Module 1

The Purpose
of Business
SM131- Lecture 7
Business, Ethics &
Module 2
Main Business
The Creation of Value Functions
Module 3
Making

MARKETING
Difficult
Decisions

SM131

WEEK 7

Module 1 Module 2 Module 3

1
 Agenda

• What is marketing?
• Marketing and innovation
• Marketing and customers
• Marketing environment
• Segmentation, targeting, positioning
• Marketing mix
• Recap
• What is next?

2
WHAT IS MARKETING?

3
What is Marketing?
What is Marketing?

https://www.techfunnel.com
 CAMPAIGNS
This is BRANDING WEBSITES

Marketing

REASEARCH SEGMENTATION

ANALYTICS POSITIONING

STRATEGY TARGETING

SEO

PRODUCT DEV. A/B TESTING

MKG AI ROI
MARKETING AND INNOVATION

7
A famous innovation (circa 2000)

Was this a
good product?

Great engineering ≠ Great product

They Designed Two Versions
Consumer Business
MSRP $4,950.00 Use?
Use ?
NEW MSRP
$3,950.00

SALES: Year1 forecast: 50,000-100,000 units

Plant capacity: 40,000 units/month or 480,000 units/year Why such a big miss?
Year1 (2001) sales: 6,000 units; Total 2001-2009: 50,000 units
http://www.ired.com/news/mkt/segway.htm
They Eventually Segmented the Market

Finding Applications = Finding Potential Customers

They did not see very
significant increases in sales
Segway focused on engineering without an
understanding of the market
Segway focused on engineering without an
understanding of the market
They missed the boom in micromobility in 2018
So e-scooters were the answer?

A slightly different solution for basically the same need.

Related technological know-how.
No, Segway offered e-scooters too!
So what was the problem with Segway?

A shared economy model (rental) versus ownership

A much better customer value
No customer fixed cost, no worries about storing, etc…
This is where the sweet spot was. Not in ownership.
06-23-20
Lessons from Segway
Marketing is central to innovation and bringing solutions to markets because:
• Innovation is too important to be left to scientists and engineers
• Innovation solves needs or relieves a pain point (better than competing
alternatives)
• Customers must be willing to pay for it (for the benefits it creates)
• A need can be solved by many types of products or services. Marketing
figures out which type is most likely to succeed.
• Innovation success is predicated on the right product/service design, the
right business model, and the right go-to-market strategy.
MARKETING AND CUSTOMERS

21
Customers don’t want a quarter-inch drill
Customers don’t want a quarter-inch drill;

… they want a quarter-inch hole.

Customers don’t want a quarter-inch drill;

They want a quarter-inch hole

People buy benefits – not features

Benefits are the basic ingredient in perceived value
From Features, to Reasons, to Emotions, to Values
Source: Vertic
From Features, to Reasons, to Emotions, to Values
Source: Vertic

Brand Ladder
From Features, to Reasons, to Emotions, to Values
Source: Vertic

Good parenting. Family values

Freedom
Love of nature

Stops children crying Brand Ladder

Reduces parental anxiety
No more fear of the outdoors

Can be used with kids >2yo

Reduces symptoms
Acts quickly

Contains camphor
Has no toxic/dangerous chemical
Is in a gel formulation
Marketing is about creating and delivering
value for customers and the world
CUSTOMER VALUE
= TOTAL BENEFITS
– TOTAL COSTS
MARKETING ENVIRONMENT

29
Marketing Management Building Blocks
Marketing Analysis (The 5 C’s)
Customers Company Competitors Collaborators Context

Market Target Market Product

Segmentation Selection Positioning

The Marketing Mix (The 4 P’s)

Product & Service Place/Channels Promotion

Price

Customer Customer
Acquisition Retention
Marketing Management Building Blocks
Marketing Analysis (The 5 C’s)
Customers Company Competitors Collaborators Context
Use SWOT analysis to understand the
external and internal environments
Use SWOT analysis to understand the
external and internal environments
Use SWOT analysis to understand the
external and internal environments
Use SWOT analysis to understand the
external and internal environment
Use SWOT analysis to understand the
external and internal environments
Determine how you can compete
Two fundamental ways to compete in any industry

