Topic 1:

Introduction and basic concepts

in Marketing

Marketing
Marketing
Degree in Int. Business Economics
Prof. Antonio Ladrón de Guevara

September-December 2022
Instructor:

Theory: Antonio Ladrón de Guevara (T1, T2)

Seminars: Begoña Bogonez (S101, S102, S103)

Margarita de Gispert (S201, S202, S203)

Readings:

 Recommended basic textbook:

 Philip Kotler & Kevin Keller
Marketing Management (14th Edition, 2011 – 15th Edition, 2018)
or
 Philip Kotler
Marketing Management (11th Edition, 2003)

 Business Articles, cases, and readings posted in the “Aula global”

Evaluation:

Final Exam 60%, minimum required 4/10

Seminars 40%
Attend. and particip. 10%
Course Timetable
 Marketing Management

Topics:

1.- Introduction and Basic concepts in Marketing

2.- Market segmentation and positioning strategies
Strategic
3.- Managing the product over time
decisions
4.- Strategic Planning in Marketing
5.- Product, product line and brand Decisions
6.- Pricing Decisions Tactic
7.- Marketing Communications decisions

8.- Distribution decisions

Definition of a Market???

Market (Marketing) ???

Antonio Ladrón de Guevara

Industry Market
(sellers) Exchange process (buyers)

Antonio Ladrón de Guevara

1.- Needs and wants???:

Main critique of MARKETING???

Need: basic requirement that an individual wishes to satisfy.

Maslow’s Theory: Hierarchy of needs (Video posted at the eCampus)

Marketing philosophy???
-
-
-

Antonio Ladrón de Guevara

2.- Broad definition of a product ???:

Antonio Ladrón de Guevara

 3.- Value (economic concept)

 Every time there is a product whose production and delivery costs are lower
than the market value (willingness to pay by a consumer), both the firm
and the consumer can be strictly better off by exchanging.

 The surplus (market value minus cost) is shared by both parties.

Value added in the economy

Firm surplus: PROFITS

Consumer surplus: Net value, UTILITY

Antonio Ladrón de Guevara

Example of value distribution
(Marginal analysis)

Peugeot 208
Price $ 10.000
Cost $ 5.000
Consumer value $12.000

Antonio Ladrón de Guevara

Production and Consumer Surpluss
Delivery costs value

7000

12000

5000

Antonio Ladrón de Guevara

Surpluss

2000
Price
7000 (10000)
5000

5000

Antonio Ladrón de Guevara

Price

Aggregate inverse demand function

Firm Profits

Units
Price

Aggregate inverse demand function

Firm and consumer surplus

P*
Consumer welfare, satisfaction, utility

1 2 3 4
Units
 Consumer Value

In marketing, the concept of value is equivalent to the concept of

“consumer surplus” in Economics.

Consumersestimate
Consumers estimatethe
thevalue
valueof
ofeach
eachproduct
productwhen
whenmaking
makingtheir
their
purchasedecisions,
purchase decisions,choosing
choosingthe
thealternative
alternativewith
withthe
thehighest
highestnet
net
value..
value

Product value

Services value

Other positive values Net Value,

Cons. surplus,
Time cost, energy cost, Utility
uncertainty, and other
negative values... Price

Antonio Ladrón de Guevara

What is the Price of this product?
 VALUE
Services can be associated to a tangible product

Good with Basic service

Pure additional with additional Pure
good goods and/or services goods and/or services service
 Case: Condensed milk
“La Lechera” (Nestlé Spain)
 Condensed-milk Spanish Market
Historic Data until year 2000

Tons -11.3% in 5 years

19360
19500

19000

18500 18200

18000 17665 17600

17500
17500 17175

17000

16500

16000 -6% -2.9% -0.4% -0.6% -1.9%

15500

15000
95 96 97 98 99 2000
“Based on market research, between 2000 and 2014, global cigarette volume
sales increased by 8% while retail values increased by 121%.”

Source: Euromonitor 2014.

