MKT 555 DECISIONS IN MARKETING MANAGEMENT

MEETING FOUR LECTURE OUTLINE

PART I: MARKETING THEMES

ETHICAL DILEMMA

Evolution and change in acceptable socio-cultural behavior and its impact on marketing strategy:
In early American history, the Native Americans offered the peace pipe to the colonists in Virginia. Until recently, smoking was an acceptable social activity in public; now it is discouraged or illegal. However, tobacco and cigarettes are legal exports from the US to those who smoke overseas. Even today cigarettes are an example of successful brand marketing--that is, Marlboro, Lucky Strike, and others.

1964-to the present: Smoking cigarettes went from being a good social activity to being a questionable social activity to being a bad social activity. Cigarette ads were taken off TV, laws were enacted to prevent children from buying cigarettes (even for their parents), and actors in medical coats were not allowed to advertise the virtues of cigarette smoking. Smokers were forced to stand outside of buildings to smoke.

Master Settlement Agreement: No cartoon characters (No "Joe Camel") may be used in ads. No product placements in movies (Mel Gibson cannot be seen smoking Marlboro cigarettes in Lethal Weapon).

However, relationship marketing and loyalty programs are permitted under the Agreement. These include Marlboro Ranch Parties, hot mugs of coffee at ski slopes or cold drinks at beaches, and other one-to-one marketing. Discount cigarette shops are permitted.

Ethical dilemma: Since cigarettes are harmful to your health, is it OK to sell cigarettes as a legal product in the US? Should cigarette firms be permitted to target those groups who have cognitive dissonance? Some people have heard all the arguments about the health risks from smoking, but they either don't believe them or they cannot break the habit of smoking. Should the federal government ban cigarettes completely? If it does, will this be a failed experiment similar to the federal government's ban of alcohol during Prohibition?

PRODUCT LIFE-CYCLE
Up until the mid-1880's, fried beef seasoned with onions was called Hamburg steak. In 1885 Charlie Nagreen of Seymour, Wisconsin at the Outagamie Fair in Wisconsin produced the hamburger patty and put in on bread; also in 1904 Louis Lassen of New Haven, Connecticut at the St. Louis World's Fair did the same. However, not until the 1930's did White Castle produce "Sliders."

Marketing strategy: Hamburgers were a marketing creation to use up the remains of cattle. In the 1950's Ray Kroc takes over McDonald's and Jim McLamore develops the Whopper. Both McDonald's and Burger King grew at a rate equal to the doubling rate for a marketing forecast. Between the 1950's and the 1990's hamburgers were the king of the fast-food category. Today, hamburgers are in mature phase of the product life-cycle; total sales of hamburgers and unit sales of hamburgers per outlet are in decline This means McDonald's has to steal customers from Burger King and vice versa, add new products, or go into another business.

Industry analysis: McDonald's has a 41.9% share. Burger King has a 19.2% share. Checkers and Rally do well in the American South. White Castle is very small potatoes today. New entrants in the fast-food category, such as pizza, submarine sandwiches, tacos and other food items, are challenging the supremacy of hamburgers. New entrants face low entry barriers. Both McDonald's and Burger King have tried value meals, back to basics, "weird" or Dijon mustard tastes, new buildings, and nostalgia marketing. Nothing has changed the decline in sales revenue.

New business strategy: Both McDonald's and Burger King are trying to grow by international diversification. Also McDonald's is buying the property of Boston (Chicken) Market to invest in a new business--that is, real estate.

PART II: USE OF DATA AND INFORMATION IN RESEARCH ON SEGMENTATION, TARGETING AND POSITIONING

Four criteria for effective segmentation:
Measurability: Can we measure the size and purchasing power of the segment? Substantiality: Is the segment the largest possible homogeneous group worth pursuing with a  long-term sustained marketing program? Accessibility: Can we reach and service the segment effectively? Actionability: Can we devise a tailored marketing program and an effective marketing strategy to serve the segment effectively?

Three suggestions about effective targeting:
Companies target large and growing segments in which they enjoy a differential advantage by using their existing 4 Ps marketing strategy or by slightly modifying their 4 Ps marketing strategy. Companies use response modeling to gain access to those individuals who will buy the products. Companies must remember a customer's most basic question: "What do I get?"

Review the 4 Ds of effective positioning: Definition. Differentiation. Deepening. Disciplined Defense. To do: draft a positioning statement for your term paper. The positioning statement must be product-focused, set the product within an attribute-defined category, and show how to measure the success of the product within the category. Here is an example of an attribute-defined category: Coke = Cola = Soft Drink. Sometimes, a positioning statement will be for a brand extension; therefore, the statement might read New Coke or Classic Coke = Cola = Soft Drink. In terms of success in the category, discuss the following: what percentage of the your target customers do you have; how many could you have; what revenue would these customers generate if they bought your full line of goods and paid full price; how long do your customers stay with you; and how often do they come back for repeat purchases?

