Marketing Engineering: Computer-Assisted Marketing Analysis And Planning

Table Of Contents:

1. Introduction.
2. Tools for Marketing Engineering: Market Response Models.

II. DEVELOPING MARKET STRATEGIES.

3. Segmentation and Targeting.
4. Positioning.
5. Strategic Market Analysis: Conceptual Framework and Tools.
6. Models for Strategic Marketing Decision Making.

III. DEVELOPING MARKETING PROGRAMS.

7. New Product Decisions.
8. Advertising and Communication Decisions.
9. Salesforce and Channel Decisions.
10. Price and Sales Promotion Decisions.

IV. CONCLUSIONS.

11. Marketing Engineering: A Look Back and a Look Ahead.

Forewords & Introductions

Several forces are transforming the structure and content of the marketing manager's job. As a profession, marketing is evolving. It is no longer based primarily on conceptual content. Marketing resembles design engineering—it consists of putting together data, models, analyses, and computer simulations to learn about the marketplace and to design effective marketing plans. While many view traditional marketing as art and some view it as science, the new marketing increasingly looks like engineering (that is, combining art and science to solve specific problems). Our purpose in writing this book is to help educate and train a new generation of marketing managers.

Several key forces are changing the marketer's job:

• Pervasive high-powered personal computers on networks: During the 1980s marketing managers used personal computers mainly for such tasks as composing letters and presentations and doing simple spreadsheet analyses. Today many marketing managers have the equivalent of an early supercomputer on their desks. And that computer is networked to other PCs and to the company's mainframe on a local area network (LAN), and to external computers and databases all over the world through the Internet. This means that a marketing manager can access current data, reports, and expert opinions, and he or she can also combine and process that information in new ways to enhance decision making. Today basing decisions on such information is a minimum requirement to be a player in many industries.
• Exploding volumes of data: A brand manager in the packaged goods industry now sees perhaps a thousand times the volume of data (more frequentlycollected in finer detail) he or she saw five years ago. The growth of e-commerce, database marketing and direct marketing parallels data explosions in other industries as well. The human brain, however, has not become comparably more powerful in the same period. More data cannot lead to better decision making unless mangers learn how to use that data in meaningful ways. If data are a burden, then insights provide relief.
• Reengineering marketing activities: All over the world organizations face increasingly well-informed customers who seek value. As a result they are carefully scrutinizing the productivity of all management processes. To reduce their costs and to improve productivity, they are reengineering many marketing functions, processes, and activities. They are reengineering such activities as segmentation and targeting, new product development, market measurement and analysis, and customer satisfaction management for the information age.
• Flatter, right-sized organizations: Organizations could respond effectively to the aforementioned trends using traditional organizational mechanisms if they trained an army of specialists to harness computer hardware, software, networks, and data. They do not have that luxury. Global competition is driving organizations everywhere to do more with fewer employees. Managers are finding themselves empowered (i.e., without support staff): they have the hardware, software, and data at their desks and are expected to use them, operating independently.

Marketing managers must learn to function in the rapidly changing environment and to exploit evolving trends. Firms and business schools can help marketing managers to tope in two ways. They can offer traditional, concept-based education and training, with the hope that good people will figure out on their own how to cope with the changing environment. The education-as-usual approach will always have some success—well-motivated and intelligent marketers will figure out how to get reasonable value from the new resources. This approach is analogous to lecturing golf novices on the rules and giving them golf clubs and self-training books. Through study, networking, and observing successful golfers, some novices will become pretty good golfers. Others will become duffers. Still others will quit the game because it seems too hard. The lack of formal training limits development.

Those who want to excel need lessons, especially early on. Hence another way to help marketing managers respond to the changes is to provide information-age-specific education and training. There will always be an important role for marketing concepts, and using the powerful information tools now available requires sound conceptual grounding. But marketers need much more than concepts to fully exploit the resources available to them. They need to move from conceptual marketing to marketing engineering: using computer decision models in making marketing decisions. In this book we integrate concepts, analytic marketing techniques, and operational software to train the new generation of marketers, helping them to become marketing engineers.

OBJECTIVES FOR THE STUDENT

We designed this book for you, the business school student or marketing manager, who seeks the education you need to perform effectively in information-technology-intensive environments. Most traditional books focus on marketing from conceptual, empirical, or qualitative perspectives. With this book we aim to train marketing engineers to translate concepts into context-specific operational decisions and actions using analytical, quantitative, and computer modeling techniques. We link theory to practice and practice to theory.

Our specific objectives for the book are

• To help you gain an understanding of the role of analytical techniques and computer models for enhancing marketing decision making in modern enterprises
• To improve your skills in viewing marketing processes and relationships systematically and analytically
• To expose you to a number of examples demonstrating the value of marketing engineering in real managerial contexts
• To provide you with a software toolkit, a companion product of this book, that will enable you to apply marketing engineering to real marketing decision problems

Our pedagogical philosophy embraces two main principles: learning by doing and end-user modeling. Most of the concepts we describe have software implementation and at least one problem or case you can resolve by using the software. You may make errors and struggle at times, attempting to apply the tools. That is part of the learning-by-doing process; you will learn what the tools and software can do as well as what they cannot do. Traditional methods of teaching in business schools (i.e., lectures and case analyses) do not go far enough in helping students to make decisions, assess risks, and solve problems. The learning-by-doing approach extends traditional marketing education. With model-based tools for decision making, you can learn to anticipate and deal with the potential consequences of your decisions—this will help you improve your strategic thinking, sensitize you to customer needs, force you to anticipate competitive moves, and develop implementation plans. In short, you should not only learn to improve how you make marketing decisions, but also how to derive the maximum benefits from your decisions.

