Marketing
Management
PROFESSOR ANDREW CHING
WEEK 1
1
Logistics
- You should feel free to ask questions during class.
- Please raise your hand before asking/answering a question,
and please wait until you are called before asking your
question.
- Bring and display your name card.
- State your name first before asking your question or
answering my question.
2
What is Marketing?
Tell me what you think Marketing is about (the
first thing that comes to your mind).
3
What is Marketing?
Tell me what you think Marketing is about (the
first thing that comes to your mind).
Marketing is not just about developing ad, or
selling!
◦These activities only represent the tactical stage
of marketing.
4
What is Marketing?
“Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for
“customers” or “consumers” (broadly defined), from AMA.
◦ Exchanging offerings that have value for consumers → requires us to
understand how consumers/individuals make their decisions – Theory
of Choice/Choice Modeling
◦ Creating offerings … that have value for consumers → discover unmet
consumer/market needs.
◦ Communicating → marketing communication & promotion (incl.
advertising, publicity campaign)
◦ Delivering → help consumers find your offerings (physical distribution
network, or digital channel)
5
Marketing Management - Marketing
Strategies and Plans
It is the full process of identifying a company’s
differential/competitive advantage in serving consumers
through an organized, in-depth study which involves:
◦ Consumers-Company-Competitors (3Cs/SWOT) analysis
◦ Market-needs analysis (Segmentation, Targeting and
Positioning, STP)
◦ Marketing-mix analysis (4Ps, tactical tools) which involves
creating products, pricing, placement/distribution, and
promotion of ideas and products.
6
What is the fundamental goal of
Marketing?
- The most fundamental goal is to understand how
individuals make their decisions.
- It involves economics, psychology, sociology,
experiments, statistics, econometrics, data science, etc.
- Marketing is a multi-disciplinary scientific area.
7
- Key premise: Business succeeds by providing
products/services that generate superior customer value.
- High customer value → High firm value
- Many businesses fail to understand this link.
- We will develop a framework to help create and manage
customer value.
8
Amazon
- In 1999, it incurred $719 million loss.
- In 2000, it had only $350 million cash on hand.
- "Will Amazon Ever Make Money?"
9
Example: Amazon
Amazon just celebrates 20 years of extremely impressive
growth.
◦ Their mission: “To be Earth's Most Customer-Centric Company”
How do they achieve it?
◦ Prime membership.
◦ Two-day free shipping (no min purchase).
◦ Prime video.
◦ Free delivery from Wholefood.
10
Example: Blackberry
Steve Jobs back in 2007: on understanding what your
customers want and how to beat your competitors:
https://www.youtube.com/watch?v=wGoM_wVrwng&t
=6s (3:30-7:40)
11
Customer Value and Firm Value
12
Finding an efficient way
of attracting
and retaining customers
Increase Firm ValueMarketing
Profit = f(customers demand, price, cost, …)
Maximize
Long term
profits
Theory of Choice –
First Principle
How do we attract new customers and retain old
customers?
◦ Attracting Customers: By offering a product/service to the
customers that gives customer value - such that
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Value from my product Value from not purchasing at all
Value from purchasing
Competitor’s products
Value from my product
>
>
Attracting and Retaining
Customers
Retaining Customers: Providing value not
only ensures that consumers will buy the
product today, but if they are satisfied, they
will buy it again in the future => Loyalty =>
Long term Profits
14
Customer Value
What is Customer Value?
◦ The positive and negative consequences (consumer utility) of buying
and consuming a product/service
Value Drivers:
◦ The factors that the customer weighs while buying a product/service
Customer Value = function (Value Drivers)
◦ We call this “Utility Function.”
Example: Nursing Home
◦ Customer Value or consumer utility
= function(distance from home, #registered nurses per
patient, #practical nurses per patient, size, doctor on site, …)
15
Course Expectations
This is a rigorous course
◦ Not a course in ‘creative’ advertising.
◦ But you need creativity.
◦ Requires critical thinking.
Math Analysis
◦ There is math, but more emphasis on the analytics.
16
Assignments, Case Analysis, Team Presentation
Slides, Team Project Final Report
Homework due dates are stated in the syllabus.
◦ For homework, you need to write up your answers and upload it
to Canvas before the deadline.
