Welcome to this course on the essentials of marketing strategy. I hope you're going to find this course very useful to you and your firm.

Transcription

1 LSM521 Transcripts Transcript: Course Introduction Welcome to this course on the essentials of marketing strategy. I hope you're going to find this course very useful to you and your firm. Marketing strategy has become increasingly important to many different companies. For example, in the high tech space, a lot of new technologies have been attempted to bring to market, but one of the issues that they face quite often is that they might be technically sophisticated and driven by an R and D or a, CS or other kind of background, but not really meeting the needs of the market broadly, and the importance of bringing that into the development of the thinking, the consumer insights, the market insight has been incredibly important as the maturing of developing startup's, processes, has been developed. A second area is many firms face more mature markets, and how do we face those markets, the competition, the changing nature of consumers and how do we think about our place in it and being as strategic as we can and getting as much competitive advantage as we can? And there quite often, having an effective marketing strategy, understanding the market, and using that systemically throughout our firm can quite often be a competitive advantage moving forward, when we don't have necessarily a particular product advantage and we have to use other things like partners and services and after sales service to make more profits for the firm. So I hope you find the kinds of things that we talk about here valuable to you. We talk about marketing broadly, but more importantly how the entire firm has to be focused on a marketing mentality, has to be focused on the market to be as effective as possible in using the advantages and the assets that the firm has, to come to market, meet the needs of consumers, and beat the competition. Now one aspect of that, that this course emphasizes, that I think is very important, is doing this ethically. That we have to think about how we do things, but also, why we do it in the right way and how it will be perceived and what the risks are if we don't do it in the right way. So this course is very focused on marketing strategy, on marketing mentality - how a firm thinks about the outside market and brings that into the firm, to be as effective as possible, but doing that in the right way so that the firm will sustainably have value in the marketplace. 1

2 Transcript: What s a Marketing Mentality? I'd like to talk for a minute about a marketing mentality, and by marketing mentality, I mean really understanding the market, and understanding consumers, and doing that even better than consumers understand themselves, better than what consumers might think they want, and certainly better than what consumers would say they would want. Why is that important? Well, truly we do want to be customer-oriented and understand customers to come up with the best marketing program, but understanding customers means really understanding what customers are buying - what benefits they want, why they want those benefit, what meaning they have behind those benefits. And consumers quite often, number one, can't articulate that if they know it, they might not have the words for the emotional benefits, they might be uncomfortable talking about things like prestige and how important it is to them, they might be somewhat less socially acceptable to talk about but might indeed be very important to consumers. Secondly, consumers might not really know what they want. We, as marketers, quite often know much more about what's possible, what attributes we can bring to the product, what kind of branding we can do, what technology or other features we can add to the product that consumers might be unaware of. Consumers might also be unaware of what they really want in terms of that they haven't really thought about it enough and might not have enough personal insight to know what they really want. So, as marketers, if we are going to come up with the best possible marketing program to market a product to consumers or a service, we have to understand what are the benefits that consumers are really looking for? What are their concerns about different kinds of costs or risks associated with our product or service, so that we can come up with that best possible plan? Let me give an example to talk about this, and that's drills. Well you might say if you ask consumers what do they want in a drill, they might say something about price, or something about reliability, or other kinds of things, But we have to think about what consumers are really buying. And the first thing would be, the consumers wouldn't say, but what they are really buying is holes, they want a hole in the wall and that's why they get a drill and we have to understand that that's what they really want, and how is the product we're selling them the best possible product to make it as easy as possible for them to perform that task? Other consumers want more than just a hole in the wall. They like the feel of a drill, they like the feel of the power, they like to show the professionalism of the drill when their friends come over, they don't want to look like they have a quote unquote home drill, they want to feel more professional about the kind of the work they do or the kind of image they project, so that image of the drill could be very important to them. Or just the feeling of pulling the trigger and feeling the power, that might be important to some consumers. But very few consumers will articulate that or even think about that to the extent that it might be important in their buying decision. 2

