Unique Marketing Issues -- The Importance of Intellectual Property (Session 19-20) [Week 10]

Unique Marketing Issues

The Process of Selecting a Target Market and Positioning Strategy

Market Segmentation

-          Involves studying a firm’s industry and determining the different target markets in that industry.

-          Markets can be segmented in a number of different ways, including:

o   Product type

o   Price point

o   Customers served

Selecting a Target Market

-          Once a firm has segmented the market, a target market must be chosen.

-          The market must be sufficiently attractive and the firm must have the capability to serve it.

-          The Netbook segment of the computer industry is new, and is being targeted by startups like Eee PC.

Establishing a Unique Position

-          After selecting a target market, the firm’s next step is to establish a  “position” within the market that differentiates it from its rivals.

-          A “position” is the part of a market that the firm is claiming as its own.

-          A firm establishing a unique position in its customers’ minds by drawing attention to two or  three of the product’s attributes.

-          Firms often develop a “tagline” to reinforce the position they have staked out in their market, or a phrase that is used consistently in a company’s literature and thus becomes associated with the company.

-          An example is Nike’s familiar tagline, “Just do it.”

o   The beauty of this simple three-word expression is that it applies equally to a 21-year-old triathlete and a 65-year-old mall walker

Selling Benefits Rather Than Features

-          Many entrepreneur make the mistake of positioning their company’s products or services on features rather than benefits.

-          A positioning or marketing strategy that focuses on the features of a product, such as its technical merits, is usually much less effective than a campaign focusing on what the merits of the product can do.

-          Consider the example of the following slide.

Establishing a Brand

      Establishing a Brand

-          A brand is the set of attributes—positive or negative—that people associated with a company.

o   These attributes can be positive, such as trustworthy, dependable, or easy to deal with.

o   Or they can be negative, such as cheap, unreliable, or difficult to deal with.

-          The customer loyalty a company creates through its brand is one of its most valuable assets.

      Brand Management

-          Some companies monitor the integrity of their brands through a program called “brand management.”

Different Ways of Thinking About the Meaning of a Brand

      Power of a Strong Brand

-          Ultimately, a strong brand can be a very powerful asset for a firm. 

      Cobranding

-          A technique that companies use to strengthen their brands is to enter into a cobranding arrangements with other firms.

-          Cobranding refers to a relationship between two or more firms where the firm’s brands promote each another.

The Four Ps of Marketing for New Ventures

      Product

-          Is the good or service a firm offers to its target market. 

-          The initial rollout is one of the most critical times in the marketing of a new product.

-          All firms face the challenge that they are unknown and that it takes a leap of faith for the first customers to buy their products.

o   Some startups meet this challenge by using reference accounts.

      Core Product vs Actual Product

Core Product → The product itself, such as an antivirus software program.

Actual Product → The product plus all the attributes that come with it such as quality level, features, design, packaging, and warranty.

Cost-Based Pricing → The list price is determined by adding a markup percentage to a product’s cost.

Value-Based Pricing → The list price is determined by estimating what consumers are will to pay for a product.

      Price

-          Price is the amount of money consumers pay to buy a product.

-          The price a company charges for its products sends an important message to its target market.

o   For example, Oakley positions its sunglasses as innovative, state-of-the-art products that are both high quality and visually appealing. 

o   This position in the market suggests a premium price that Oakley charges.

      Promotion

Promotion

-          Refers to the activities the firm takes to communicate the merits of its product to its target market.

-          There are several common activities that entrepreneurs use to promote their products and services.

Advertising

-          Advertising is making people aware of a product or service in hopes of persuading them to buy it.

Pluses and Minuses of Advertising

Pluses:

-          Raise customer awareness of a product.

-           Explain a product’s comparative features and benefits.

-           Create associations between a product and a certain lifestyle.

Minuses:

-          Low credibility.

-           The possibility that a high percentage of people who see the add will not be interested .

-           Message clutter.

-           Relative costliness compared to other forms of promotion.

-           Intrusiveness.