◦ Assignment 1 due in week 3.
◦ Case Analysis due in week 4.
◦ Team project progress report (slides only) due in week 5. A
representative from your team will give a short in-class
presentation of 5 minutes (lightning presentation!).
◦ Assignment 2 due in week 7.
◦ Final Team Project Report and Presentation Slides due in week
8.
◦ CANNOT use generative AI (e.g., ChatGPT).
17
Course Expectations
Textbook and course material
◦ Principles of Marketing, freely Available at:
https://open.lib.umn.edu/principlesmarketing/
◦ Optional Reference Textbook: “Marketing Management,”
by Kotler and Keller.
◦ No need to buy the latest version of this book because it is very
expensive. An older version of used copy is much more reasonably
priced!
HBSP course packet. Link in the syllabus.
Additional readings shown in the course outline or will be
provided in Canvas.
18
Course Grade
Participation (12%)
Two individual assignments
◦ Assignment 1 (18%)
◦ Assignment 2 (22%)
One case analysis individual assignment (10%).
Team Project Progress Report Presentations (8%).
Team Project (report 20%, and presentation 10%).
19
Participation
Students are expected to have read the required readings
and cases before attending class.
I may use warm and cold calling, students are encouraged
to actively participate in class discussion.
Students will be evaluated after each class based on their
contributions to discussions.
If you do not attend a class in person, you will receive
zero participation mark for that class.
20
Contributions are defined as:
Questions/comments that advance the discussion or
(positively) change the direction of the class discussion,
insightful comments that raise learning points, etc. (see
syllabus).
In other words, you will be graded on quality instead of
quantity.
You should avoid repeating what someone else just said.
21
Attendance
Attendance is required for all classes.
If you do not attend a class in person, you will receive
zero participation mark for that class.
You can have one absence without affecting your
participation grade.
22
Classroom Protocol
1. Come to class on time.
2. Do not leave the classroom before a break or the class is
dismissed.
3. Do not use your laptop, phone and tablet to do things that
are unrelated to the class.
4. If you have questions during my presentation, please direct
your questions to me instead of talking to other classmates.
Please note that any classroom protocol violations can lead to
penalty in class participation marks.
23
Marketing Plan Project
You need to form a group of 5 members yourself (at
most 6 member).
You will let me know your group by next class, using a
shared spreadsheet that you will find in Canvas course
page.
Do NOT free-ride. There will be a peer evaluation in
week 8 to adjust your final mark for the team project,
and the penalty for free-riding is serious.
24
Team Project
Identify a marketing problem/challenge faced by a
tech or start-up company from Forbes 30 under 30.
Visit https://www.forbes.com/30-under-30/2023/ or
https://www.forbes.com/30-under-30/2023/asia/
Pick a company from the lists above.
Develop a marketing plan to address it.
Your plan needs to include 3Cs, STP and 4Ps.
25
Each team will pick one company and enter it in
the shared spreadsheet.
First-come-first-serve. Once a team enters their
company of choice in the spreadsheet, it is no
longer available for other teams to choose.
Each team will present a unique company.
26
Session 1:
3Cs, STP, 4Ps framework
3C Analysis and Marketing Strategy (Segmentation, Targeting
and Positioning)
◦ Lecture on the Role of 3C Analysis in Segmentation, Targeting and
Positioning
27
Segmentation,
Targeting and
Positioning
Competition
Company
Value Creation
Product
Place
Promotion
Price
Customer
Session 2
- Network Effect
- Two-sided Market
28
Session 3 (Assignment 1 due)
- Consumer Behavior and Psychology
29
Session 4 (case analysis due)
- Statin Market
- New Product Diffusion and Marketing
Communication in the prescription drugs market.
- Involves First-mover advantages, Late-mover
advantages, Direct-to-consumer advertising, Direct-to-
physician advertising, publicity, clinical trials.
- The roles of doctors and patients.
30
Session 5
(Progress Report due)
Team project progress report due and class
presentation.
