SMAI 2013 - Principles of Marketing Management


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The 5 Ps Heuristic re managing demand. Preceded the case

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SMAI 2013 - Principles of Marketing Management

  1. 1. Marketing Management If you keep doing what you’ve always done, you’ll only get what you’ve always gotten (or maybe less).
  2. 2. What is “MBA Marketing?”Section and Chapter Headings of Marketing Management Text (Kotler/Keller) 1. Understanding Marketing Management 1. 2. 2. Capturing Marketing Insights 1. 2. 3. Defining marketing for the 21st Century Developing marketing strategy and plans Gathering information and scanning environment Conducting market research, forecasting demand Connecting with Customers 1. 2. 3. 4. Creating customer value, satisfaction, loyalty Analyzing consumer markets Analyzing business markets Identifying marketing segments and targets
  3. 3. 4. Building Strong Brands 1. 2. 3. 4. Shaping the Marketing Offerings 1. 2. 3. 4. Creating brand equity Crafting the brand positioning Dealing with competition Setting product strategy Designing and managing services Developing pricing strategies and programs Delivering Value 1. 2. Designing and managing value networks, channels Managing retailing, wholesaling, logistics
  4. 4. 7. Communicating Value 1. 2. 3. Designing and managing integrated marketing communications Managing mass communications: Advertising, sales promotions, events, and public relations Managing personal communications: Direct marketing and personal selling 8. Creating Successful Long-Term Growth 1. 2. 3. Introducing new market offerings Tapping into global markets Managing a holistic marketing organization
  5. 5. 30-Minute Marketing Management Selected Concepts  Adjusting to market and customer dynamics  Goals  ROI  Relative value  Primary/Category vs Secondary/Share Demand  Differentiation  The Marketing Mix Framework  Case
  6. 6. Managing Means Adjusting to the Market to Ensure there are Customers Demographics + Economics + Social Forces + Government Policy MARKETING: What we design in order to attract/retain customers comprising the market THE MARKET Unmanageable Manageable
  7. 7. Key Marketing Goals Connoted by “School Advancement” 1. Recruiting 2. Retaining 3. Reputation 4. Relationships 5. Revenues Aka The Path to Sustainability!
  8. 8. R(eturn) O(n) I(nvestment): Challenges to Answering “the ROI Question”  Lack Evidence-Based Practices  The Alaska Pipeline Dilemma  Some Returns are Qualitative   How much is one more denied application worth? Diversity? How does one measure the value of “loyalty”? How do we know if a parent satisfaction survey will improves retention? Common Problem: Sub-optimal allocations due to mis-framing “If we pay $125,000 for a branding initiative, how many new students/gifts will it produce?” VERSUS “Given a $125,000 budget, what allocation across multiple strategies will yield more students/gifts?”
  9. 9. Customers’ Assessment of Relative Value Drives Demand Value = Perceived Benefits Perceived Costs •The higher the perceived value, the higher the probability of purchase. •If benefits do not keep up with costs, value erodes. For further discussion see readings for draft of JTW’s chapter in NAIS book entitled “Affordability and Demand”
  10. 10. Lower  Perceived Benefits  Higher Competitive Perceived Value Space C D Be tte r RE LA TI VE B X i qu E en al v e lu a tV Which letters correspond to the following: • • W or se F Urban public? • E VA LU E Suburban public? Selective magnet? •Leading • independent? 2nd tier independent? Must have huge endowment? ;-) • A Low Perceived Cost  High • What is area ‘X’?