Steps Involved in Putting Together an Advertisement

Steps 1 → Identify the purpose of the ad

Steps 2 → Determine the target audience

Steps 3 → Select a medium

Steps 4 → Create the ad

Steps 5 → Select a place and time for the ad to appear

Steps 6 → Fulfill expectations

Google AdWords and AdSense Program

      AdWords

-          Allows advertisers to buy keywords on the Google home page.

-          Triggers text-based ads to the side (and sometimes above) search results when the keyword is used.

-          The program includes local, national, and international distribution.

-          Advertisers pay a certain amount per click.

-          Advertisers benefit because they are able to place their ads in front of people who are already searching for information about their product.

      AdSense

-          Allows advertisers to buy ads that will be shown on other Web sites instead of Google’s home page.

-          Google selects sites of interest to the advertiser’s customers.

-          Advertisers are charged on a pay-per-click or a per-thousand impression basis.

-          Advertisers benefit because the content of the ad is often relevant to the Web site.

-          Web site owners benefit by using the service to monetize their Web site.

Public Relations

-          One of the most cost-effective ways to increase the awareness of the products of a company is through public relations.

-          Public relations refer to efforts to establish and maintain a company’s image with the public.

-          The major difference between public relations and advertising is that public relations is not paid for—directly.

Place (Distribution)

-          Encompasses all the activities that move a firm’s product from its place of origin to the consumer. 

-          The first choice a firm has to make regarding distribution is whether to sell its products directly to consumers or through intermediaries (such as wholesalers and retailers).

Within most industries, both choices are available, so the decision typically depends on how a firm believes its target market wants to buy its product.

The Importance of Intellectual Property

The Importance of Intellectual Property

Ø  Intellectual Property

-          Is any product of human intellect that is intangible but has value in the marketplace.

-          It is called “intellectual” property because it is the product of human imagination, creativity, and inventiveness.

Ø  Importance

-          Traditionally, businesses have thought of their physical assets, such as land, buildings, and equipment as the most important.

-          Increasingly, however, a company’s intellectual assets are the most important

Determining What Intellectual Property to Protect

Criteria 1: Determine whether the intellectual property in question is directly related to the firm’s competitive advantage.

Criteria 2: Decide whether the intellectual property in question has value in the marketplace.

Common Mistakes Firms Make in Regard to Protecting Their Intellectual Property

-          Not properly identifying all of their intellectual property.

-          Not legally protecting the intellectual property that needs protecting.

-          Not fully recognizing the value of their intellectual property.

-          Not using their intellectual property as part of their overall plan for success.

The Four Key Forms of Intellectual Property

Patents

Ø  Patents

-          A patent is a grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for the term of the patent. (see the next slide for a full explanation)

Ø  Increasing Interest in Patents

-          There is increasing interest in patents.

o   Since Patent #1 was granted in 1790, the U.S. Patent & Trademark Office has granted over six million patents.

o   The patent office is strained.  It now takes an average of 32.2 months from the date of first filing to receive a U.S. patent.

Business Method Patents (Special Utility Patent)

Ø  Business Method Patent

-          A business method patent is a patent that protects an invention that is or facilitates a method of doing business.

-          The most notable business method patents that have been awarded:

o   Amazon.com’s one click ordering system.

o   Priceline.com’s “name-your-price” business model.

o   Netflix’s method for allowing customers to set up a rental list of movies to be mailed to them.

Patent Infringement

Ø  Patent Infringement

-          Takes place when one party engages in the unauthorized use of another party’s patent.

-          The tough part (particularly from a small entrepreneurial firm’s point of view) is that patent infringement cases are costly to litigate.

o   A typical patent infringement case costs each side at least $500,000 to litigate.

Trademarks

Ø  Trademark

-          A trademark is any word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those product or services from others.

-          Trademarks also provide consumers with useful information.

o   For example, consumers know what to expect when they see an Abercrombie & Fitch store.

o   Think how confusing it would be if any retail store could use the name Abercrombie & Fitch.