3 So as marketers, we have to understand what really is behind the purchase of a customer, so that we can set up the best possible marketing plan. Transcript: Defining Marketing and Market Orientation In this section, I'd like to talk about what is marketing? Define it, but then, more importantly, discuss three different types of orientation that we can talk about within marketing: a sales orientation, a customer orientation, and what I'll try to argue is the most important thing for an organization is a market orientation. So, here we have the standard textbook definition of what is marketing? That marketing involves a mutually beneficial exchange of goods and services. By mutually beneficial exchange we mean that a customer gets a set of benefits from the product or service at a cost that's lower than those benefits. So it's beneficial to the customer, they're getting more benefits than the cost, be it dollars, or acquisition costs or other kinds of things, but it's mutually beneficial. Throughout this course we'll be talking about things that are profitable and maximizing the profit of the company, so it's not only beneficial for the customer but it's also beneficial for the company that the cost for us to provide those products and services to the customer are less than the revenue that we get when we make a profit. The second part of the definition is aimed at satisfying the needs and wants of buyers, that we want customer satisfaction, and that's crucially important in almost all marketing, not all marketing, but in most marketing, we want repeat customers. That customer loyalty, and lifetime value of the customer over a period of time, is what truly maximizes our profits. Therefore, having satisfied customers who will come back and be repeat customers becomes very important. A last part that's not in the standard definition but which I'd like to emphasize is doing this better than the competition. We're not going to make profits, we're not going to have customer loyalty if we're not able to have a superior value proposition to the competition over time. Not just a value proposition that is beneficial to customers, but a value proposition that is more beneficial to customers than what else is available to them in the marketplace. So having talked about this definition, I want to talk about three ways of thinking about it that I think are important to distinguish. First, you might think of a sales orientation, thinking about that well what is the marketing department's role? What's the role of marketing? Well that the role of marketing is to take what we have, a product or a service, benefits that our organization can provide, and go out and sell it in the marketplace, that what marketing does is come up with the positioning statement, the sales material, the collateral, the brochures, the advertising to communicate to consumers as effectively as possible what benefits we provide. Selling what we have, that's what marketing's about. Obviously that's an important function to the marketing 3

4 department, but not what I think in the end is enough to be as effective a marketing organization as we can be. A second orientation that people talk about is being customer oriented. It's not just about taking what we have and selling to customers but it's also really understanding customers and bringing that understanding into the organization. So, the marketing organization has two roles. First, going out and understanding customers, so that we indeed have an organization make what that customer wants and then taking what the organization provides and going out and selling that to the end customer. Obviously very important to understand customers and bringing that into the organization, but even that's not enough, because being customeroriented is the first part of that definition that I talked about, it's about providing benefits to that customer over and above the cost, but it doesn't deal with the last part that I talked about, competition. So, just being customer-oriented isn't enough, we have to be the third definition which, I think, is the crucial one for organizations is market-oriented. Understand all the aspects of the market, the customers, the competition, maybe legal aspects, maybe how the economy is doing, all the aspects of the market so that we truly understand what our value preposition is, what's the marketplace for that value preposition and in particular what's the competitive value prepositions out there in the marketplace? So that we can provide superior value to customers, and I would argue even further that's not the role of the marketing department, it's role of the entire organization. If the entire organization doesn't think about what is the marketplace, how are we providing superior value to customers within that marketplace? It won't be as effective as if people think that it's the marketing department's role to give us that information. So in the end, I think the best marketing organizations, the organizations that are the best positioned to maximize their profits through providing superior customer value and getting loyalty over time, are those organizations where which the entire marketing organization is market-oriented - thinks about customers, thinks about competition, thinks about the marketplace and is able to, as an organization come together to provide that superior customer value. Transcript: What Sales People Know In the previous section we talked about the importance of a market orientation. In this section, I would like to talk about how that applies to the marketing organization and the sales organization. It's ironic that most people think that while in terms of marketing, in terms of being customer oriented, and the kind of things that are important to making an effective presentation of value to customers, that marketing and sales are the two parts of an organization that should be most focused on that, but actually quite often the marketing organization and the sales organization are in tension with each other when it comes to going to market, why is that? Well, quite often, that's because the marketing organization thinks the sales organization is very short term oriented. They're focused on getting the sale, they're focused on whatever s necessary, to get the sale they don't 4