  11. 11. Primary vs Secondary Demand Primary Demand: 1. • • Admissions: Will the child attend any private school? (NOTE: Parent is primary decision-maker) Fundraising: Will I make a donation for any purpose this year? Secondary Demand: 1. Admissions: Among the choices of private schools, which one will the child attend? (NOTE: Student and parent choose) • Fundraising: I’ll make donation, but to what purpose? Focus on growing share, not creating primary demand. e.g. Not “why a boys school” but rather “why our boys school” •
  12. 12. Concept of Distinction: What is an independent school?  Shared characteristics/benefits distinguish IS as a category from other education options:  Students are selected, and can be de-selected  Expensive  Shared values, such as college prep  Teaching/education is better  Classes are smaller  Safe  Independent NOTE: NAIS has completed surveys and focus groups about perceived benefits of independent schools and which ones differentiate the category from public and religious.  But these do not distinguish ISs from one another
  13. 13. Strongly favor IS Favor IS Not Distinctive Favor Public Important features believed more true of Public 80% Important features believed more true of ISs High quality teachers 70% 0 Challenge students Keeping students mo tivated and enthusiastic P revent drug /alco ho l use 0 0 Suppo rt climate that say it is OK to study and excel M aintaining discipline 0 60% 0 0 Preparing academically fo r co llege 0 0 0 (% of 9 or 10) 0 50% A dequate to o ls fo r learning (co mputers) Preparing students fo r life and a career Teach values and manners Importance NAIS has done public opinion polls (this from 2000, a replication a couple years ago), and focus groups with high income families, both focused on perceptions of ISs 0 Graduating wellro unded students 0 A ttending to the needs o f learning disables Enco uraging parents to participate 0 Keeping class size small 0 0 Creative and respo nsive to change Individualized attentio n to students 0 Offering students o ppo rtunities to be leaders 40% Enco uraging mo ral, spiritual develo pment Range o f cultures, races/ inco me gro ups 0 0 0 Pro grams in music and the arts Helping students mature so cially 0 0 Having students invo lved in co mmunity service activities 30% 0 0 Being visible in the co mmunity 0 Invo lving students in athletics and spo rts Less Important features believed more true of ISs M aintaining bo nds with it graduates 20% 0 7:1 6:1 5:1 4:1 3:1 2:1 1:1 2:1 3:1 4:1 Less Important features believed more true of Public
  14. 14. The Marketing Mix: The Tools Used to Design Value Demand is determined by how the offer to the market is designed; how the offer is perceived from the customer perspective is one definition of brand. Promotion People The 5Ps…imo THE The 5Ps…imo THE most important of most important takeThe 4Ps (+1) takeaway from the away from the The MarketingitMix Institute because it is Institute because is the foundation of the foundation of strategic marketing strategic marketing planning planning
  15. 15. Seller’s 5P View <---> Buyer’s 5C View  Product  Customer Solution  Price  Cost  Place  Convenience  Promotion  Communications  People  Contacts (Community)
  16. 16. Imagine you are to design a fine restaurant ….. What features or characteristics: * Do customers expect? * Would undermine the offering, or brand?
  17. 17. Overview of the Marketing Mix Elements Product/Program Pricing Place/Channels/Access Promotion People The Red Room Paradox, and Organizational Silos, are Two Barriers to Good Marketing
  18. 18. Product/Program  = the “bundle of benefits”  Special challenge of being a service e.g.  Intangibility  Maintaining quality and consistency of people  Importance of Differentiation  e.g recent trends toward “centers”, brand-think  Some benefits differ by segment, or change over time  e.g. the nature vs rigor as example of mass communication problem; why major donor asks are customized
  19. 19. Price Monetary and Non-Monetary Costs  Monetary e.g.,  $$$ cost  Opportunities foregone  Interest  College 529 savings  Non-Monetary e.g.,  Energy  Inconvenience (e.g. lack of transparency on cost)  Time  Retirement  Waiting  Other purchases  Distance  Psychic risk  Worry  Embarrassment  Fear  Fairness (e.g. to sibling)
  20. 20. Even the Simplest Notion of ‘Price’ is Complex in School Context A K-12’s Situation in Mid-August: Tuition is $20,000 14 openings: 2 in 11th, 5 in 10th, 7 in 9th No more applicants likely to appear Financial aid budget of $300K is committed 2 good applicants to the 9th, the 10th and the 11th grades each qualify for $10,000 in FA Superior ASSIST scholar for 11th grade (1 year only) is available, requires a full scholarship What would your school do?
  21. 21. A College’s Strategy for Shaping Perception Using Price and Promotion: What is the Parent/Student Perception of these Offers as Would Be Presented in Letter of Admission? College A’s Offer $30,000 Tuition $7,500 need-based grant College B’s Offer $30,000 Tuition $2,500 need-based grant $5,000 merit scholarship 1. How do the parents’ net costs, and the school’s net revenue, of the two offers compare? 2. Which one do parents talk about at the cocktail party?
