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Introduction to Marketing

#1 Introduction
2014 Fall
What is marketing?
What is Marketing?
Marketing is the activity, set of process for creating,
communicating, delivering, and exchanging offerings
that have value for customers, clients, partners, and
society at large.
Kotler and Armstrong, Principles of Marketing
A social and managerial process by which individuals and groups
obtain what they need and want through creating and exchanging
products and value with others.
What is Marketing?
The thing that drives everything is
creating genuine value for customers.

- Jeff Bezos
The empty chair
An employee specially trained to represent customers
Recommendations for You
Personalized product recommendations even without
actual human interaction
Collaborative filtering
Reflecting past purchases and purchasing patterns
-tailor made
-HK? convenient to go shopping
-technology with advanced programs
What is Marketed?
What is Marketed?
What is Marketed?
What is Marketed?
Marketing offerings are not limited to physical products. Here, the U.S. Forest
Service markets the idea of reconnecting young people with exploring the joys of
nature firsthand.
products = intangible and tangible goods
What is Marketed?
What is Marketed?
Example) green tea ad
What is Marketed?
Example) Bud Light ad
Name: Sara Kim
Email: sarakim@hku.hk
Office: K.K. Leung 708

Ph.D., Marketing, Booth School of Business, University of Chicago,
M.S., Marketing, KAIST, Korea
B.S., Management Engineering, KAIST, Korea


Self-Affirmation and Consumer Emotion System
Consumer Judgment and Decision Making
Consumer Preference Formation and Word-of-Mouth Behavior
About me
Chicago and Booth School of Business
Tentative Course Schedule
Date BUSI1004
September 1 Session 1
September 8 Session 2
September 15 Session 3
September 22 Session 4
September 29 Session 5
October 6 Session6
October 13 Reading week
October 20 Session7
October 27 No class
November 3 Session 8
November 10 Session 9
November 17 Session 10
November 24 presentation
December 1 presentation
Assessment Tasks Weights
AT1: Class Participation 15%
AT2: Group Case Study 10%
AT3: Group Marketing Plan Project
Marketing Plan Presentation (20%)
Marketing Plan Written Report (20%)
AT4: Final Examination 35%
Total: 100%
Final Exam (35%)
50 multiple choice questions (50%)
3 essay questions (50%)
Multiple choice questions will be used to assess students
understanding of key marketing concepts and processes covered
in class and assigned textbook chapters.
Essay questions will be used to evaluate students ability to
integrate and apply the learned knowledge and skills to identify
marketing problems and critical issues, compare, contrast, and
evaluate alternatives, and/or recommend marketing solutions
relevant to the contexts.
Show up for every class on time and prepared
Class participation: to participate you must be present
Active & constructive role in class discussions
No multi-tasking in class
Be a productive member of your group
Constructive Collaboration
Cannot drop the class after two weeks
Examination Unit
Absence from a final exam should take another sit-in exam
Early exam hard to get approved
Dont be a free rider Group members should inform me ASAP
when they have a problem so I can take an action

Five Basic Markets and Their Connecting Flows
Traditionally, a market was a physical place where buyers and sellers gathered to
buy and sell goods. Five basic markets and their connecting flows are shown above.
Manufacturers go to resource markets (e.g., raw material markets), buy resources and
turn them into goods and services, and sell finished products to intermediaries, who
sell them to consumers.
The government collects tax revenues to buy goods from resource, manufacturer, and
intermediary markets and uses these goods and services to provide public services
Inputs for the Marketing Planning Process
Analyze Situation (3 Cs)

Set Strategy
Formulate Tactical Plan (4 Ps)
Implement and Monitor
Customer Company Competitor
Designing Customer Driven Marketing Strategies
Marketing Management: The art and science of choosing
target markets and building profitable relationships with them
Selecting customers to serve
Market segmentation
Target marketing
Choosing a value proposition
Value Proposition
Connect and share with the people in your life
Provides a place for people to connect, inform, and
inspire others across the globe
The ultimate driving machine
Marketing Management Philosophies
1) Production concept
The idea that consumers will favor products that are available and highly
affordable, and that management should therefore focus on improving
production and distribution efficiency.

