MKT 555 DECISIONS IN MARKETING MANAGEMENT

MKT 555 DECISIONS IN MARKETING MANAGEMENT
MEETING TWO: LECTURE OUTLINE
PART I. MARKETING THEMES
MARKETING NOSTALGIA
The nostalgia cycle gets shorter and shorter, or the clock just gets faster and faster. Do you remember 78s, 45s, 33 1/3 (or vinyl), cassettes, CD-Roms, and DVDs? Do you remember the Al Pacino movie Sea of Love and the 45 record playing the song of the same name over-and-over again at the murder scene? How many people who came of age in the 1950's and 1960's still have 45s and an operational record player for 45s? Did the actors play roles of people who came of age in the 1970's and 1980's? This is an example of the period eye not being quite right. Other examples include: the colorized version of Casablanca; Seven Years in Tibet; and many other Hollywood and TV productions.
Cliff Chenfeld, who is the co-owner of New York's Razor & Tie record label, advertises his CD "Living in the '90's" on late-night cable TV. The assemblage of insta-hits includes Right Said Fred's "I'm Too Sexy," Wilson Phillipps' "Hold On," and M.C. Hammers' "U Can't Touch This." More than 500,000 copies of the two-part set have been sold. He is now selling a grunge nostalgia CD. Note: Two different targeted segments. Also the Beastie Boys (1980's) and the Back Street Boys (1990's) sell merchandise and their music.
Robert Van Winkle (the white rapper who is better known as Vanilla Ice) captured the music charts with his single "Ice, Ice Baby." He then made a rapid descent into pop exile. Less than a decade later he has been playing his "oldies" to sell out crowds of more than 1,000 patrons. Note: Product line extension.
Will the next nostalgia fad be "The Boss," Madonna, Titanic, the Spice Girls, or Seinfeld? Is the new VW a nostalgia car?
Nostalgia fantasy décor (such as, the Old West) is not just for amusement parks. See Wildwood, New Jersey, the quintessential 1950's beach resort where Dick Clark used to do his summer broadcasts of American Bandstand, and its new 1950's neon look. The Doo-Woppers of Wildwood are focusing on renovating the classic 1950's flat-roofed motels--complete with kidney-shaped pools and exotic names like Kona Kia and Casa Bahama. The goal: Be as tacky as possible and compete with world-class tacky places, such as the Magic Kingdom in Orlando and Caesars Palace in Las Vegas. Note: promotion and integrated marketing communications is used by WTTW-TV (PBS in Chicago) when they replay music from the Doo-Wop years to raise funds.
Dead Brands Society
Sometimes nostalgia marketing does not work. Examples of dead brands: Ipana. Woolworth's. Barney's. Automat. DeSoto. Packard. Burma-Shave.
MARKETING TO A TARGET GROUP WITHIN A LARGER MARKET SEGMENT
Age group. Young kids (ages 4-6) whose families have discretionary income to spend on birthday parties.
Self-reference criteria (or SRC). National backgrounds (Mexicans, Mexican-Americans, Anglo-Americans). This is an example of similar targeted market segments across national frontiers.
4 Ps marketing strategy. Piñata or product standardization for the global market. Promotion and price adaptation within local national markets.
Marketing makes war on Mexican cultural memory by the introduction of the Bart Simpson piñata.
Other examples:
Canada: NFL overshadows the CFL, and Super Bowl dominates the Grey Cup.
Japan: KFC meals versus traditional chicken meals.
France: "McDo" quick lunches versus multiple courses and wines.
USA: "Tripping the light fantastic," or college kids doing swing dancing of the 1940's.
VALUE-BASED MARKETING DECISIONS
Example #1:
What is the context of a decision? Restructure the music industry.
What is the object of a decision? Create Miami Sound and cross-over music.
What is the impact of a decision? Buy bilingual talent and integrate them into a global marketing business: for example, Ricky Martin.
Example #2:
What is the context of a decision? Shift the telecom/computer industry to broadband technology.
What is the object of a decision? Link up G3 backbone capacity in Europe with GSM, WAP, and SMS.
What is the impact of a decision? Vodafone enters into a partnership with Bell Atlantic and others to bring European technology to the US.
MARKETING REBRANDS PRODUCTS AND LIFESTYLES
Disney targets kids and retired seniors in the US, and families in Paris and Tokyo.
Mickey Mouse skirts, saddle shoes and jeans with cuffs, and rock-and-roll music are sold as nostalgia items to young Japanese adults who party on Saturday afternoons.
