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Marketing Management and Organization XMBA 206.1

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What does Marketing mean in your company? ... Geico ... lizard. Country-wide. Head-on. Cialis. Lunesta. Boeing. Avodart. Pillsbury. 4. Ganesh Iyer ... – PowerPoint PPT presentation

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Title: Marketing Management and Organization XMBA 206.1


1
Marketing Management and Organization XMBA 206.1
  • Summer 2008
  • Professor Ganesh Iyer
  • Edgar F. Kaiser Professor of Business
    Administration

2
Agenda
  • Introductions
  • What is Marketing?
  • Marketing Concept
  • A Framework for Marketing Analysis and Planning
  • Caselets.
  • Bombardier
  • Preview of the Course
  • Syllabus (What to expect?...And what is expected?)

3
Some Perspective
  • What does Marketing mean in your company?
  • When you think of industries traditionally
    associated with marketing which industries come
    to mind?
  • 8 Ads on CNN, Sunday morning…
  • Geico … lizard
  • Country-wide
  • Head-on
  • Cialis
  • Lunesta
  • Boeing
  • Avodart
  • Pillsbury

4
Some Perspective
  • A Historical Perspective
  • In well-ordered states, storekeepers and
    salesmen are commonly those who are weakest in
    bodily strength and, therefore, of little use for
    any other purpose. - Plato
  • Advertising ... is a meretricious endeavor in
    which psychological appeals to fear and shame
    are developed to bamboozle the public into
    purchasing essentially worthless packaged goods
    at bloated prices. - Thorstein Veblen

5
Some Perspective (cont…) A modern view
  • Marketing Philosophy Customer Orientation
  • I came here with a view that you start the day
    with customers, that you start thinking about a
    company around its customers - Lou Gerstner,
    Chairman IBM.
  • Why does the customer want to buy from me? -
    Charles Schwab.
  • Stop being a company with its face towards the
    CEO and ass towards the customer - Jack Welch,
    ex-CEO, G.E.
  • Reaction to TQM--Reengineering--Competing for
    Future.

6
The Marketing Concept Two Components
  • C Customer Orientation
  • The Marketing concept is to make profits through
    creating and keeping customers.
  • Connection (Emotional Identification)
  • C Competitive Advantage
  • The marketing concept is about satisfying the
    needs and wants of consumers more effectively
    than competitors.

7
Caselet New Coke Cola Category Share of Soft
Drinks
From 57 to 67
8
Cola Category (Sales Volume)
Almost tripling
9
Cokes Declining Performance
From a 12 lead to a 3 lead
10
Competitive Comparisons
  • Advertising
  • Coke 34.4 million (1975) to 211.5 million
    (1993)
  • Pepsi 25.3 million (1975) to 147.3 million
    (1993)
  • Distribution
  • Coke stronger in fountain. But Pepsi growing in
    supermarkets.
  • Pricing
  • no differences
  • Why the decline??

11
Market Facts
  • Baby Boomers respond to the Pepsi Generation
    and boost Pepsi sales.
  • Pepsi sales surpass Coke in supermarkets by 1975.

12
Market Facts
  • Pepsi had Diet Pepsi and Mountain Dew since the
    60s. Coke had Sprite and Tab.
  • In 1982 made a departure in extending the Coke
    brand name for the first time - Diet Coke.
  • Runaway success and becomes 3rd largest soft
    drink and had 5.2 m.s by 1984 (versus 22.5 for
    Coke and 19.1 for Pepsi).

13
US Soft Drink Industry
  • Pepsi Cola
  • 1960s Pepsi Generation
  • 1974 Pepsi Challenge (based on taste test)
  • Coca Cola
  • Coke had nostalgic home town image in early 60s.
  • Real Thing response to Pepsi Generation

14
The Pepsi Challenge
  • Integrated Advertising/Promotion Campaign (1975
    to 1984)
  • a majority of consumers prefer Pepsi in blind
    taste tests
  • Advertising hammered away on this
  • promotion had booths in malls across U.S.
  • by 79, Pepsi share in overall grocery was bigger
    than Coke
  • In supermarkets and convenience store where the
    two brands were available side-by-side.

