Lecture 2 Marketing and Other Business Concepts

Lecture 2 Marketing and Other Business Concepts - MKTG 311...

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MKTG 311 Marketing and other Business Concepts (September 3, 8, and 10)
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Key takeaways: Part A: The key features of Marketing: (1) Solving (satisfying) the customers’ needs (2) An organization philosophy, different from production, product, or selling philosophies (3) Integrated with CSR (Corporate Social Responsibility)
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Part B: Establishing and sustaining buyer-seller relationships (1) Customer Satisfaction (2) Transitioning from Customer Satisfaction to Customer Loyalty (3) Managing Customer Lifetime Value
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Part A: Marketing a) Starts with the customers’ needs (expressed or anticipated) and addresses that need through a product or service b) prices, promotes, and places (delivers) that product/service in a way that offers value to customers, and in doing so c) establishes a long-term relationship (life-time) with the customer
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Example Customer Needs:
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Cadillac US Army Lincoln Ensure Volvo As you watch the ads, notice: (1) Lower versus higher level needs (2) The needs are key to a brand’s positioning (3) The positioning evolves over time (Volvo)
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The product (and/or service) addressing the need is integrated with other elements of the marketing mix (the old 4P’s)
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Marketing Mix (Four P’s) Customer Relationships (Marketer’s perspective) (Customer’s perspective) Product Solution to a need Promotion Information to make a good decision Price Value (does the quality justify the price) Place Access (easily available)
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Packaging the Information, Value, Solution, Access: Shopping Advisors (e.g., “I want a DVD Player”)
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These DVD Players Best Suit Your Needs
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To summarize: The Marketing business model is Solution to the customer’s need Product Profits through customer lifetime value
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There are other business models: (1) Production (2) Product (3) Selling (4) Societal Marketing
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(1) The “Production” Business Model: Profits through production and market share Production Learning Profits through lower costs
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Learning rate (r): How much are unit costs (as a fraction of the original costs) every time experience doubles. Cumulative production Unit Cost (at r = 40%) (at r = 80%) 100,000 units $5 per unit 200,000 units $2 (0.4X$5) $4 (0.8X$5) 400,000 units $0.80 (0.4X$2) $3.20 (0.8X$4) Here, we are given the learning rate, r, and we are asked to calculate the unit cost
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Exercise: (Here, we are given the units costs, and asked to calculate the learning rate) At 10 units, cost per unit is $5, at 40 units, cost per unit is $3, what is the learning rate? At 10 units, unit cost is $5 At 20 units, unit cost is r($5) At 40 units, unit cost is (r) (r) ($5) = $3 Solve for r, when 5r 2 = 3, or 0.77 0.6 5 3 r = = =
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Some cautions about a production philosophy: (1) There are limits to experience effects, i.e., how much efficiency you can squeeze out of the system (1) There should be a demand for your product and a well established distribution system in place
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(2) The Selling (Promotions) Business Model: Product Incentives Profits through volume
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Problem: Incentives war: So I get this offer in the mail – “Switch to Sprint and get $35 credit on your next phone bill” I figure, “Why not? $35 is good money for a phone call.” So I call Sprint and make the switch.
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Lecture 2 Marketing and Other Business Concepts - MKTG 311...

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