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Principles of Marketing Management

by: Malvina White Jr.

Principles of Marketing Management IBM 301

Malvina White Jr.
CSU Pomona
GPA 3.92

Michael Assumma

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Michael Assumma
Class Notes
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This 13 page Class Notes was uploaded by Malvina White Jr. on Saturday October 3, 2015. The Class Notes belongs to IBM 301 at California State Polytechnic University taught by Michael Assumma in Fall. Since its upload, it has received 34 views. For similar materials see /class/218254/ibm-301-california-state-polytechnic-university in International Business at California State Polytechnic University.

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Date Created: 10/03/15
What is a product Anything offered for attention acquisition use or consumption that might satisfy a need or want Products are physical objects services person places organization and ideas A Product exists on 3 basic levels Core product what is the buyer really buying The core product refers to the use benefits or problem solving service that the consumer is really buying when purchasing the product Actual product the tangible product or intangible service that serves as the receiving core product benefits quality features styling brand packaging Argument product consist of the measures taken to help the consumer put the actual product to use installation delivery and credit warranties and after sale service Attributes of the perfect product fulfills a need or want Has either a niche market appeal or a mass market appeal has at least a 21 margin 51 or higher is optional Has a high perceived value Must be replenished or repurchased often s easily up sold or cross sold we vesz Has a related back end product Product Life Cycle ekaoucr quotmm GROWTH wMTu tYY VDLWE nsvztaemem 5 arms Sales Pm ts 0 TIME chLwE Degmmng te end The PM rs drvrded rrrte ve majur stages a Preduet Devetepment Market tntmdtretrerr 0 Market 3th 3 Market Maturrty o SatesDeetrne 1 rmpromng and updatrng product Mes rs crucrar rortke successror any orgamzahon Farrureror an The process or These stages Mu be drscussed orrerry oerou Stage 1 Idea genevallon Product Deveror Some sources rrrcrude 39thhm Me companyr e emproyees 39Compemovs Customers Distributors Supplies and others Stage 2 Idea Screening This process involves shifting through the ideas generated above and selecting ones which are feasible and workable to develop Pursing non feasible ideas can clearly be costly for the company Stage 3 Concept Development and Testing The organization may have come across what they believe to be a feasible idea however the idea needs to be taken to the target audience What do they think about the idea Will it be practical and feasible Will it offer the benefit that the organization hopes it will or have they overlooked certain issues Note the idea and concept is taken to the target audience not a working prototype at this stage Stage 4 Marketing Strategy and Development How will the productservice idea be launched within the market A proposed marketing strategy will be written laying out the marketing mix strategy of the product the segmentation targeting and positioning strategy sales and profits that are expected Stage 5 Business Analysis The company has a great idea the marketing strategy seems feasible but will the product be financially worth while in the long run The business analysis stage looks more deeply into the cashflow the product could generate what the cost will be how much market shares the product may achieve and the expected life of the product Stage 6 Product Development Finally it is at this stage that a prototype is nally produced The prototype will clearly run through all the desired tests and be presented to the target audience to see ifchanges need to be made Stage 7 Test Marketing Test marketing means testing the product within a speci c area The product will be launched within a particular region so the marketing mix strategy can be monitored and if needed be modified before national launch Stage 8 Commercialization lfthe test marketing stage has been successful then the product will go for national launch There are certain factors that need to be taken into consideration before a product is launched nationally These are timing how the product will be launched where the product will be launched will there be a national roll out or will it be region by region MARKET INTRODUCTION STAGE A Characteristics Sales are low Costs high per customer Profits negative Customers innovators Competitors few B Marketing Ob39ective create product awareness and trial C Marketing Strategy Product basic offering Price use costplus tends to be on high side Distribution build selective distribution Advertising build product awareness among early adopters and dealers Sales Promotion use heavy sales promotion to entice trial The company has to decide how much money to spend on promotions bearing in mind limited resources Demand must be calculated carefully in order to estimate units that can be sold at the correct price A lot of money was spent on research and