FIFA World Cup targets sports "nuts" around the world, but fails to score in the US.
PART II. RESEARCH METHODOLOGY ON AGE GROUPS
DEMOGRAPHIC FORECASTING APPLIED TO JAPAN
Age group (55+). More retired folks in Japan than ever before.
4 Ps marketing strategy of Citigroup, Merrill Lynch and others in Japan.
What are marketers about? We are reconfiguring the value chain for new investment products in Japan.
How are marketers doing their job? We are selling US T-bills and creating US-style stock and bond portfolios to retired Japanese women.
What do our customers get? Retired Japanese get higher yields than from their traditional postal savings accounts.
New marketing concept is to teach retired Japanese how to gain advice from an asset management team, and to manage and then diversify their own investments worldwide.
TYPES OF FORECASTS
Continuing forecast means things stay about the same in terms of sales and revenue growth until inflation starts up and the Fed begins to raise interest rates; this type of forecast works best with firms in the Old economy. Food and paper industries.
Amplifying forecast means growth occurs each month, quarter and year with the exception of years in which the economy is in recession or when new competitors appear on the scene from overseas or with better technology. White-line appliances and heavy duty equipment industries.
Doubling forecast means growth goes through the roof for a limited period of time; this type of forecast works best with firms in the New Economy. Dot.coms and wireless phones.
REFERENCE CRITERIA OR SELF-REFERENCE CRITERIA (SRC)
First problem facing market researchers. In all research we make an unconscious reference to our own cultural values. Therefore, researchers who do exceptionally good work know their own traits, habits and norms; then we try to get to know our customer's habits, values and life-styles; however, we make no judgments about our customer's traits. We must search for our customer's SRC.
Second problem facing market researchers. In most research we offer customers phrases that are clear in our own minds, but are imprecise to respondents. These concepts tend to be without content for respondents. These are our biases imposed on our customers. We must pre-test our questions and our interpretation of the results.
Third problem facing market researchers. In some research we use words and phrases that our customers consider in bad taste, offensive and off limits. We must be very careful to not offend our respondents.
DIFFUSION
Time effect of diffusion. How long does it take for customers to adapt new technologies, new products, new marketing concepts, new habits, etc.? Why do 50% of American families not have a computer in their homes? Why do most Americans still go to the bank to get money out of their accounts? Why do most Americans still pay their bills by check?
Country effect of diffusion. Why is the US two years behind Europe in wireless phones?
AGES OF AMERICAN CONSUMERS
Period eye: roaring 1920's. Presentism: very elderly who live in assisted living.
Period eye: depression of 1930's. Presentism: great-grandparents who live alone.
Retirement has become the new American adolescence. Marketers are making retirement respectable. It is no longer the beginning of the end, but just the end of the beginning. Retirees think they are 50 again. They are constantly dancing, swimming, playing golf or tennis; the most important man in South Florida is the 90-year old who still can drive at night so he can take his friend out and go dancing. The mind shift about retirement is nothing but shrewd marketing that growing old is OK, maybe even pleasant.
Doers who believe the good life has to be earned
Period eye: 1940's, World War II and "Saving Private Ryan." Glen Miller and the Big Bands. Presentism: retired seniors who live independently.
Silents who did what their parents told them
Period eye: 1950's, black-and-white TV and "Pleasantville." No air conditioning. The beat generation of Jack Kerouac. Elvis. Presentism: grandparents in their golden years.
The culture of the 1950's is the culmination of an era, stretching back to the founding of the American nation in 1776, when strong family values, a belief in absolute standards of truth and morality and respect for religion and authority were the cornerstones of the national culture. The culture of the 1950's has become the dissident culture in today's United States.
The 1950's had no sensitivity training, no speech codes, no diversity task forces, no manuals about what might be considered harassment. The 1950's generation is between the WWII generation who fought the good fight and the boomers who are self-absorbed and rebellious against authority. The 1950's generation is called the silent generation. The silents have always done the right things. They did what their parents told them. They are reliable and show up for work on time. Today. the silents are going through a second middle age that has been made possible by advances in medicine and healthier life-styles.
The silents and Gen-X
Today, the silents are mentoring Gen-X because this gives Gen-X the sense of family that many are lacking. However, the silents are also into self fulfillment. They want blocks of time off at a reduced salary to do something else. Corporate culture must shift its attitudes towards full-time and part-time employment so they can keep the silents and Gen-X working together. Note: Gen-X does not like working for or with the boomers.
