This notes are to help understand ourselves and people. How our behavior is influenced by society and other factors. How do we use the different things to market…socially and psychologically. We will try to understand the different theories of sociology, psychology, etc and see the strategic application of that into the marketing sphere.

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In books that you may have read and classes you make have taken, the instructor may have tried to convey to you “what is marketing” but may have never really stepped back to ask “what is marketing thinking”?

What are you doing on this blog and why are you here? Perhaps you’re here to think like a marketer. Acquire the mindset, which is different from that of someone who is in operations, management, engineering, etc. When you go to school, what you are really doing is acquiring a certain type of thinking. Another mindset is to learn how to DO something.

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What is marketing thinking?

Something about competition perhaps? Analyzing data? Thinking how others think? Psychology? Come up ways to create demand?

If someone were to ask “What is thinking?” and you were to answer in one word, what would that word be? – “Questioning!” So if you stop questioning, do you stop thinking?

A lot of things we do minimize the need to think, thus we think less and less. We become “cognitive misers”. When we go to work or school every day we tend to do the same thing the same way every time. Why?

Marketing thinking involves a particular type of question. Marketing thinking “occurs when someone is questioning how to compete through a targeted market. It is an active, cognitive engagement centering on out thinking the competition (strategically) through the means of marketing” – Hill, McGinnis, & Cromartie 2006

You are actually engaging in marketing thinking when you ask yourself if its high involvement, low involvement, how you can compete and engage the target market. You are competing through a group of people to what you call the target market.

What are you doing and what are you engaging in?

The target market is always a moving target because the target is always changing and you are always changing thus you are always going though this questioning stuff to get good at it.

Additionally, the questioning could involve the generation of alternatives (creative thinking), or can be about the evaluation of an alternative (critical thinking), or evaluating the outcomes of one’s actions (reflective thinking). In all case, questioning (thinking) is involved through the marketer’s curiosity when the questioning stops so does the thinking.

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What is marketing?

Depending on how you define it, it will determine how you engage in it. If you have a narrow definition, you engagement will be very constrictive. If you define it in a deeper and broader way, your thinking and engagement will be far broader than that of your competitors.

Every so many years people would realize that certain things aren’t working any more, thus they step back and see what would work and what wouldn’t work again. Some will say that marketing has something to do with relationships. What is it about relationships that its of great interest to marketers? When there is a relationship, people will defend it in the face of attacks.

Marketing is about relationships, facilitating them, internally and externally. To do this the organization needs to be structured in such a way that their internal relationships drives them to building relationships outside of the organization.

Ultimately as marketers were trying to persuade. We would be learning the art of persuasion through consumer behavior. We take from what we’ve learned from our trials and errors and look onto the marketplace and see what’s going on with consumers. When you look into the marketplace, what do you see? The marketplace isn’t homogeneous. It’s made up of individuals, groups of people who have different interests and likings. (*note…sociology is for the society, psychology is for the individual).

When looking into a marketplace, there are a set of marketing logics. What do you do first, second, third? In this case what do you do first? If as a graduate some junior comes to you and asks, “What do I need to do first?”…what do you tell them? When you’re looking at the marketing place what do you look for first? – Who should we market to…and…why should we market to them?

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Segmentation Analysis

You’re looking over at the market place, you see the different groups of people, you want to decide which one of those groups you want to market to. You do what is called segmentation analysis. From this comes your target market.

There are four criteria in a segmentation analysis:

• Measurability – Demographics…the ease at which you can identify one segment from another. This may pertain to gender, age, where they life, etc.
• Accessibility – What media do they consume? The ease in which you can communicate to one segment over another. Say you have one segment that gets info via newspapers, and another segment via email.
• Substantiality – What is the return of going after one segment versus another? This is also determinant on how much you put into it.
• Unique Responsiveness – As you look out into the market place you are finding how receptive one segement is to another based on what you have to offer them? You may want to see the different attitudes that one segment may have over another.

Logic Step #1 - DO that segmentation and analyze it! — What criteria do you start your analysis with? Which of the four do you start with first? The best one to start off with is “Unique Responsiveness.” See which segments respond positively and negatively. Then you ask “WHY do they respond to it that way?” When you see the unique responses, maybe you will look at why a certain group responds positive as opposed to another group that is a triple negative. — Segmentation analysis is used to identify the most attractive segment from the organization’s perspective.  This segment then becomes known as the target market.  