  22. 22. Place Channels, Convenience, Access/Policies Admissions Referral Channels Summer, gifted programs Teachers Feeder school Education consultant Alumni referral Parent Coaches Website On campus events Directory Information Website sources Website ADMISSION OFFICE News
  23. 23. Other Place Factors Strategic design, or merely “cuz we’ve always done it that way”?        Location Transportation Method of inquiry Method of application Letters of recommend Testing Interview scheduling       Phone access Policies (sibling, legacy, financial, etc.) Paperwork requirements Selectivity criteria On-line classes School calendar Strategy Examples: 1) Burroughs School: adds bus route to distant hi-income area 2) Stuart Hall: Decides to not limit test requirements to SSAT 3) Westover: Encourages on web post-deadline applications 4) Cheshire: Shifted to on-line giving/auctions to allow participation of int’l fams
  24. 24. People The job comprises more than expertly running the cash register Selection (skills, style, accents) Training, indoctrination Service expectations Rewards, motivation Development Leadership Engaged, informed
  25. 25. Promotion Strategy categories comprising promotion Advertising (e.g. direct mail Sales Promotions (e.g. merit program) Events (e.g. reunions, fairs) Web-based (e.g. adwords, social media) Print (e.g. brochures) Publicity, Media Relations “P”=Communications will be addressed tomorrow
  26. 26. Marketing Mix Case in Groups
  27. 27. Sample of Questions the Exercise Provokes  No Magic Bullet? OMG! Now what!  With so many possibilities, how does one decide which are best?  Since the school has so little bandwidth, do you increase bandwidth, or reduce the plan to the bandwidth?  How does one ensure that choices are consistent and synergetic?  Since actions require more than one person, how does one ensure all are on same page?  How does one get continuity of progress and accountability?
  28. 28. End of the Principles of the Business Discipline of Marketing Recommended Books: Marketing Management, Kotler and Keller Long the leading business school text, the one the marketing champions on your board used in grad school. THE book for getting the principles down, but will require the non-professional to translate to the business of schools. Strategic Marketing Management for Educational Institutions, Kotler and Keller Done in 1995, it is a bit dated, but still good for seeing marketing translated to education NAIS Handbook on Marketing Independent Schools New marketing book edited by Kathy, lead chapter by Jeff. Competing for Students, Money, and Reputation, CASE, Larry Lauer CASE offers several college-focused books on marketing-related topics. In the college world the term ‘advancement’ is often used instead of marketing to label an integrated marketing model.
  29. 29. So the “answer” for this particular school….. 1. Focus on building MS enrollment, LS will follow 2. Make more acceptable to broader Jewish market
  30. 30. Example of How the Marketing Mix Framework Surfaced Strategies for Inclusion in the “Blueprint”
  31. 31. Program/Product  Make a jewel of the middle school  Build on technology strength  Prof develop re brain research (Dweck’s mindset)  Create distinct MS space  Feature MS leadership  Align more with independent schools  Development “ask” for laptops  Offer choices to appeal to “less Jewish”  Hebrew or Spanish  Spring trip: Israel or DC
  32. 32. Pricing  Transition to market-appropriate tuition  Uncouple from other campus’ rate  Set relative to overlap competitors  Graduate rate by grade  Adopt SSS and adhere to recommendations  But net tuition revenue mentality (e.g. revenue reporting)  Customize annual giving for this campus
  33. 33. Promotion/Communications  Message behind the markets  Split website of the two campuses  Separate middle and lower school  Raise visibility among high income, Jewish- affiliated fams (eg direct mail)  Feed parents and parents of alumni with news of progress  Distance identity/signage from JCC
  34. 34.  Talk about high school and college successes  Develop 2 year communications plan  Clarify distinctions  Create new materials  Revise the website  Boost staffing 2 days/week
  35. 35. Place/Process/Accessibility  Test bus service to XXXX  Reduce barriers to application  Accept public school test scores  On-line application  Shift to opt-out re-enrollment contract  Form committee to explore new location
  36. 36. People  Create speaker series for 2011-12 (3x year)  Adjust to “more American” school culture  Adopt NAIS governance principles  Give assistant head higher profile  Engage faculty on goals and roles
  37. 37. After 2 Years….  193 enrolled compared to 169 last year (+15%)  57% of new students are FP, compared to 42% of all students  Tuition revenue: up 13%  Average tuition per student: up $733  Initial year 12 new students joined MS (never happened before…all chose Spanish!)  Permitted 6th grade to split to 2 smaller sections
  38. 38. Extra Slides Initial several are included to demonstrate that in Marketing, quality service is designed and intentional. As In Search of Excellence will show. Also included are a couple slides about discounting and net tuition revenue. Follow-up with Jeff, if interested.
