Dirección de Marketing – 5º E3 A

TOPIC 1: INTRODUCTION

1. CONCEPT AND OBJECTIVES

MARKETING: Is the achievement of corporate goals through meeting and exceeding

customer needs better than the competition. Is the delivery of value to customers at a
profit.

STRATEGY: Is a method or plan chosen to bring about a desired future, such as

achievement of a goal or solution to a problem.

Strategy is a sequence of choices designed to reach a goal. This requires to study the
battlefield, our targets and our rivals, predict future behaviors and barriers to overcome.
Strategic marketing is crucial for growth and sustainability.

STRATEGIC MARKETING: Is the market oriented process that pursues the knowledge of
consumer´s needs and the estimation of the potential of the company and its
competitors to achieve a competitive advantage, sustainable over time and that can be
defended from competitors.

IMPORTANCE OF STRATEGIC MARKETING:

2. THE MARKETING STRATEGY

Marketing strategy is the concept that integrates the main goals and policies of an
organization, and establishes the coherent sequence of actions to undertake in order to
obtain sustainable competitive advantages, based on the proper knowledge of the
different needed elements.

The strategic marketing plan is the description of the marketing strategy of an

organization.

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It must become effective during a long period of time and it affects the organization
holistically in a very relevant way, as it concentrates and commits a large part of its
resources to reach its intended results.

MISSION: the company’s (or department’s) reason for existence.

VISION: describes the organization as it would appear in a future successful state.

VALUES: what the organization believes in and how it will behave.

2.1. INTERNAL AND EXTERNAL ANALYSIS

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The macroenvironment consists of a number of broader forces that affect not only the
company, but also the other actors in the microenvironment.

Þ Political: Political stability, taxation, state interventionism, worker unions, etc.

Þ Economic: Economic growth, unemployment, interest rates, exchange rates,
inflation, economic cycle, investment policies, etc.
Þ Social: Demographic forces, cultural forces, corporate social responsibility and
ethics, the consumer movement, population aging, birth rate, labour market,
geographical mobility, new family structures, social conflicts, new lifestyles,
consumption, etc.
Þ Technological: R+D investment, new production methods, technological
infrastructure, scientific advances, patents, etc.
Þ Environmental: Pollution, climate change, conservation of scarce resources,
recycling, use of environmentally friendly ingredients, animal testing, renewable
energy sources, etc.
Þ Legal: The European Union legislation, employment law, competition law,
product safety and security legislations, advertising law, etc.

PESTEL FOR STARBUCKS:

Þ Political: Sourcing of raw materials, tax policies, employment laws.

Þ Economic: Economic recession, labour costs, operational costs, currency
exchange rates, economic environment in different markets, inflation rate.
Þ Social: Changing family patterns, consumer preferences, work patters, changes
in lifestyles of population, level of education, changing values.
Þ Technological: Emerge of innovative technologies, biotechnological
developments, developments in agriculture.
Þ Environmental: Environmental regulations, environmental disasters in countries
that produce coffee beans, global warming.
Þ Legal: Stricter customs and trade regulations, licensing regulations, health
regulations.

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INTERNAL ANALYSIS: SUPPLY

The microenvironment consists of the actors in the firm’s immediate environment or

business system that, that affect its capabilities to operate effectively in its chosen
markets.

WHO IS A COMPETITOR?
A company that fills the same buyer need you fill but fills it in a different way
(substitute).

HIGH RIVALRY IN CASE OF…

• Low market growth rate
• High fixed costs that require high sales
• Excess of capacity
• Low product differentiation
• High number of competitors
• Strong exit barriers

EXIT BARRIERS:
• Use of highly specialized assets
• High fixed costs
• Inter-related businesses
• Legal and social barriers
• Emotional barriers

WHAT ARE POTETIAL COMPETITORS?

They represent a threat as they may cause sector instability and market share loss.

STRONG POTENTIAL COMPETITION IF…

• High market growth rate
• High profitability
• Vertical integration
• Deregulation in the market

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• Weak entry barriers

ENTRY BARRIERS:
• Market share needed
• Level of investment
• Legal barriers
• Product differentiation
• Access to distribution channels
• Price level

IMPACT OF SUPPLIERS:
Suppliers have an impact on price increases, quality reduction, the supply limit as well
as on the change of the sale conditions.

