Get inside the mind of the Consumer & leverage economic principles

JWI 515 Managerial Economics, Week3 Summary, 10/28/12

Get inside the mind of consumer (eg. with simulation as a customer with Walmart.com shopping experience)

(1) Constraints
****************
Money, Time, Resources

(2) Goal - Maximize utility
****************************
To maximize my utility (JWI 515, week2, lecture1) & social responsibility and lower the implicit & opportunity costs (JWI 515, week1 lecture1).
As a consumer, make decisions by weighing benefits tied to consumption of goods and services against costs

Utility is the satisfaction that comes from consumption of goods and services.
To maximize total utility, I need to maximize (Budget constraint - Explicit Cost - Opportunity Cost).
I need to do this with a judicious combinations of goods and services.
I need to be conscious that time, cost of car travel & insurance risk, missing the opportunity to do other profitable work are opportunity costs.
Evaluating alternative choices, and never losing sight of the constraint, I need to make the the optimal decisions that lead to economic profit and social responsibility.

How much quantity I buy of a given item depends on marginal utility ie. the satisfaction gained from consuming one more unit.
At one point law of diminishing marginal utility applies - I as a consumer will limit the quantity of an item I will purchase.

(3) Consumer behavior theory & 3 basic assumptions regarding Utility are:
*********************************************************************
(i) Nonsatiation principle - more is better eg. more money brings additional satisfaction or well-being
(ii) Preferences are complete - I as a consumer am able to compare and rank the benefits tied to consumption
    indifference => market basket of goods and services provide the same utility
(iii) Preferences are transitive
    I as a consumer am able to rank order the desirability of goods and services
    Ordinal utility - rank ordering of preferred goods and services ie. A is better than B
    Cardinal utility - understand the intensity (weightage) for preferences ie A = 2B

(4) Deliverable: Optimal market basket
***************************************
To determine the best feasible combination of goods and services I as a consumer desire and can purchase within a budget.

(5) Use Substitutes and Complements to optimize market basket
**************************************************************
  Substitutes: Products that serve same purpose eg. Coke & Pepsi (Hirschey, 2009)
  Perfect substitutes satisfy the same need or desire
  Complements: Products that are best consumed together

(6) Leverage Price change
**************************
Income effect - increase in consumption due to a price cut or decrease in consumption due to a price increase
Substitution effect - change in relative consumption that occurs as consumers substitute cheaper products for expensive products

(7) Be aware of the key curves
******************************
Price consumption curve (PCC) - Maximize utility for a given product at different prices
Income consumption curve (ICC) - Rising income enables greater consumption, shifts demand curve right
Engle curve - income vs quantity consumed of a good or service
    normal good: directly proportional; positive slope
    inferior good: inversely proportional; negative slope
     eg. bus rides vs income first has positive slope; then shifts to negative slope

(9) Price sensitivity - Elasticity in demand
************************
Elastic demand - price change leads to more than proportional change in quantity demanded => Revenue changes with price
Unitary elasticity - price and quantity changes offset each other
Inelastic demand - price change leads to less than proportional change in quantity demanded  => Revenue does not change much with price

(10) Demand & Supply
***********************
Several factors influence Demand and Supply in a given industry
Becoming aware of these factors help with profit maximization

(11) Jack Welch Podcast - Managing in Recession
*****************************
Cut out the fat that comes with periods of profitable growth

Dr DP

Research the Market & Offer Superior Customer Value

JWI 518 Marketing, Week3 Summary, 10/28/12


This was another great week of training in marketing. I am receiving a solid foundation in marketing principles through this class. I can apply these principles gainfully in designing key surveys to understand customer needs, build a unique value proposition that is superior to the next best alternative and ultimately increase customer satisfaction.

I. Kotler Chapter4: Creating Customer Value, Satisfaction and Loyalty
**********************************************************************
Total Customer Value = Total customer benefits - Total customer cost
    Total customer benefits = Benefits form (Image + Personnel + Services + Product )
    Total customer cost = Benefits from (Psychological + Energy + Time + Monetary)
Customers seek maximum value and will buy from a firm that offers it
Customer satisfaction - product's perceived performance - customer expectation
High satisfaction leads to customer loyalty
Customer Lifetime value (CLTV) is the net present value of stream of future profits over customer's purchases
CRM uses a database to mine trends, segments, individual customer needs


II. Anderson, Customer Value Proposition in Business Markets (HBR)
******************************************************************
Help customers understand and believe in the superior value of your offerings

Value proposition types:
************************
(a) Benefit - List all the benefits: "why should our firm purchase from your offering ?"
(b) Value - Focus on favorable points of difference with the next best alternative: "why should or firm purchase from you instead of the competitor?"
(c) Customer value research- Resonating Focus
Rally around top one or two differences that will deliver greatest value to customer:
"what is most worthwhile for the firm to keep in mind about your offering ?"

