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Marketing is all about revenue generation.

Overview for Analyzing Marketing Cases: 1) Problem statement: Decision-makers perspective @ time of the case. Viewed from key decision maker at time of the case. 2) Situation analysis: Uncontrollable variables that relate to the problem at hand. Required step for all marketing cases. Effective decisions cannot be made unless. SA provides critical info. w/out it you are just guessing. Higher unit volume increases revenue spread advertising costs over more units lowers avg costs. A growing market is usually easier to overtake a market share leader than in a mature market. Does it influence decision at hand? If yes, include it. Otherwise, dont. Buyer behavior: Understanding the customer. Incorporate voice of the customer. How do they shop? Nature of demand -How do buyers (consumer and industrial) currently go about buying existing products or services? Describe the main types of behavior patterns and attitudes. Try to determine the who, what, where, when, why, and how about the purchase decision. Market Segments Need & Want differences. Most businesses need to do more of this. Pick a target market. Extent of demand-Can they be broken into different groups? i.e. age, sex, etc. What is the size of the market (future, current). Market size is often overlooked by entering MBAs. Nature of competition-Purpose is to evaluate the present and future structure of competition. Number of competitors? Current marketing programs? More competition = more differentiation of products. Environmental climate-Relevant social, political, economic, and tech. trends. PEST Stage of product life cycle-What stage is product in? How old is it, state of consumers knowledge? (introduction, growth, maturity, decline). Lots of costs here (introduction). Growth most fun, healthy profits. Decline competitors shaken out. Cost structure of the industry-What is the marginal or additional cost of supplying increased output, what is the fixed and variable costs? Avg. costs decline as you sell more products. Spread costs over more units (advertising costs). Must have good sense of costs. Skills of the firm-Do we have the skills and experience? How does it compare to our competitors? The more you do something the better you get at it. Financial resources of the firm-Do we have the funds? Where are they coming from? Capital market. Venture capitalists. Financial $ comes from top management of financial units. Distribution structure-Evaluate the availability of channels of distribution Alternatives Conclude with decision about Product, Promotion, Price, and Distribution. Include:Situat. Anal., Prob. and opport., Give and Eval Alternat., Anal. Of alter.nDecision 4 Cs of Marketing:1. Company2. Customers3. Competitors4. Collaborators = Suppliers + Channel Intermediaries 3) Marketing strategy alternatives: Controllable variables a) Target market potential customers b) Product positioning USP c) Marketing mix i) Product ii) Distribution iii) Promotion iv) Price d) Recommendation e) Plan of action

Breakeven Market Share =

Breakeven Sales Industry Sales

Targets Affluent(Traditional), Road Warriors (Courtyard), Families(Fairfield), and Extended(Resident)

Retailer' s % Margin =

Selling price - Purchase price Selling price

Breakeven sales in dollars: companies try to maximize dollars, not units Use breakeven market share for mature markets; use breakeven sales for young markets. Buyer behavior process: 1) Problem recognition 2) Information search 3) Evaluate alternatives 4) Purchase decision need to get here! 5) Post-purchase behavior a. Word of mouth b. Repeat purchases Different types of buying: - Habitual purchase: low involvement - Limited problem solving - Extensive problem solving Lifetime value of a customer: Value = trial purchase + repeat purchases New product development decision process 1) Idea generation 2) Idea screening 3) Concept development & testing 4) Marketing strategy development 5) Business analyis 6) Product development 7) Market testing 8) Commercialization How Stores Make You Shop Retailer psychology 1. Happiness factor for shoppers, Happy feeling at the door sights, smells, creating creative ways of using things and leading you to buy more 2. Touching encourages buying 3. Salespeople talking to customers increases the chance they will buy by half 4. Use low- and high-end priced goods to draw people toward the center price, Differentiate priced brands and buy the middle 5. What the hell! effect spending 6. Mall place + colors + End-cap display, High-margin items in front of the store 7. Suggestions to buy more 8. Eye-level products 9. Try clothes on 10. Most people turn to the right and go counterclockwise through the store, so Right hand items (higher margin) up sales by 15% 11 Slow shoppers down, mix up items 12. Large stores, carts, and bags make consumers feel like they are buying less.
13. Mix-up merchandise to slow you down. 14. Red/Yellow restaurants signals that you can get in/get out Quickly (they dont want you to linger). Higher margin stuff on perimeter of store.