5 want to say no to customers. Therefore giving discounts doing other kinds of things that are short term, to do whatever it takes to get the sale that something that a lot of sales people are indeed very focused on. Likewise, the sales organization is often frustrated with the marketing organization, that the marketing organization doesn't give them what they really need, to make that sale at that point in time, and that the roll of the marketing organization is to support those sales. Why else do we have a marketing organization other than to support sales? The response to that is the marketing organization quite often is looking at longer term, is looking at long term objectives of what customers might be profitable over the long term, and what customers might not be as profitable over the long term, or if we go ahead make one sale through giving a discount, it might affect other sales or future sales to that particular customer and our strategy. So it's important if we're going to truly be a market-oriented firm, a market-oriented organization, that sales and marketing both come from that perspective, and so I'd argue that marketing should value sales and that sales should more value marketing. And what do I mean by that? the marketing organization quite often, as I said before, thinks of sales as short-term oriented, and doing whatever it takes to get the sale, But they don't often think of well, the sales organization is the people that are out talking to the customers all the time. Quite often, they're the best source of information and marketing research about customers. So, if the marketing organization thinks about sales, not only as the delivery of information to consumers part of the organization, but also about gathering information from consumers, to be able to provide the best possible products and services and value proposition to those customers, then all of a sudden you start to have sales and marketing working together in getting the organization to be most effective in delivering the best value proposition. So quite often we have a tension between marketing sales, because it's said that marketing is quite often more longer-term oriented. And sales is quite often much more short term, get that particular sales oriented. But if we think of market orientation, and truly have marketing and sales both working together, in that higher order, longer term vision, and sales being input to the organization, as well as going out, quite often we can have a more effective relationship between those two organizations. Transcript: Potato Chip Case Study Up until now, we've been spending some time talking about the importance of a market orientation, understanding customers, understanding the competition, understanding the organization delivering superior customer value. That might seem relatively straight forward and something that an organization that has the right mindset, does on a regular basis, but it's more difficult in practice that it might seem just talking about it, and I'd like to use an example of a great marketing company and some of the mistakes they've made, to show how important it is to truly understand the marketplace, and for that I'd like to use the example of Pringles potato chips. Procter & Gamble, who developed Pringles and brought it to the market, is clearly one of the superior marketing companies in the world today. It's been that way for many, many years, there's lots of 5

6 great marketing companies, Coca Cola, Apple, many people think about, but Procter and Gamble and its many products have been marketed, they started the product management system, many other developments within marketing have come from Procter and Gamble. Yet, even with all its history, all its resources and all its expertise in marketing, even a company like Procter and Gamble can make mistakes by not really thinking about the entire market, in terms of being market-oriented, and Pringles is a good example of that. Procter and Gamble started in the 50s thinking about the potato chip market, a fairly large market, and one that was very fragmented. Probably all of you, at some point, have bought a bag of potato chips and knows that it's pretty fragile product, it quite often has a lot of breakage at the bottom of the bag, and because of that, potato chips are hard to ship, and they also have relatively short shelf life, they can't stay on the shelf very long before they have to be sold and they would spoil. So, in the 60s, when Procter and Gamble started really focusing on Pringles, they looked at the potato chip category as a lot of small marketers in, all across the United States that were each shipping very short distances to stores, and Procter and Gamble thought, well national marketing, against each of these little regional competitors, would be very effective. They also understood at stores, grocery stores and other convenience stores and other stores that sold potato chips had difficulty with the product because of it's fragile nature. So if they could come up with a potato chip that overcame the fragility, the shipping problem, overcome the shelf life problem and could bring the bear national marketing and national advertising against these small regional competitors, that they'd have a winner in a very profitable segment. So they went about using their considerable R&D resources to develop Pringles, which is a rolled potato chip, so they're all just uniform in shape, so they could put it in the can, and they also don't spoil very quickly. So Procter and Gamble put that product into the marketplace, where usually they want something to taste better, here they had a project that in blind taste tests tasted as good as other products, it didn't spoil on the shelf and it didn't break in transit. So they thought that even though taste was not superior, that these other factors of advertising, shipping and shelf life would be superior enough that they would win in the marketplace, and their goal was a 25% market share in this marketplace, very aggressive goal. They brought out the product and got a 25% share very quickly because of the large amount of marketing they put behind it but just as quickly shares dropped to only 7%, and Procter and Gamble in fact thought about pulling Pringles from the shelves. Well, why did that happen? I would argue it happened because Procter and Gamble was not sufficiently market oriented, they were customer oriented, they were competition oriented, but they didn't think enough about the end consumer. So what did they think about? Well, they thought about shelf life and shipping, well that was helpful to their customers, the convenience stores, the supermarkets, the distributors, that was very helpful for them but it wasn't helpful for the end consumer. There was no real superior selling proposition to the end to the consumer, and consumers thought oh, potato chips in a can, they must be artificial. In a blind tester, Pringles tasted fine but in actual market place consumers didn't think it tasted so good. 6