Go deeper to win
*********************
Know the own market offering
Know the own market offering + next best alternative
Know how own market offering delivers superior value to customers vs next best alternative

Strengthen, demonstrate, document value proposition

III. Jack Welch video - Market Research
************************************************
Market research is an art and a science
Generally need to do some market research
But there are all kinds of products that don't make the test
GE Energy efficient light bulb, used less energy, lasted longer
market research - everyone in the market research test loved to be environmentalist and save energy
Then we told them What it cost - $12 vs $1.50 for the light bulb
Market research still never said they would not buy at that price..I would love to suport a product like that
so we went to market - it fell right on its face
Everybody is green until they have to pay for it
That is what we learned 12 years ago
That has changed quite a bit in last decade - people are spending more on green
perfect case of market research saying you got it made
"If you ask questions in market research that go to people's view of what they perceive themselves to be
- great environmentalist, great corporate citizens, great neighbors, great educators
they will tend to bias their answers around what they would like to be perceived as
if it goes right to their wallet and what they have to spend on - market research runs into trouble"
Disconnect - behaviors in market research contrasted vs opening up the wallet and paying excessively
Good market research is an important part of marketing in general

IV. Week3 Lecture1
*******************
Conducting a Survey
*************************
(i) Market Research Goal - Get to the truth, even if it hurts
(ii) Survey sample - unbiased; get people from the right market segment; 384 people for 10M 95% accuracy
(iii) Population - accurately define the population of customers in target market eg. affluent, magazine, zip codes highest incomes
(iv) Size of sample - not small; randomly select sufficient numbers from target population

(v) Survey questions - relevant; beware of bias and pay attention to the way the questions are written; do not make it long
 (a) Likert Scale Questions - Strongly agree, agree, neither agree nor disagree, disagree, strongly disagree
 Use this to find out what extent consumers agree with various statements about your product, service, competition or price
 (b) Semantic Differential Scale Questions
 Use this to reveal emotions that influence decisions
 gather details about how customers view and judge your product, likelihood of shopping at a particular store
 (c) Rank order scale questions
 Rank items in order of preference, enjoyment, importance, value, critera

(vi) Sample response rate - use timing, convenience of web and incentives as needed
(vii) Convert answers to numbers
(viii) Target market - segment of the market
(ix) marketing message - predict attitudes & behaviors; how they would behave when they read a message

4 ways to conduct survey
*************************
Survey method decision - depends on Budget, Timetable
(i) Telephone - moderate cost, fast, hard to get enough qualified people to respond
(ii) in person - expensive, slow,hard to get responses, superior quality
(iii) mail - low cost, slow, poor response rate without incentives; built in bias as only some answer mail surveys
(iv) internet web & email- least expensive, responders may not be representative of target population; surveymonkey.com, zoomerang.com

Dr DP

Demand, Supply & Market Equilibrium

JWI 515 Managerial Economics, Week2 summary, 10/21/12

Supply, Demand, Price, Quantity, Demand function & Demand curve, Supply function & Supply curve, market equilibrium, shortages, surplus and how the internet has changed the game are some of the concepts I learned this week. Much of these I already learned from a class I took earlier in my undergraduate education but working on the excel file to simulate supply-demand scenarios added a nice touch to extend my learning and preparing me to better apply these concepts.

Dr DP

Marketing is an Art and a Science

JWI 518 Marketing in a Global Environment, Week2 Summary, 10/21/12
************************************************************


A tough week with numerous marketing concepts to grasp.

(I) Marketing is both an art and a science
***********************************************
To be effective in reaching and influencing the right customers - and influencing their perceptions and preferences, with the right promotions at the right time, leaders will need to carefully balance data and instinct as appropriate for the business situation. To do this, marketing leaders need to conduct research through focus groups (to collect qualitative data) and surveys (to collect quantitative data) and proceed with a marketing plan with 8 attributes including goals, company SWOT, PESTEL evaluation of external environment, buyer analysis, strategy, tactical options, timetable and evaluation.