STRONG IMPACT OF SUPPLIERS:

• Concentration of suppliers (or one single supplier)
• Difficult replacement of the product
• The company is a small account for the supplier
• The product is important for the company
• The company is a captive client
• The supplier could integrate vertically downstream

IMPACT OF BUYERS:
Buyers have an impact on price decrease, quality increase, the purchase conditions as
well as on the change of the paying conditions.

STRONG IMPACT OF BUYERS:

• Concentrated group of buyers
• Strong impact on the company’s financial results
• Low importance of the product for the buyer
• Low product differentiation
• The buyer could integrate vertically upstream
• Large amount of product, price and costs information

WHAT ARE SUBSTITUTES?

• They are products that satisfy the same need for the consumer, but they are
based on a different technology.
• The main threats that substitutes represent are related to the improvement of
the price/quality ratio and the user experience.

KEY IDEAS:
• Slow entry in the market as they require new product technologies.
• The company may stop the entry of its own substitutes, due to the possible
cannibalization of their current market share.

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INTERNAL ANALYSIS: DEMAND

GLOBAL DEMAND:

The amount of sales made of a product in a market (or industry) in a given place and
period, by the set of competing brands, e.g. sweet biscuits market in Spain in 2018
amounts 1,200M€.

POTENTIAL DEMAND:

• Potential demand is the limit that market demand has in a given environment.
• The difference between potential demand and global demand measures the
growth potential of a market, and consequently, the opportunities for
development.

SPECIFIC DEMAND:

The specific demand is the demand of the company or the brand, in a market (or
industry) in a given place and period.

2.2. STRATEGIC VS. TACTICAL MERKETING

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THE SURVIVAL MATRIX:

- 1. SUCCESS: An effective operational management combined with a suitable

strategy.
- 2. PROBLEM: A bad execution disables a right strategy. Problems to appear on
the mid term.
- 3. SLOW DEATH: An unfitting strategy lies hidden by an outstanding execution...
Unless we correct the strategy failure is shortly expected.
- 4. QUICK DEATH: Difficult to diagnose. Dangerous situation, difficult solution.

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MARKETING AUDIT (MA): analysis and revision of the strategic plan to verify:

STRATEGIC CONTROL: follow-up on the strategic marketing plan to:

- Make sure that the actions are being developed according to the plan.
- Verify that the results of such actions are aligned with the goals.
- If the goals have not been achieved, establish the alternative actions that must
be carried out in order to meet them.

GOAL:
- Increase market share.
- Enlarge the product offerings if the market requires so.
- Find a substitute competitive advantage.
- Enter new market segments.

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3. PRODUCT-MARKET AND STRATEGIC BUSINESS UNIT

• Basic unit of analysis in strategic management

• Comprises the set of substitute products that satisfy a need or function for
potential customers
– Who: target the product will try to reach (buyers)
– What: function/need the product will satisfy (functions)
– How: technology used (process, raw materials ...)

PRODUCT MARKET (PU)

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STRATEGIC BUSINESS UNIT (SBU)

• It is made from one or several related product-markets (pm), that satisfy a

common need of the market or a group of related needs.
• It is a set of homogeneous activities or businesses for which we can formulate a
common strategy.
• Every SBU requires a specific management, different from the other SBUs, that
may match or not with the internal organization of the company.

The addition of PMs into an optimal SBU must, at least, fulfill the following conditions:

Þ Must have a business mission independent and different from the rest of SBUs.
Þ Must have a defined group of competitors.
Þ Must be able of taking into action an integrated marketing plan independently
from other SBUs.
Þ Must be big enough to justify its direction by a senior manager, but small enough
to assume a reasonable allocation of resources and funding.

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TOPIC 2: MARKET SEGMENTATION

1. CONCEPT AND OBJETIVES

SEGMENTATION: The process of dividing the market in groups of consumers with

homogeneous preferences or characteristics in order to select the target groups that fit
best with our business and design differentiated marketing programs to meet each
segment’s needs.

