Introduction to Marketing Strategy

Part C


Initial Marketing Frameworks
and a Model

Abel Jeuland
University of Chicago
BUS 37000-Spring 2014

Slide1
Marketing is an integrating function: Good
marketing requires a balance of skills.

- Understanding the consumer experience, for
example the interface consumer
behavior/technology (user-friendliness)
- Decision orientation: in particular dealing
with incomplete information
- Implementation: of marketing plan
Slide2
Initial Marketing Frameworks
Since Levitt, many frameworks have been
developed to make marketing not just a business
philosophy but a critical function with specific
responsibilities and tasks within the company or
institution (including non-profit organizations*)

*Churches, political parties, foundations, etc. all
extensively engage in marketing today.
Slide3
Initial Marketing Frameworks
To implement Levitts philosophy
(Marketing Myopia), marketers use frameworks
such as the MMP (Marketing Management
Process with the 5Cs, SWOT analysis, 4 Ps) and
the NPDP (New Product Development Process).



Slide4
The Marketing Management
Process
Examines the situation and identify problems and
opportunities: 5 Cs (Customer, Competitor,
Company, Collaborators, Context)
Establishes objectives: operations objectives
(supply), market objectives (demand)
Formulates strategy: 4 Ps = Product, Price, Place
(distribution), Promotion (communication)
Implements and monitors the strategy (the marketing
plan)
Slide5
The 5 Cs
Slide6
Analysis of First C : Consumer
Understanding the consumer, the consumer
experience
Recognizing consumer heterogeneity: market
segmentation
Slide7
Model of the Consumer

Developing a Model of the Consumer Experience.
The consumer experience is a process. It may be a shared experience (This sharing is
greatly facilitated by the Internet).
The Household Production Function of Gary Becker* is a related concept.









Consumers often choose not directly from the commodities that they purchase but from
commodities they transform into goods through a household production function.
It is these goods that they value.
The idea was proposed by Gary Becker and Kelvin Lancaster in the mid 1960s.
A simple illustration is the baking a cake: The consumer purchases flour, eggs, and
sugar and then uses some labor, time and equipment to produce a cake.
The consumer did not really want the flour or sugar but purchased them to produce the
cake consumed.
Slide8
What is the product from the
marketing point of view?

Example 1: What is the sling box?

Slide9
-Watch live TV on a laptop or smart phone anywhere with Internet access
-Watch and control DVR anywhere with Internet access
-Freedom to watch TV programs however and wherever one wants
Convergence of media product/service categories: TV, laptop, tablet, smart phone
-Built-in TV tuner
-Connects to the Internet
-Connects to audio/video sources including TV, cable, satellite, or DVR
-Small size
-Supports current technology standards
-Picture quality
-Ease of use of user interface
-Ease of installation
-Never separated from favorite programs
-I am an innovator
-Seen as tech-savvy
-Feeling of power
-Control over entertainment
-Coolness factor
-Comfort and pleasure of instant gratification
-Impress others
The product is multi-dimensional as are the underlying consumers needs and wants
What is the sling box?
Slide10
To adopt the point of view of the consumer
experience, we need to organize these
product elements
What is the sling box?
Slide11
The means-ends framework has been found
to be useful in organizing the product
components
What is the sling box?
Slide12
Slide13
What is the Chicago Booth MBA product?
Slide14
The MBA education and experience
-Classrooms
-Communication networks
-Lectures
-Packets
-Assignments
-Meet new people
-Gain experience
-Learn new things (leading edge)
-Networking
-Expand career options
-Large knowledge base
-Gain exposure
-Make more money
-Get promoted
-Meet lifelong friends
-Feel smarter
-Feel more powerful
-Feel more well rounded
-Feel more personally and professionally satisfied
-Others see me as part of elite group
-Others impressed by my abilities
-Others see me as a leader
-Increase self esteem
-Empowerment
The product is multidimensional as are the consumer needs and wants
Slide15
Slide16
VibRAM
FIVE FINGERED
FOOTWEAR
Means-End Chain
Attributes
Consequences
Values
Concrete Abstract
Functional
Psychosocial
Instrumental
Terminal
Form fitting
Light weight
Antimicrobial Fiber
Machine washable
Good traction
Barefoot simulated
Innovative
Convenient
Fashionable
Trendy
I will be in shape
Fewer injuries
Balance
Redevelop muscle
groups
Better
performance
I will be self-
confident
I will have
knowledge of new
products
I will feel better
about myself
People see me as
an athlete
People respect me
Reconnected to
nature
Independence
Strength
Rogers Factors of Innovations
and Segmentation
Trend Setters appear to be target for the product, at
least initially.
Avid Runners and Cross Trainers will need to see
some evidence of benefits.
Reviews (Runners World), High-Profile runners, Word-
of-mouth
Trend
Setters
Avid
Runners
Cross
Trainers
Relative
Advantage High Medium Medium
Compatibility High High High
Complexity Low Low Low
Trailability Medium Medium Medium
Observeability High Medium Medium
Competition Puma / Crocs Nike / NB / Asics Nike / Reebok
Analysis of 2nd C: Company
-Core Competencies of the Corporation
-Sustainable Advantages of the Corporation
-Differentiation from Competition
-Relative Positioning of Company, its
offerings (which products/services for
which markets)
Slide20
Analysis of 3rd C: Competition
Nature of Competition (definition of the
category, of the relevant set)
Number of Competitors
Relative Positionings of Competitors
(differentiation)
Slide21
Analysis of 4th C: Collaborators
Firms do not perform all functions.
Important market participants include: suppliers,
manufacturers, resellers (wholesalers, retailers)
Suppliers Manufacturers Resellers End-users
There may be conflict between the objectives of
these interdependent market participants (channel
coordination is critical): Apple acts as channel
captain in the app market for its mobile devices
(iPhone, iPad)

