Marketing 101 For Business Plans Presented by: Leslie Kendrick JHU Marketing Lecturer

Marketing 101 For Business Plans
Presented by:
Leslie Kendrick
JHU Marketing Lecturer
January 2007
Marketing 101 For Business Plans
Presenter’s Bio:
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B.A., Advertising, M.B.A., Marketing.
12 years as a marketing practitioner.
Worked in Sales and Marketing Management for 2
major publishers (Harper & Row, LWW Medical) and
a major apparel manufacturer (Londontown).
3 years experience in business-to-business sales
support (sold to pharmaceutical companies).
5 years experience reviewing JHU student business
plans, attending finalist presentations & hearing
judges’ feedback!
Test Your Marketing “IQ”
Answer True or False to the following statements:
1)
2)
3)
4)
5)
6)
7)
8)
9)
__“Marketing” and “selling” are the same thing.
__The best way to sell a product is “direct” (without an intermediary).
__My “target market” and “buyer” are always the same.
__Devoting most of my promotion budget to magazine advertising will
guarantee my success.
__Budgeting $30,000 for the “marketing” budget, without breaking down this
amount by promotional vehicle is sufficient.
__Budgeting $50,000 for a sales rep. is more than enough.
__The sales process is similar for consumer and business products.
__I can develop a marketing plan and budget without quantifying the size
of my target market.
__I can convince the judges of the feasibility of my idea and its market
potential without incorporating end-customer research or channel
research into my plan.
Scoring Your Marketing “IQ” Test

If you answered “TRUE” to any of the
statements on the prior slide, you need to
stay for this presentation!

If you answered “FALSE” to ALL of the
statements and you can explain why they are
false, you’re ready to go without listening to
me for the next 30 minutes!
Marketing 101: Outline
By the end of this talk, we will have answered the
following questions:
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What is marketing?
What is market segmentation and how do I use it to better
quantify my target market?
What is a SWOT analysis and how will it help me?
How is marketing to consumers versus businesses different?
What is the marketing mix and what “mix” decisions do I have
to make, budget for?
What are the differences between the promotional mix
elements in terms of characteristics, costs, response rates?
What type of market research should I conduct to support my
business idea (that is quick, cheap, but credible)?
What Is Marketing?
American Marketing Assn. Definition:
“The process of planning and executing the
conception, pricing, promotion an
distribution of ideas, goods and services to
create exchanges that satisfy individual and
organizational goals.”
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is Market Segmentation?
Definition: “The process of dividing a market into meaningful,
similar and identifiable groups.”
3 Reasons That Segmentation Is Important:
1)
Enables marketers to identify customers with similar needs,
buying behavior.
2)
Allows for the tailoring of the “Marketing mix” to specific
segments (also cost effective).
3)
Consistent with marketing concept of satisfying customer
wants and needs.
Source: Marketing, 7th ed., by Lamb et al., 2004.
What Is Market Segmentation (con’t)?
Segmentation for Consumer Markets:
 Geographic: by region, country, climate.
 Demographic: by age, gender, income, ethnicity,
family lifecycle (single, married).
 Psychographic: by personality or lifestyle.
 Benefit: by the benefits customers seek.
 Usage-rate: by the amount of product bought or
consumed.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is Market Segmentation (con’t)?
Hypothetical Example:
Product:
Total Market:
Market Segmentation:
Target Market:
Device for Ob/Gyn Physicians
39,071 ob/gyns (U.S. only)
Ob/gyns under age 55 (demographic)
Subset of 39,071--need to quantify!
Source: AMA Ob/gyn counts from MMS, Inc. 2006 Healthcare List Catalog.
What Is Market Segmentation (con’t)?
Segmentation for Business Markets:
 Company Characteristics—location, type of
company, size of company, product use.
 Buying Processes—purchasing criteria such as
price, quality, service.
 Customer Relationship—the type/significance of the
relationship they have with their customer.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is Market Segmentation (con’t)?