Jack Welch says marketing is both and art as well as science, depending on the skills of those who make the decision.
He confesses to being guilty of practicing it more as an art but is quick to appreciate those who practice it as a science.
He adds that there are companies now that do a fantastic scientific job of reaching Right customers, Right Promotions, at Right Time.
Finally, Jack Welch states that for mature products it is much more an art to catch the eye of the consumer around features that reach right into the soul and touch them.

Kotler (2012) in the textbook makes a similar argument:
"Marketing management is the art and science of choosing target markets and getting,keeping, growing customers through delivering and communicating superior customer value. Marketing is about identifying and meeting human and social needs profitably. The aim of marketing is to make selling superflous - to know and understand the customer so well that the product or service fits him and sells itself. The role of effective Marketing is to identify needs, wants, interests of target customers, satisfy more effectively and  efficiently than competitors while preserving or enhancing consumers' and society's long-term well-being".

(II) Marketing begins with understanding the customer(JWI 518, week1, lecture1)
*****************************************************************
Need to understand why the customer makes a purchase and then influence the perception and preferences before he makes the next purchase. To do this, marketer needs to:
(a) Convey a persuasive message to target audience
(b) Design marketing pieces to stop customers, attract eyeballs and present a message
(c) Reinforce brand's image and communicate it is still around
(d) Create subconscious images to influence customer behavior
(e) People like to do business with people they like - so use right spokespersons to influence buying decisions at a later date

(III) To understand the customer, Need a marketing plan & solid research
******************************************************************************
Clearly, understanding the customer's perceptions and preferences is a critical first step. To do this,  a marketing plan - like a road map - is needed. It shows a company the best route to get where it wants to go. Without a map to guide its marketing journey,
a company may end up a long way from where it intended (JWI 518, week2, lecture1)

One of the worst approaches a company can take is to conduct marketing on an ad hoc basis. eg. A company says something like, “That sounds like a good idea. Let’s try it.”

(IV) Marketing plan must have eight attributes (week 2, lecture1):
*******************************************************************
(1) Goals and Objectives
A company must have a clear idea of what it wants to accomplish with its marketing plan.  Does it want to grow sales, increase market share, enhance brand image, introduce a new brand, or reposition an aging brand?  Did we achieve our goals or not?
(2) Company Evaluation
A marketing plan must take into account the strengths and resources of the company and its weaknesses–profitability, product lines, acquisitions, management skills, technological capabilities, image with the public, and the list goes on.
(3) Environmental Evaluation
It means analyzing all the outside factors that can influence the target market or the company eg. PESTEL, STEEP
(4) Buyer Analysis
An analysis of buyer motivation forms the foundation upon which the marketing plan can be built. Buying first takes place in the mind of the buyer.
(5) Strategy - the overall approach marketing message will take
(6) Tactics - how will the firm implement the marketing strategy
(7) Timetable - outline what needs to happen when for marketing
(8) Evaluation - did the marketing effort succeed or fail ?

(V) To understand the customer, conduct research
***********************************************************
Research much have a purpose and be designed to answer specific questions.
Primary research has qualitative and quantitative approaches
  Qualitative - focus groups to uncover depth of attitudes, ideas and feelings
  Quantitative - Surveys to learn about buyer's attitudes and behaviors
Secondary research consists of company research, govt publications, trade and marketing journals, internet

(VI) TCV, TCC, CLTV
*************************
Total Customer Value (TCV) is the perceived monetary value of the bundle of economic, functional and psychological benefits customers expect from a given market offering
because of the product, service, people and image (Kotler, 2012, p55).

Total Customer Cost (TCC) is the perceived bundle of cost the customers expect to incur in evaluating, obtaining, using and disposing of the given offering including
monetary, time, energy and psychological costs.

TCV and TCC are related - in the customer's mind
Before making a purchase decision, and when considering market offerings from competitors, customers assess TCV against TCC for each offering.
To compete effectively and win, a firm needs to (a) lower the monetary cost (b) reduce the non-monetary costs in terms of time, energy and psychological cost and/or
(c) increase the economic, function and psychological benefits.