  39. 39. Key Dimensions Underlying Strong Service Relationships  Tangibles: Appearance of facilities, equipment, personnel  Reliability: Perform service right the first time, consistently, fairly  Responsiveness: Willingness to help customer and to provide service  Competence: Knowledge and skill of employees Adapted from Berry, Parasuraman, and Zeithaml
  40. 40.  Trustworthiness: Credibility, honesty, safety  Empathy: Caring; individualized attention  Courtesy: Friendliness in contacts  Communication: Keeping customers informed in language they understand; listening to what they say
  41. 41. 6 Questions for Managing Quality 1. Do we strive to present a realistic picture of our service to customers? e.g. in college counseling? 1. Is performing the service right the first time a top priority? e.g. missing teacher comments 1. Do we communicate effectively with customers? e.g “I only hear from them when they want money”
  42. 42. 4. Do we create opportunities to surprise? e.g. return call instantly; call on first day of school 5. Do staff regard service problems as opportunities to impress customers? - building equity in advance 6. Do we evaluate and continuously improve performance against customers’ expectations? - where is this a topic of discussion?
  43. 43. Rise in Discounting Strategies  Merit Awards, Discounts, Fire Sales…  Net Tuition Revenue Management  Shift in focus from allocating a fixed FA budget, to maximizing revenue per spot  In traditional model, once FA budget was expended, no more aid was awarded, even if a space was available  Bump in current family need shrunk budget for prospects  The thinking of NTR is essentially: If I have a space, rather than leave it empty, by offering a few thousand dollars can I attract a family that will pay the balance of the tuition, thus “netting” this additional revenue?
  44. 44. Some Principles of NTR and Discounting  It is for the selective, not common situation  Be sure you study where it ends-- there is considerable risk of eroding your, and the market’s, pricing (imagine a website where parents are posting their deals! Or you are auctioning spots on e-Bay)  It is preferable to use only in your school’s latest grades (so you carry the discount for as few grades as possible)  It is better if you can erect fences so few current families qualify (e.g. left-handed, red-haired students) BEWARE: In marketing, discounting is the last thing one does…it is cocaine.
  45. 45. Selected Pricing Issues  Lack of transparency “We offer lots of financial aid” but in reality “We don’t meet full need” plus “We won’t tell you the cost until after you’ve incurred huge non-monetary costs.” In one school’s study of inquiries not applying we found that about half those reporting incomes $75-$100K did not think they would qualify for aid.  The more one pays, the more one expects  Commodities (undifferentiated services) cannot command high prices  High price as cue to quality dilemma For every $1 increase in tuition, family must earn $3.44 to remain full-pay – NAIS/SSS  Tuition level trades off against quality of students
  46. 46. Other pricing issues given the current economic environment….  The faster tuition is raised at rates higher than family income growth, the sooner the full-pay market will shrink to near-zero.  Reality/feeling of less being less well-off increases perceived costs Younger families particularly affected?  Parents assess multi-year and multiply by number of children, whereas schools think year-at-a-time for a single child: The risk of tuition increases in the future is part of the buying calculus
  47. 47. A College’s Strategy for Shaping Perception Using Price: What is the Parent/Student Perception of these Offers as Would Be Presented in Letter of Admission? College A’s Offer $30,000 Tuition $7,500 need-based grant College B’s Offer $30,000 Tuition $2,500 need-based grant $5,000 merit scholarship 1. How do the parents’ net costs, and the school’s net revenue, of the two offers compare? 2. Which one do parents talk about at the cocktail party?
  48. 48. Differentiation: Position Guides Strategies Points-of-difference (+PODs) enhance one IS’s relative value Product/Objective Reality Market’s Perception Relative to Alternatives + Point of Difference Strength Point of Parity Shout it! Reveal it! (e.g. college stats; lower cost; innovative) (e.g. global/international, transportation avail) - Point of Difference Fix the perception (e.g. college counseling, complex admissions process) Weakness Unmet expectations (e.g. technology) Be thankful Fix the (e.g. teacher experience) program (e.g. sciences; sibling policy)