Hypothetical Example:
Product:
Total Market:
Market Segmentation:
Target Market:
Device for Residential Homes
69,000 “builder” members of Ntl.
Assn. of Homebuilders
Luxury home builders (company
type)
Subset of 69,000--need to
research & quantify
Source: National Association of Home Builders counts from web site (www.nahb.org), 2005.
What Is A SWOT Analysis?
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A “snapshot” of your company’s current internal
strengths & weaknesses (management, personnel,
financial marketing, manufacturing, R&D) AND
Your assessment of future opportunities and threats
relating to all the environments external to the firm
(technological, social, political/legal, economic,
competitive, natural).
Source: Strategic Marketing, 8th ed., Kerin & Peterson, 1998 and Strategic Marketing for Nonprofit Organizations, 5th ed., Kotler &
Andreason, 1996.
How Does A SWOT Help Me?
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A strong SWOT
analysis allows you to
leverage off the internal
strengths of the
company and match
them to opportunities in
the external
environment.
SWOT Handout.
How Does My Marketing Effort Differ
For Consumers vs. Businesses?
Characteristic
Business Markets
Consumer Markets
Demand
Organizational
Individual
Purchase volume
Large
Smaller
# of customers
Fewer
Many
Location of buyers
Geogr. concentrated
Dispersed
Distribution structure
More direct
More indirect
Nature of buying
More professional
More personal
Buying influence
Multiple
Single
Type of negotiations
More complex
Simpler
Use of reciprocity
Yes
No
Use of leasing
Greater
Lesser
Main promo. Method
Personal selling
Advertising
What Is The “Marketing Mix”?
Also known as the 4 “P”s, the marketing mix
consists of:
 Product
 Price
 Promotion
 Placement/Distribution
What Is The “Marketing Mix”?
Product:
 Defined as a good, a service, an idea
(“recycle”), or any combination of these.
 Business products & consumer products.
 Considerations—brand name, packaging,
labeling, trademark, warranties.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
Price:
 Revenue (price times units sold) is what pays
for every activity of the company: production,
finance, sales, distribution, etc.
 Key: choose a price that will earn a fair
profit, and that equates to the perceived
value to target customers.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
Pricing Objectives:
 Profit Oriented
--Profit Maximization: setting prices so that total revenue is as large as
possible relative to total costs.
--Satisfactory Profits: a “reasonable” level of profits (for stockholders &
management).
--Target Return On Investment, ROI (also called “return on assets”):
measures management’s effectiveness in generating profits with
available assets. Dupont and GM use target ROI as their main pricing
goal. ROI=Net profit after tax divided by total assets.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
Pricing Objectives:
 Sales Oriented
--Market Share: a company’s product sales as a percentage of total
sales for that industry (reported in units or dollars). But some
companies like P&G switched from market share to ROI objectives
when they saw that a large market share doesn’t always equate to
large profits.
--Sales Maximization: Firm ignores profits, competition and the
environment as long as sales are rising. Used when strapped for
funds and need to generate maximum cash in short run. Examples:
selling excess inventory at discount (post holiday season) or selling old
model cars at year-end.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
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Status Quo Pricing
--Seeks to maintain existing prices or meet
competition’s prices.
--Requires minimal planning.
--Often occurs with firms competing in an
industry with an established price leader.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
Other Pricing Considerations:
 Elasticity of Demand
--Elastic Demand is when consumer demand is very sensitive
to changes in price.
--Inelastic Demand is when an increase or decrease in price
will not significantly affect demand.
--Factors affecting elasticity include: availability of substitutes,
price relative to purchasing power, product durability, a
product’s other uses.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
Cost Determinants of Price:
 Markup pricing
--Popular with wholesalers and retailers. Considers the cost of
buying the product from the producer, plus amounts for profit
and expenses not otherwise accounted for. The difference
between the retailer’s cost and the selling price is the gross
margin.