Customer Life Time Value (CLTV)- dollar value associated with long term relationship with any customer
Reveals how much a customer is worth over a period of time.
Useful in customer acquisition, selecting optimal service levels to provide different customer groups, identify different valuations for customers with different characteristics,
influencing the behavior of different customers and changing their LTV; helps modify assumptions and input variables to assess impact on CLTV
Helps firm focus on profitable customer relationships, maintaining the core customer base, retaining right customers who have strong impact on customer profitability.
Helps firm avoid overspending on less profitable or unprofitable customers and focus more on keeping profitable ones.
Best customers provide profit from base, increased purchases, price premium, reduced operating cost, referrals

(VII) Other marketing terms
********************************
Acquisition cost - mney for advertising and promotion in securing potential customers
Discount rate - interest rate used in determining the present value of future cash flows
Net Present Value - NPV of all future cash flows with a discounted rate of return; if NPV is positive, an investment is acceptable
Retention rate - rate at which a firm retains its customers from purchase to purchase
Profit per customer - Net profit divided by total number of customers

exhausted but better educated
Dr DP

Understand the customer with research and marketing plan

JWI 518, Marketing in a Global Environment, week2 summary, 10/15/12


Is marketing an art or a science ?

My position - marketing is both an art and a science
Based on the class lectures and the book (Kotler, 2012), my short answer is that marketing is both an art and a science. To be effective in reaching and influencing the right customers - and influencing their perceptions and preferences, with the right promotions at the right time, leaders will need to carefully balance data and instinct as appropriate for the business situation. To do this, marketing leaders need to conduct research through focus groups (to collect qualitative data) and surveys (to collect quantitative data) and proceed with a marketing plan with 8 attributes including goals, company SWOT, PESTEL evaluation of external environment, buyer analysis, strategy, tactical options, timetable and evaluation. I also believe that when time to make the marketing decision is short and competition is fierce, a leader must boldly move forward with decisions based on his gut instinct.

Jack Welch's position - marketing is both an art and a science
Jack Welch says marketing is both and art as well as science, depending on the skills of those who make the decision. He confesses to being guilty of practicing it more as an art but is quick to appreciate those who practice it as a science. He adds that there are companies now that do a fantastic scientific job of reaching Right customers, Right Promotions, at Right Time. Finally, Jack Welch states that for mature products it is much more an art to catch the eye of the consumer around features that reach right into the soul and touch them.

Kotler's position - marketing is an art as well as science
******************
Kotler (2012) in the textbook makes a similar argument: "Marketing management is the art and science of choosing target markets and getting,keeping, growing customers through delivering and communicating superior customer value. Marketing is about identifying and meeting human and social needs profitably. The aim of marketing is to make selling superflous - to know and understand the customer so well that the product or service fits him and sells itself. The role of effective Marketing is to identify needs, wants, interests of target customers, satisfy more effectively and efficiently than competitors while preserving or enhancing consumers' and society's long-term well-being".

Marketing begins with understanding the customer(JWI 518, week1, lecture1)
*****************************************************************
Need to understand why the customer makes a purchase and then influence the perception and preferences before he makes the next purchase. To do this, marketer needs to:
(a) Convey a persuasive message to target audience
(b) Design marketing pieces to stop customers, attract eyeballs and present a message
(c) Reinforce brand's image and communicate it is still around
(d) Create subconscious images to influence customer behavior
(e) People like to do business with people they like - so use right spokespersons to influence buying decisions at a later date

To understand the customer, Need a marketing plan & solid research
***********************************************************
Clearly, understanding the customer's perceptions and preferences is a critical first step. To do this,  a marketing plan - like a road map - is needed. It shows a company the best route to get where it wants to go. Without a map to guide its marketing journey,
a company may end up a long way from where it intended (JWI 518, week2, lecture1)

One of the worst approaches a company can take is to conduct marketing on an ad hoc basis.
A company says something like, “That sounds like a good idea. Let’s try it.”

Marketing plan must have eight attributes (week 2, lecture1):
********************************************************
(1) Goals and Objectives
A company must have a clear idea of what it wants to accomplish with its marketing plan.  Does it want to grow sales, increase market share, enhance brand image, introduce a new brand, or reposition an aging brand?  Did we achieve our goals or not?
(2) Company Evaluation
A marketing plan must take into account the strengths and resources of the company and its weaknesses–profitability, product lines, acquisitions, management skills, technological capabilities, image with the public, and the list goes on.
(3) Environmental Evaluation
It means analyzing all the outside factors that can influence the target market or the company eg. PESTEL, STEEP
(4) Buyer Analysis
An analysis of buyer motivation forms the foundation upon which the marketing plan can be built. Buying first takes place in the mind of the buyer.
(5) Strategy - the overall approach marketing message will take
(6) Tactics - how will the firm implement the marketing strategy
(7) Timetable - outline what needs to happen when for marketing
(8) Evaluation - did the marketing effort succeed or fail ?