2) Product concept
The idea that consumers will favor products that offer the most quality,
performance and innovative features, and that an organization should thus
devote energy to making continuous product improvements.

3) Selling concept
The idea that consumers will not buy enough of the organization's products
unless it undertakes a large-scale selling and promotion effort.
Five alternative concepts for marketing activities
Marketing Management Philosophies
4) Marketing concept
Achieving organizational goals depends on determining the needs and
wants of target markets and delivering the desired satisfactions more
effectively and efficiently than competitors do.

5) Societal marketing concept
the organization should determine the needs, wants and interests of target
markets. It asks if the firm that senses, serves and satisfies individual wants
is always doing what's best for consumers and society in the long run.
Selling Concept vs. Marketing Concept
Focus Means Ends
Selling and
Profits through
sales volume
The selling concept
The selling concept takes an inside-out perspective.
1) It starts with the factory,
2) focuses on the company's existing products, and
3) calls for heavy selling and promotion to obtain profitable sales.
4) It focuses on customer conquest - getting short-term sales with little
concern about who buys or why
Profits through
customer satisfaction
The marketing concept
Selling Concept vs. Marketing Concept
The marketing concept takes an outside-in perspective.
1) It starts with a well-defined market,
2) focuses on customer needs, co-ordinates all the marketing activities
affecting customers, and
3) makes profits by creating long-term customer relationships based on
customer value and satisfaction.
4) companies produce what consumers want, thereby satisfying
consumers and making profits
Marketing Management Philosophies
Smart Car
Marketing Management Philosophies
Value Proposition: Smart car suggests that you open your mind Sorry, big
guy. Efficiency is in these days.
Delivering what customers want Efficiency
Marketing Management Philosophies
Delivering what customers want Safety
Customer Driving- vs. Driven-Marketing
Customer-driven marketing
When customers know what they want
Customer-driving marketing
Customers do not always know what they want
If I had asked people what they wanted, they would have
said faster horses.
- Henry Ford
The Marketing Myopia
Marketing Myopia: The mistake of paying more attention to the
specific products a company offers than to the benefits and
experiences produced by these products.
The Marketing Myopia - Examples
We are making films and Sony is making electronic products so
we are in totally different industries.
They did not view Sony, an electronics
company, as a potential competitor.

But what happened?
One of the electronics Sony developed
was a digital camera so people no longer
needed Kodak film
Ford Motor Company began what was thought to be a highly
successful ad campaign, "The Edsel is Coming. But nobody could
see this mystery car, just a glimpse of a hood ornament. Anyone
involved with the Edsel was sworn to secrecy not to leak a word
about what was being claimed to be a radically new and innovative
motor car. Dealers were required to store the Edsel undercover and
would be fined or lose their franchise if they showed the cars
before the release date.

From About.com guide
The Marketing Myopia - Examples
The Marketing Myopia - Examples
Ford Edsel
It didnt live up to the expectations
Competed with its own sister division, Mercury cannibalization
Difficulty-to-pronounce name (the first child of Fords founder Henry)
Fords mechanics were unfamiliar with the cars state-of-the-art
The Marketing Myopia - Examples
New Coke
It seemed like a good idea at the time
Won the blind taste tests over Coke classic and Pepsi
Coca Cola had ignored the sentimental value which its loyal
American consumers had towards Coke Classic
-brand equity
The Marketing Myopia - Examples
RJ Reynolds smokeless cigarettes

In 1988, when the anti-smoking lobbyists could finally claim the
majority of public opinion was behind them, and when passive
smoking had been officially recognized as a serious danger to
health, the company decided to conduct trials on a smokeless