Product positioning Dos: - important benefit to target customers - Affordable benefit to target customers - Different benefit from competition - Profitable to the company Donts - Head to head w/established competition - Fill a hole in factory instead of the mind - Technological achievement with no need Management of Distribution Cost savings by using distributors Industrial marketing channels: - Manufacturer, Manufacturers rep, Manufacturers sales branch, Industrial distributor, Industrial customer Consumer marketing channels: - manufacturer, wholesaler, jobber, retailer, consumer Channel intermediaries can be: - Exclusive, Selective, Intensive Channel conflict: - Vertical, Horizontal, Multichannel Pricing Decisions 1. Pricing objectives: Makret share? Short term profits? Survival? 2. Customer demand 3. Competition 4. Costs: Fixed & variable 5. Select pricing strategy: Cost plus or breakeven 6. Setting the final price: -Think about how the product will be coordinated with the entire line -Psychological effects (e.g. 1995 vs 2000) -Retail margins Common communication platforms Advertising, Sales promotion, Public relations, Personal selling, Direct marketing. Want free publicity but you cant control it. Loss of control if Robert Ebert belittles movie will hurt movie sales. Consumer goods (less than 1% of budget spent on advertising) The 5 Ms of Advertising Mission what are your sales goals, Money, Message, Media, Measurement communication & sales impact Pepsi One Target market & product positioning help guide the marketing mix Target: young men Positioning: Only one has it all A diet cola that avoids the word diet
Young men dont like to drink cola. Took off diet symbol. Still didnt sell. Didnt do enough market research. Spent 100 million on its launch. Sa Sa sometimes growth and success can weaken a successful strategy. Spread R&D costs over more sales. It is very important to have an internally consistent marketing strategy.

the size and scope of a firms business expands 4. Demonstrates the impact of competition as later entrants into a Category stake out a market positioning in the consumers mind 5. Illustrates the need to continually redefine the market segments that the firm wants to target
Had to rely on outside factors. The bigger they got the less products were available to them.

Corona How to become the #1 imported beer? When analyzing a case, look at it from the point of view of the key decision maker at the time of the case. Why does Corona want to be the #1 imported beer in every market? Higher unit volume & lower avg. cost = more profits It is not easy to overtake a leader in a mature market, due to customer tastes & loyalties. Easier to build shares when people are still making up their mind. Hyper focus on your strengths. Moving customers through buyer behavior process-problem recognition, info search, eval. Alternatives, purchase decision, post purchase behavior. Product recognition, info search, evaluate product decisions, and post-purchasing behavior. Need repeat purchasing. Sales force helps closes sales. Growing Hispanic market helped bring Corona to #1 Brita Better to cannibalize your own sales than to let the competition do it for you. Most new products and services cannot be justified with trial alone. Need repeat sales. Late entry with a me too product only works if you enter with a strong brand name during the growth phase. New product launches require large advertising and promotion budgets. Market Research helps forecast sales. Lifetime value of a customer. Revenues come from filter sales. Trial plus repeat purchase New-Product Development Decision Process - idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, market testing, commercialization. Aqualisa Quartz I. Obstacles to New Product Success Resistance to Change a) Inside Firm - Complacent sales force, passive mentality b) Distribution Structure No real selling, skeptical of change c) Customers Unhappy but uninformed about products II. Motivating DistributionPush vs.Pull - push: use incentives (increase retailer profits) - pull: create consumer demand III. Internal Consistency in the Marketing Mix Case illustrates need to provide internal consistency in the market mix pricing, product forms, and the proper channel structure Premium products sold by top end retailers Distribution is most overlooked part of marketing mix. How do we get from factory to consumer? IKEA Unmet need. Stores located around the world. Low-price. Disposable
furniture, looks good. China has low-priced furniture. IKEA floundered here.

Diffusion of innovations: 1. Innovators (2 %) 2. Early adopters (13 %) 3. Early majority (34 %) 4. Late majority (34 %) 5. Laggards (16 %) Breakeven analysis:

BEV =

Avg. Annual Fixed Costs Price Variable Costs

Strengths: Easy to calculate & intuitive Weaknesses: Ignores time value of money Advertising is amortized over 5 years Ignore sunk costs. New product launch may cost $10 million dollars.

Identifying market segments & selecting target markets Two ways to start a marketing strategy: 1. Mass marketing: Be all to all people 2. Target marketing: Serve a few very well Target marketing is most effective in the US, due to competition & increased income. Step 1: Market segmentation - Primary factors: product benefits, usage/attitude - Secondary factors: Geographic, demographic, psychographic Ideal market segment should be: - Homogeneous - Identifiable - Accessible - Large enough to support a marketing mix Step 2: Select target markets - Segment size & growth - Segment profit potential Marriot Video.-

Market research helps when direct contact with customers is lost (founders stop talking with customers). Diseconomies of scale surface when growth weakens successful strategylimited amt. of high quality, discount cosmetics Good example of segmentation and targeting. Target market: real spenders (price conscious shoppers for quality cosmetics) Positioning: Quality products at a fair price Marketing mix: Price conscious shoppers for quality cosmetics. - Product: high quality brand name products. House brands will help drive future growth. Also premier products & services - Distribution: New stores are either pleasant & spacious or selfservice. Internet sales through sasa.com - Promotion: limited - Pricing: Below department stores, but above Bonjour & Rainbow Diseconomies of scale Close to department store
prices. Increase price some to protect profit margins.