7 Think about yourself, when you go to something and it looks unappetizing, in fact quite often it tastes unappetizing, because you bring that attitude towards your taste experience, that's what happened to Pringles, and without taste consumers didn't see a superior value proposition. Potato chips in bags might have some spoilage in the bottom, but they weren't worried about the shipping problems. They weren't worried that somebody had to make it close to the store, there was no real superior value proposition to the end consumer. So Procter and Gamble had thought about the competition, they had thought about their customers, but they hadn't really thought sufficiently about what would be the superior value proposition to their end consumers? Now today, Pringles is very successful. In fact, in 2011 Procter and Gamble for strategic reasons sold Pringles to Diamond Brands for $2.5 billion. Well, that's because they relaunched it and repositioned it as something that had superior customer values, that to children, it was a very good snack, it was a fun snack, and from others, it was something they could give to children very easily because it wouldn't break in the package, they could put it in the lunch boxes, they could put it in snack boxes and other kinds of things without worrying about breakage and those kind of things, and that relaunch of Pringles in the 1990s eventually led to the success that we see in Pringles today. But the lesson that I want you to take away from this is even a great marketing company like Procter and Gamble, that is indeed almost always very market oriented, does a lot of market research, brings a lot of resources and expertise to marketing, sometimes makes the mistake of not thinking about all the different aspects of the marketplace sufficiently to be successful, and we have to think about that. We have to think about the channel, we have to think about who we're selling to, the customer, we have to think about the end consumer, we have to think about competition, and we have to put all those elements together to truly have a, a market orientation that leads to superior customer value against the competition, and maximizes profits for the company. Transcript: Marketing Ethics Continuum In this section I'd like to introduce and talk a little bit about marketing ethics. It's important that we're all ethical in our marketing practices, and we all try to be, but thinking a little more deeply about it sometimes gives us perspective to think about, what does that mean, and what are the choices available to us? And how do we think about going to market, and what's our responsibility as marketers? For that I'd like to talk about what I call a marketing continuum, and this has been developed by a number of people as a way to think about marketing ethics. At one end of the continuum, is caveat emptor, which many of us have thought about, buyer beware - that it's the buyer's responsibility, to understand the marketplace, to understand what's being offered, and then buy the right thing for them, that the buyer has the responsibility in terms of the purchase situation. At the other end of the spectrum, is caveat venditor, 7

8 that the seller beware - that in fact, it's the seller s responsibility, the marketer s responsibility, to make sure the customers make the right decision. Now that might seem odd, we talk much more often about caveat emptor than caveat venditor, but if you think about it, marketers have much more information, many consumers don't know enough to buy the right thing, so many people argue that it's really the marketer that has the resources, and has the information, who should be responsible for making sure that buyers buy the right thing. Each has its proponents, but each has its difficulty. So to think about that, I'd like to talk to an example of what is deceptive advertising. In the United States during the 80s and 90s and 2000s, there's been a large debate over what is deceptive advertising? One side suggests it's caveat emptor, that all the marketer has to do is tell the quote, unquote, truth, something that's truthful, and it's up to the buyer to make sure that they interpret the information correctly, and use that information to make a decision correctly. Another side, and the side that's evolved much more in the law to be the state that is the case in the United States today, is it's a little more caveat venditor, it's the responsibility of the marketer to make sure that they provide the information in a way that does not deceive consumers. So if we as marketers have advertising, where what we say is literally truthful, but what consumers take away, is something that's not true, then that's our responsibility as marketers, it's our responsibility as marketers to have consumers understand the truth, not for us merely to say the truth, and those are two very different things. So one talks about the responsibility being more on the buyer, and one talks about the responsibility being more on the seller. I think, and many others in marketing think, the truth is really somewhere in the middle, that we have to think about this continuum. It shouldn't all be responsibility of the seller, if the responsibility was totally on the seller, the cost of sales would be too much, the lawsuits and the other responsibilities of the seller would make markets pretty inefficient. But likewise, all the responsibility should not be on the buyer. The buyers don't know enough, the don't have enough information, they're not spending enough time in the marketplace, so that there is some responsibility on marketers to be respectful of buyers, and to understand the problems that buyers have, to try to make the marketplace a more efficient, fairer one. So, in the middle could be things like industry guidelines, which quite often say, okay, let's as an industry think about what's reasonable for marketers and industry participants to do, and let's come up with a set of guidelines of our responsibilities as marketers in this particular marketplace. It could be something like laws, where government says well, instead of the industry doing it, we're going to have a set of laws that say okay, in this marketplace, this is where it should be. But whatever it is, it's important to think about for you and your company, and your customers, what's your responsibility as a marketer to provide the right information? And what should be the proper responsibility of your customers and consumers to take on responsibility for understanding what they're buying and how they're using it? Transcript: Consumer Sovereignty 8