SEGMENTING: To divide the market into groups of people with homogeneous needs
which can be treated in a different commercial form.

MARKET SEGMENT: An identifiable group of customers that share one or more needs.
market segments generally respond in a predictable manner to a marketing or
promotion offer.

PURPOSE OF MARKET SEGMENTATION:

Þ To better meet customer needs.
Þ To identify opportunities for new products and services development.
Þ To help in designing the most effective marketing programs to reach more
homogeneous groups of clients.
Þ To improve the strategic allocation of marketing resources.

PROCESS OF MARKET SEGMENTATION: sequentially, there are three decision-making

processes interrelated:

MACRO VS. MICROSEGMENTATION

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2. MACROSEGMENTATION

To divide the market into markets of reference (product-markets). That is identifying the
intersection between needs/functions, buyers and technology. Unveils the 4 key
elements of the marketing strategy:
- Buyers
- Competitors
- Seeked atributes
- Opportunities

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EVOLUTION OF THE PRODUCT-MARKET: CAUSES

EVOLUTION OF THE PRODUCT-MARKET: NEW SCENARIOS

Þ New technologies can meet the same function or need.

Þ New functions could be met by a modified or improved product.
Þ Other customer groups with a need or function in common.
Þ One product can offer a variety of functions.
Þ Needs are best met when products feature a small number of functions.

3. THE STAGES OF THE SEGMENTATION PROCESS

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EXPLAINED VARIABLE:

Examples of variables to explain with the segmentation:

Þ To consume or not a product
Þ More of less acceptation of a product/brand/characteristic
Þ Brand preference

Explanatory variables (segmentation criteria):

Þ Indicators that identify groups of buyers as homogeneous as possible withing
each group (intra-group homogeneity).
Þ Indicators that identify groups of buyers as heterogeneous as possible among
groups (inter-group heterogeneity).

DIFFERENT WAYS OF SLICING THE MARKET WILL GIVE US DIFFERENT PERSPECTIVES

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FIRST-ORDER SEGMENTATION:

- Value sought by the buyer satisfied need (in a watch: measure time, prestige,
investment, quality…).

SECOND-ORDER SEGMENTATION:

- Profile buyer characteristics:

Þ Geographic: region, region size, area (urban/rural), climate, city size, etc.
Þ Demographic: age, sex, marital status, family size, family type, children, etc.
Þ Socioeconomic: income level, social class (status), occupation (employment),
studies, religion, nationality, etc.

- Behavioral:

Þ Purchase occasion: self-buy, gift, special occasions

Þ Purchase behaviour: frequency, loyalty, channel
Þ Usage: heavy or light user, moment of use
Þ Media behaviour: primarly online, primarly offline

- Psichographic: People within the same demographic group can exhibit very
different psychographic profiles on the basis of personality traits, lifestyle or
values.

Þ Lifestyle: trendsetters, conservatives, sophisticates.

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Þ Personality: conscientious, agreeable, extrovert.

VALUE OF THE CLIENT:

• Client value in a medium or long term.

• Estimated reaction of each group of clients to the company's offer.
• We must distinguish between:

Þ MVCS (most valuable customers) or better clients

Þ MPC (most potential customers) with longer haul
Þ BZS (below zeros) the non-profitable.

COMPANIES SEGMENTATION: ACTION ORIENTED

Many companies have forgotten that the real challenge begins when the client has been
caught. The key points to understand this segmentation are to know:

Þ Link or level of economic commitment of the client. Measured in terms of

possession of products or expense and use of the company products.
Þ Loyalty of the client. It is key to manage correctly and in a different way the
faithful clients vs. "mercenaries".
Þ Risk of Abandon. Analyzing and understanding the reasons and the symptoms
we can predict/ identify clients who surely are sharing us or will leave us.

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TELEFÓNICA/MOVISTAR:

• INDIVIDUALS
• HOMES
• SMEs
• CORPORATIONS
• PUBLIC ENTITIES

SEGMENTATION TYPE – TWO WAYS TO MAKE MARKET SEGMENTATION:

Descriptive segmentation or “a priori”:

• The market is divided according to some criteria or pre-established explanatory
variable.

