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A Refreshing Case for Marketing Strategy

Franklin Shaddy’s course analyzes customer values before product development

Assistant Professor of Marketing and Behavioral Decision Making Franklin Shaddy teaches Marketing Management in UCLA Anderson’s full-time MBA program. His current research examines the psychology of bundling, how consumers resolve trade-offs, perceptions of fairness, and the causes and consequences of impatience. Before pursuing his Ph.D. at University of Chicago Booth School of Business, Shaddy worked as a management consultant at PricewaterhouseCoopers.

  • Franklin Shaddy’s marketing course teaches first-year MBA students the language of marketing strategy
  • Understanding customers and their needs enables companies to design products that create the most value for them
  • Shaddy challenges students to notice and analyze marketing strategies in the real world

Franklin Shaddy, UCLA Anderson assistant professor of marketing and behavioral decision making, is interested in understanding how consumers form judgments and make decisions in the marketplace. “It’s something we all do all the time — and yet we often have little insight into how we actually make these choices,” he says.

One of Shaddy’s projects asked: Why do people often think that raising prices is unfair, but asking people to spend time standing in line isn’t? “After all, this is simply raising a different kind of price,” he says. Shaddy’s research suggests that because time (unlike money) is distributed equally, people tend to favor first-come, first-served policies, which require people to spend time.

Among the courses Shaddy teaches is the core course in marketing, an overview of the topic. Since all first-year MBA students are required to take the class, Shaddy’s goal is to make clear the importance of marketing to a company right from the start.

Q: What are the goals of the course?

What I try to emphasize are the principles of marketing strategy, because I know it’s a core class and many of my students won’t actually end up going into marketing. But marketing is a critical business function that implicates nearly every aspect of a firm’s operations.

So, one of my goals is to get everybody on the same page, where we’re all speaking the same language. We all need to understand the same constructs, frameworks and principles. In other words, I want students to come out of my class with a baseline level of marketing knowledge and marketing strategy that will equip them with the tools to do this in the real world — regardless of what role they end up in.

On top of that, it’s important to me that students are excited about marketing and to notice it in the real world. Even if you don’t go into marketing yourself, you’ll see an advertisement or product that’s either really great or really terrible, and you’ll have a systematic way to analyze why.

Q: How is the class structured?

We teach a 10-part framework over the course of the 10 weeks, in which we have a lecture and corresponding case study for each element. And we divide that marketing framework into three different elements.

The first is analysis. We break this out into what we call the “3 Cs,” which require assessing your competitors, your customer and your own company. This analysis needs to happen way before you design a product or service, let alone decide how to price, promote or distribute it.

This is in fact one of the principal takeaways that I want to students to walk away with: Marketing strategy starts way before you ever make any of these tactical decisions, because before you get to that point, you need to understand what the competitive landscape looks like. You need to understand what customers are looking for, what they value, their needs and wants. You need to understand what your own company does well.

It’s not until you get that understanding that you can move on to the second piece of the framework, which is developing a strategy for optimizing your position within the competitive landscape you’ve just analyzed.

We call this “STP,” for segmentation, targeting and positioning. Once you recognize that there’s a whole bunch of customers out there, you want to divide them up into some number of reasonable segments and then pick one of those segments to actually go after. We ask things like, “Which segment of our potential universe of customers would find our offerings most appealing? How do we create a value proposition to resonate with that particular segment?”

Now that we have a plan, we then execute that strategy with what we call the “4 Ps.” These are the marking tactics, or the marketing mix. This is when you start to develop the product. This is when you figure out how to price. This is when you figure out the best way to promote it. Where should we place or distribute it? Do we want certain stores to sell this thing exclusively, or do we want every big box retailer out there to stock it?

Q: Do people confuse marketing and advertising with marketing strategy?

The same way that most people think finance is “the stock market,” a lot of people, when they think “marketing,” think about advertising. In many cases, they think about examples of bad advertising.

In this class, we might have some fun talking about examples of bad advertising, which is part of promotion. It’s one of those 4 Ps. But what I stress to the students is that this class is designed to teach marketing strategy, and we’re going to spend only one week on advertising, which is part of promotion.

I hope that the light bulb comes on and I get students to understand that there is so much more to marketing than just the consumer-facing advertising you see during the Super Bowl. Marketing is really about understanding customers and what they want, and that’s how you can design products that make the most sense for them. Then you advertise those products.

The other point that can resonate is, unlike some of the other business areas, when we’re talking about finance or accounting, marketing is the only one that starts with and is all about the end customer. Good marketing is designing products and offering services that effectively serve customers’ needs and wants and, unlike in accounting, you have to really understand your customer first.

Q: Do you think most people don’t realize how involved the marketing team is in product development?

If you don’t understand your customers and what they want and need and what benefits they’re seeking, there’s no way to conjure a product that’s going to meet their needs most effectively.

Apple’s always a great example of this. They know consumers so well that they’re able to create products that satisfy needs that people didn’t even think they had. Before you had tablets, no one knew they needed an iPad. What they’ve done is so compellingly filled this unmet need that we’re thinking, “Oh, yeah, we get it.” That’s because Apple fundamentally understands customer needs better than most.

Another anecdote I tell in class is that, in the 90s during the PC wars, you had Gateway and Dell battling over who’s got the best specs, the best hardware. Apple came along and said, “Everyone else is overlooking something the customer really cares about, and that’s the aesthetics of the product.” So they designed those ruby- and emerald-colored iMacs. They understood the consumer is somebody who really cares about the way the computer looks in the home or the office. But you’re never going to develop that ruby-colored iMac if you don’t understand the customer. That’s the first piece of the framework, right? You’re analyzing your customer.

Q: What are the nuts and bolts of the course assignments?

It’s a case-based course, largely. Most of the graded assignments during the quarter are case analyses that you either work on with your learning team or individually. Everyone reads the same case. Everyone, presumably, is going to answer the same questions, like, “How do we price this product?” But they all come up with very different answers, which can make things fun. Because everyone has to write up an analysis justifying, for example, how they priced a certain thing, they’re expected to bring that perspective to class. And then we discuss and debate, often disagreeing. Often there is no right or wrong answer — as long as you can compellingly explain why you pursued one option or another.

I expect a lot of participation from the students. That’s the only way to dissect a case. You need a bunch of different perspectives, and then we always offer a “debrief,” where we learn what the company could have done better.

At the end of the quarter, you’re graded on a final group project and a final exam. The group project is essentially creating a marketing strategy for a business somewhere in Los Angeles. The final exam is another case study analysis.

Q: How do you refresh the course each year? Do you use any of your own research?

I study consumer psychology, and a lot of that is trying to understand where consumers make errors in decision making. I have a whole lecture on behavioral economics, decision making, biases and judgment that is related to my core research. I have another whole line of research on perceptions of fairness in the marketplace, and I talk about that as well.

For example, one of the conversations we have, when we talk about segmenting customers and targeting them, is whether it’s ethical to use a certain variable as the basis for segmentation, and to decide to go after only this particular demographic. The research I’m doing shows that there are a lot of different ways companies can get into trouble segmenting based on variables people don’t think are appropriate. You can imagine, for instance, that targeting certain genders with certain products could seem inappropriate.

As for keeping the class fresh, I encourage students to tell me examples of where they see the principles we discussed actually playing out in the real world. We’ll spend 10 or 15 minutes at the beginning of every class talking about some of those examples. We analyze a situation we don’t yet know how it will play out, but we’re able to offer some kind of compelling prediction based on the framework that we teach in class. That’s all current. That’s all student-driven. And it’s probably the biggest reason why I have such a great time teaching this class.