9 In the last section, I talked about a consumer ethics continuum between caveat emptor or caveat venditor and thinking about what's the responsibility of the marketer to consumers but also what should be the responsibility of consumers to act in the marketplace in their own best interest? In this section, I'd like to talk about one framework that I think's very useful to think about, that most of the time, consumers should be responsible, that we can't expect marketers to respond, be responsible for anything other than being truthful, and transparent in the marketplace, but there are times when we have to think about the marketers having more responsibility. In particular there are three of them that I'd like to talk about that are sometimes called a sovereignty test for consumers, times when the marketer have a special responsibility to make sure that they're doing what's in the consumer's best interest. The first of those is when consumers don't have choice, when they don't have some other alternative in the marketplace. So, if we're the only marketer: we're a monopolist, the government, other kinds of situations where consumers don't have choice, we really have a responsibility to provide what's best part for consumers because they're not able to say, oh, this provider doesn't have the right things for me, I'll go to a different provider, and therefore we have a special responsibility in that situation. A second situation is when consumers don't have ability, when they're not able to make the best choice. So, for example, we talk about marketing to children, or quite often marketing to the elderly, people who might not have the ability to really make informed choices in the marketplace. We, as marketers, have a special responsibility in those situations to make sure that we're taking the interests of those consumers into account and their lack of ability to make the best decision when we market to them. Finally, there are situations where consumers just don't have the expertise and information. For example, in many medical products, or health situations, consumers just do not have the expertise to make the best choice, so for doctors and other hospitals, other medical providers, have a special responsibility that when they're talking about different products and services for consumers that they take the consumer's best interest into account, and they use their expertise, that the consumer does not have, to help the consumer make the best possible choice. So in terms of what's the marketer's responsibility and what's the buyer's responsibility, we have to balance both appropriately, and the consumer sovereignty test of thinking about does the consumer have choice? Does the consumer have the ability to make good decisions? And does the consumer have the information to make those decisions? Is a way to think about it. If the consumer has all three: has choice, has ability, and has information, then more of the responsibility can be within the buyer. However, if one of these three things does not hold, they don't have a choice or they don't have the ability or they don't have the information, there's more responsibility on the part of the marketer to help the buyer make the best possible decision. Transcript: What Is a Marketing Strategy? 9

10 In this next set of sections, we're going to be talking about marketing strategy and different strategic aspects of going to market. So I want to start by discussing what is marketing strategy, and a little bit what it's not. So first of all, I think very important to strategy is not only what we do but what we don't do. If you have a strategy, you're thinking about what's important to your organization, and part of what's important is really being able to define what is not important. So think about your own organization, it's usually very easy for an organization to say this is what we do, but if you have a clear or compelling strategy, members of the organization ought to be able to say, well, here is things we wouldn't do, because they are not consistent with our strategy. So think about your organization and your product or your service, and think about are there things that your organization wouldn't do that you'd know is not consistent with your strategy, if that's true, quite often that's a good definition of having a clear strategy. Secondly, marketing is just part of an overall corporate strategy, it has to do with things like who are the customers we are targeting, who are the competition we are positioning ourselves against? How we going market to define superior value to those customers? Well, that's in other strategic aspects of what the company is trying to accomplish, but a very important part of one I would argue, but here we're going to focus mostly on marketing strategy as part of overall corporate strategy. The last thing I'd like to say about marketing strategy, and all strategies, is that they're proactive, they're long term thinking. Certainly, we have to have a strategy that works in the moment, we have to think about who are our competitors now? Who are our customers now? How are we providing value and making money now? But, if we have a strategy, we should be thinking about something that's sustainable over time. Now, we are just not reacting to the market as it is today, we're proactively thinking about what's going on in this market and what it is going to go on in this market, or what do we think might go on in this market? And how we are setting a strategy that's going to establish our place in the marketplace that's going to be sustainable for the longer term. Transcript: Levels of Strategy In this section I'd like to talk about levels of marketing strategy, because I think it's a good example of an organization really thinking about, if we're going to market in the right way, we have to be organized in the right way to be most effective in the marketplace, and that's changed a lot over the last hundred years, and it's changed because markets have changed. Early in the twentieth century, most organizations were organized in what I would call the firm level; so they were really thinking about marketing strategy form the overall corporate level. In the mid 1900s, that changed very radically, led by Procter & Gamble, that brought about what most people know of today as the brand management strategy, where we had brand managers, and, organizations started to think, well let's have brand 10