Paradigm shift in social values.
After November 22, 1963 and especially after the student riots protesting the Vietnam War in 1968-1999, the counter culture, with is unbridled sexuality, its flight from tradition and personal responsibility, its flouting of authority and its cultural relativism, has become the dominant culture of today. Jackie Kennedy Onassis with the help of Teddy White, the journalist, created the Camelot myth about the JFK years in Washington.
Boomers who are self absorbed and rebellious against authority
Period eye: 1960's and color TV. Civil Rights and Martin Luther King. Hippies, drugs and protests. The Beatles and Judy Garland. Presentism: older boomers.
Period eye: 1970's, oil crisis and stagflation. Mick Jaggar and David Bowie. Presentism: liberal parents and conservative kids. Boomers with "second acts," or Jesse Ventura as governor of Minnesota. "The Boss," or Bruce Springsteen who sings of emotional distress and says take nothing for granted--that is, marriage, fatherhood, divorce.
Baby boomers who rejected their parents attitudes towards life
Period eye: 1980s and the PC. Beastie Boys. Presentism: conservative parents with liberal kids.
Echo boomers who went from being slackers to strivers.
Period eye: 1990's and wireless telephones. Rap musicians. Presentism: Gen-X slackers become Gen-X strivers with mortgages.
Net-gen or techies
Period eye: 2000's and wireless Internet technology. Gen-Y do they accept the counterculture of their parents, or do they prefer the traditional culture of the grandparents? Check out the increased religiosity and their resistance to premarital sex, abortions on demand and births out of wedlock.
M-gen
2010's . Current thoughts about presentism: Pre-teens or 'tweens get mobile phones from their parents for safety and security. Teenagers demand mobile phones from their parents for safety, security, and social reasons. Some teenagers use their disposable personal income (DPI) to buy their own mobile phones.
SEGMENTATION
By age group. See above.
By life-style. Yuppies. Adult children living at home. Double income, no children (DINCs). Married with children. Grandparents who take care of grandchildren. Seniors who live independently.
By income. Lower-lower (no skills). Upper-lower (semi-skilled). Lower-middle (skilled at a trade). Upper-middle (skilled at a profession). Lower-upper (top of professional ladder). Upper-upper (new rich, old money).
By family background. Languages spoken at home. Religions practiced by family. Ethnic backgrounds of family. Racial backgrounds of family.
Other segmentation variables. Food, music, sitcom and computer preferences.
Crucial ideas about segmentation.
Demographic data forecasts the future. Values information shapes assumptions about products and services in the market. Usage information offers insights about why choices are being made. Benefits knowledge offers insight on how choices are made.
Faith Popcorn, a professional trend spotter, says, "We run our fingertips along trend bumps as they speed past. We Braille the culture."
PART III. EXECUTIVE DECISIONS
Companies serve the unarticulated, unserved customer. VCR. Walkman. Minivan. SUV.
Companies promote standardization. Gillette.
Companies promote adaptation. Frito-Lay.
Companies insist their SBUs be #1 or #2 in their market category, segment or industry. GE.
PART IV. READINGS FROM TEXTBOOK
Strategic marketing planning. Define the corporate mission. Define the competitive scopes in which the company will operate. Set up and measure the success of SBUs. Downsizing old businesses. Planning new businesses. Do SWOT analysis. Enter into strategic alliances. Formulate, implement and control programs. Know the value creation and delivery system. Do a marketing plan.
Trends in the macro environment. Faith Popcorn's 16 trends. Demographic data. Population data. Ethnic data. Household data. Geographic data. From mass market to micro markets. Income data. Natural environment. Technology data. Political and legal environment. Socio and cultural environment. Core cultural values.
Dealing with competitors. Porter's five forces. Identify competitors. Entry, mobility and exit barriers. Cost structure. Vertical integration. Globalization. SWOT analysis to analyze competitors. Acquire the best competitors. Benchmark against the best companies. Strategies for expanding market share, defending market share, being a leader, a follower, a market nicher, and many more.
PART V. CASE ANALYSIS ON CLICKS AND BRICKS
WAL-MART VERSUS AMAZON.COM
How will each revolutionize retailing for the age groups listed above?