Logic Step #2 - Once a target market has been chosen, positioning can be conducted which includes identifying the relative perceptual positions of products/services within the minds of the target market.  This type of analysis also provides competitive information from the target market’s perspective. 

Logic Step #3  - With the positioning information at hand, a marketer has information available to determine what the marketing mix needs to do.  In other words, it is at this point a marketer has the information to start thinking about developing an appropriate marketing mix.  In this context, the marketer can also assess the likelihood of achieving certain marketing objectives. What does a Marketing Strategy consist of in terms of its components?

• Target Market – once this is identified we setup our…
• Offering – this is the marketing mix. (4 Ps). Price, place, product, and positioning. This strategy is then used to meet the objectives…that is your…
• Plan - You begin to ask questions on how to compete in that target market.

After you have that you being to position your stuff. This is via advertising and promotions. POSITIONING. Only when you have the target market, can you begin to position your brand. If I’m going to engage in positioning, I need to see things via the consumer’s prepsective. Take the marketing mix and turn it into the consumer’s meal:

• Product >> Customer Value
• Price >> Cost
• Place >> Convenience
• Promotion >> Communication

Logic Step #4 - Relationship and competitive advantage. By developing particular types of relationships with our target market (ie; brand loyalty), we have the potential to develop a competitive advantage by which the target market would be resistant to competitive actions.

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Review

Marketing Logic Steps #1-$4 — to build a marketing strategy you need to

• Do the segmentation and analyze it to find out target market
• Positioning the product
• Load up the marketing mix
• Build and keep a relationship with the customer and hold a competitive advantage

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An Analogy

Imagine there were seven blind scientists touching an elephant. Each one had a different part of the elephant. One had the feet and would be describing it as hard and rough. Another had the tails and is describing it as always moving around and thin. Another has the tusk and describes it as smooth, hard, and curvy.

When it comes to all the different perspectives of consumer behavior, each theory is like a different scientist. The different theories hit upon areas of psychology, anthropology, philosophy, sociology, statistics, etc…each on is a blind scientists that we use to describe consumer behavior (elephant).

Each one is trying to describe the same thing but from a different area. In essence were trying to describe human behavior, which is a very challenging thing. Even understanding ourselves can be a challenge. A lot of the research is on incomplete information.

Competing on Differentiation

When you compete this way you have to ask yourself “what will make our product or service better/unique/different from the competition?” Effective OMs (operation managers) assist in defining everything about a product or service that will influence the potential value to the customer. This may be the convenience of a broad product line, features , or a service related to the product.

There is also an idea of “experience differentiation”, which is to engage the customer-to have them use each of their five senses so they become immersed and perhaps even an active participant in the product. Restaurants like Hard Rock Cafe like to differentiate themselves by providing an “experience” engaging the customer with food, music, and a memorable environment.

Competing on Cost

Low-cost leadership entails getting maximum value as defined by the customer. The idea in this case is to utilize any and all resources effectively with least expense.

Competing on Response

Dell is an excellent example of this. They started off as a means of being custom and responsive to the customer. They started via custom phone orders, which later evolved to internet orders, and they were the first ones to do that effectively.

There are three areas where a company want to compete on response:

• Flexible response may be thought of as the ability to match changes in a marketplace where design innocations and volumes fluctuate substantially.
• Reliability of scheduling is another aspect. One can have high labor costs, but if their reliability and scheduling is on top, this will then be communicated to the customer and value will be understood in their minds.
• Quickness is a very important aspect. The faster an OM is on design, production, and delivery the more results the company will have.

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In practice these three concepts; differentiation, low-cost, and response; are often implemented via six specific strategies:

1. flexibility in design and volume
2. low price
3. delivery
4. quality
5. after-sale service
6. broad product line

Through this OM can increase productivity and generate a sustainable competitive advantage.

Mission

An organization’s mission is its purpose–what it will contribute to society.

Example mission statement from Hard Rock Cafe:

Our Mission: To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family an fun, healthy, and nurturing work environment while ensuring our long-term success.