11 strategies, that we're going to have managers of each of our brands and this is the growth of the large multi-brand, multinational marketing company, and each of our brands will have its own strategy and really go to market in the most effective way for that brand. That might create competition between brands within our company, but will maximize overall our effectiveness in the marketplace, and that was an excellent adaptation which now became the standard for marketing organizations to be really focused on building that brand, but in the late 20th century, so over the last 20 or 30 years, that's changed somewhat radically, in the sense that the market has changed, particularly with globalization and technology. Technology and globalization have meant that retailers, supply chains, other things, have consolidated in a very significant way. We have huge international retailers, for example Carrefour or Walmart, that look across countries, have very large shares of each market that they operate in and therefore put pressure on marketers to work with them in certain kinds of ways. Because of that, having different brand managers with different strategies to go to these large multinational retailers became somewhat less efficient and less effective, they wanted each marketing company, Proctor & Gamble, Unilever, these large companies to work with them in a much more coordinated way. That led many of the marketers to shift from a brand level strategic framework to more of a category level. So, if we working with a large retailer in the detergent category or the shampoo category or whatever category it might be, we go to these large retailers like Carrefour and Walmart and work with them at that category level which is what's most important to the retailer. So, as marketers, we have to think about not only our framework being a market orientation in terms of customers and competitors, but also how we are best organize strategically to do that at the firm level, at the category level, at the brand level, to think about how we set the best marketing strategy. Transcript: Ask the Expert: Clarence Lee Talks about Digital Marketing Strategy How does digital change the way firms engage with customers? So digital allows for this new type of marketing, called inbound marketing. Now one way to look at traditional marketing, or traditional advertising, is through this sales orientation, this push approach, in which you're looking at consumers; we're looking at the role of marketing as that you, as a firm, has this marketing message that you're trying to blast out to the world, trying to push out to your consumers. And as long as you communicate that value proposition to your consumers, they will purchase your product. Under digital, under this paradigm of inbound marketing, you reverse this perspective into a pull model. Another way to think about this is through a customer orientation way of marketing to consumers. The idea behind this is to think about what are the needs 11

12 and the problems of your consumers and you think about how to provide solutions and provide useful information for your customers and basically provide all that information through the form of podcasts, blog posts, white papers on your website, and on all the owned media that you have access to. An example of this, a poster child of this inbound marketing is 37signals. They're a project management software based in Chicago. And their typical customers are office workers that are mostly working in software. And so what 37signals did is to launch a specific blog that caters to the needs of these information technology workers. And they would have relevant posts, guest speakers, podcasts posted on this blog. And they were able to use this blog, this medium to engage with its consumers and therefore, build a community. And through that channel alone, they were able to garner at the end of its effort, close to three million readers. And a good subset of them eventually became their customers. So this is one way in which inbound marketing is being applied in the real world. How has mobile technology changed marketing? So mobile technology enables two things, the monitoring as well as the delivery of demand. So, if you think about the sharing and on demand economy, this is exactly enabled by mobile technology. Uber, services like Uber for instance, would not be made possible without the invention of smartphones. With Uber and Lyft, what happens is that a consumer wants to get from one area to another in a city, and they push a button on their mobile phone. And at that instance, that's an example of what I talk about as the monitoring of live demand. And then when that happens, the firm can match this live demand to a driver who can fulfill that demand. And that is entirely enabled and made possible by mobile technology. Transcript: Overview of Frameworks As we get into talking about different frameworks for thinking about marketing strategy, I'd like to start with one overall integrated framework, at the different levels that we have to think about strategy. It starts at the top with the overall strategy, what we often call the three Cs - Consumer, Company, Competition, and those are the three elements that make up the market. Who are the consumers who might buy our product or service? What are the core competencies of our company that we bring to providing value? And also, what are the competencies and vulnerabilities of the competition that will allow us to provide superior value? We bring those three things together into what's called STP - Segmenting, Targeting, and Position. We don't go after all consumers, we think about different segments of consumers that have different needs, that have different wants that we may be able to provide, and our competition may be able to provide. So, we segment the market into 12