1. A stripped-down value proposition eliminating elements of the expected value proposition: a)no in-store sales assistance b) limited variety c) no delivery d) non-durable lifetime (sub-standard) quality 2. De-facto reverse self-selection self-selection with respect to customers. Product offerings are designed in such a way that they naturally repel non-targeted customers 3. Psychological distance from the product category incumbents IKEA is a maverick that has been able to distance itself from the high-end players (ie., Ethan Allen,Thomasville) and the low-end players (Walmart and KMart) Unmet need-low prices, disposable furniture that looks good Competitive Limitation-50 yrs no competitor on a larger scale. Starbucks American Customer surveys - satisfaction feedback provides an early signal that something is wrong. Serving 2 target markets- coffee connoisseur (hardcore coffee drinkers) and convenience seeker. Must please two customers at same time. Not easy to please two target markets. Wants repeat purchases. Like atmosphere.

Market research important, esp. in the absence of direct customer contact. Market research good in this case. Success attracts competition Internally consistent marketing strategy important 1. Illustrates the use of marketing research in determining the proper positioning of a retailer 2. Shows the evolution of many retailing concepts where growth destroys what was so attractive about them 3. Shows how marketing strategy must evolve as

BMWFilms

Like free entertainment. Sell business or show business? Image advertising: important but difficult to measure the impact. Couldnt document success. Internet ads: Most are a big failure. Search engine ads have

been working (googles search engines ads are one exception). BMWFilms built brand image among youth (future customers) without alienating existing customers Challenges of advertising to teens/twenties: - grew up in an ad-saturated world - hard to predict what will be cool What can be done? - Go to extreme lengths to stand out - Take it underground
- Entertaining ads - Simple brand message Sell business vs. Show business Image Advertising is important, but difficult to measure impact. 1. Demonstrates the need for an integrated marketing strategy and marketing plan that fits the considerations regarding the customer 2. Illustrates the role played by the product category what is the category that you are competing for? What do you do when you represent the entire category? 3. What is the role played by the brand manager vs. the company executives? Brand managers move into their position ready to make their mark but, typically, also have reason to be very risk averse. Worried young people wouldnt buy cars their parents have.

Kingsford Charcoal we calculated each share point worth $2-3million. Pressure competition w/limited price increase Clorox needs increased profitability

- Descriptive: Consumer Survey or experiment. - Who will be surveyed? i.e. the target market - How many will be surveyed? Related to costs - Cause and Effect: Experiment suspect Ads drive Sales, therefore track consumer spending given certain advertisements on their cable TV 3 Data Collection Expensive and prone to error (nonrespondent bias, missing target b/c shes too busy to fill out a survey form). Data is your friend. Analyze all or only some observations. 4 Analyze the Information: Descriptive Results, regression equation, Analyze all or only some observations? Usually put data into subcategories 5 Present Findings: Market research supports decision making. Sometimes though it is done to protect the decision maker (if product/ad campaign fails, can say market research supported my decision. E. Competitive snooping/surveillance is a good idea F. Difficult to Forecast Sales for a Pioneering Product (Sony AIBO) 1 Purchase intent estimates are often not reliable for really new products, often more reliable for products people know 2 Managing consumer expectations plays a key role in customer satisfaction (Pet (low expectations) vs. Worker Robot (higher expectations dont accept a command being ignored). Position AIBO as a pet helps manage consumer expectations IDENTIFYING MARKET SEGMENTS AND SELECTING TARGET MARKETS: 2 Ways to Start a Marketing Strategy: 1. mass marketing, e.g. Ford and Model T 2. target marketing (most effective in US because of increased competition and income) o Market segmentation Primary factors product benefits, usage/attitude Secondary factors geographic, demographic, psychographic Ideal market segmentation homogenous, identifiable, accessibility, size o Select target markets Overall attractiveness of each segment segment size and growth, segment profit potential Company objectives, skills and resources Use marketing mix PRODUCT POSITIONING: Dos Important benefit to target customers, affordable benefit to target customers, different benefit from competition, profitable to the company Dont head to head vs. established competition, fill a hole in factory instead of in the mind, technological achievement with no need Single benefit uses a line, 2 benefits use a perceptual map SA SA COSMETICS SUMMARY: Strategic evolution in some cases, growth and success can weaken a successful marketing strategy. This is an example of diseconomies of scale. Market research is especially important when managers do not have direct customer contact. This is a good way to reduce risk. IKEA SUMMARY: great global success. Does best in w. Europe. Unmet Need: Low priced disposable furniture that looks good Competitive Imitiation: Nothing yet on a large scale! One strategy for sustainable growth commitment free furniture Diffusion of Innovation product innovations spread across our economy mainly by word of mouth o Consumer Response to Innovation innovators(risk takers), early adopters(look towards innovators for guidance), early majority(want proven product), late majority(price sensitive), laggards(risk averse) AQUALISA SUMMARY: Obstacles to New Product Success: o Inside Firm marketing and sales force o Distribution Structure order takers o Customers uninformed How to Movivate Wholesalers & Retailers

