Marketing Management

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Marketing Management

• Small Business Management Entrepreneurship
• AAEC 3454

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Marketing Management

• Marketing is not just selling a product
• Marketing management includes
• Identifying customers customer needs
• Product development
• Pricing policies
• Promotional programs
• Distribution systems
• Marketing provides utility (adds value)
• Form, place, time

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Field of Dreams

• 3 main approaches to marketing
• Product Approach
• If you build it (well) they will come
• Sales Approach
• If you advertise it (whether its any
  good or not), they will buy
• Customer Approach
• Go the distance (focus on customer satisfaction)
• Fill customers needs, the profits will follow

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Marketing Management

• Looking at the total picture
• Know the industry
• Know the territory
• Your resources and operating environment
• Know the customer
• Know the competition
• Know the product
• Know the opportunities risks
• Requires good market research

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Market Research

• Provides needed information
• Market, economy, trends, competition, etc.
• Helps you define your target market
• Helps identify new trends, products, needs
• Stay in touch with the customers!
• Informal market research
• Windshield survey, observation, internal records
• Formal market research
• Formal surveys, focus groups, secondary data

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Steps in Market Research

• Define your main concern(s)
• Determine the relevant information
• What do you need to know?
• Plan the research design
• How to gather the information
• Gather the information
• Analyze the data
• Use the analysis

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Ask the Right Questions

• Who buys the product? Who
  doesnt?
• Why do they buy it? Why dont they buy
  it?
• Where/how do they buy it? Where/how dont?
• When do they purchase it? When dont
  they?
• What complementary products exist?
• What substitutes exist?
• What packaging is preferred? Not preferred?

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Obtaining the Information

• Internal
• Sales receipts, inventory
• Suppliers, employees
• Focus groups
• External
• Trade groups, US Census, American Demographics
• SBA, magazines
• Research agencies, primary/secondary data

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Analyze the Data

• Statistical analysis
• Mean, median, std. dev.
• Correlations
• Regression analysis, factor analysis
• Trend analysis
• Charts/graphs are helpful
• Economic analysis
• Cost structures
• Elasticities

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The Overall EnvironmentOld McDonald Principle

• Environment
• Resource use, EPA, environmental risk
• Institutional Setting
• Laws, regulations, restrictions, zoning,
  covenants
• Economic Setting
• Interest rates, inflation, unemployment, value of
  the dollar
• International Situation
• Relations, trade deficit, trade barriers,
  war/conflict
• Other factors
• Consumer tastes, health concerns, fads/crazes

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Competition

• Direct Competition (Head-to-Head)
• McDonalds Burger King, Hardees
• Secondary or Indirect Competition
• McDonalds Steak n Shake, Mikes Grill
• Taco Bell, PKs
• Country Kitchen, Farm House
• Cafeterias, snack foods,
• Convenience stores, eat-at-home

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Your Market

• 3 Main Components of Your Market
• Potential customers
• They must have unsatisfied needs
• They must have purchasing power (Cash/Credit)
• 80 of all new business is from existing
  customers
• Keep your existing customers happy
• 90 of dissatisfied customers do not complain
• 70 will take their business elsewhere
• 95 will become loyal customers if their
  complaints are handled quickly and well

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Target Market

• Segment by
• Customer Attributes
• Lifestyle, gender, income, age, education,
  company size, etc.
• Geographic Zones
• Community, state, regional, national,
  international
• Product Factors
• Frequency of usage, price sensitivity, major
  competitors, utilization, brand loyalty

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Customer Profile

• Develop a profile of your typical customers
• Age, Income, Interests
• Gender, Ethnic background, etc.
• Use demographics to estimate your potential
  market
• How many potential customers in your area?
• What percent market share do you expect
• Is this a reasonable estimate?

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Example of Using Demographics

• Health Clubs used by about 17 of population
• Blacksburg Population 40,000
• Percent of population between 18-65 85
• 40,000 x 85 34,000 people between age 18-65
• People age 18-65 who use health clubs
• 34,000 x 17 5,780 potential customers
• Pare down by income, gender, disability, etc.

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The 4 Ps of Marketing
P P P P

• Product
• What do we actually provide?
• Price
• How do we determine the price of our
  product/service?
• Promotion (Advertising)
• How do we let our target market know about us?
• Place (Distribution)
• How do we get our product/service to our market?