13 different segments and then we try to choose a target segment or segments where our company can win, where the competencies in things that we bring to the market is superior to what the competition can do for those particular consumers, that leads to positioning. Positioning is really at the heart of marketing, that there's a set of consumers, the target market, where we can provide a superior value proposition. Positioning is really the statement of our value proposition, and how it's superior to the competition. It defines the competition, it defines our value proposition in relation to how it's superior to that competition. When we have that defined and we really know who those consumers are, and what our value proposition is to them, that gets expressed in the market place in what we call the four Ps. First the Product, the product or service, what are the benefits we're providing that make that value proposition real? That provides those benefits that are part of that value proposition? Second, Promotion, how do we go about convincing consumers that in fact we have a superior value proposition? How do we go about informing them about that? How do we go about convincing them and persuading them that our value proposition is indeed superior to that of the competition? Third, Price, a critical part of the value proposition is not just the benefits we provide in terms of the product or service, but also the cost to the consumer of acquiring those benefits, and most of that cost is in price. So having the right price to provide superior value proposition in a way that's profitable to the company is obviously critical to expressing that value proposition and brand in the marketplace. And lastly, Place, and quite often, people don't think about that, about distribution, and other kinds of things as part of marketing strategy. Often people think of that, well, that's logistics and distribution, but it's an important part of our value proposition. If consumers can't easily get our product, or don't get it in the way and the time and the place that they want to get it, they're not getting the full benefits that they'd like to get. So part of the cost to consumers of acquiring product is quite often going out and actually purchasing it. Well, that's the effectiveness of our distribution strategy in getting it to them in the right way, so that's another expression of the value proposition, to make sure we put together, what is our product or service that benefits, what's the price to consumers of acquiring it? How do we go about in terms of distribution, of getting it to them in the right way so we're maximizing the value proposition, and promotion in terms of convincing them and giving them the information that indeed we have a superior value proposition? If we do all of these things well over time, we have what's called sustainable competitive advantage, we'll have a value proposition in the mind of consumers that's superior to the competition, so they'll become loyal to us. Transcript: What Is a Brand? Let's talk for a minute about brands - what are brands? And I would say that what brands are our positioning, but not what we think our positioning is, but what is our positioning in the minds of consumers. If we've really looked at the customers out there, 13

14 and picked the target segment and thought about what our value proposition is, in relation to some competition, we then go to market with some specific positioning, where we want consumers to believe that our value proposition is superior to some competition. If we've done that effectively, then we have a brand. So what are the elements of the brand that come out of that? That consumers believe that we have a superior value proposition? First, if it's going to be superior, it has to be superior to something, we call that the competitive frame of reference. So, how do consumers think about our brand? For example, we might be a decaffeinated coffee. Consumers might think of our brand as a decaffeinated coffee against another caffeinated coffee, or consumers might think about our brand as a decaffeinated version of our coffee, so it might be Starbucks decaf against Starbucks regular, or it might be Starbucks decaf against Pete's decaf, so that's a different competitive frame of reference to think about the brand. So how do brands distinguish themselves? Where do we get a competitive advantage in terms of value proposition from? Well, we do that by having points of differentiation, ways in which we're superior to the competition. So if it's Starbucks decaf against Pete's decaf, it might be, we have superior taste, or we have superior body, or something else where we're different. Also important is to make sure we don't lose in certain places, what we call points of parity. So, if it's Starbucks decaf against Starbucks regular coffee, quite often, we say, well, Starbucks decaf has the value proposition of not having the caffeine, if you don't want caffeine, but quite often, we'll say that the point of parity is taste, it tastes just as good as Starbucks regular, but doesn't have the caffeine, has a point of differentiation, but also has a point of parity against a specific frame of reference. Finally, if we have all that, brands have to have a reason why. Consumers won't believe the value proposition, won't really have the positioning in their minds, if they don't have a reason to believe. That might be because they've tasted the Starbucks decaf, it might be because they believe Starbucks when they say that they really have gone through the effort to get the very finest beans and have the finest decaffeination process so that their decaf coffee will have a true coffee, Starbucks coffee taste. If we have all of that, if consumers know what the competitive frame of reference is, have in their mind some point of differentiation on which our product or service is superior to that competition, and they have a reason to believe that it's true, then we end up building a strong brand in the consumer's mind. Transcript: Brands Are in the Mind of the Consumer In the last section we defined brands and I mentioned that brands are something that live in the minds of consumers, they're not what we sell or what consumers believe that they are buying. And I like to give a couple of examples, and one in particular to bring that out and how we can use brands and use those concepts very profitably for the company. So first, what's very famous to a lot of people is the secret Coca Cola formula. 14