Cost Leadership
(lower cost)

Competitive Advantage

Differentiation
(premium price)
SEGMENTATION, TARGETING,
POSITIONING

38
 Marketing Management Building Blocks
Marketing Analysis (The 5 C’s)
Customers Company Competitors Collaborators Context

Market Target Market Product

Segmentation Selection Positioning

These initial steps involve developing a deep understanding of Customers and Markets

Jobs/courses: Marketing Research

Marketing Insights/Consumer Behavior
Marketing Analytics etc.
Steps in customer analysis

6. Dev elop
Mix for Marketing
Each Segment Market
5. Develop Positioning Positioning
for Each Segment

4. Select Target
Segment(s) Market
Targeting
3. Develop Measures
of Attractiveness

2. Develop Profiles
of Segments
Market Segmentation
1. Identify Bases
for Segmentation
Segmentation

6. Develop Marketing
Mix for Each Segment
Market
5. Develop Positioning Positioning
for Each Segment

4. Select Target
Segment(s) Market
Targeting
3. Develop Measures
of Attractiveness

2. Develop Profiles
of Segments
Market Segmentation
1. Identify Bases
for Segmentation
Let’s segment this!
What is it?
 What is it?
Food?
Fruit/Vegetable?
Fruit?
Citrus?
What is it for?
What is it for?
Juice?
Snack?
Dessert?
Ingredient?
Mixer?
In what form do
they want it?
What do people
care about?
 ETC. ETC. ETC.
There are MANY ways to segment markets.

The challenge is to find the meaningful way. The one that maximizes
competitiveness for a given firm and a given set of market conditions.
Segmentation
= identifying and describing groups of customers who share similar needs

Unsegmented
market
Segmentation
= identifying and describing groups of customers who share similar needs

Unsegmented Segmented
market Market
Segment A
Segment B
Segment C
Different market structures / Different strategies
Targeting

6. Develop Marketing
Mix for Each Segment
Market
5. Develop Positioning Positioning
for Each Segment

4. Select Target
Segment(s) Market
Targeting
3. Develop Measures
of Attractiveness

2. Develop Profiles
of Segments
Market Segmentation
1. Identify Bases
for Segmentation
 Targeting
= selecting the group(s) of customers to go after (best potential return)

Unsegmented Segmented
market Market
Segment A (target)
Segment B (nontarget)
Segment C (nontarget)
 Targeting
= selecting the group(s) of customers to go after (best potential return)

Unsegmented Segmented
market Market
Segment A (target)
Segment B (nontarget)
Segment C (nontarget)
Market targeting strategies
Patterns of Target Market Selection
Positioning

6. Dev elop
Mix for Marketing
Each Segment Market
5. Develop Positioning Positioning
for Each Segment

4. Select Target
Segment(s) Market
Targeting
3. Develop Measures
of Attractiveness

2. Develop Profiles
of Segments
Market Segmentation
1. Identify Bases
for Segmentation
Positioning

Segmentation How a consumer (segment)

thinks of the brand
&
Targeting

Positioning
Inclusion in
comparison set
of competitors

Differentiation How the company tries to impact

Distinguishing that thinking though the use of all
brand from its marketing mix variables
competitors
What is the
positioning
for this car?
 Trying to be everything often ends up being nothing!
Stuck in the middle usually does not work well.

You need to be best at something that resonates with customers

in order to have a competitive advantage.
 Sometimes you can be more than one thing,
but it has to make sense and have a market for it.
 THE 4 Ps
PRODUCT, PRICE, PLACE, & PROMOTION

66
 Marketing Management Building Blocks
Marketing Analysis (The 5 C’s)
Customers Company Competitors Collaborators Context

Market Target Market Product

Segmentation Selection Positioning

The Marketing Mix (The 4 P’s)

Product & Service

Jobs/courses: Product/Brand Management,

Design Thinking and Product Development
A product is a bundle of features and services