To understand the customer, conduct research
**************************************
Research much have a purpose and be designed to answer specific questions.
Primary research has qualitative and quantitative approaches
  Qualitative - focus groups to uncover depth of attitudes, ideas and feelings
  Quantitative - Surveys to learn about buyer's attitudes and behaviors
Secondary research consists of company research, govt publications, trade and marketing journals, internet

Dr DP

Task of a firm & Role of Marketing

JWI 518 Marketing in Global Environment, Week1, 10/14/12



Tremendous exposure to core marketing concepts in week1 itself.

Ia. Kotler 2012, Chapter 1: Defining Marketing for the Twenty-First Century
**********************************************************
Marketing is about identifying and meeting human and social needs profitably.
Marketing management is the art and science of choosing target markets and getting,keeping, growing customers through delivering and communicating superior customer value.
The aim of marketing is to make selling superflous - know and understand the customer so well that the product or service fits him and sells itself.

Ib.Task of the firm & Role of Marketing
***************************************
Identify needs, wants, interests of target customers
satisfy more effectively and efficiently than competitors
while preserving or enhancing consumers' and society's long-term well-being

The bottom line of marketing (JWI 518, week1, lecture1)
*********************************
Why your customer makes a purchase is in large part within your control.
(a) Convey a persuasive message to target audience
(b) Design marketing pieces to stop customers, attract eyeballs and present a message
(c) Reinforce brand's image and communicate it is still around
(d) Create subconscious images to influence customer behavior
(e) People like to do business with people they like - so use right spokespersons to influence buying decisions at a later date

Ic. Task of Marketing Management
*****************************************
(i) Develop marketing strategies and plans - based on core competencies and market experience, identify organization's long-run opportunities
(ii) Capture market insights - research to closely monitor market, information; assess market potential & forecast demand; assess market environment
(iii) Connect with customers - determine how to best create value for target customers; develop strong long-term relationships with customers
(iv) Build strong brands - understand how customers perceive brand's strengths and weaknesses; develop positioning strategy & how to deal with competition
(v) Shape market offerings - product (quality, design, features, packaging), services, critical marketing decisions related to pricing
(vi) Deliver value to target market - channel activities; retailers, wholesalers, distribution firms & how they make decisions
(vii) communicate value of products & services to target market - integrated marketing communications program;
    individual & collective contribution of marketing activities; mass communication - advertising & PR; personal communications - direct & indirect marketing
(viii) Create successful long-term growth - consider changing global opportunities & challenges; put in place a marketing org capable of implementing marketing plan

Id. Implement with 4P + 4P framework
************************************

McCarthy's 4 Ps of Marketing
*****************************
Product: variety, quality, design, fetaures, brand name, packaging, sizes, services, warranties, returns; which offers competitive advantage?
Price: List price, discounts, allowances, payment period, credit terms; what are the financial as well as non-monetary costs ?
Promotion: Sales promotion, advertising, sales force, public relations, direction marketing; which offers competitive advantage over rivals ?
Place: Channels, Coverage, Assortments, Locations, Inventory, Transport; how convenient is it to get ?

Modern Holistic Marketing Management's 4Ps
******************************************
People - employees and internal marketing; understand people are not just as they shop but as people whose lives need to be understood broadly
Processes - creativity, discipline, structure of marketing managment; right set of processes to guide activities and programs for beneficial long term relationships;
    generate insights; create breakthrough products, services, marketing activities
Programs - consumer directed activities online and offline; 4Ps + 4Ps
Performance - financial (profitability) and non-financial (brand, customer equity)

Ie. Marketing Fundamentals
**************************
what is marketing? Identification, creation, communication, delivery of customer value
What is marketed ? Goods, Services, Events, Experiences, Persons, Places, Properties, Organizations, Information, Ideas
Who Markets? A marketer is one who seeks a response - attention, purchase, vote, donation - from a prospect to achieve a sale.
What is a Market? Market is a collection of buyers and sellers who transact over a product.
Market types? based on needs, product, demographic, geographic, vote, labor, donor
Markets served? consumer, business, gloabl, non-profit or combos.
Marketplace can be physical or digital
Metamarket - cluster of complementary products and services closely related in minds of customers but spanning diverse industries.