15 Well that is something that's locked in Atlanta, and people don't know what that formula is, but that's not what the Coca Cola brand is, it's part of the Coca Cola brand, because it's part of what we believe about Coca Cola, and that's the Coca Cola true brand, is what's in consumers' minds about Coca Cola. So, how do we use that kind of concept to be profitable for the company? And in the car industries, it's used quite often, because the car industry uses quite often similar features, similar engines, similar platforms to create very different brands that have very different value propositions. An example that I think is a great example of that for creating great value for the company is the PT Cruiser. Some of you might know the Chrysler PT Cruiser. The Chrysler PT Cruiser brand is a great brand for Chrysler, but in fact, the PT Cruiser was built on the base of a Plymouth Neon, a very inexpensive car that Chrysler took the inner workings of, 90% of the parts are shared, and put a different body on top and created a very different brand at in fact, a much higher price point. When introduced, the Chrysler PT Cruiser cost to Chrysler was an additional $1,000 to produce, but the price point to consumers was an additional $4,000, creating a tremendous amount of profit, $3,000 in incremental contribution, over hundreds of thousands of units, so many hundreds of millions of dollars in incremental profit. And the genius behind that, was understanding that there was a need out there in the marketplace for a different kind of car. That need was not about the engine, it was not about the chassis, it was about the experience of the car, the brand of the car, what people thought they were driving, how people felt when they were driving it, and that was very different in a PT Cruiser than a Neon. Although part of the story is somewhat interesting, when Chrysler bought out the PT Cruiser, they thought it would be good for young families who instead of an SUV that be a little too big, might be a little smaller and more fun for them, and in fact, the brand was very attractive to an older audience that thought that it was kind of retro, kind of had a 1950s look and feel to it, it would be a lot of fun. So sometimes we might not have it exactly right, but the strategy of thinking about let's take the product we have, let's take the features, the car, the engine, the transmission, and lets think about different kinds of consumers that we can give those features to with some additional changes and create what is a very different brand. Consumers don't think of the PT Cruiser as 90% of the Neon, they think of it as a totally different brand that has different meaning to them, and that was created by the body, but also the marketing and advertising and positioning of that product. So brands are very much things that live in the minds of consumers, and we as marketers can use branding, and can use different positioning statements and different expressions of that positioning statement through promotions, through the features we have in the product, to create very different brands in the minds of consumers that provide value to those consumers and in the end of course lead to profits for us because we're able to be able to sell those different products in the marketplace to different consumers effectively and profitably. 15

16 Transcript: Brand Contacts LSM521: Essentials of Marketing Strategy I've talked for a bit about how brands live in the minds of consumers. They're not things that we as an organization own, they're things that we try to affect but things that really are owned by consumers. If that's true, we really have to think about what are called brand contacts. They're the different ways in which the consumer comes in contact with our brand. Those are the things that affect, how consumers think about our brand. Some brand contacts we control, some brand contacts we don't control but we have to think about all of them to make sure we're building the brand as strong as we can be. And one of the most important things for that is consistency. It if consumers get different impressions or different statements about our brand in different context they have with our company or other things in the marketplace. This could be hard for us to build a strong brand in the mind of consumers. So, for example, if our sales people are out there saying, buy this product now because it's on sale and it's inexpensive. But our marketing collateral is saying we have a premium product that's the very finest in the marketplace, the consumer's getting a mixed message. Not getting a consistent message about, what is this product really, what is its benefits, where does it really stand in the marketplace. Is this a premium product? Or is this a product that's more of a value product? So, as an organization, not just within marketing, but as an organization we have to be consistent in how we deal with our product if we're gonna build a strong brand in the minds of consumers over time. Example, I would like to use for that is just a fantastic company that's really focused on this, is Apple. Apple, for a very long time since the introduction of the Macintosh in 1984 has been focused on a very consistent image of what it's benefits are. What's its position in the marketplace. What kind of customers is an Apple product for? And who might an Apple product not be for? That Apple is about design. That Apple is about usability. That Apple is about function. It's not about other things. It's not about low price. It's not about just being fast. It's not about being for everybody. And other kinds of things that other kinds of computer brands try to position themselves in the marketplace to be. And Apple's been very consistent with that. They were consistent with that with their PCs. They were consistent with that when they brought out the ipod. They were consistent with that when they brought out the iphone. They've been consistent with that when they brought out the ipad. It was about design, it was about usability, it was about certain user experience, and are certain kind of user profile that was appropriate for Apple, and by doing that consistently in their marketing, in their products, in their PR. In everything they have done about the marketing, and production of their products in the market place, Apple has built extremely strong brand. It is very consistent, that almost everybody knows exactly what Apple stands for. And that's of course extremely valuable to them as they introduce radically new different products in the marketplace. They get accepted cuz people understand their Apple products, and they understand many aspects of what they're likely to deliver before they even know what it really is. So, I'd like to suggest that its very important in an organization, that if we are gonna build strong brands the entire organization sales, marketing distribution different aspects. Understand what are brand promises, understand what we are trying to accomplish in the marketplace so all the 16