Segmentation “a posteriori”:
• Segmentation techniques are used to identify the variables.
• It consists of two steps:
§ Market research on consumers' expectations
§ Determination of socioeconomic, geographical, behavioural, etc. profiles
of the identified functional sectors

SEGMENTATION TECHNIQUES:

DEPENDENCE:
• Identify homogeneous segments
• Identify the most relevant selection criteria

1. AID (Automatic Interaction Detector)

2. CHAID (Chi-Square Automatic Interaction Detector)
3. Discriminant Analysis

INTERDEPENDENCE:
OBJECTIVES:
• IDENTIFY MULTIPLE AND SIMULTANEOUS INTERDEPENDENCE RELATIONSHIPS

1. Cluster Analysis

SEGMENTATION VALIDATION: To determine that the market has been properly

segmented, five criteria are considered:

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DIFERENTIATED SEGMENTS:
Þ MOST IMPORTANT CONDITION: to maximize the differences between groups
(heterogeneity) and to minimize the differences between buyers inside each
group (homogeneity).
Þ The lack of heterogeneity can generate cannibalism among products of the same
company destined to different segments.

MEASURABLE SEGMENTS:
Þ The variables or selection criteria (size, purchasing power, and characteristics of
the segments in terms of purchase behavior) can be measured.

SUBSTANTIAN AND STABLE SEGMENTS:

Þ A segment must imply a sufficient potential to justify itself the development of
a specific marketing strategy.
Þ The temporary duration of the segment must be sufficient to assure the
profitability.

ACCESIBLE SEGMENTS:
Þ Able to undertake marketing decisions.
Þ It can be more or less permeable: degree of difficulty inherent to the access.

ADEQUATE SEGMENTS FOR THE COMPANY:

Þ Appropriate to company's objectives and resources.

SEGMENT ANALYSIS:

THE FIVE STEPS OF SEGMENT ANALYSIS:

Þ Select factors and criteria to measure the market attractiveness and the
competitive position.

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Þ To weight the factors of the market attractiveness and the competitive position
to reflect its relative importance.

Þ To evaluate the current position of every potential target market in every factor.

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Þ To project the future position of each market based on expected environmental,

customer and competitive trends.

Þ To select segments and to assign resources: TARGET MARKETS

4. SEGMENTATION STRATEGIES

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FULL MARKET COVERAGE – ALL SEGMENTS AND ALL PRODUCTS:

UNDIFFERENTIATED: GOOGLE, COCACOLA

• Treat the market as a whole (ignore segments)

• Standardized products (scale economies)
• One strategy for most possible buyers
• Risk of counter-segmentation

DIFFERENTIATED: CITI, VODAFONE, NIVEA

• It recognised different submarkets

• Adapted products (higher costs)
• A set of strategies adapted to every segment
• Risk of hyper-segmentation

SINGLE SEGMENT CONCENTRATION – ONE SEGMENT AND ONE PRODUCT:

Often adopted by SMEs (Small and Medium Enterprises). Moleskine, Whole Foods,
Victoria’s Secret, Louboutin.

Þ The firm looks for a strong market presence, due to a strong knowledge of the
segment’s needs and a better image.
Þ This “directed” specialization can rely on a function or on a specific group of
buyers.
Þ Advantage: scale economies (production and marketing).
Þ Disadvantage: higher risks than normal (as operating in just one segment).

MARKET NICHE – ONE SUBSEGMENT AND ONE PRODUCT:

A market gap or niche is in fact a micro-segment, a very specific segment. Pronovias,

Harley-Davidson, Lush Cosmetics…

Þ A market gap has a complex and specific set of needs.

Þ A market gap (or niche) strategy is increasingly more frequent.
Þ Advantage: the leader firm is normally not vulnerable to competitors attacks.
Þ Disadvantage: the narrower the gaps are defined, the fewer potential buyers will
stay and, in consequence, the potential benefit will be lower.