--Advantage is its simplicity. Disadvantage is that it ignores
demand and may result in over- or under-pricing.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
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Profit Maximization Pricing
--Occurs when marginal revenue equals marginal cost.
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Break-Even Pricing
--Determines what sales volume must be reached before the company
breaks even (total costs=total revenue).
--Advantage: tells the firm how much it must sell to break even and
how much profit can be earned if a higher sales volume is obtained.
--Limitations: some costs are hard to classify as fixed or variable &
also, this method ignores demand.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
Choosing a Pricing Strategy:
 Price Skimming
--Charging a high introductory price.
--Used when the product is perceived by the target market as
having unique advantages.
--Allows management to recover its product development
costs.
--But as a product moves through its lifecycle, the firm may
lower its price to reach larger market segments.
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Marketing Mix”?
Choosing a Pricing Strategy:
 Penetration Pricing
--Charging a low price initially to reach the mass
market.
--Goal is to capture a large share of a large market.
Often seen when large market share is the pricing
objective. Effective in a price sensitive market.
--Disadvantage: lower profit per unit, so requires a
higher volume of sales to reach break-even.
What Is The “Marketing Mix”?
Promotion:
 Consists of 4 elements known as the
Promotional Mix:
--Advertising (print, TV, radio, internet)
--Public Relations (press releases)
--Sales Promotion (contests, rebates)
--Personal Selling (face-to-face, sales rep.)
Source: Marketing, 7th ed., by Lamb et al, 2004.
What Is The “Promotional Mix”?
Advertising
PR
Sales
Promotion
Personal
Selling
Communicator
Control
Indirect,
nonpersonal
Indirect,
nonpersonal
Indirect,
Nonpersonal
Direct, face-toFace
Amt.feedback
Little
Little
Little to moder.
A lot
Speed of
Feedback
Delayed
Delayed
Varies
Immediate
Message flow
One-way
One-way
One-way
Two-way
Content
control
Yes
No
Yes
Yes
Speed
Fast
Usually fast
Fast
Slow
Message
flexibility
Same
message
No control
over message
Same
message
Tailored to
buyer
What Should My Total Promotion Budget
Be?
Factors to consider:
 What your objectives are in terms of sales
the first 3-5 years (i.e. sales should be
derived from response from marketing
vehicles chosen such as direct mail, personal
selling, trade shows).
 What industry competitors are spending.
What Should My Total Promotion
Budget Be?
Sample Marketing Budgets:
 Medical Journals--$30,000 to $50,000/yr. Higher the
first 3-5 yrs. & for publications with greater circulation
potential (larger medical specialties).
 Medical Devices—3%-6% of net sales.
 Other (AMA list serve executive feedback): $30,000$800,000 per year for products ranging from a food
ingredient to a veterinary clinic to an information
service/database business.
Sources: Senior Product Manager, Medical Device Company, President, Market Experts Inc.
and Business Development Manager, Dow Corning Corporation.
Costs for Promotion Vehicles
Typical Costs For Selected Vehicles:
 Advertising (used to create awareness)
--Business 2.0, full-page color ad costs
$63,500 (one-time insertion).
--Obstetrics & Gynecology, full-page color ad
costs $6,365 (one-time insertion).
Sources: Rate information extracted from 2006 Web Site Media Kits for Business 2.0 and Obstetrics &
Gynecology Journal.
Costs for Promotion Vehicles
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Direct Mail (to consumers)
--Cost averages .55 cents/piece or more
(Ann Zeller, V.P., Direct Mktg. Assn.).
Includes printing, copywriting, list rental &
postage.
--Response rates average 1%-1.5% (of total
number of pieces mailed).
Costs for Promotion Vehicles
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Direct Mail (lead generation for B to B)
--Response rate for customer data form
mailing to develop opt-in list (8-10%). This
rate reflects the use of an incentive
(additional cost).