 Sales of condensed milk “La lechera”

Situation of the brand

Sales of condensed milk NESTLE: falling since 1969

Tons
22938
21378
-22.5% in 5 years
18512
20000

16343
14960
15000
14492 13745
13018 12665

10000

5000

92 93 94 95 96 97 98 99 '00
 “Sirvefácil” System

 New package: plastic bottle

including a dose valve that
opens when squeezing the
package. The dosing is
clean

 Once pressure stops, the

valve closes automatically,
“cutting” the product flow
 The Market
The market started to grow in 2002:

+4.5% in volume, +9% in value

Tons.
19360
19500

19000

18500 18200

18000 17665 17600

17500
17500 17175 17245

17000
16500
16500

16000 -6% -2.9% -0.4% -0.6% -1.9% -3.9% +4.5%

15500

15000
95 96 97 98 99 2000 2001 2002
Brand sales

This was the first increase in sales in 33 years

Volume sales Value sales

(Tons.) (Mill. Euros)

12000
11.273
+15% +32% 30,5
10.179 30
10000 9.795 26,6

23,1

8000 20
'00 '01 '02 '00 '01 '02
 Market share

Market share
(%) 65
58,5
60 54,9 55,3 Value
55 +3.6
50

45
48,4 Volume
40 46,6 47,0
+1.8
35

30
'00 '01 '02
 Main results: Consumer

new consumers driven to the category

+12% penetration increase
What is market penetration???
How can we measure the product penetration?

augmentation of consumption frequency

heavy users –everyday consumption- growths +40%
How can we measure consumption frequency???
Ways of consumption
% consumers using SCM as … (1999 - 2002)
3,24 €/Kg 3,11 €/Kg 4,86 €/Kg 5,00 €/Kg

4,41 €/Kg 6,94 €/Kg

 8,00

Price per Kg (€) 7,00

6,00

5,00

4,00

3,00

2,00

1,00

0,00
0 0,2 0,4 0,6 0,8

Size (Kg)
Some web-based examples:

Adding value (willingness to pay) through:

- Providing useful information

- Providing additional services
- Reducing uncertainty
…

- In consumer goods
Ej:
- IKEA

What consumer profile does IKEA target?

Antonio Ladrón de Guevara

IKEA Home Planner 2009
Antonio
 XX de XXXXXXXX del 2011
Nombre del
 XX de XXXXXXXX del 2011
Nombre del
 XX de XXXXXXXX del 2011
Nombre del
Antonio
IKEA Home Planners 2021
 Spots IKEA

Augmented reality
(for mobile devices)

2013
http://www.youtube.com/watch?v=vDNzTasuYEw

Sept. 2017
https://www.youtube.com/watch?v=UudV1VdFtuQ
 New trends – IKEA

2020
https://www.youtube.com/watch?v=QvKvB6e-h6A
https://www.youtube.com/watch?v=ac4rWWjMiNQ
https://www.youtube.com/watch?v=R5OnjiDa71s
Some web-based examples:

Adding value (willingness to pay) through:

- Providing useful information

- Reducing uncertainty
- Providing additional services
-…

- In consumer goods.

- In services
Remember, services are non-standardizable!!!
New business models:
INFOMEDIARIES
(Intermediaries of information)
Antonio Ladrón de Guevara
 Spots Tripadvisor
15’
https://www.youtube.com/watch?v=nn1m1pfq6TM
How do additional attributes increase the economic welfare?

Example: A new version with additional attributes:

- Product A: standard features (marginal analysis)
- Product B: Additional features

Product A Product B
Price $ 10.000 $ ???
Cost $ 5.000 $ 6.000
Consumer $12.000 $16.000
value
Price strategy for the new product???
 Product A Product B

Cost Value Cost Value

16000

12000

6000
5000
Product A Product B

Surplus Surplus

10000

7000

6000
5000
 Product A Product B
Surplus Surplus

Value (16000)

Value (12000) Price???

2000 10000
Price (10000)

5000

6000
5000
 Markets and flows:

What kind of flows occur in the market?

communication

advertisment

Industry
(sellers) Market
(buyers)

information
 Markets and flows:

¿How has this dynamics changed with the

new digital media?

producst and services

Industry
(sellers) Market
(buyers)

money
 Social marketing:

Example: Flu vaccination campaign

Government Market
(Citizens)