development so the aim is to recover costs as soon as possible and start making a pro t Fifty percent of new product ideas fail The company must do ongoing consumer research and stay in touch with customers to evaluate reaction to the new product MARKET GROWTH STAGE A Characteristics Sales rapidly increasing Costs average per customer Profits rising Customers early adopters Competitors growing number B Marketing Ob39ective maximize market share C Marketing Strategy Product offer product extensions services and warranties Price to penetrate market Distribution build intensive distribution Advertising build awareness and interest in the mass market Sales Promotion reduce to take advantage of heavy consumer demand Initially a few customers only accept the new product Word of mouth promotion encourages more people to purchase Sales increase rapidly and the company starts making a pro t Competitors enter the market with similar products You may loose sales to competitors especially if improved or new varieties are introduced by competitors a small car using even less petrol offering more attractive payment terms see competitive advantage Total sales in the industry increase Hold on to and increase market share Focus on building relationships with customers ensure consistent quality of your product its availability and service backup Start a customer newsletter or have an annual customer day MARKET MATURITY STAGE A Characteristics Sales peak Costs low per customer Pro ts start to decline Customers middle majority Competitors stable number but beginning to decline B Marketing Ob39ective maximize profit while defending market share C Marketing Strategy Product diversify brands and models Price price to match or beat competitors Distribution build more intensive distribution Advertising stress brand differences and benefits Sales Promotion to encourage brand switching Competition is erce sales grow steadily and level off Profits start declining more money is spent on promotions discount offers coupons 2 for 1 price deals competitions Some competitors start price cuts New firms still try to enter the market This can be very expensive as newcomers need to capture market share from companies already in the market The new company may go for a niche market a speci c market segment not catered for by other competitors eg exclusive fashion sold on a party plan basis not in boutiques Most customers in the target market will be using the product Sales may only increase in line with population increases Update and modernize the product improve the packaging add new ingredients add more raisins to our breakfast cereal mix and offer price deals month end special back to school offers Reduce the number of target markets you are aiming at rationalize your product line or mix SALES DECLINE STAGE A Characteristics Sales declining Costs low per customer Profits declining Customers laggards Competitors declining number B Marketing Ob39ective reduce expenditure and milk the brand C Marketing Strategy Product phase out weak items Price cut price Distribution go selective phase out unprofitable outlets Advertising reduce to level needed to retain hardcore loyalists Sales Promotion reduce to minimal level New product ideas start a new product life cycle the electric vehicle Customers now start buying the new product the innovators first the early adopters etc Sales start dropping There comes a time when the company realizes that it makes no financial sense to keep the product in the market Concluding remarks Marketing oriented companies put new products on the market in time to have profitable products on sale when old products die and come off the market McDonald s Corporation is the world s largest chain of hamburger fast food restaurants serving nearly 47 million customers daily In addition to its signature restaurant chain McDonald s Corporation held a minority interest in Pret AManger until 2008 and owned the Chipotle Mexican Grill until 2006 and the restaurant chain Boston Market until 2007 The company has also expanded the McDonald s menu in recent decades to include alternative meal options such as salads and snack wraps in order to capitalize on growing consumer interest in health and wellness Each McDonald s restaurant is operated by a franchisee an af liate or the corporation itself The corporations revenues come from the rent royalties and fees paid by the franchisees as well as sales in companyoperated restaurants McDonald39s revenues grew 27 over the three years ending in 2007 to 228 billion and 9 growth in operating income to 39 billion McDonald s primarily sells hamburgers cheeseburgers chicken products french fries breakfast items soft drinks milkshakes and desserts In response to obesity trends in western nations and in the face of criticism over the healthiness of its products the company has modified its menu to include such healthier alternatives as salads wraps and fruit Otherwise McDonald39s the world s largest and fastest growing global restaurant chain uses recruitment and training policies with practices that are designed to attract identify develop and retain the high caliber of sta its line of business requires Atypical McDonald39s restaurant