You don’t have to make the mission statement as elaborate as Hard Rock did. One of the reasons they do it like that is to be completely safe from employee complaints and political reason. Hard Rock is simply about “Food, Fun, and Rock’n'Roll”

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Strategy

This is the organization’s action plan to achieve the mission. Each functional area has a strategy for achieving its mission and for helping the organization reach the overall mission.

There are three major strategies that companies use:

• (better) Differentiation – making yourself different from others.
• (faster) Cost Leadership – ie: lowest cost
• (cheaper) Quick Responsiveness – You provide the customer with what ever they need.

Before you can decide on which strategy you can use, you need to do a SWOT analysis of your company and team. You can follow the steps to a SWOT analysis:

STEP ONE
Identify the people you want to get feedback from. Include people from as many of the following categories as possible:

• Employees
• Vendors
• Clients
• Investors
• Mentors or other “friends of the business”

STEP TWO
Send out an e-mail requesting feedback on your business. You might want to include the following items:

• As part of our ongoing effort for continuous improvement, we are conducting a SWOT Analysis that will look at the strengths,weaknesses, opportunities and threats relative to our business
• We respect your opinion and are asking for your feedback
• Please return your feedback by (date)
• Thank you for your time and your honest feedback. It is invaluable to me.
• Please answer the following questions:
  • What are the strengths of (company name)?
  • What are the weaknesses of (company name)?
  • What are the opportunities available to (company name)?
  • What are the threats to (company name)?

Generally, strengths and weakness are internal to the organization. Opportunities and threats are most often external factors.

STEP THREE

Summarize the feedback into a Summary Document. Have four different sections: Strengths, Weaknesses, Opportunities and Threats. Within each section, group comments together under specific categories. It can also be helpful to distinguish which comments come from people internal to the company (like employees) versus those that come externally.

STEP FOUR

Anytime you ask for feedback it is important to let the participants know you heard them. Thank them for their honesty. Summarize for them (at whatever level of detail you are comfortable) what you heard. If you have received honest feedback, you should have a clearer picture of your business than ever before. This is one of the most valuable ways you
can spend your energy. Let’s talk ROI! This is powerful stuff and it will lay the groundwork for the planning we will do in the next two sessions.

Take for example Volvo, considered a Swedish company, is controlled by a US company, Ford. The current Volvo S40 is built in Belgium on a platform shared with the Mazda3 (built in Japan) and the Ford Focus (built and sold in Europe).

• Reduce Costs - Many international operations seek to take advantage of the tangible opportunities to reduce their costs. Foreign locations with lower wages can help lower both direct and indirect costs. Trade agreements also help reduce costs. World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA) have been working in reducing tariffs over time to almost nothing. European Union (EU) has reduced trade barriers by standardizing common currency through the euro.

• Improve Supply Chain - Supply chains can often be improved by locating facilities in countries where unique resources are available. These resources may be expertise, labor, or raw material.

• Provide Better Goods and Services - We need an ever better understanding of differences in culture and of the way business is handled in different countries. Improved understanding as result of a local presence permits firms to customize products and services to meet unique cultural needs in foreign markets.

• Learn to Improve Operations - Learning does not take place in isolation. Firms serve themselves and their customers well when they remain open to the free flow of ideas. — – General Motors found that it can improve operations by jointly building and running, with the Japanese, an auto assembly plant in San Jose, California. This strategies allows GM to contribute its capital and knowledge of US Labor and environmental laws while the Japanese contribute production and inventory ideas.

• Attract and Retail Global Talent - They need people in all functional areas and areas of expertise worldwide. Global firms can recruit and retain good employees because they provide both greater growth opportunities and insulation against unemployment during times of economic downturn.

• Cultural and Ethcial Issues - One of the greatest challenges of operations going global is reconciling difference in social and cultural behavior. Issues ranging from bribery, to child labor, to environment, managers many times don’t know how to respond.

Below are different common forms of business organization with an small explanation of what they are. This is not legal advice, rather just an educational overview of the different types of business organization. If you wish to incorporate yourself as anyone of these types, I highly recommend that you seek out a lawyer for sound advice. Another place is to seek council is SCORE.

Before you read on, I found the following article and videos to be worthy of sharing: [video]

• [article] Starting a New Business with Bootstrap Funding
• [video] Building a Company
• [video] Starting a Business: What Structure Makes the Most Sense?
• [video] Startups: How Many Founders Should There Be?