Response modeling:
Four types of gasoline buyers: Road warriors are generally higher-income, middle-aged men who drive 25,000 to 50,000 miles per year. they buy premium gasoline with a credit card. They purchase sandwiches and soft drinks from the convenience store. Sometimes they wash their cars. Road warriors make up 18% of buyers. True believers are usually men or women with moderate to high incomes who are loyal to a brand and sometimes to a particular station. They frequently buy premium and pay cash. True believers are 16% of buyers. Generation F3 (fuel, food and fast are upwardly mobile men and women, half under 25 years of age, who are constantly on the go. They drive a lot. They snack heavily from the convenience store. Gen F3 make up 27% of buyers. Homebodies are usually housewives who shuttle their children around during the day and use whatever gasoline station is based in town or along their route of travel. Homebodies make up 21% of buyers. Price shoppers generally are not loyal to either a brand or a particular station. The rarely buy premium. they are frequently on tight budgets. Marketing strategies are designed to woo them to a particular brand or a particular station. Price shoppers make up 20% of buyers.

PART III: EXECUTIVE DECISIONS

Start term paper presentations.

PART IV: READINGS FROM TEXTBOOK

Buyer behavior:
Cultural factors: Majority cultures. Minority cultures. Social class.
Social factors: Reference groups. Income. Family. Status symbols.
Personal factors: Age. Stage in the life cycle. Occupation. Life-style. VALS. Personality. Self-concept.
Psychological factors: Motivation. Maslow. Herzberg. Perception. Learning. Beliefs. Attitudes.
Buying decisions: Roles. Behavior.
Stages of the buying decision process: Problem recognition. Evaluation of alternatives. Purchase decision. Postpurchase behavior.
Add B2C buyer behavior and the use of the Internet.

Organizational buying:
Business market. Purchase/procurement process. Who are the best customers? How do we keep them?
Institutional and government markets.
Add B2B buyer behavior and the use of Vertical Nets.

Segmentation:
Segment marketing. Niche marketing. Local marketing. Individual marketing.
Geographic segmentation. Demographic segmentation. Psychographic segmentation. Behavioral segmentation. Multi-attribute segmentation (geoclustering).

Targeting:
Single-segment concentration. Selective specialization. Product specialization. Market specialization. Full market coverage. Ethical choice of market targets. Segment-by-segment invasion plans. Megamarket.

PART V: CASE ANALYSIS ON MARKETING BROADBAND TECHNOLOGY

Ethical question: Should broadband technology be used for cheap entertainment? Examples include the following: OJ, the Bronco and the trial. Network TV had the capacity and gave 24/7 coverage. Monica, the dress, Special Prosecutor Ken Starr, and Clinton's impeachment. Network and cable TV had the capacity and gave 24/7 coverage. The counting of votes in Florida for the 2000 presidential election. Network, cable, and the Internet had the capacity and gave 24/7 coverage. Should broadband resources be used to convey simple messages to the mass population?

Alternative channel of distribution: The Internet is the newest distribution outlet for movies, broadcast television, cable and print media. Marketing is what differentiates the winners from the losers, and advertising is therefore by far the biggest item in the budget of the new-media companies. The rule of thumb is that 70% of the budget of an Internet company goes into marketing. The broadband industry is up for grabs. Therefore, marketing people should study the buying behavior of 'tweens and teenagers as the latter age groups carry out self-networking with others. Their choices will result in long-term decisions about broadband.

Targeted segments for lower-upper income group: Those who can spend $500-600 to rewire their homes, and another $2,000-3,000 on a new PC and peripherals are probable customers in the year 2000. As prices drop, additional customers with sufficient disposable personal income will pay for broadband. New data mining techniques mean the customer is the data. Therefore, organize business around Gen-X and Gen-Y (or wired customers) and around the digital corporate culture (or the wired workforce).

Marketing strategy for the mass market: Package TV, telephone and Internet service into one bundle so consumers can pay for it on one bill. The grand prize is the estimated $100 to $150 a month a middle-class household is willing to spend on cable TV, cable and long-distance telephone service and Internet access.

PART VI: THE APPLICATION OF "BOTTOM-LINE" ANALYSES TO SUPERMARKET RETAILING

Weight-out: Earn more from everyday products by reducing the quantity in the package or the size of the container without scaring off price-conscious shoppers. Examples: Fewer Fig Newtons from Nabisco in the double-rows packages. Fewer chips in bags of Fritos, Tostitos, and Chee-tos from Frito-Lay. The number of Huggies in a box has dropped from 240 to 228. The size of the Poland Springs water container has dropped from 6 to 5 gallons. However, the price has remained the same for all these products.

As production costs rise (packaging and energy costs), weight-outs are used to maintain corporate profits without enraging customers. Also weight-outs are used to maintain magical price points: 99 cents; $1.29, and $2.99.

Are weight-outs legal? Yes. The true weight must be listed on the package (FTC rule). Are weight-outs ethical? You be the judge. Are weight-outs a rip-off? If consumers know about them, they probably are a rip-off because they answer the question "What do I get?" with the answer "less." However, for marketers, weight-outs are a retail marketing tactic to keep the "bottom line" healthy.