employs about 60 people Most employees are paid by the hour and are referred to as crew members39 Their primary responsibility is to prepare the food serve customers and carry out tasks for the ef cient running of the restaurants Each McDonald s restaurant is structured as an independent business with restaurant management r quot 39 for quot J quot inventory control community relations training and human resources McDonald s is the leading global foodservice retailer with more than 31000 local restaurants serving more than 58 million people in 118 countries each day More than 75 of McDonald39s restaurants worldwide are owned and operated by independent local men and women Company History McDonald s history is a long story to describe McDonald s has existed about sixty nine years to develop its business McDonald s is one of the leading restaurant chains in the world touching the lives of people every day and has literally changed Americans and nonAmericans39 eating habits The long journey of the burger brand started in 1940 when two brothers Dick and Mac McDonald opened the first McDonald s restaurant in San Bemardino California Initially they owned a hotdog stand but after establishing the restaurant they served around 25 items which were mostly barbequed It became a popular and profitable teen hangout In the late 1940 s Dick and Mac McDonald were searching for a way to improve their little drivein restaurant business in San Bemardino California In order to make increase their sales they invented an entirely new concept based upon speedy service low prices and big volume In 1948 the brothers closed and reopened the restaurant to sell only hamburgers milkshakes and French fries According to the information of the McDonald s history the major revenue came from hamburgers which were sold at a nominal price of 15 cents Word of their success spread quickly and a cover article on their operations in American Restaurant Magazine in 1952 prompted as many as 300 inquiries a month from around the country The restaurant gradually became famous and the McDonald brothers began franchising their restaurant in the year 1953 The first franchise was taken by Neil Fox and under it the second Mc Donald s restaurant was opened in Fresno California It was the first to introduce the Golden Arch design The quotGolden Archesquot on the sides became the model for the first wave of McDonald39s restaurants to hit the country The third and fourth restaurants were opened in Saginaw Michigan and Downey California respectively Roy Kroc s is a significant businessman who brought McDonald39s well known over the world He took over the McDonald39s Corporation franchise in 1954 and built it into the most successful fast food operation in the world Before becoming the partnership of the two brothers Kroc sold numerous mixers to many newly opened restaurants After he partnered with the McDonalds brothers he suggested that they franchise their restaurants throughout the country When they hesitated to take on this additional burden Kroc volunteered to do it for them Kroc eventually became frustrated with the brothers39 willingness to accept their chain having only a handful of restaurants In 1961 he purchased the company from the brothers The agreement was for the McDonald s to receive 27 million for the chain and to continue to receive an overriding royalty of 19 on the gross sales There were more history between Roy Kroc39s and the brothers after all However it is more important to know that how Ray Kroc operated McDonald39s more famous and began opening McDonald39s over the world Later Ray Kroc created a new kind of fast food with McDonald s implementing Henry Ford39s assembly line idea into his restaurants He also utilized standardization a business tactic that he used to make sure that every Big Mac would taste the same whether a person is in New York or Tokyo Kroc also knew for the most part what the people wanted which was standardized hamburgers Key History Time Line 1948 Richard and Maurice McDonald open the first McDonald39s restaurant in San Bemardino California 1954 Ray Kroc gains the rights to set up McDonald s restaurants in most of the country 1955 Kroc opens his first McDonald s restaurant in Des Plaines Illinois he incorporates his company as McDonald s Corporation 1960 The slogan quotLook for the Golden Arches is used in an advertising campaign 1961 Kroc buys out the McDonald brothers for 27 million 1963 Ronald McDonald makes his debut 1965 McDonald s goes public 1967 The company opens its first foreign restaurant in British Columbia Canada 1968 The Big Mac is added to the menu 1973 Breakfast items begin to appear on the menu with the debut of the Egg McMuf n 1974 The first Ronald McDonald House opens in Philadelphia 1975 The first McDonald s drivethru window appears 1979 The children s Happy Meal makes its debut 1983 Chicken McNuggets are introduced 1985 McDonald s becomes one of the 30 companies that make up the Dow Jones Industrial Average 1998 The company takes its first stake in another fastfood chain buying a minority interest in Coloradobased Chipotle Mexican Grill 1999 Donatos Pizza Inc is acquired 2000 McDonald s buys the bankrupt Boston