Decision models range from large-scale, enterprise-wide applications to those that can be quickly put together by an individual with an understanding of basic marketing and marketing engineering. We emphasize end-user modeling here. End-user modeling has the characteristics of good engineering: do as good a job as you can with the time and resources you have available.

Good end-user modeling provides direct benefits, permits rapid prototyping for more elaborate approaches, and makes the user a better customer (and critic) of larger, enterprise-wide applications. We are not trying to train you to be a technical specialist. Rather we hope to prepare you to put together technically simple but operationally useful decision models and to become astute users of those models and of the results of models that others have developed.

NEW FOR THE SECOND EDITION

The first edition of Marketing Engineering, published four years ago, had as its objective to provide the background and tools needed to train information-age marketers. Our aim was to help marketing students move from conceptual marketing to marketing engineering—to access and use computer decision models when making marketing decisions. As such, that edition combined 26 different software tools with a two-volume book and tutorial package that implemented our pedagogical philosophy: learning by doing and end-user modeling.

The positive (and negative feedback) associated with the first edition has lead to this second edition. Reviews of the concepts and the tools that we included were very positive. Hence, while we have updated the material and the references, we have changed very little of the core of the book, either in terms of the basic textual material or in terms of specific implementations of our software.

Criticisms of the book were mainly associated with

• Its high price, necessitated by the breadth of the ME package—two volumes, CDROM, 26 software packages, instructor's manual, videotapes, and web site;
• The difficulty and complexity of getting the latest software distributed and working on different systems; and ,
• The limited set of data sets/cases for classroom use.

This second edition addresses these concerns by a redesign of the ME package to be accessible through the Internet. While a single softcover textbook remains, there is no longer a CD-ROM or a tutorial volume included with the text. Cases and exercises have been integrated into the single volume; tutorials (and other electronic components of the text) are now available on the Internet.

Adopters have three options for accessing the software:

1. The latest version of the software will be available to book adopters for free for a year on the Internet (but will require the current versions of Windows and Excel to run).
2. Academic adopters can have a version installed and made available on a local area network to speed up response time.
3. For most rapid response, individuals can purchase, download and run the software locally, without the need for an Internet connection. (This version will support versions of Excel 7 and later under Windows 95 and later.)

Thus, in this second edition, we have:

Revised the text, with corrections, and enhancements and combined the text with the cases into a single volume. Made the software available separately from the book with access options as noted above. Made enhancements to several of the most frequently used software modules.

ORGANIZATION

The text for the second edition is organized as follows:

• In Part 1 (Chapters 1 and 2) we introduce and define marketing engineering and develop key marketing engineering building blocks-market response models.
• In Part 2 (Chapters 3 through 6) we focus on strategic marketing issues such as segmentation, targeting, positioning, market selection, portfolio analysis, market measurement, and strategic planning.
• In Part 3 (Chapters 7 through 10) we address tactical marketing issues such as product design, advertising and communications, salesforce deployment, outlet location, and price and promotion decisions.
• In Part 4 (Chapter 11) we conclude, summarizing some key points and highlighting new developments that are driving the future of marketing engineering.

Each chapter also contains cases and problem sets that are keyed to the major concepts. We have also created a Web site to provide the software for running the models described in the book. The Web site contains tutorials, help files, tips and other resources for using our software and for deriving the maximum benefits from marketing engineering. We update this site frequently to ensure that you will always have access to the latest software and accompanying resources.

In addition, instructors who adopt the book receive videotapes that highlight award-winning marketing engineering applications and the impact that those applications have had at the following firms:

• ABB Electric (the profitable use of choice-based segmentation)
• Marriott Hotels (the use of conjoint analysis to design the Courtyard by Marriott hotel)
• ASSESSOR (the use of the ASSESSOR pretest market model and procedure at hundreds of firms)
• AT&T (the use of systematic copy testing to develop AT&T's cost-of-visit advertising campaign)
• Syntex Labs (the use of judgmental response functions to size and allocate a sales-force)
• American Airlines (the use of a yield management system to increase profits)

USES OF THE BOOK FOR INSTRUCTORS

We designed this book primarily as a text for a one-semester, capstone MBA course. Students need not have strong backgrounds in quantitative methods; however, it will be helpful if they have some quantitative and marketing background and some facility with microcomputers and related (Windows-based) software. We have used the material successfully in executive programs and in undergraduate classes as well.

As there are 26 software modules (each with a different focus), the book includes twice as much material as can be covered in a normal one-semester course. The software and related problems should be viewed as a menu; students need not use all the software to gain benefits from the material. Indeed we find that students can readily absorb only 6 to 10 modules in a semester. For shorter courses and executive programs, you should make a much more limited selection.

Many of the software modules are intended for general use (i.e., not just for the problem set provided); they can be used for term projects that can provide a very valuable learning experience.

Many of us recognize that reading textbooks or listening to lectures is not the best way to learn marketing decision making. Instead, students should experience marketing in a way that leaves behind enduring lessons. Therefore, the best way for students to learn marketing engineering is to encourage them to use the software, to do the problems, and cases.

The software empowers students to solve marketing problems. We find that classes work best when we keep-lectures to a minimum and have one or two student groups present their problem analyses to the rest of the class, which acts as (skeptical) management. This follows the learning-by-doing philosophy and makes students responsible for their own learning. It also simulates how marketing engineering works in the real world.

Special Features:

Marketing Engineering