15
Testimonials
  • The company is obsessed about Coke losing the
    No.1 slot.
  • Concern Over the last ten years we moved by
    barely 3 tenths of a percent, the competition
    gained 4 points on us. Brian Dyson, Coca-Cola
    1979
  • Confusion If we have twice as many vending
    machines, dominate fountain, have more shelf
    space, spend more on advertising, and are
    competitively priced, why are we losing share?
    Roy Stout, Coca-Cola 1980
  • I am not going to sit on my ass and watch that.
    To do nothing means I am forever condemned to not
    touching my product even though I know I can make
    a better product and move with consumer tastes.
    Brian Dyson, Coca-Cola 1981

16
Change to New Coke
  • 1983 go-ahead to explore possibilities of
    reformulation.
  • September 1984 found a formula that beat Pepsi in
    nationwide blind tests by 8 points.
  • Even Pepsi exclusive drinkers preferred it.
  • Decision to not introduce the new formula as a
    line extension.
  • January 1985 Secret mission to introduce New
    Coke (after 200,000 taste tests).

17
Change to New Coke
  • Taste Tests
  • blind taste tests
  • what if this were a new Coke taste? test
  • Direct test against branded and unbranded Pepsi
  • But did not disclose that the product that they
    were testing would replace Old Coke.
  • Once again overwhelming preference for new
    formulation over Pepsi in blind taste tests.
  • A small minority (about 6) will not get over the
    change. This loss will be more than compensated
    by Pepsi consumers switching to New Coke.
  • In focus groups when participants knew that it
    was new coke about one in ten participants get
    upset.

18
Change to New Coke
  • April 23, 1985 Launch Press Conference in New
    York City.
  • Coke PR line Product improvement, necessary
    change to follow trends in consumer preferences.
  • the best just got better.
  • Absolutely no mention that New Coke beat Pepsi in
    taste tests.

19
Pepsis Response
  • Responded aggressively to Coke through
    advertising, public media
  • Re-framed the change as a product withdrawal.
  • Gave reporters list of questions to ask

20
Pepsis Message
  • ... After 87 years of going at it eyeball to
    eyeball, the other guy just blinked. Coca-Cola
    is withdrawing their product from the
    marketplace, and is reformulating brand Coke to
    be more like Pepsi. ...
  • There is no question the long-term market success
    of Pepsi has forced this move. ... Maybe they
    finally realized what most of us have known for
    years. Pepsi tastes better than Coke.
  • Letter by Roger Enrico, CEO Pepsi-Cola USA, to
    employees and published as full page ad on the
    morning of the New Coke introduction.

21
Consumer Reactions A Surprise
  • Many consumers did not perceive the introduction
    of New Coke as a product improvement, but as a
    loss of Coca Cola, a sentiment that was
    reinforced by the media coverage.
  • Coca Colas toll-free number was flooded with
    calls from angry and deeply saddened consumers.
  • Dear Chief Dodo What ignoramus decided to
    change the formula of Coke?
  • It was nice knowing you. You were my friend for
    most of 35 years. Yesterday I had my first taste
    of the new Coke and to tell the truth, if I had
    wanted a Pepsi, I would have ordered a Pepsi.
  • Some hard-core drinkers stocked up Coke worth
    hundreds or even thousands of dollars.

22
Consumer Reactions
  • Organized groups of consumers that resisted the
    change received extensive news coverage.
  • Old Coke Drinkers of America laid plans to file
    a class action lawsuit.
  • Many bottlers also resisted the change.
  • What was the problem? Why was this happening?

23
Cokes Retraction
  • July 1985 Comeback of original formula as Coke
    Classic announced.
  • Hype actually did the overall Coke brand good
  • love you more if harder to get syndrome.
  • Emphasis from brands to category (megabrand
    strategy).
  • January 1986 Coke Classic becomes flagship
    brand.

24
What can we learn from this?
  • Even a marketer as experienced as Coke can
    misread its customers.
  • Two Questions
  • When people consume Coke what do they really
    consume?
  • Did Coke really have a problem?

25
Corporate Shares
A constant 8 point lead
26
Total Cola Shares
Goes up from a 5 point to a 6 point lead
27
How was Coke actually doing?
  • Diet Coke was the main reason for the decline in
    regular Coke
  • Coke is lighter than Pepsi
  • Pepsi is sweeter than Coke
  • Should we be surprised that Coke drinkers
    converted more enthusiastically to the diet
    version?
  • Obsession on the Coke vs. Pepsi rivalry blinded
    management on the real reason for Cokes decline.
  • It wasnt taste----it was Diet Coke.