22
Analysis of 5th C: Context
(Environment)
Socio-economic, demographic, cultural,
life-style
Political (deregulation, privatization)
Technological (innovation)
Globalization, outsourcing
23
Integrating the 5 Cs: SWOT analysis
(Strengths, Weaknesses,
Opportunities, Threats)

Company
Collaborators
Consumer
Competition
Context
24
Integrating the 5 Cs via SWOT
analysis
Given ones objective, a strategy to achieve
it is developed by answering the questions:
-How can we use and capitalize on each of our strengths?
-How can we improve each of our weaknesses?
-How can we exploit and benefit from each opportunity?
-How can we mitigate each threat?

25
Where are we
today
(our offering) ?
Where i s the
consumer
(unmet needs) ?
Where are our
competi tors
(others' offeri ngs) ?
Where can we (do we want to)
be at what time horizon?
Slide26
Marketing Management Process
Review
-Examines the situation and identify problems and
opportunities: 5 Cs (Analyses of Customer,
Competitor, Company, Collaborators, Context);
SWOT analysis of the business
-Establishes objectives: supply (costs,
differentiation) , consumers(markets)
-Formulates strategy: Marketing Plan with 4 Ps
(product, price, place (distribution), promotion)
-Implements and monitors
Slide27
The Marketing Mix: the 4 Ps
The marketer needs answers to 4 fundamental
questions about the chosen customer base:

What do they need (want)? Product
How, when will they get informed
about their options and persuaded to
make a choice? Promotion
How much will they pay? Price
Where will they want to buy? Place
Slide28
The Marketing Mix (4Ps)
Slide29
Framework of the New Product
Development Process* (NPDP)
1-Generating new ideas
2-Screening new ideas for consistency with our business definition
3-Concept development and testing (to make new idea relevant to
consumer)
4-Marketing strategy (target market, marketing plan: 4 Ps)
5-Business analysis (economics of the marketing plan)
6-Product development (producing a prototype)
7-Testing (alpha and beta testing, market tests)
8-Commercialization

*Tasks 1-7 are not performed in the exact sequential order but they
need to be performed prior to 8. Often these tasks will be repeated as
product and strategy revisions are made. The NPDP should thus be
viewed as an iterative process.

Slide30
Example of models in marketing:
diffusion of innovation
-Three parameters: market size m, coefficient of
innovation p and coefficient of imitation q
Slide31
Parameters CSt-1 St
m 20000.000 0.0 400.00
p 0.020 400.0 588.00
q 0.500 988.0 849.84
1837.8 1197.72
3035.6 1626.70
4662.3 2094.47
6756.7 2501.89
9258.6 2701.09
11959.7 2564.79
14524.5 2097.73
16622.2 1471.21
18093.4 900.54
18994.0 497.83
19491.8 257.80
19749.6 128.64

Example of Bass Model:
S
t
=(20,000-CS
t-1
)(2%+50%(CS
t-1
/20,000)
S
t
=(m-CS
t-1
)(p+q x CS
t-1
/20,000)
15 14 13 12 11 10 9 8 7 6 5 4 3 2 1
3000
2500
2000
1500
1000
500
0
Index
S
t
Time Series Plot of St
32