What Sellers give and get
*************************
Sellers send goods, services, advertising communications
Sellers get money and information (customer attitudes and sales data)

If. Core Marketing Concepts
***************************
(ia) Needs preexist marketers
*****************************
Basic human needs: air, water, food, clothing, shelter
Secondary human needs: recreation, education, entertainment
Some customers have needs they are not conscious of or they cannot articulate

(ib) Types of Needs are:
************************
Stated need - customer says "I want a car.."
Real need - going deeper, customer wants something very specific; "a car whose operating cost is low - not necessarily initial price"
Unstated need - customer expects good service
Delight needs - customer would like GPS
Secret needs - customer wants to be seen as a savvy customer

(ii) Wants are needs that are directed to specific objects.
************************************************************
Demands are wants for specific projects backed by an ability to pay.
Measure demand not just by want but by ability of people to pay for it.
Marketers, along with societal factors, influence wants


(iii) Target markets, Segmentation
************************************
Identify and profile distinct buyer groups - who prefer varying products and services through demographic, psychographic, behavior differences

(iv) Positioning - Develop offering and position in the minds of target buyers as delivering specific benefits
*****************

(v) Offering
************
value proposition - address customer needs with a set of beliefs that satisfy those needs
Offer - a combinatin of products, services, information and experiences

(vi) Brand - an offering from a known source; build a strong, favorable, unique brand image
***********

(vi) value
***********
value - combo of quality, service, price; value perception increase with quality and service but decrease with price

(vii) satisfaction
*******************
a person's judgment of product's perceived performance vs expectations
sum of tangible and intangible benefits must deliver the most value in the marketplace and exceed customer expectations

(viii) marketing channels
**************************
marketers must choose the right mix of 3 channels to reach a customer
communication: deliver and receive messages from target buyers using newspapers, magazines, radio, TV, mail, phone, billboards, posters, internet, retail stores, websites, media, email, blogs, toll free number
distribution: display, sell, deliver product or service to buyer; direct & indirect (distributors, wholesalers, retailers, agents)
service:warehouses, transportation companies, banks, insurance companies

(ix) Supply chain
******************
raw materials to finished products delivered to buyers
each company captures a certain percentage of total value generated by supply chain's value delivery system

(x) Competition
****************
All actual and potential rival offerings and substitutes a buyer might consider
Key to think broadly about who the competition is

Ig. New Marketing Realities
***************************
(i) Major societal forces
    IT allows accurate levels of production, targeted communications, relevant pricing
    Globalization in transport, shipping and communication gives consumer choices
    Deregulation creates more competition and growth opportunities
    Privatization increases efficiency
    Intense competition raises marketing costs, shrinks profit margins
    Strong brands extended into other product categories and became megabrands
    Industries converging - New opportunities are at intersection of two or more industries
    Retail in transformation - store based vs nonstore competition; brick-and-click
    Consumers seek new shopping experiences
(ii) New consumer capabilities
    Disintermediation gives consumers buying power: removal of middle men by getting information for any offering online
    Social media like Facebook, Flickr, Wiki, YouTube- Personal connections, user generated content; marketers inviting customers to help design and market offerings
    Perception that product differences are minimal - customers less brand-loyal, more marketing resistant
   
(iii) New company capabilities
    Internet for communicating and receiving information as a sales channel
        augment geo reach; collect rich information about markets, customers, prospects, competitors
         Social media like Twitter, Facebook - create online and offline buzz through brand advocates and user communitites
        improve internal communications - purchasing, recruitment, employee training
        pressure from corporate buyers pushing for increased cost efficiency with online technology
    Special interest TV channels and magazines
        micro-target audiences to deliver ads, coupons, personalized messages
    Mobile marketing to target customers on the move
    Make and sell individually differentiated goods - through Factory customization, computer technology, db marketing software

(iv) New Age of Turbulence is the new normal
    chaos, risk and uncertainty characterize markets, industries, companies - spurts of periodic ups and downs

Ih. Choose among Five Competing Concepts to compete
*****************************************************
(i) Production Concept - Customers prefer products that are widely available and are inexpensive
    Production efficiency, low cost, mass distribution key to also expand the market
(ii) Product Concept - Consumers prefer products that offer most quality, performance, or innovative features
    Beware the "better mousetrap fallacy" - a better product by itself may not succeed in the market - pricing, distribution, advertising and proper selling are key
(iii) Selling Concept - Aggressive hard-selling effort key to push products into the marketplace
(iv) Marketing Concept - Sense and respond to customer need - being more effective than competitors in creating, delivering, communicating superior customer value to target markets
    Find not right customers for your products but right products for your customers
(v) Selling vs Marketing - Seller vs Buyer focus; Selling focuses on needs of seller - convert product to cash
    Marketing focuses on satisfying needs of customer - through the product creation, delivery, consumption