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QUICK SUMMARY: What Business Structure is Best?

• Sole Proprietorship – You own the company and are responsible for both its assets and liabilities.
• General Partnership – You contract with one or more people to run the business with equal responsibilities and liabilities.
• Limited Partnership – Some of the partners in the partnership have less interest and liability in the company. In this type of partnership, there must be at least one general partner.
• Limited Liability Company – You structure the company so that you and the people with whom you are starting the company have less or limited liability.
• C Corporation – A traditional corporation that, when set up, leaves you with little or no personal liability.
• S Corporation – The liability aspect is the same as a C corporation. The difference is the way it is taxed. C corporations are taxed twice, once on the corporate level and again on the personal level. S corporations are only taxed on the personal level.

If you wish to know more details…read on below.

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Sole Proprietorship

A SOLE PROPRIETOR is someone who owns an unincorporated business by himself or herself. It is the most common and simplest form of business. The individual proprietor owns and manages the business, while also being responsible for it completely. Responsible for transactions, contracts, ect. There are no specific taxes paid by the company and the owner pays taxes on income from the business as if it is their own income. Many sole proprietorships are setup via person’s own funds and loans. Once business gets rolling the person may incorporate as a different structure to take advantage of benefits that come from that.

Advantages of Sole Proprietorship:

• A sole proprietor has complete control and decision-making power over the business.
• Sale or transfer can take place at the discretion of the sole proprietor.
• No corporate tax payments.
• Minimal legal costs to forming a sole proprietorship.
• Few formal business requirements.

Disadvantages of Sole Proprietorship:

• The sole proprietor of the business can be held personally liable for the debts and obligations of the business. Additionally, this risk extends to any liabilities incurred as a result of acts committed by employees of the company.
• All responsibilities and business decisions fall on the shoulders of the sole proprietor.
• Investors won’t usually invest in sole proprietorships.

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The next form of business, Partnerships, aren’t of just one type. Basically a PARTNERSHIP is a contract between individuals, who in cooperation contribute with knowledge, resources, activities, etc to the business and share in the profits.

If you are considering doing a partnership for your business, I think the following article is a worthy read: Top 10 Mistakes Businesspeople Make When Forming Partnerships

General Partnership

Partnerships are formed via currently existing relationships and connections. Paul Prescott, a partner of Arthur Andersen stated, “Generally, all partnerships have one common factor — a desire by each party to achieve a more advantageous business result by combining resources,“

A business or persons may want to consider a partnership for reasons such as, seeking additional capital for growth and form a partnership with a financier who will share in the profits of the business in exchange for cash contributions.

The “ideal” partner will vary. It depends on the particular business needs and objectives of the venture. Although a written document may not be legally required to establish a partnership, every partnership should have a controlling document or partnership agreement that establishes in writing how the partners will conduct business together.

Each general partner is deemed the agent of the partnership. Therefore, if that partner is apparently carrying on partnership business, all general partners can be held liable for his dealings with third persons. By default a partnership is terminated upon the death, disability, or even withdrawal of any one partner. However, most partnership agreements provide for these types of situations where the share of the departed partner is purchased by the remaining partners in the partnership.

In the USA, a partnership is a legal entity on it own, while in the UK it is not. I don’t know about other nations.

Each general partner has a legal right to participate in the business in management and control. Disagreements are settled by the involvement of the other partners. For anyone to become a partner in the business, it has to be agreed upon by all the partners of the business.

Limited Partnership

Limited partnerships are different general partnership in the area of role and responsibility. Limited partners provide capital and help arrange financing while not taking an active role in running the business. They do, however, receive a share of the profits for their involvement. The general partner in a limited partnership runs the operations of the business.

A limited partnership can be attractive for a limited partner who can provide funding but not expertise, and does not have the time to devote to being a hands-on part of the business. Taking on the financial risk of his or her investment, but not the liability risk, is also more attractive to a limited partner.

For tax purposes, a limited partnership works like a general partnership, in that it is a pass-through operation with profits passing through to the partners, who then include their allocated income on their personal tax returns. Limited partnerships are often formed to acquire, operate, and hold real estate.