Source: D.B., Owner, Simply Direct (a B to B marketing consulting firm).
Costs for Promotion Vehicles
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E-Mail Campaigns
--Cost averages 9 cents per contact (Zeller,
DMA), but you must first build a list (“spam”
issue).
Costs for Promotion Vehicles
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Trade Shows/Exhibits (lead generation for B to B sales)
--Space rental average is $14.12/square foot; but can be as high as
$42.85 (according to Tradeshow Week’s 1998 survey).
--Average cost for 10 x 10 ft. booth is $1,500-$2,700.
--Add another $2,600 for exhibit transportation, drayage, electricity,
booth table and booth lighting.
--Travel, food & hotel expenses for company Sales Reps not included
above.
--Cost to mail (prior to exhibit) to prospects, registered attendees not
included. This is strongly recommended in order to attract traffic to
your booth.
--Cost for brochure or catalog to hand out at book not included.
Depends on quantity, use of color, type of printing.
Source: M.Ferelli., V.P. Marketing & Sales, Two Hands (a jewelry company), 2004.
Costs for Promotion Vehicles
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Personal Selling
--Average total compensation is $110,206
($70,553 base salary plus $39,653 in
bonus/commission), with Top Sales Executives
earning $145,978. Excludes healthcare &
benefits costs.
Source: “The 2005 Compensation Survey”, Sales & Marketing Management, May 2005,
p. 25.
Costs for Promotion Vehicles
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Web Site (awareness & lead generation)
--Cost of Dreamweaver is $199
(Amazon.com); add cost of web site
developer’s time.
--Hiring an outside firm much more costly
and total cost, plus monthly costs vary based
on site’s complexity and functionality.
Costs for Promotion Vehicles
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Google AdWords
--AdWords ads are displayed along with search
results on Google, as well as on search and content
sites (AOL, Earthlink & others).
--Cost per click pricing which you set (1 cent to $100
per click).
--Click through rate not guaranteed (for an expert’s
tips, see Nielsen’s “Designing Web Ads Using ClickThrough Data”.
Source: Google web site, 2006.
Costs for Promotion Vehicles
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Google AdSense
--AdSense is a quick way for website publishers to display
relevant Google ads on their site’s content pages and earn
money.
--It also allows web site publishers to provide Google search to
their site users and earn money by displaying Google ads on
the search results page.
--Advertisers pay when users click on ads (CPC), or when their
ad is shown on your site (impressions). You earn a portion of
the amount paid for either activity on your site.
Source: Google web site, 2006.
What Is The “Marketing Mix”?
Placement (Distribution):
 For consumer products and B to B products,
there are 2 possibilities:
--Direct (product sold by producer to
consumer). Includes direct sales via the
Internet.
--Indirect (product sold by producer to
intermediary, who then sells to consumer).
What Type of Market Research Should I
Conduct?
Survey Research (quantitative):
 Use a non probability quota sample (quicker and
cheaper).
 Quota samples are selected so that demographic
characteristics of interest are typically represented in
the sample in the same proportions as they are in
the population.
 Refer to supplemental handout regarding market
research.
Source: Contemporary Market Research, 3rd ed., McDaniel & Gates, 1996.
What Type of Market Research Should I
Conduct?
One-on-One Interviews
(qualitative):
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Allows for probing in
specific areas due to
2-way communication.
Source: Contemporary Market Research, 3rd ed., McDaniel & Gates, 1996.
What Type of Market Research Should I
Conduct?
Who To Target For Research:
 Potential customers (target market)--consumers or businesses.
 Potential buyers (often different than customers or “users”).
 Potential channel members.
Information Needed:
 Proof of viability of idea/market.
 Feedback on 4 Ps, including media consumption (i.e. what
consumer/trade journals are read, internet sites visited, list
serve affiliations).
 Association memberships and trade show attendance.
 Buying process, duration, and decision makers.
Marketing 101 For Business Plans
Questions?