- taste issue: it tasted like shit.
- difficulty of using the product: Inhaling the Premier required
vacuum-powered lungs

smokers didnt enjoy using the smoke-free product, and non-
smokers didnt have a reason to. In short, there was no market.
The Marketing Myopia - Examples
Appealing to Customer Needs
Google wallet
Appealing to Customer need
Integrated Marketing Communication (IMC)
Its goal is to make all aspects of marketing communication such as
advertising, sales promotion, public relations, direct marketing,
personal selling, online communications and social media work
together as a unified force, rather than permitting each to work in
isolation, which maximizes their cost effectiveness.
added-value to lifetime customers
Building Customer Relationship
The overall process of building and maintaining profitable
customer relationships by delivering superior customer
value and satisfaction.
Customer Relationship Management
The customers evaluation of the difference between all the
benefits and all the costs of a marketing offer relative to
those of competing offers.
Customer Perceived Value
long-term relationship
small difference means a big step to customers
Building Customer Relationship
Frequency marketing programs reward customers who buy frequently or in
large amounts.
Frequent flyer programs
Hotels room upgrades

E.g. Starbucks, Cathay Pacific, Ibis Hotel etc...
Club marketing programs offer members special benefits and create member
Monthly meetings
Training classes
Product discounts
Swapping ideas
Weber grills
Access to online grilling classes
Interactive recipe box

Building Customer Relationship
frequent users enjoy privileges
Building customer relationship: Harley Davison sponsors the Harley Owners
Group (H.O.G), which gives Harley owners an organized way to share their
passion and show their pride. The worldwide club now numbers more than
1,500 local chapters and one million members.
Building Customer Relationship
most common example for marketing club
Customer generated marketing: When Heinz invited consumers to submit
homemade ads for its ketchup brand on YouTube, it received more than 8,000
entries some were very good, but most were only so-so or even downright
Building Customer Relationship
Building Customer Relationship
To keep customers coming back, Stew Leonards has created the Disney of Dairy
Store. Rule #1 The customer is always right. Rule #2 If the customer is ever
wrong, reread Rule #1.
Customer lifetime value: The value of the entire stream of purchases a customer
makes over a lifetime of patronage
Customer equity: The total combined customer lifetime values of all of the
companys customers
Relating with More Carefully Selected Customers
Preemptively screening out potentially unprofitable customers
- Progressive asks prospective customers a series of screening questions to
determine if they are right for the firm. If they are not, Progressive will likely
tell them,
You might want to go to Allstate.
very easy to buy --> makes customers feel very convenient
customized recommendation system
not using price competition
Marketing research links the organization with its
market environment. It involves the specification,
gathering, analysis, and interpretation of information to
help management understand the environment, identify
problems and opportunities, and develop and evaluate
courses of marketing action.
Marketing research aid to decision making.
Marketing research reduces uncertainty

Marketing Research - Definition
Why Not Just Make Educated Guesses?
I think there is a world market for maybe five computers

- Thomas Watson, IBM Chairman in 1943

importance of marketing research
Television wont be able to hold on to any market it captures
after the first six months. People will soon get tired of staring
at a plywood box every night.

Why Not Just Make Educated Guesses?
Darryl Zanuck,
20th Century
Fox Films, (1946 )
importance of marketing research
What Seems Obvious May Not Be True..
A car for women Result: Pink color --> horrible diasters
Hot Wheels (Barbie) computer
15" monitor, mouse, mouse pad, and
speakers (and even steering wheel!)
The sad part is that due to some manufacturing flaws, most of these
machines die and they got stuck repairing and replacing so many of
them that it drove them out of business...
What Seems Obvious May Not Be True..
But Experts Know Better
Or do they?

Predictions made by doctors, psychologists and financial
forecasters are often less accurate than statistical models
Even experts, even with more information

Highest accuracy comes from combining expert judgment and
statistical models
But Research Has its Limitations
Predicted Success
New Coke
Predicted Failures
Telephone answering machines (60% adoption)
Star Wars (2
highest grossing movie $461M)
Sony Walkman (over 100 Million Sold)