Push(direct profit motive; increase retainers profits) versus Pull(create consumer demand) Marketing Mix Internal Consistency do not forget distribution; premium brands premium retailers (showrooms) Distribution: the most overlooked marketing mix element. Typical channels are retail stores, catalogs, and Web sites. Channel Conflict o Vertical Channel Conflict manufacturer and retailer o Horizontal Channel Conflict two retailers: Levis at Wal-Mart and Sears/Gap o Multichannel Conflict Target vs. Tupperware parties o

5.

Plan of action: implementation.

Need good base in finance. May be shot down by them. Many interactions with them. Data is your friend, especially on new job (no credibility). Take some ricks on your new job. Lots of opportunities in organizations to get to the top. Consultants know what you want to hear. Nonprofit marketing: Cons lower pay, limited budget. Cant be all things to all people.

Quality
High

Price competition is usually avoided because if there is a price war everyone hurts. Easy for competition to match price cuts. Every
firm may be hurt. Stock price tanks (Wall Street). Pricing objectives have an important impact on pricing decisions. Sales force: pressure competition w/ limited price increased. Royal Oaks. Promotion: taste not convenience(will get beat by gas grills) Capacity problem in 5 years. (5% increase per year). After 911 travel decreased. In 2002 they ran out of capacity. Ad campaign against gas grills would be an uphill battle. Royal Oaks is harvesting market share. Great to have a monopoly. Govt. wont allow it. Market Share Goals: 1. Build (get share points from Royal Oaks) 2. Hold 3). Harvest (cut costs, let market share slip) Problems seasonal product, profit pressures from Clorox/top management (want more profits now), gas grill growing, limited ad budget (6 to 1 million), capacity (5 years to increase) very expensive to start a new plant

Value > 1.0

Bonjour Sa Sa

Value = Quality Price = 1.0 on diagonal line Department Stores

Middle

Rainbow

AIBO First-generation tech products are prone to failure Customer reactions are difficult to predict; helps to get feedback. Market research unreliable for pioneering products Innovators and early adopters more tolerant of bugs. Not price sensitive. Internally consistent marketing strategy: - target market (unmet need), product positioning , marketing mix, Sonys product launch benefits: - Revenue to fund further R&D, learning: R&D and manufacturing, avoid customer dissatisfaction by managing expectations Difficult to forecast sales for a pioneering product, estimates are often unreliable. When a market evolves it can take many years to be profitable. Managing customer expectations plays a key role in consumer satisfaction. Kotlers 6 Steps of Making Pricing Decisions 1) Pricing Objectives 2) Customer Demand 3) Competition 4) Costs 5) Select Pricing Strategy 6) Setting Final Price III. MARKET RESEARCH use to determine consumer demand A. Good Way to Decrease Risk B. Especially Important when Managers dont have Direct Contact with Customers (SaSa) C. Types: 1 Business/Economics and Corporate Research 2 Pricing (demand analysis), Product, Distribution, Promotion (Advertising Effectiveness) 3 Buying Behavior understanding customer, product satisfaction D. 5 Key Steps plot sales vs. advertising and run regression model. 1 Define Problem and Research Objectives why are you doing the research? 2 Research Plan - Exploratory: Difficult to prove, include focus group interviews (like what Levi did)

Low

Drugstore Chains: Watsons Mannings

Middle High Where are Sa Sa, Bonjour, and Rainbow?


Final Exam Fall 2002 questions & solutions:
Breakeven:

Low

F ix edCosts $ $ $ a). BEV = b). c). B reakeven unit sales 720,000.00 B reakeven unit sales with a p rofit targ et of $500 ,000 1,720,000.00 Breakeven dollar sales with a profit taget $ 2,580,000.00

P rice 200,000.00 $ 160,000.00 $ 360,000.00 $

Variable Costs 2.50 $ 1.00 $ 1.50 $ $ 0.50 0.25 0.25 1.00

Overview for analyzing marketing cases (iterative process): 1. Problem statement: take decision makers perspective at time of the case. 2. Situation analysis (uncontrollable variables): required in all marketing cases. 3. Target Market: actual/potential customers. Product Positioning: unique selling proposition. Marketing Mix: 4 Ps Product, Price, Promotion, distribution. 4. Recommendation: select the best alternative.