Copyrights

Ø  Copyrights

-          A copyright is a form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits from the work.

-          A work does not have to have artistic merit to be eligible for copyright protection.

o   As a result, things such as operating manuals and sales brochures are eligible for copyright protection.

What is Protected By a Copyright?

-          Literary Works

-          Computer Software

-          Pantomimes and Choreographic Works

-          Musical Compositions

-          Dramatic Works

-          Pictorial, graphic, and sculptural words

Exclusions From Copyright Protection

Ø  The Idea-Expression Dichotomy

-          The main exclusion is that copyright laws cannot protect ideas.

o   For example, an entrepreneur may have the idea to open a soccer-themed restaurant. The idea itself is not eligible for copyright protection.  However, if the entrepreneur writes down specifically what his or her soccer-themed restaurant will look like and how it will operate, that description is copyrightable.

o   The legal principle describing this concept is called the idea-expression dichotomy.

o   An idea is not copyrightable, but the specific expression of an idea is.

Obtaining a Copyright

Ø  How to Obtain a Copyright

-          Copyright law protects any work of authorship the moment it assumes a tangible form.

-          Technically, it is not necessary to provide a copyright notice or register work with the U.S. Copyright Office.

-          The following steps can be taken, however, to enhance copyright protection.

o   Copyright protection can be enhanced by attaching the copyright notice, or “copyright bug” © to something.

o   Further protection can be obtained by registering the work with the U.S. Copyright Office.

Copyright Infringement

Ø  Copyright Infringement

-          Copyright infringement occurs when one work derives from another or is an exact copy or shows substantial similarity to the original work.

-          To prove infringement, a copyright owner is required to show that the alleged infringer had prior access to the copyrighted work and that the work is substantially similar to the owner’s.

-          The illegal downloading of music is an example of copyright infringement.

-           Copyright infringement costs the owners of copyrighted material as estimated $20 billion per year in the U.S. alone. 

Trade Secret

Ø  Trade Secrets

-          A trade secret is any formula, pattern, physical device, idea, process, or other information that provides the owner of the information with a competitive advantage in the marketplace.

-          Trade secrets include marketing plans, product formulas, financial forecasts, employee rosters, logs of sales calls, and similar types of proprietary information.

-          The Federal Economic Espionage Act, passed in 1996, criminalizes the theft of trade secrets.

What Qualifies For Trade Secret Protection

Ø  Trade Secret Protection

-          Not all information qualifies for trade secret protection.

-          In general, information that is know to the public or that competitors can discover through legal means doesn’t qualify for trade secret protection.

-          Companies protect trade secrets through physical measures and written documents.

The strongest case for trade secret protection is information that is characterized by the following:

-          Is not known outside the company.

-          Is known only inside the company on a “need-to-know” basis.

-          Is safeguarded by stringent efforts to keep the information confidential.

-          Is valuable and provides the company a competitive advantage.

-          Was developed at great cost, time, and effort.

-          Cannot be easily duplicated, reverse engineered, or discovered.

Physical Measures for Protectiong Trade Secrets

-          Restricting access

-          Password protecting computer files

-          Maintaining logbooks for access to sensitive material

-          Labeling documents

-          Maintaining logbooks for visitors

-          Maintaining adequate overall security measures

Conducting an Intellectual Property Audit

Ø  Intellectual Property Audit

-          The first step a firm should take to protect its intellectual property is to complete an intellectual property audit.

-          An intellectual property audit is conducted to determine the intellectual property a firm owns.

-          There are two reasons for conducting an intellectual property audit:

o   First, it is prudent for a company to periodically determine whether its intellectual property is being properly protected.

o   Second, it is important for a firm to remain prepared to justify its valuation in the event of a merger or acquisition.

Ø  The Process of Conducting an Intellectual Property Audit

-          The first step is to develop an inventory of a firm’s existing intellectual property.  The inventory should include the firm’s present registrations of patents, trademarks, and copyrights.

-          The second step is to identify works in progress to ensure that they are being documented and protected in a systematic, orderly manner.