Core Product
Basic Features/Benefits

Actual (Formal) Product

e.g., Brand, Quality, Style,
Packaging, Design

Augmented Product
e.g., Extra Service, Delivery,
Installation, CSR, Financing,
Warranties, End of Life
visualcapitalist.com
Brands are powerful
Brand equity shifts the demand curve
People are will to pay more for strong brands
 Marketing Management Building Blocks
Marketing Analysis (The 5 C’s)
Customers Company Competitors Collaborators Context

Market Target Market Product

Segmentation Selection Positioning

The Marketing Mix (The 4 P’s)

Product & Service Place/Channels

Jobs/courses: Retail and Ecommerce,

Sales Force Management,
Merchandising, Buying,
The roles of channels
The roles of channels
Sales Contacts without an Intermediary

12 commercial relationships
The roles of channels
Sales Contacts without an Intermediary Sales Contacts with an Intermediary

12 commercial relationships 7 commercial relationships

A related example reducing transaction costs
 Marketing Management Building Blocks
Marketing Analysis (The 5 C’s)
Customers Company Competitors Collaborators Context

Market Target Market Product

Segmentation Selection Positioning

The Marketing Mix (The 4 P’s)

Product & Service Place/Channels Promotion

Promotion: often called Integrated Marketing Communication (IMC) to reflect

the multitude of media and touch points between customers and the brand
Jobs/courses: Advertising, Sales Promotions,
Digital Marketing, Sponsorship,
Sales etc.
IMC : 3 basic objectives

Inform

Persuade

Remind
Media types
IMC in practice
 Marketing Management Building Blocks
Marketing Analysis (The 5 C’s)
Customers Company Competitors Collaborators Context

Market Target Market Product

Segmentation Selection Positioning

The Marketing Mix (The 4 P’s)

Product & Service Place/Channels Promotion

Price

Jobs/courses: Pricing
Business Development
REVENUE EXPENSES

Profit
The pricing paradox
Price is arguably the easiest,
fastest, and least costly
adjustment that one can make to
the marketing mix
The Pricing Paradox And, small changes in price can have very large
effects on the bottom line
Price is arguably the easiest,
fastest, and least costly
adjustment that one can make to
the marketing mix
The pricing paradox And, small changes in price can have very large
effects on the bottom line
Price is arguably the easiest,
fastest, and least costly
adjustment that one can make to
the marketing mix
The pricing paradox And, small changes in price can have very large
effects on the bottom line
Price is arguably the easiest,
fastest, and least costly
adjustment that one can make to
the marketing mix
Price in action: How to price the Apple i-Watch?
Total component costs: $81.20
Assembly costs: $2.50
Total manufacturing costs $83.70

(IHS technologies 2015)

Price has nothing to do

with cost (!), it is what
people are willing to pay
 Marketing Management Building Blocks
Marketing Analysis (The 5 C’s)
Customers Company Competitors Collaborators Context

Market Target Market Product

Segmentation Selection Positioning
Creating
&
Delivering The Marketing Mix (The 4 P’s)
Value
Product & Service Place/Channels Promotion

Capturing Price
Value

Sustaining Customer Customer

Acquisition Retention
Value
It is usually cheaper and more profitable to
retain customers than attract new ones
Recap of this week’s lecture
• We explained what marketing does for the firm
• Marketing is the business function with customer knowledge
• As such, marketing is central to guiding strategy and innovation
• We examined the main steps in marketing management
• Environment analysis
• Segmentation, targeting, and positioning
• The marketing mix (the 4Ps)
• Basics of revenue management: acquisition & retention of customers
• We provided an overview of what marketing jobs might look like
In conclusion: remember the big difference

marketing

vs
Marketing
What’s Next?

• Discussion 1: The Creation of Customer Value

• Discussion 2: Branding
• Friday: TA Workshop
• Next week: Operations Management

93
 Module 1
The Purpose
of Business

Module 2
Main Business

THANK YOU FOR Functions

Module 3

ENGAGING! Making
Difficult
Decisions

SM131

WEEK 7

Module 1 Module 2 Module 3

94