SELECTIVE SPRECIALIZATION – SOME SEGMENTS AND SOME PRODUCTS:

Condé Nast, Bimbo, Virgin Atlantic…

Þ Advantage: diversification of the firm’s risk.

Þ Disadvantage: lack of synergy (very often).

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PRODUCT SPECIALIZATION – ONE PRODUCT AND ALL SEGMENTS:

Goldman Sachs, Michael Page, Warner Music Group, Ray Ban, New Balance…

Þ Advantage: strong reputation in the specific product area.

Þ Disadvantage: risk that the product may be supplanted by a new technology.

MARKET SPECIALIZATION – ALL PRODUCTS AND ONE SEGMENT:

Þ Advantage: strong reputation of the company specialized in a group of

customers.
Þ Disadvantage: risk of concentration (the customer group may suffer budget cuts
or shrink in size).

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TOPIC 3: POSITIONING

1. CONCEPT AND OBJECTIVES

PRODUCT: Any commercial offer that, across a specific set of attributes (features),
satisfies market needs.
A product is successful if it offers value to its potential market. If it satisfies needs in
conformity with consumer expectations on it. Consumer expectations change from
some products to others depending on the promise of value that each of them transfers.
They depend on perceptions.

PRODUCT DIMENSIONS:

Þ Expectations relate to the traditional product attributes: physical, functional and

psychological.
Þ Not all the attributes influence in the same measure the purchase process. Most
influential attributes are named determinant attributes.
Þ Determinant attributes are those on which customers or consumers argue their
purchase decision.
Þ Determinant attributes represent the comparison sets between the different
products/brands that form the commercial offer.

CONSUMER ATTITUDE: a learned predisposition to feel attraction or rejection towards

objects and ideas and to behave according to those negative or positive prejudices.

Attitudes develop a very consistent conceptual framework in individuals, changing

attitudes results extremely complicated. It is preferable to modify the product or its
perception to fit it with the existing attitudes rather than trying to change customer
attitudes.

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POSITIONING: the relative place our brand occupies vs. Competitors, according to
determinant attributes.

OBJECTIVE POSITIONING: the company’s efforts to make the perception of the product
coincide with the identity under which it wants a market segment to associate the
product with. These efforts represent the positioning process. The perception of the
customer does not have to coincide with the positioning desired by the company.

SUBJECTIVE POSITIONING: the location in mind with which a certain product / brand is
perceived by its potential market of customers or consumers in relation to the rest of
references that operate on the above-mentioned market. Perception rests on the
consumer segment’s valuation of the determinant attributes. Thus, the same product
can have different positionings in different market segments.

IDEAL POSITIONING: the demands that the different segments of the market request to
the products and to the brands on the basis of those features of product that for them
bring major value. Neither the objective positioning nor the subjective positioning
necessarily coincide with the ideal positioning. The ideal positioning must align the
strategy of positioning of the company, it is necessary to be the base of the objective
positioning.

POSITIONING KEY CONCEPTS

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2. THE POSITIONING PROCESS

2.1. DETERMINATION OF THE PRODUCTS/BRANDS TO BE CONSIDERED

Positioning can refer to: the company, the category of products, the brand… It is
necessary to know the situation of the competitor brands and to consider the situation
of the competitor indirect products (category of products).

2.2. IDENTIFICATION OF THE DETERMINANT ATTRIBUTES

DETERMINANT ATTRIBUTES: attributes to which the consumers assign more

importance and they correspond those who they bear in mind when buying a certain
brand. They are identified by using analytical technologies.

Consumers can consider several attributes to evaluate products or brands, but only few
ones really influence on his choice (3 attributes or less).

2.3. BUILDING A POSITIONING MAP

Positioning maps are built by using different technologies that gather and analyze
consumers perceptions on diverse products or competitor brands.

The most frequently applied techniques:

• Direct qualifications
• Fishbein-bass
• Partial components analysis (pca)
• Factorial components analysy (fca)
• Non- metric multimensional analysis
• Discriminant anaylisis
• Conjoint analysis

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BIDIMENSIONAL MAPS: Products/brands are positioned depending on two only

determinant attributes. The objective is not to reflect differentiated territories of value
but the different position of the products / brands based on the same features.