Market chain 2002 Restructuring charges of 853 million result in the firm39s first quarterly loss since going public 2003 McDonald s sells Donatos in order to refocus on its core hamburger business S ervices McDonald s has provided many services but mainly about fast food parties For fast food service McDonald s has di erent type of menu they have breakfast menu happy meals They sell mainly burger with French fries Their burger are either beef chicken or fish burgers They are also famous for McNuggets which are chicken nuggets and salad For drink they provide many kind of drink from soda to milk or shake Recently they have created McCafe which provides more choices for beverages coffee Beside selling fast food they also provide a place for kid to come and play They have been place for many parties People can order for having parties at their place such as birthday parties It s mostly for kid s birthday parties Target Market McDonald s target market ranges from children to adults They get to children by promoting healthy eating education and exercising They also have kids meals and a play area in most McDonalds which is another attraction to target children Another way they target kids is locating McDonalds in shopping centers where adults will be shopping with their children like Kmart malls and plazas A survey among school children showed that 96 percent of them were able to spot out Ronald McDonald which shows the impact that McDonalds has had on children Adults are another target audience McDonalds has been around since the 1940 s so almost every adult knows what a McDonalds is It is a long time name brand that has been around for a while Since the economy is rough these days a lot of people are strapped for cash McDonalds has a Dollar Menu that include many items to meet these people s needs McDonalds also targets people who are in a rush and need a meal right away for a cheap price McDonalds is also located all around and convenient with a drive thru for those people who are in a rush McDonalds often has promotions such 2 Big Macs for 350 or 2 Egg McMuffins for 350 The target audience most often goes for the promotion when available which increases revenue during the promotion By sponsoring sports and other main athletic events such as the Olympics it shows how much McDonalds has reached out to people It also makes McDonalds look healthy in some fashion since they are sponsoring sports Its also apparent that McDonalds is trying to expand their target audience to people such as coffee drinkers starbucks They also seem to be trying to bring in other types ofpeople offering free wifi so people can hang out in hopes of selling food or drinks Market Description The Overall Market that McDonalds is a part of a group of restaurants called quotQuickservice Restaurantsquot The industry is segmented into 4 categories of companies National chains regional chains franchises and independent operators The industry includes large companies such as Burger King Taco Bell JackintheBox KFC and Subway Individual companies and restaurants also provide heavy competition in the industry by providing unique products and ability to serve local market needs In recent years with its development and popularity over the counter readymade food from grocery stores has come into the competitive landscape of the Quickservice Industry McDonalds also competes with consumer options outside the Quickservice Industry Full service restaurants supermarkets convenience stores snack shops and cafeterias all provide even more competition for the Golden Arches Industry sales are highly fragmented and the top 50 Quickservice Industry companies hold only about 25 of the industry39s sales SWOT Analysis Strengths o Relatively inexpensive Food 0 Well Established have been around for a long time 0 Diversity among their menu in other countries 0 Early adopters of healthy menu items 0 Charitable Company 0 The Monopoly game 0 Ahuge menu selection 0 A Dollar Menu 0 Their I m lovin it slogan 0 Employees must go to the Hamburger University for training 0 Are partnered with Coca Cola Co 0 Located in areas of major interest and seen as corresponding with those areas airports Theme Parks Tourist locations etc 0 Very strong brand name 0 Recognizable characters 0 Large target group 0 New stores almost 100 guaranteed to succeed 0 Ability to adapt when faced with criticism 0 Play Area for children 0 Global presence 0 Brand equity 0 Scale Nearest competitor in the US is half of McDonald39s size 0 Real estate portfolio 0 Solid identical store ID sales growth 0 Nation wide taste test winner of best french fries 0 Always on the right side of the street 0 Consistent advertising over the decades Weaknesses Food is unhealthy Customer Service isn t always great Failure to capitalize on the Iced coffee idea to compete with Starbucks Their Breakfast menu is only available until llam They have no vegetarian food They have Segregated Websites speci cally for black and Asian people High Employee Turnover Have not capitalized on the Organic food trend Many other similar competitors Negative image due to Fast Food Nation and other media sources Oversaturation of real estate in the US Heavy price competition