- Marketing Research and AI
- Revealed Preferences and Conjoint Analysis
- Concept Drift
- Case: TikTok
31
Session 6
- Pricing
- Price Discrimination
- Zero Price Effect
- Price fairness, tax fairness, ideology difference
- Pricing under Consumer Learning
32
Session 7 (Assignment 2 due)
Assignment 2 (EpiPen, and other problem sets)
Marketing to Forward-looking Consumers
◦ New and Used Video Game Demand
◦ Bitcoin Pricing (bubble)
◦ Consumer Stockpiling, Panic Buying, Inflation
Expectation
◦ Exploitation vs. Exploration
Walmart distribution/place strategy
33
Session 8
- Final Report and Presentation Slides due.
- Class Presentation (Group Presentation, every
team member needs to do part of the presentation).
34
Consumers, Company, Competitors
Fundamental (1st) Principle: Since consumers will purchase
the product that gives them the highest perceived value, a
firm
◦ should first know the value drivers of consumers, and
competitors who are satisfying those value drivers
◦ consider the company’s constraints, and try to come up
with a product/service that satisfies value drivers of
consumers better than the competitors
35
What are the
drivers of customer value?
Offer a product/service whose
attributes deliver the value
as good as or better
than the competitors
Who are the competitors
that satisfy the similar need?
The consumers The competitors The company
Situation/Environmental Analysis
Understanding the 3Cs:
Understanding the Customers’ Needs
Understanding the Competitive Scenario
Understanding your Company’s Strengths and Weaknesses
36
SWOT Analysis
Strengths and Weaknesses (S, W) = Company Analysis
Opportunities and Threats (O, T) = Competitive
Scenarios + macro environment (e.g., geopolitical
environment, health threats, etc.), competitors analysis
37
What are the Tactical Decisions Marketers make to
Deliver Customer Value?
The 4Ps of Marketing
Product Decisions
◦ What should be the attributes of the product/service that deliver value?
Pricing Decisions
◦ What should be the price of the product/service?
Place/Distribution Channel Decisions
◦ The contact point between customers and the product: How should you sell
the product: through the internet, smartphone, retailers, your own sales
force, etc.
Promotion/Communication Decisions
38
3Cs, STP and 4Ps
3Cs set the stage for strategic planning.
Segmentation, Targeting and Positioning (STP) – a high
level of strategic marketing strategy.
4Ps (tactical tools) help us accomplish the STP vision.
39
Moving from 3Cs to 4Ps via
STP
There are three steps that form the background marketing strategy
◦ Segmentation
◦ Targeting
◦ Positioning
40
1.Environmenal
Analysis
2. High-level
Marketing Strategy
Competition
Company
Value Creation
Product
Place
Promotion
Price
3. Tactical
Marketing
Decisions
Customer
S => T => P
What are Customers/Consumers?
• “Consumers”: people or institutions
with sufficient purchasing power,
authority, and willingness to buy
• Types of Consumers: Regular
Consumers (like us!) vs. Businesses.
Consumers have …
Need
Ability
Willingness-to-pay
Authority
+
Role of Market Segmentation
Market Segmentation: division of the total
market into smaller, relatively homogeneous
groups
Why?
Levels – Mass, Segment, and Niche
And… https://www.youtube.com/watch?v=40pkutLB0n8
44
Why segment?
Most
convenient
Most
effective
One Mass
Market
Many Groups
of One
The Importance of Market Segmentation
• Markets have a variety of product
needs and preferences.
• Marketers can better define customer
needs.
• Decision makers can define objectives
and allocate resources more accurately.
Most important point
In relation to responsiveness to different
marketing mixes, segments must be:
◦Homogeneous within a segment.
◦Heterogeneous between segments.
No Market Segmentation
Segmented by Gender
Segmented by Age
Segmentation Process
• Marketers follow two methods to determine the bases on
which to identify markets:
– Basic: Segments are predefined by managers based on
their observed demographic characteristics of likely
users.
– Advanced: Segments created based consumer
preferences.
– By asking consumers directly – but problematic.
– By observing their choices, we reverse engineer to
obtain the relative importance of different
attributes to a consumer (Revealed Preferences).
– Sentiment Analysis from social media.
Ideal Segmentation Base
First Best: Group consumers based on the
closeness of their utility function/preferences.
But we do not directly observe their utility
function/preferences
◦ Rely on revealed preferences tools to uncover their utility
function from their choices.
Second Best: Consumers observed characteristics
are often correlated with their preferences.