Wal-Mart has 7 percent of the United States retail market or US $143 billion in domestic revenue for fiscal 1999; this is seven times greater than all Internet sales combined. Consumers are addicted to quality and value at low prices. This will enable Wal-Mart to inflict real pain on their Internet competitors. Land-based stores are teaching consumers that what they are buying to wear is the real fashion of today. Note: This is the application of the new marketing concept to land-based retailing. Moreover, Wal-Mart joined forces with Accel Partners, a venture capital firm, in a new Internet venture to compete against Internet rivals.
Should Amazon.com set up land-based retail outlets in malls? At Wal-Mart?
COCA-COLA
Coke re-introduces glass bottles from the 1950's and hopes to reconnect with its customers. Coke is still focusing on the product; Pepsi focuses on the user. Will Coke's strategy of nostalgia marketing be a success? Which segment does Coke seek? Does Coke have a target market in mind? How is Coke positioned today? Will Coke join the dead brands society?
PART VI: APPLICATION OF REAL OPTIONS TO MARKETING M-COMMERCE
    The value of real options to m-commerce is to give marketers the ability to time the selection of appropriate market segments for the wireless Internet, and to cost out the crucial elements of a 4 Ps marketing strategy for shifting customers from free Internet content to paid m-commerce content. Real options formalizes this idea—namely, mobile commerce faces discontinuous change in how it is delivered to customers. The segmentation options are as follows:
    Join a brand community, then disband the community, and later form a new brand community; or a set of platform and investment options.
    Go from a miniature information device business, then face price elasticity of demand, and later become a commodity business; or a set of options to switch or terminate or both.
    Segment national groups by demographic data, then by values and lifestyle information, and later determine that actionable segmentation depends on cross-cultural similarities across national frontiers; or a set of options to chose effective segments with high levels of disposable personal income, and a customer base with the knowledge and desire to become believers in m-commerce in one or more countries.
    Create new market space for online hotels and online financial services, face competitive pressures over price-value-service, recreate this new market space without the expectation of ever crossing the finish line; or a set of options to chose a set of different 4 Ps marketing strategy as wireless products and m-commerce services go through a discontinuous change in their product life cycle.
    Smart investors want to make investments in promising similar market segments across national frontiers and in successful cross-cultural marketing strategies among m-commerce customers. They bet on the long shot that wireless will replace wired telecommunications between 2001 and 2005. The optimum set of options for smart investors permits wireless firms to make just enough investments in appropriate market segments to raise their returns on invested capital to the level of NTT DoCoMo without suffering the slow earnings growth of AT&T Wireless.
ACTIONABLE SEGMENTATION
Definition:
Hard demographic data. Disposable personal income. Ethnic groups. Age. Gender. Urban-rural living.
Soft values and lifestyles information.
National segments in China:
Lifestyles of professional business executives. Managers at expatriate firms.
Lifestyles of young dot.com netrepreneurs. Students at Quinghua University.
Lifestyles of crucial decision makers. Senior government executives.
National segments in Japan:
Lifestyles of professional women. Managers at MITI. Own their own businesses.
Lifestyles of business executives. Senior managers at MITI. Big corporations.
Lifestyles of “Bit Valley” teenage men. Dot.com netrepreneurs.
Lifestyles of “Supli” teenage women. Love manga.
Lifestyles of unmarried young males adults and office ladies. Retro music.
Lifestyles of married salarymen. Lack of disposable income.
ONLINE BANKING SERVICES
    Segmentation question: Do you want your e-bank to operate like a technology company that works in banking, or do you want your e-bank to operate like an established bank that works with technology? Promotion marketing: Image building is crucial to e-banking. Brand awareness and brand relevance. Shrinking profit margins: Reduce retail banking costs. Price marketing: The prices charged by banks for various financial products services become transparent. Online e-banks: Less than one percent of online customers consider the e-bank their primary bank.
HUMAN TOUCH OF CALL CENTER CRUCIAL TO E-BANKING
    Customer relationship management (CRM): 24/7 anytime, anywhere. enhances the capability of e-banks to build and keep customer loyalty. Outsourcing: These interactive interactions lower costs, reduce prices, raise margins, and increase profits for all m-businesses.
OBSOLETE BUSINESS DEFINITION OF RETAIL BANKS
    Marketing strategy: Include all the information that flows within the bank and between the bank and its co-respondent banks, mortgage brokers, stock brokers, and its existing or potential customers. Recognize that brand identity, process coordination, customer loyalty, employee loyalty, and switching costs all depend on various kinds of product and consumer information. A good e-banking marketing strategy is based on demographic and value-based segmentation, or actionable segmentation.

ACTIONABLE TARGETING
Crucial questions:
Where does the important marketing opportunity lie within the market segment?