28
The Pepsi Challenge
  • Despite the Pepsi taste tests...did Coke really
    have a taste problem?
  • consumers in mall prefer the taste of Pepsi
    (58).
  • only 67 of ALL consumers are cola drinkers
  • Pepsi was stronger than Coke but with non-cola
    drinkers.
  • depending on who you sample you can get very
    different results.
  • There is a market research lesson here.
  • Form of Marketing Myopia Obsession about
    competition leading to a misreading of consumer
    behavior

29
Homework
  • What if Coca-Cola made the product change
    gradually and did not announce the change?
  • The Canadian new coke experience

30
Connection…1984
  • "There is a twist to this story which will
    probably keep professors puzzled for years…
  • The simple fact is that all the time and money
    and skill poured into consumer research on the
    new Coca-Cola could not measure or reveal the
    deep and abiding emotional attachment
    (connection) to original Coca-Cola felt by so
    many people." …Don Keough, President Coca-Cola.

31
Connection…2004 Neuromarketing evidence (Neural
Correlates of Behavioral Preference for
Culturally Familiar Drinks, Neuron 2004, v.44,
October) Effect of Brand Knowledge on Brain
Activation
32
Connection
  • More than four million of children under five die
    in sub-Saharan Africa every year.
  • In sub-Saharan Africa, child mortality rates are
    running at an average rate of 172 deaths per 1000
    babies born, compared with 9 per 1000 in
    developed regions.
  • Please donate to the red cross.

33
Connection Emotional Identification
Help the children of Africa
34
Caselet Apple Computers Identifying the
competitor
  • Apple 1980s - a tremendous success story
  • Introduced computers that anybody could learn to
    use
  • had a stranglehold on the US educational market,
    so kids got exposed to Apple much earlier than
    competitive products
  • Better products and better advertising
  • price premium reflecting the product advantage
    and the stronger loyalty of its customers
  • Where did they go wrong?

35
What can we learn from this?
  • Apple didnt understand who their competition was
  • Who did Apple think was their competition?
  • In fact, competition changed over time
  • Apples perceived vs. actual competition
  • Apples strengths
  • good at designing customer interfaces
  • Apple was superior because of its operating
    system and software.
  • What was the best way to leverage Apples
    strength?

36
Key Takeaways
  • What do these two caselets tell us?
  • Coke misread their customers emotional value
    for the product.
  • Mis-read the emotional connection that customers
    had with Coke.
  • Coke executives did not make the Coke brand
    versus Coke corporate distinction.
  • Marketing Myopia Obsession about competition
    leading to a misreading of consumer behavior.

37
Key Takeaways
  • Understanding the market and customer needs is a
    firms most difficult task.
  • Using relevant quantitative and qualititative
    customer analysis tools is a critical skill.
  • Consumers often consume more than the physical
    product.

38
Key Takeaways Apple
  • Werent really sure who the competition was.
  • licensed their system for the first time very
    late.
  • the horse already bolted
  • Technically superior
  • operating system
  • the hardware/software interface
  • Microsoft which was technically behind
  • understood the market and the need for an open
    Windows platform.
  • network effects
  • icon-based

39
Summary
  • Successful marketing strategy entails two
    principles. Designing products, services, and
    programs that emphasize attributes which
  • which customers value and connect to.
  • provide a sustainable differential advantage over
    competitors.

40
Analysis Framework
Company Analysis
Competitor
Analysis
Marketing Strategy
Product
Price
Promotion
Place
Market
41
Course Summary
  • Use a consistent analysis framework so you see
    the link between different sessions.
  • Cases which involve integrating more than one of
    the four elements of the Marketing Strategy Mix
  • Expose you to through cases to decision
    situations which involve the application of the
    specific marketing strategies.
  • Analytical decision tools (MDS, conjoint
    analysis, product line design etc.)

42
Course Summary
  • Each session case lecture / in class activity
  • Go through case prep notes in syllabus or given
    to you prior to class.
  • Performance Evaluation
  • Class participation
  • Please display name cards.

43
Course Summary
  • Written Case Report (Individual Assignment)
  • Session 5, Optical Distortion.
  • Written Case Report (Group Assignment)
  • Session 7, Calyx and Corolla.
  • Group assignment
  • Groups by the end of Block 1.
  • Final Exam

44
Administrative Details
  • Course Information
  • Course pack available at https//www.study.net/de
    fault.asp
  • Course website
  • http//groups.haas.berkeley.edu/marketing/COURSES/
    xmba206.html
  • Contact Details
  • Office Room F699, 510-643-4328
  • email giyer_at_haas.berkeley.edu
  • Cell 925-788-1769

45
Expectations
  • Please prepare the case and readings.
  • Please stick to a constant seat in the class as
    far as feasible.
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