52
Bases for Segmentation
Characteristics of individuals, groups, or
organizations used to divide a total
market into segments.
(variables)
Bases for Segmentation
Psychographic
Demographic
Geographic
Behavioral –
Usage Rate
Behavioral –
Benefits Sought
Segmentation: Behavioral
• Benefit segmentation: Grouping
customers according to the benefits they
seek from the product.
• Usage segmentation: Grouping
customers according to the amounts they
bought and consume.
Segmentation
• Geographic Segmentation: Dividing
an overall market into homogeneous
groups on the basis of their locations
Metropolitan Statistical
Area (MSA)
Segmentation
• Demographic segmentation: dividing
consumer groups according to
characteristics such as gender, age,
income, occupation, education, ethnicity,
household size, and stage in the family
life cycle.
Age
Marital
Status
Children
Family Life Cycle
Segmentation
• Psychographic Segmentation
• What are psychographics? They are the
psychological and cognitive attributes of a consumer
that reveal their beliefs, values and goals.
• Use qualitative methods to solicit such information
from survey participants. See VALS survey from SRI:
https://www.strategicbusinessinsights.com/vals/survey
new.shtml
Segmentation
• Psychographic Segmentation: dividing a
population into groups that have similar
psychological characteristics, and lifestyles.
• Psychological characteristics include subconscious or
conscious beliefs, motivations, and priorities to explain
and predict consumer behavior.
Targeting
Choosing one or more segments for which to
design your marketing operations
Targeting
Rank segments based on profitability.
Which segment(s) to target will partly
depend on the company’s resource
constraints.
The more profitable a segment, the
higher the priority.
62
Concentrated Strategy
Single
Marketing
Mix
Target Market
Organization
Differentiated Strategy
Organization
Marketing Mix 1
Target Market
Marketing Mix 2
Cannibalization
Situation that occurs when
sales of a new product cut into
sales of a firm’s existing
products.
Cannibalization
One-to-One/Personalized Marketing
• Personalized marketing: Individual specific
marketing activities tailored for a particular
customer.
• Examples?
LO9 0.7%Fabric & skin safety on baby clothesIvory Snow
0.1%Tough cleaner, aimed at Hispanic marketAriel
1.0%Outstanding cleaning for baby clothes, safeDreft
1.2%Detergent and fabric softener in liquid formSolo
1.4%Bleach-boosted formula, whiteningOxydol
1.8%Value brandDash
2.2%Stain treatment and stain removalEra
2.6%Sunshine scent and odor-removing formulaGain
2.9%Detergent plus fabric softenerBold
8.2%Tough cleaning, color protectionCheer
31.1%Tough, powerful cleaningTide
Market
Share
PositioningBrand
Positioning of
Procter & Gamble
Detergents
Product Positioning Dimensions
Product Attributes / Differences / Benefits
Product Usage
Problem Solution
Against a Competitor / Away from Competitors
Perceptual Map
A means of displaying, in two or more
dimensions, the location of products, brands, or
groups of products in customers’ minds.
High moisturizing
Low moisturizing
Nondeodorant Deodorant
1
2
3
4
5
7
6
8
Safeguard
Lever 2000
Zest
Coast
Lux
Dove
Tone
Lava
Lifebuoy
Dial
Product Positioning using perceptual maps for
Soap Bar
Product Positioning
Positioning is not just what you do to a product; more
importantly, positioning is what you do to the mind of
the potential customers. That is, you position the
product in the mind of the prospect (i.e., customers).
Al Ries and Jack Trout (1981)
Repositioning
Changing consumers’ perceptions of a brand in
relation to competing brands.
Positioning and Product Differentiation
Product repositioning
Trump claims Hydroxychloroquine, an anti-malaria drug, can also
treat COVID-19.
74
Moving from 3Cs to 4Ps via
STP
There are three steps that form the background marketing strategy
◦ Segmentation
◦ Targeting
◦ Positioning
75
1.Environmenal
Analysis
2. High-level
Marketing Strategy
Competition
Company
Value Creation
Product
Place
Promotion
Price
3. Tactical
Marketing
Decisions
Customer
S => T => P
See you next class!
- Network Effects
- Two-sided Market
76