attract, retain, and grow customers, they create value for shareholders. Marketing as a philosophy embraces an external orientation this is a responsibility of all organizational members. The six marketing imperatives represent the must dos for the firm. Marketing as four principles, provides the guiding framework within which the firm implements the six marketing imperatives.
Marketing Roadmap: Imperatives, Principles, Philosophy

Integration
INSIGHT
Customer Value
4. OFFER

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CH 1

Introduction to Managing Marketing

Copyright, Wessex Inc., 2009

The Changing View

Key Ideas: Chapter Overview

Copyright, Wessex Inc., 2009

The Purpose of Marketing

The Purpose of Marketing

What They say:

Tracy and Wiersema:

Key Ideas: Fundamentals of Marketing

Copyright, Wessex Inc., 2009

The Key Meanings of Marketing Marketing as six imperatives

Four principles guide execution of the six imperatives

Copyright, Wessex Inc., 2009

Key Ideas: Customers and the Financial Perspective

Copyright, Wessex Inc., 2009

Value that Customers Receive and Value the Firm Receives

High Value that Customers Receive

Low Value the Firm Receives

Two Sides to Value

Copyright, Wessex Inc., 2009

Marketing Roadmap: A Philosophy of External Orientation

Determine & Recommend Which Markets to Address

Selectivity & Concentration

Customer Competitor Market

Secure Support From Other Functions

Identify & Target Market Segments

Design the Marketing Offer

Set Strategic Direction and Positioning

Copyright, Wessex Inc., 2009

Marketing Roadmap: Six Imperatives for Market Strategy

Determine & Recommend Which Markets to Address

Selectivity & Concentration

Customer Competitor Market

Secure Support From Other Functions

Identify & Target Market Segments

Design the Marketing Offer

Set Strategic Direction and Positioning

Copyright, Wessex Inc., 2009

Marketing Imperative 1: Determine and recommend which markets to address

Roles for Marketing

Copyright, Wessex Inc., 2009

Marketing Imperative 2: Identify and Target Market Segments

Two very different tasks Creative and analytic Decision focused

Copyright, Wessex Inc., 2009

Target customers Target competitors Value proposition Reason to believe

Copyright, Wessex Inc., 2009

Product? Promotion? Distribution? Service? Price?

Variations by segment? Implications for other functions?

Copyright, Wessex Inc., 2009

Marketing Imperative 5: Secure Support from Other Functions

Copyright, Wessex Inc., 2009

Copyright, Wessex Inc., 2009

Key Ideas: Marketing Imperatives 1, 2, and 3

Copyright, Wessex Inc., 2009

Key Ideas Marketing Imperatives 4, 5, and 6

Copyright, Wessex Inc., 2009

Marketing Roadmap: Four Principles

Determine & Recommend Which Markets to Address

Selectivity & Concentration

Customer Competitor Market

Secure Support From Other Functions