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Product

• What are you selling or providing?
• You must know this to compete/survive
• Requires critical thinking, creativity, open-mind
• Who is your market?
• Success depends on accurately identifying your
  market
• Realize that your product/service probably should
  change over time
• Constantly assess the needs of your market
• Redefine the mundane!!!

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Product

• What product does each of these firms provide
• Virginia Tech
• McDonalds
• Crossroads Music
• Wal-Mart
• 7-11 or Deli-Mart
• A. White Enterprises

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Product Life Cycle

• Research Development
• Developing the product
• No sales, high costs
• Introduction
• Product introduced to market
• Shotgun or rifle marketing?
• Pricing Strategy
• Penetration
• Skimming
• Sales start, high costs, profits may be negative

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Product Life Cycle

• Growth
• Rapid growth of sales, positive profits start
• Adjust Price Promotion policies
• Expand staff, facilities, etc.?
• Maturity
• Sales begin to slow as competitors enter market
• Profits may start to decline
• Further Price Promotion adjustments
• Differentiate product
• Turn product from commodity to specialty
• Find new uses, new markets for product

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Product Life Cycle

• Decline
• Sales begin to decline - profits decline/negative
• Decision time
• Continue to sell/support the product
• Kill the product
• Budweiser Principle
• Know when to say when!
• Very emotional phase!

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Product Life Cycle
Profits
Develop.
Intro.
Growth
Maturity
Decline
RD Startup Costs No Sales
Sales Start High Costs? Profits lt 0
Sales Decline Kill vs. Keep? Profits Decline
Sales Slow Competition Differentiate
Rapid Sales Pricing Profits gt 0
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Price

• Customer determines value, not the seller!
• Compete on value, not price!!!
• Must know how price-sensitive your customers are
• Must understand price elasticity of demand
• As price increases, demand decreases (usually)
• Does increased revenue from higher price outweigh
  lost revenue from decreased demand?
• No price is set in stone!
• Need to know your costs!!

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Pricing Methods

• Market Penetration
• Skimming the Market
• Cost Markup
• Profit Margin
• What the Market Will Bear
• Competitive
• Discount (Sales)
• Psychological Pricing
• Scarcity

Which one do I use?
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Pricing

• Cost Markup
• Price Cost x (1 Markup )
• where Cost the cost of producing and selling
• Markup ??
• Profit Margin
• Price Cost / (1 - Profit Margin)
• where Cost cost of producing and selling
• Profit Margin required margin ()

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Pricing Questions

• Why does a 2 liter bottle of soda cost 1.19 and
  a 20 oz. bottle cost 1.29
• Why do people pay 5 for a cup of Starbucks
  coffee rather than 0.25 to make a cup of coffee?
• Why do software designers offer a trial version
  that is almost the full version?
• And whats up with sales are they just
  preparing us for higher prices?
• Why are prices slightly different in 7-11 stores
  around town?

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Promotion

• Determining how to introduce the market to your
  firm and/or your product
• Strategies change over time!
• Stage of Product Life Cycle
• In Ag, 70 of marketing is word of mouth
• Neighbors selling neighbors!
• Quality Customer Service is an excellent
  promotional strategy!
• 1 unhappy client tells 20 others about it
• Good experiences create solid relationships!

How do you start the word of mouth ads?
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Promotion

• Shotgun Approach (hit em all!)
• Radio, TV, flyers, billboards, newspapers, Yellow
  Pages, mass mailing, Internet, etc.
• Useful during Introduction Growth phases
• Rifle Approach (hit your target!)
• Direct mailing, industry magazines, FAXing,
  directed electronic advertising, personal
  contact, word of mouth
• Useful during Maturity Decline phases

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Promotion

• Determine
• How/where you will advertise
• Be specific (what stations, what newspapers)
• How often you will advertise
• Weekly, monthly, seasonally
• Your marketing budget
• Itemize the costs
• How to determine the efficiency of your ads
• Coupons, surveys, cookies, etc.

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Promotion

• How/where to advertise a health club in
  Blacksburg?
• To reach students
• Collegiate Times, monthly during school year
  
• WUVT, K-92 3x/day during first 2 weeks of
  semester
• Flyers, weekly, dining halls, etc.
• Website
• To reach older population
• Roanoke Times Current section, weekly
• NPR, AM 2x/day, 3x/week, year-round
• Direct mailing, website

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Place

• Physical Location
• Location, location, location!
• Not as important for some industries
• On-line vs. On-site
• Distribution method
• Wholesale, Retail, Centralized, Regional, etc.
• Sub-contract
• Supply Lines
• Support staff/services