Ii. Marketers use consistent and holistic marketing concept
*************************************************************
Key Points for an integrated approach:
(i) Secure core customer segments against competitive moves
(ii) Aggressively take market away from weak competitors
(iii) Research customer needs and wants that are in flux
(iv) maintain or increase marketing budget rather than cutting it
(v) emphasize core values, safety and security of the firm and offerings
(vi) Act quickly to drop programs that are not working
(vii) Don't discount the best brands of the firm
(viii) save the strongest brands and products; lose the weakest

Ij. Four components of Holisting marketing are:
***********************************************

Relationship marketing
***********************
Customer Relationship Management (CRM) & Partner Relationship Management (PRM) -" build an effective network and profits will follow"
    customers; employees; marketing partners - channels, suppliers, distributors, dealers, agencies; financial community - shareholders, investors, analysts
    past trasactions, demographics, psychographics, media, distribution preferences
    focus on most profitable customers, products, channels - achieve profitable growth, capture large share of customers' expenses, build customer loyalty
    estimate customer lifetime value - design offerings and prices to make profit over customer lifetime   
   
Integrated marketing
*********************
Design marketing activities such that "whole is greater than sum of parts"
    Many different activities can create, communicate and deliver value
    Marketerrs should design and implement any one activity with all other activities in mind
    Choose communication options that reinforce and complement each other
    Develop integrated channel strategy - optimize number of channels & resolve conflict among channels
   
Internal marketing
******************
Marketing is a company-wide undertaking - all departments must work together to succeed
Must communicate a vision of how the company's marketing orientation and philosophy serves customers.
Ensure organization and senior managers embrace marketing principles
    Engineering - design right products
    finance - provide right amount of funding
    purchasing - buy right materials
    production - make right tools in right time horizon
    accounting - measure profitability in right ways
Build mutually satisfying long-term relationships with stakeholders
    Select employees and managers - Must have positive attitude towards company, products, customers;  must want to serve customers well
    Train, motivate and empower entire staff - they should have knowledge, tools, authority to provide value to customers; give booklet outlining attitude about how to interact with guests
    Establish standards for employee performance - remind them to deliver on brand promise; help them understand the brand and become effective advocates
    Monitor employee actions - reward and reinforce good performance

Performance marketing
*********************
Understand financial and non-financial returns to business and society from marketing activities
Go beyond sales revenue - examine scorecard, interpret market share, customer loss rate, customer satisfaction, product quality
    Financial Accountability
    *************************
    assess direct and indirect value created
    - financial: impact to profitability
    - intangible assets: brand building, growth of customer base, employees, distributor & supplier relations, IP capital
    Social responsibility
    *********************
    PESTEL concerns including Ethical, Social, Environmental, Legal impact
    Use social responsibility as a differentiator - for socially conscious consumers and firms; build consumer preference, increase sales, profits

II. Kotler, Wolcott and Chandrasekhar, Playing Well with Others
****************************************************************
The key message is:
The entire organization, from R&D to Marketing, must be brought together to think and act together from a customer point of view.

III. Video: Jack Welch, A Great Idea
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Nice thing about US is,
(a) there are fewer business regulations than any other place in the world and
(b) there is lots of money that most people in other countries don't have

Problem is, we have too few ideas and we are dying to find people with ideas.
If you have got an idea, just gotta have patience, knock on doors, show them your passion, sell like hell, get some capital to sell your idea. But you gotta have the ability to take no, Punches in the nose over and over again to sell, because it won't be an easy sell.


awesome training

Dr DP

Managerial economics for better business decisions

JWI 515 Managerial Economics, Week1 Summary, 10/11/12



Summary below is based on readings (Hirschey, 2009), class lectures and learning from class discussions. Excellent opportunity for me to revisit the core economic principles and get trained in making better business decisions.

Ia. Managerial economics (week1 lecture1)
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- uses powerful economic concepts and quantitative methods to solve managerial decision problems. Economic concepts include marginal analysis, theory of consumer demand, theory of the firm, industrial org and firm behavior, public choice theory, cost functions, supply demand curves, elasticity. Quantitative methods include Numerical analysis, Statistical estimation, Forecasting, game-theory, optimization techniques, information systems
- It is about winning through applied microeconomics. Maximize the value and efficiency for society by making constrained decisions and allocating scarce resources.
- Navigating competitive environment by making informed decisions, quickly adapting to changes in economic conditions
- illuminate economic forces at individual, firm, economy and market levels
- it is heavily quantitative and statistical; theoretical
- Heart of it is the Economizing problem: To maximize ability to meet unlimited wants and needs of businesses, households and society, using Resources that are are limited. Factors of production are limited resources such as Land, labor, capital, entrepreneurial ability. Organizations will pay for factors of production per current wages for labor, interest for capital and land, and make goods and services to sell. Consumers will purchase the products made with talent and pay with money. Companies will use sales revenue to pay for costs of business. Companies operate with joint effort between investors, suppliers, workers, management and serve customers. Understanding interrelationships is key to meet short term and long term goals. Companies are constrained by legal issues, regulations, public policy, market forces, supply chain, pricing factors, labor union, min wages. Constrained optimization is needed.