Advantages of Limited Partnership:

• It is easier to attract investors as limited partners.
• This arrangement allows for general partners to use their expertise, make key decisions, and manage the business.
• Limited partners can leave the business or be replaced, without the need for the limited partnership to be dissolved.

Disadvantages of Limited Partnership:

• There are more filings, formalities, and state requirements with limited partnerships.
• General partners assume personal liability.

Limited Liability Partnership (LLP)

In this structure all partners have a form of limited liability, similar to that of the shareholders of a corporation. However, the partners have the right to manage the business directly, and a different level of tax liability than in a corporation. This sort of formation is great where investors want to take a greater role in management.

Although you’ll find many business fields using this structure, the LLP is an especially popular form of organization among professionals, particularly lawyers, accountants, and architects.

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The following business organization types are used mainly used in for-profit ventures. The CORPORATION can be classified as either a C-Corporation, S-Corporation, or a Limited Liability Company (LLC). Read on for details.

A corporation is defined as a legal entity or structure created under the authority of a state’s laws, consisting of a person or group of persons who become shareholders. The entity’s existence is considered separate and distinct from that of its members. The defining legal rights and obligations of the corporation are:

• The ability to sue and be sued
• The ability to hold assets in its own name
• The ability to hire agents
• The ability to sign contracts
• The ability to make by-laws, which govern its internal affairs.

Incorporating yourself can require a lot of paperwork and be complicated. You may want to get a lawyer to help you with this. Read Do I Need an Attorney to form a Corporation for more info. Once you’ve decided on whether or not you want to incorporate read Once I’ve Decided to Incorporate.

C Corporation & S Corporation

Advantages of Corporation

• Limited liability. One of the key reasons for forming a corporation is the limited liability protection provided to its owners. Because a corporation is considered a separate legal entity, the shareholders have limited liability for the corporation’s debts. The personal assets of shareholders are not at risk for satisfying corporate debts or liabilities.
• Corporate tax treatment. Since a corporation is a separate legal entity, it pays taxes separate and apart from its owners (at least in the typical C corporation). Owners of a corporation only pay taxes on corporate profits paid to them in the form of salaries, bonuses, and dividends. The corporation pays taxes, at the corporate rate, on any profits.
• Attractive investment. The built-in stock structure of a corporation makes it attractive to investors.
• Capital incentive. The stock structure also allows corporations to attract key and talented employees by offering them an ownership interest in the form of stock options or stock.
• Owner/employee. A business owner who works in his or her own business may become an employee and thus be eligible for reimbursement or deduction of many types of expenses, including health and life insurance.
• Operational structure. Corporations have a set management structure. The owners of a corporation are shareholders, who elect a Board of Directors, which then elects the officers. Other than the election of directors, shareholders do not participate in the operations of the corporation. The Board of Directors is responsible for managing and exercising the rights and responsibilities of the corporation. The Board sets corporate policy and the strategy for the corporation, and elects officers — usually a CEO, vice president, treasurer, and secretary — to follow the policies set by the Board, and manage the corporation on a day-to-day basis. In a small corporation, the lines between the shareholders, Board of Directors, and officers tends to blur because the same people may be serving in all capacities.
• Perpetual existence. A corporation continues to exist until the shareholders decide to dissolve it or merge with another business.
• Freely transferable shares. Shares of corporations are freely transferable, because as a separate entity, the existence of a corporation is not dependent upon who the owners or investors are at any one time. A corporation continues to exist as a separate entity, and is not terminated or dissolved even when shareholders die or sell their shares. Shares of corporations are freely transferable unless shareholders have “buy-sell” agreements limiting when and to whom shares may be sold or transferred. Also, securities laws may restrict the transferability of shares.