in the fastfood industry Lack of product innovation Opportunities Capitalize on Iced coffee more Cater toward the new dining out generation Appeal to a higher standard of foodenvironment Endorse more products with the McDonalds logo Increase the hours of the Breakfast menu Setting up a rewards or points systems for eating McDonalds Offer overseas food in the US market due to the diversity in the US Provide food to appeal to people with allergies such a gluten free and peanut free products Going green 7 energy management improving packaging efficiency environmentally friendly refrigerants and partnering with Greenpeace for rainforest protection New store looks styles 7 McCafe coffee shop and forever young redesign Remodeling older stores Continue expansion in international markets Diversify portfolio ie similar to what it did before divesting Chipotle Boston Market Product innovation ie coffee healthier food choices Charity 7 The Ronald McDonald House provides a cheap or free place to stay for parents of sick children Over 250 worldwide in 48 countries Funded primarily by donations and Joan Kroc founder Ray Kroc s wife Threats Over Marketing to Children creates hostility towards the Company Possible Food contamination Possible injury in the Play Places The Unhealthy View of their food and its high publicity A bad economy Threats from local competitors in different countries Many competitors for same costumer Subway Burger King KFC OOOO Taco Bell 0 Etc Criticism 7 contribute to obesity and other health problems Brand equity at risk Selloff of international operations to franchisees means company can t control operations to same extent it did in the past Changing eating habits in the US towards healthy organic food FDA amp government regulation Strate gy Weaknesses 9 Strengths Food is unhealthy Research healthier food choices and offer a healthy burger Customer Service isn t always great Employ more mystery shoppers and random evaluations to ensure customer service is maximized Failure to capitalize on the Iced coffee idea to compete with Starbucks Create a stronger marketing campaign for the Iced Coffee Offer more deals to promote purchase of Mc Coffee products Their Breakfast menu is only available until llam If cost effective follow Jack in the Box and do an all day breakfast menu They have no Veggitarian food Design and implement a vegetarian menu They have Segregated Websites specifically for black and Asian people Create websites for individual countries not individual ethnicities High Employee Turnover Create more mobile employment options increase worker benefits or create some kind of system that makes being a McDonalds worker not a joke Have not capitalized on the Organic food trend Use organic and locally grown products to support the environment and local farmers Negative image due to Fast Food Nation and other media sources Listen to the consumers and add healthier food choices Threats 9 Opportunities Over Marketing to Children creates hostility towards the Company Market new healthy choice food to kids and make it cool to be and eat healthy The Unhealthy View of their food and its high publicity Use the consumer awareness of the unhealthy food to drive the creation of a healthier more desirable food A bad economy Offer incentives and perks during times of nancial crisis This will help maintain customer loyalty and give others a reason to dine at McDonalds Threats from local competitors in different countries This is an opportunity to expand into different food markets in foreign countries to try and create more market dominance It would be particularly relevant in large areas like China Many competitors for same costumer Subway Burger King KFC Taco Bell Etc More competitors crate an opportunity for McDonalds to be the best of a larger group of companies Ifthey are better than 15 competing companies instead of 5 it makes them look better and stronger Criticism 7 contribute to obesity and other health problems This creates an opportunity to be more health conscious and be one of the first fast food companies to spear head the transition from unhealthy to healthier food Changing eating habits in the US towards healthy organic food McDonalds has the opportunity to be on the forefront of healthy fast food eating Using organic products and renewable resources to please local communities FDAamp government regulation Ahealthy FDA approved menu could be created and advertised as such With the support of the FDA the view of McDonalds food would change dramatically OOOOO Conclusion McDonald s is the largest hamburger fast food chain in the world The company has a vast market in which to work in and has set itself up to be a popular choice among any demographic This coupled with the fact that McDonald s has over 31000 restaurants in 118 countries makes it easy to see why McDonald s has continued to dominate the fast food market The company s weaknesses are easily turned into strengths and its threats can easily become opportunities Whether it s offering healthier food choices or improving their customer service It won t be long before McDonald s has you saying I m loving it


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