Ib. Types of Profits

1a. Normal Profit
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Normal profit is the rate of return expected to attract and retain capital
A business is making an economic loss when it fails to earn a normal profit.

1b. Economic Profit
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Economic Profit is the above normal rate of return required to satisfy the firm's shareholders.
Economic Profit = Business Profit - Implicit cost (Opportunity Cost)
Use this to answer "Is it worthwhile running the business? Are opportunity costs (tangible and intangible) too high ? Is this a successful business ?"

1c. Business Profit
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Business Profit (Accounting Profit) = Total Revenues - Explicit Cost
Use this to answer "Is the business viable ?"
If a firm produces an accounting profit that is lower than normal profit, then it is not viable in the long run.

2a. Explicit Accounting Cost (tangible, financial)
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Cost of goods sold, rent, wages, interest, insurance

2b. Implicit Opportunity Cost (intangible, non-monetary)
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Foregone value associated with current use rather than next-best use of an asset.
It is the highest-valued opportunity that must be turned down to allow current use.

In the job market, it is the income opportunity provided by next-best employment opportunity.
If another firm offers to double your salary, you can't afford to turn in down as the opportunity cost of staying with the current employer is too high.

Reference: Managerial Economics, Hirschey, 2009

Ic. Why Profit is important
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- it is an indicator of business success
    when positive, it signals a firms need to expand; says firm realized a gain for society and will continue to grow and prosper; attracts new entrants
    when negative, it indicates a firm is in trouble; says the firm needs to change or die
- it is important for business and society
    having a profit allows a firm to better fulfill the needs of society


IIa. Optimize, don't compromise (week1, lecture2)
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Ability to identify and analyze costs properly helps make better decisions.
Optimization means to make something as effective, perfect, or useful as possible.
Optimal decision making requires evaluation of choices and alternatives to pick winners and losers.
This is vitally important to optimize resources to achieve the firm's objectives.

IIb. Revenue
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Total Revenue = Quantiy sold * Price of product
Average Revenue = Total revenue/Number of units sold => use this to Determine which customers drive most revenues and which product lines lag competition

IIc. Marginal Revenue
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Marginal Revenue = change in total revenue from producing one more unit of product
Typically downward sloping line as prices decline with increasing output. When Total Revenue is maximized, marginal revenue equals zero. Each additional unit of production results in lesser and lesser added revenue. Negative marginal revenue occurs past the point of maximum revenue.

IId. Costs
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Short run costs - operating period in which at least one input is fixed eg. no time to buy or install new machinery
Long run costs - total flexibility in use of inputs
Fixed Costs - exists in short run; does not fluctuate with output
          eg. machinery, buildings, trucks, mortgage payment, insurance premium, AMC
Variable Costs - fluctuates with level of production & output; exist in short run and long run;
          eg. utility expenses, hourly wages, gas, phone bills, temps salary
Total cost = Fixed cost + Variable cost
Marginal Cost = change in total cost from producing one more unit of product; typically positive
Average cost = total costs/number of units sold = cost per unit
If Marginal cost is greater than average cost, average cost will rise.

IIe. Profit
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Total profit = Total Revenue - Total costs
Marginal profit = change in total profit from a one-unit change in output.
When a firm maximizes profit, marginal profit equals zero
At point of maximum profitability, marginal revenue = marginal cost; does not make sense to keep expanding.

IIf. Optimization with Incremental decision making
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One extra unit of production can affect revenue, cost and profit.
Incremental decision making analyzes effect of alternate choices.

IIg. To run a business, key metrics to track are: Revenues, Costs, Profits
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The aim of the firm is to Maximize Revenue, Minimize Costs, Maximize Profits. Revenue and Profit should show an upward slope with time while costs should ideally show a downward slope with time. Dysfunctional business will have these relationships reversed eg. IBM in 1993 (Gerstner, "who says elephants can't dance", 2002). Turning around such firms will require a solid grasp of concepts in managerial economics.

Dr DP