Are there groups within the market segment that share demographic characteristics, and present to the world the same core values and lifestyles?
Do these groups have unique mind sets about their expectations of the goods and services they use?
Can marketers collect data about the purchasing habits of groups, array them in to easily recognizable product categories, give the groups and easy to remember moniker or call sign and label them according to well-established norms of consumer behavior?
REAL OPTIONS
    Pursue some target groups within a market segment because members of the groups already have formed brand communities and are ready for an aggressive set of marketing strategies, or a set of platform and investment options. See below professional basketball players as brands, especially Michael Jordan of the Chicago Bulls, within the market segment labeled NBA, or others from the NFL and MLB.
    Postpone the pursuit of other target groups for some future date because members of the groups can switch from one brand community to another even with an aggressive set of marketing strategies, or a set of options to switch. See below professional hockey players as brands, especially Wayne Gretzky of the Edmonton Oilers, Los Angeles Kings, and other teams, within the market segment labeled NHL.
    Terminate the pursuit of still other target groups because members of the groups do not have the ability to form brand communities, offer actionable targeting, and create new market space even with the aid of marketers who could invest in the new marketing concept, or a set of options to terminate. See below Pele of Brazil and Zidane of France who never found brand community in the US within the market segment labeled FIFA Soccer.
TARGET GROUPS: SPORTS MARKETING
    Professional athletes: high-paid, mid-twentysomethings. Come from Net-generation; hence quick to adapt new technology. Spend free time at WWF.
    Coaches: high paid, mid-thirtysomethings or older. Come from tail end of boomers. Some have problems with the diffusion of new technology. Spend free time at NFL and NBA games.
    Owners: high-net worth individuals; fortysomethings or older. Boomers. Most have some problem with new technology, and many don't want to learn about it because they have staff to do the work. Spend free time as couch potatoes watching sports on TV.
Deeper data mining:
    Fans (first cut) from MLB: Cubs versus Sox. North side versus south side. White wine crowd versus beer drinkers. White collar versus blue collar workers. Mobile phones attached to pants versus mobile phones in cars.
    Fans (second cut) at Cubs stadium: younger, unmarried men in the uncovered bleachers, who drink beer and eat junk food (so-called sports brutes) versus married with children men who sitting in the covered seats and are entertaining clients (so-called sedate sports fans). Both have mobile phones, but the sedate fans use them during the game to get quotes for their clients.
    Both sets of Cubs fans are business executives, but their personal actions differ at games.
THREE "S" MODEL OF TARGETING
    Substitutes. If twenty somethings gave up wired for wireless service would anything change?
    Scale. If professional athletes, their agents, investment advisors, and others joined the bandwagon for wireless service would this be enough to make the shift to wireless sustainable over the long run?
    Structure. Is US structure with laptops and credit cards as a basis for m-commerce transferable to Asia and Europe or vice versa? Similar target groups and similar actionable targeting are unproven assumptions about global marketing.
TARGET GROUPS: E-BANKING
    Fortysomethings who run European banks prefer to form alliances with Internet companies. This violates the rule that e-banks should operate like a technology firm that works in banking.
    Thirtysomethings in Europe (in Munich, Paris and London) provide the venture capital for the dot.com start ups that turn into e-banks. This is OK.
    Twentysomethings in Europe create the start ups that become the dot.coms and eventually the e-banks. This is OK, too.
    Example of poor marketing strategy from traditional European banks to get customers to use in-house e-banks. Egg in the UK (Prudential) and First-e from Dublin offer the highest savings rates possible as loss-leader pricing. They are both losing money on e-banking.
    E-banks to watch: Merita-Nordbanken, the Finnish-Sweden bank.

ACTIONABLE POSITIONING
Crucial questions:
How do marketers customize expectations, opportunities, and content
How fast is the expansion phase of the product life cycle for content?
How do marketers deal with open boundaries and greater flexibility?
Which firms never touch products because their inward and outward supply chains are totally outsourced?
Why do the value chains of these firms look like a piece of Swiss cheese?
REAL OPTIONS
No m-commerce businesses last forever.
Pursue target markets and invest in content.
Capture first round investments.
Pay attention to burn rate of cash.
Review postpone and switch options.
Go after future rounds of investments.
KEY IDEA
Do the deal fast. If the deal can be done better and cheaper, fine. All deals require speed. They must be able to accelerate quickly and capture opportunities as soon as they become a reality.