MULTIDIMENSIONAL MAP: Depending on the determinant attributes of positioning it

reflects territories of value differentiated by product / brand.

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2.4. ANALYSIS OF CURRENT SITUATION

READING THE POSITIONING MAP (REASONS FOR THIS POSITIONING):

• Proximity in the perception of the brands b and c (higher share)

• Isolated situation of the brands f (lowest share) and e
• Absence of brands in the top right quadrant (more softness and deodorant
power)

2.5. DETERMINATION OF THE IDEAL POSITIONING

Þ The product or ideal brand contains the combination of attributes preferred

from the point of view of the consumer.
Þ Different ideal positions for the product or brand that correspond to different
groups of opinion can be identified.
Þ Not all the consumers look for the same benefit: different market segments.

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2.6. POSITIONS AND SEGMENTS CONSIDERATION

Þ Different ideal positions of the consumers regarding products or brands reflect

differences in the benefits that they search, that is, they answer to different
segments.
Þ Examining together the preferences in every segment together with perceptions
of the different brands, it can be detected:

• The strong points of every brand (by segment).

• The intensity of the rivalry between brands in a given segment.
• The opportunities to reach a differentiated position.

2.7. ANALYSIS AND INTERPRETATION OF RESULTS

The final decision with regard to the positioning of a new brand or the repositioning of
an already existing brand must be based on the analysis of segmentation and
positioning, bearing in mind:

Þ The current situation of the preferences of the groups and the position of the
rival brands.
Þ The future expectations of the attraction of the segments and the forces and
weaknesses of the company and of the competition.
Þ Quantification of the economic implications to manage and to support the
chosen position.

2.8. DEFINITION OF THE OBJECTIVE POSITIONING (POSITIONING STRATEGY)

• To transmit the idea (basic benefit)

• Differ from the competition

MISKATES TO AVOID:
Þ UNDERPOSITIONING: the market does not associate anything special with a
brand (the consumers have a vague idea of the brand, its attributes are

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irrelevant, its positioning is not unique and it doesn’t have a competitive

advantage).
Þ OVERPOSITIONING: the market has a too concrete, limited image of a brand (for
example, tiffany's = high price, exclusive).
Þ CONFUSED POSITIONING: due to too many associations or frequent changes of
positioning.
Þ DOUBTFUL POSITIONING: the associations are slightly credible, for the
characteristics of the product, the price or the manufacturer.

3. THE POSITIONING STRATEGY

TO CHOOSE A STRATEGY OF POSITIONING, IT IS POSSIBLE TO FOLLOW THE

METHODOLOGY USED BY KOTLER:
Identify the competitive advantage à Choose the global positioning strategy, through
the value proposition

Identify the competitive advantage

- Product (quality: Fairy)
- Service (quickness: Fedex)
- People (Disney, Emirates)
- Image (Google)

Choose the global positioning strategy, through the value proposition

- More for more (Mont Blanc)
- More for same (Lexus)
- Same for less (Walmart)
- Less for much less (Aliexpress)
- More for less
HOLY GRAIL OF MARKETING EXECUTIVES

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4. POSITIONING TECHNIQUES

THE MOST APPLIED TECHNIQUES ARE:

4.1. DIRECT QUALIFICATION

Þ It uses the euclidean space to represent the consumers opinions about different
attributes or dimensions (axes).
Þ The application of the euclidean distance allows to reveal the similarities or
differences between several brands and the proximity to the ideal position.
Þ The consumers qualify the brands on the basis of the selected attributes or
dimensions, in a scale from 0 to 10, and define the ideal qualification.

A company that makes and sells yoghurt positions four brands (a, b, c and d) that
compete in a segment, according to the opinions of the consumers, on the basis of two
principal attributes: creaminess and sweetness. Opinions were qualified from 0 to 10,
depending on the perception of every attribute. In the same survey, they expressed also
the opinion about the ideal product (i).