Disadvantages of Corporation

• Fees. It costs money to incorporate. There are four types of fees: a fee to file the Articles of Incorporation with the Secretary of State, a first-year franchise tax prepayment, fees for various governmental filings, and attorneys’ fees. But every year, tens of thousands of businesses choose to incorporate online without the use of an attorney. For example, basic incorporation before filing fees at a site like LegalZoom.com costs just $99.
• Formalities. The proper corporate formalities of organizing and running a corporation must be followed, to receive the benefits of being a corporation.
• Paperwork. Paperwork is a huge component of the corporate formalities that must followed. Reports and tax returns must be compiled and filed in a timely fashion; business bank accounts and records must be maintained and kept separate from personal accounts and assets; records must be kept of corporate actions, including meetings of shareholders and Board of Directors; and licenses must be maintained.
• Disclosure of names of corporate officers and directors. Most states do not require that names of shareholders be a matter of public record; however, many states require that the names and addresses of corporate officers and directors be listed on one or more documents filed with the Secretary of State.
• Dissolution. Since corporations have a perpetual existence, states provide a mechanism for dissolving a corporation and liquidating its assets. Dissolution does not happen automatically. A corporation can be dissolved voluntarily or involuntarily. A corporation’s officers and directors are charged with responsibility for dissolving the corporation, including gathering corporate assets, paying creditors and outstanding claims, and distributing the remaining assets to shareholders.
• Tax consequences. C corporations have potential double-tax consequences — once when the company makes its profit, and a second time when dividends are paid to shareholders. S corporations can mitigate this tax issue.

If you wish to know further the differences of S Corp vs C Corp, read the following articles:

• Advantages and Disadvantages of C Corporation
• Advantages and Disadvantages of S Corporation
• S corps vs. C corps: How Tax Law Changes May Prompt Switching

Limited Liability Company (LLC)

Like a corporation, an LLC is a separate legal entity that limits the liability of its members. However, it has the tax benefits of a partnership. LLCs are also free of many of the legal requirements that govern corporations (including annual reports, director meetings, shareholder requirements and so on). In addition, LLCs are a “pass through” tax entity, which means company profits and losses are passed through the business and taxed solely on the members’ individual tax returns.

There are disadvantages to organizing your business as an LLC. Some states impose income or franchise taxes on LLCs or require LLCs to pay annual fees to operate in that state (do your research). If your goal is to eventually take your company public, you may want to organize it as an S corporation now. Because LLCs have existed as legal business entities only since 1996, there is not much legal precedent available to help owners predict how legal disputes may affect their businesses.

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Sincere advice…consult an attorney experienced in business law before making any decision about how to organize your new business venture.

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The above infomation was gathered from:

• Wikipedia’s Company Law Section
• Allbusiness.com
  • Advantages and Disadvantages of Sole Proprietorships
  • Building the Perfect Partnership
  • Advantages and Disadvantages of Limited Partnerships
  • Costs of Forming a Corporation
  • Advantages and Disadvantages of Forming a Corporation
• IRS’s Business Section

1. Lazer sharp focus and dominant priorities. Vision isn’t enough
2. Know the GUTS of the business. If you cannot explain the guts to a kid, your strategies are worthless.
3. Right people in the right jobs.
4. Manage a social system. Tighten the social network between your people and your clients people. This creates tremendous value.
5. Three Core Processes: Strategic planning, succession/talent building, annual budgeting…and the reviews…make them productive.
6. Habit of following through.

It’s the set of activities that creates value in the form of goods and services by transforming inputs into outputs…meaning….Taking resources and turning them into things that people want. Taking raw materials and labor into something that has more value than that which it came from.

What is the objective of operations management? – Efficiency…how to do we do more with less.

Essential Functions:

• Marketing – generates demand
• Production/Operations – Creates the product, has a lot of technical stuff and people.
• Finance/Accounting – Tracks how well the organization is doing, pays bills, and collects the money.
• Information Technology
• Human Resources

Why Study Operations Management?

Its one of the three functions (finance, operations, marketing), we need to know how stuff is produced, we want to understand what the managers do, and why it’s the most costly part of the company.

What do Operations Managers do?

They make decisions in TEN specific areas:

1. What is the product or service?
2. What sort of quality?
3. How is it going to be made and how many?
4. Where will be it located? Mall? Intersection? Where?
5. How will things be layed out at the location? If it’s a restaurant…what will the layout of it be?
6. What sort of people will be needed? (Human Resources)
7. Who will manage the supplied and where are we gonna get it from?
8. Once you have your supplies, how will you manage your inventory?
9. How many employees will show up and at what times?
10. What maintenance items are there?

What is Productivity?

Ratio of outputs of outputs (good and services) divided by the resources (capital, people, etc). In math it meas:

• productivity = units produced / labor-hours used
• productivity = output / ( labor + material + energy + capital + misc )