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TOPIC 4: PRODUCT

1. CONCEPT, ANALYSIS AND LEVELS

PRODUCT: any commercial offer that, across a specific set of attributes (features),
satisfies market needs. Under the generic denomination of product, it is included:
tangible products, services, experiences, events, people, places, organizations,
information and ideas.

PRODUCTS GATHER INFORMATION ABOUT:

• Attributes
• Manufacturing
• Costs and margins
• Life cycle
• Uses
• Modification and elimination
• Attended segments
• Commercial research
• Communication
• Strategies
• Competition
• Prospects

Companies have to know perfectly every product that integrates its portfolio and
analyse them permanently.

PRODUCT ANALYSIS MUST SHOW:

Þ Its commercial qualities or external behaviour

Þ Its productive qualities or internal behaviour
Þ Its situation vs. Competition
Þ Relation with other company products

This analysis or “product audit”, should be done annually and it should be done by a
cross-functional committee.

PRODUCT LEVELS

The product has a series of levels that make up the hierarchy of value of the consumer.

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The product has a series of levels that make up the hierarchy of value of the consumer.

CORE BENEFIT:
• Benefit that the customers want to purchase
• What they buy the product for

BASIC PRODUCT:
• Basic traits of the product related to the satisfaction of the need

EXPECTED PRODUCT:
• Additional benefits usually associated with the product

EXPANDED/INCREASED PRODUCT:
• Exceeds the customer's expectations
• Increased benefits turn into expected benefits over time
• If the company increases the price of the expanded product, competitors could
offer the expected product at a lower price

POTENTIAL PRODUCT:
• The increases and transformations that the product should incorporate in the
future
• The company must continue investigating in order to satisfy its clients

PRODUCT VS. BRAND

PRODUCT
• PRODUCT ATTRIBUTES: Manufacturing process and self movement
• DESIGN: Sportive
• USES: Every day use and/or special moments
• FUNCTIONAL BENEFITS: Measure time and date

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BRAND
• IMAGE: High quality and history
• COUNTRY OF ORIGIN: Switzerland
• ASSOCIATION WITH THE ORGANIZATION: Very high since years
• BRAND PERSONALITY: Competence and sophistication
• RELATIONS WITH CUSTOMERS: Close, high and loyal
• SELF-EXPRESSION Focus on adventure and extraordinary facts
• EMOTIONAL BENEFITS: Status and lifestyle

2. PRODUCT PORTFOLIO MANAGEMENT

PRODUCT PORTFOLIO: the set of products that the company manufactures or

commercializes. Each product plays a role for the organization. The product portfolio
analysis aims to optimize the investment-divestment decisions and resources allocation
among the different product-markets.

TYPES OF PRODUCTS IN THE PORTFOLIO:

Þ Leading products: the center of the range, an important part of the sales volume,
and provide the greatest benefits.
Þ Attraction products: attract the customer to sell leading products. They can be
simplified or premium versions. Some are not profitable but they increase sales.
Þ Products for the future: called to replace the leaders.
Þ Regulatory products: compensate the seasonal sales of the leaders, absorbing
fixed costs.
Þ Tactical products: are intended to disturb competition or respond quickly to
attacks from competitors, in order to avoid losing market share.

MODELS OF PORTFOLIO ANALYSYS:

The process of analysis in these models is structured in four steps:

Þ Definition of the business unit in scope: product-market
Þ Evaluation of every unit of analysis
Þ Examination of the interrelationships
Þ Determination of the project of future portfolio

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Dirección de Marketing – 5º E3 A

THE MATRIX MODELS TO BE STUDIED ARE:

BCG – ANALYSES:

• The phase of the product life cycle which relates to market growth rate
(mgr)
• In fast growing markets it is easier to increase the market share
• Fast growing markets require additional financing
• The effect of experience, which is associated with the relative market
share (rms)
• The higher the production level the lower costs per unit, higher
margins and higher revenue
• Rms is obtained dividing the company’s market share by the main
competitor’s market share

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WIND & CLAYMAP (DYNAMIC MATRIX) – 4 dimensions: total sales, company’s sales,
profitability and shares

Analyses:
• The market growth rate (mgr)
• The company growth rate (cgr)
• The profitability of the company, according to the objective
• The market share
• It is the only matrix that contemplates the time dimension in portfolio
management

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Dirección de Marketing – 5º E3 A

MARKET SHARE:
• WEAK: < 10%
• AVERAGE: FROM 11 TO 25%
• LEADER: > 26%

PROFITABILITY (ACCORDING TO OBJETIVE):

• LOW: < OBJECTIVE - 5%
• NORMAL: =OBJECTIVE +/- 5%
• HIGH: > OBJECTIVE + 5%

MARKET GROWTH RATE (MGR) & COMPANY

GROWTH RATE (CGR):
• DECLINE: NEGATIVE TREND
• STABLE: FROM 0 TO 10%
• GROWTH: > 10%

GE-MCKINSEY – Market attractiveness-competitive position

Analyses:
• The attractiveness of the market
• The competitive position of the company’s product
• Profitability is the better measure than the cash flows to be able to
compare in what business to invest
• The factors are selected, are weighted and are qualified, to place them in
the matrix

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Dirección de Marketing – 5º E3 A

ADL (ARTHUR D. LITTLE) – Life cycle-competitive position

Analyses:
• The product lifecycle
• The competitive position of the company’s product:
o Dominant: it controls the behavior of the competition
(monopoly)
o Strong: it behaves independently of a possible threat
o Favorable: enough freedom to develop their strategies
o Stable: it has guarantee of continuity
o Weak: its development is not satisfactory (change or retire)

HUSSEY – Market growth-sales growth

Analyses:
• The market growth rate ( or competitors)
• The sales growth rate in the products (or mp) considered (average of 3
years)
• The diagonal is named a " line of constant participation ": to the left side
the market grows more than the company (share loss) and to the right
side the company grows more than the market (share gain) at the
expense of the competitors
• It is applied also to compare with the principal competitor

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Dirección de Marketing – 5º E3 A

3. PRODUCT STRATEGIES

PORTFOLIO MANAGEMENT STRATEGIES

- PRODUCT ELIMINATION

Reasons to eliminate:
• Low profitability, low market share
• Transfer of resources (opportunity costs)
• Harmful for the company’s image

Reasons to maintain:
• Contribution to fixed costs
• Helps selling other products of the company
• Expectations of improving the profitability
• Emotional reasons

- LINE MODIFICATION

A product line is defined by its:

Þ Depth: the number of different products that it contains

Þ Consistency: how are this products related among them:
o Use
o Type of consumption
o Manufacturing process
o Etc.

• Line extension strategy: adding new products to an existing product line.

• Continuation strategy: keeping the same products in the product line.
• Product modification strategy: improve product adding features or improving
quality.
• Line extension/reduction strategy: add a new product to existing lines,
discontinuing a product or creating new lines.

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Dirección de Marketing – 5º E3 A

- PRODUCT LAUNCH

GROWTH STRATEGIES

MARKET ENTRY STRATEGIES

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Dirección de Marketing - 5º E3 A

TOPIC 5: BRAND

1. THE CONCEPT OF BRAND

PRODUCT VS. BRAND

- PRODUCT: Product attributes, design, uses and functional benefits.

- BRAND: Image, country of origin, association with the organization, brand
personality, relations with customers, self-expression and emotional benefits.

BRAND: A name, term, design, symbol, or any other feature that identifies one seller's
good or service as distinct from those of other sellers. The legal term for brand is
trademark. A brand may identify one item, a family of items, or all items of that seller.
If used for the firm as a whole, the preferred term is trade name.

Þ A brand is a name, symbol design or mark that enhances the value of a product
beyond its functional purposes.
Þ Brand is a set of mental associations, held by the consumer, which add to the
perceived value of a product or a service.

RELATIONS BETWEEN PRODUCT AND BRAND

Þ A brand does not exist without a differentiated product behind it.

Þ The origin of most of the brands should be sought in an innovation made in a
product or service, ahead of the competition.
Þ The brand is the largest source of value and produces the "halo effect":
knowing the brand name influences the perception that the consumer has on
the product and its advantages.
Þ Products are many. It is the brand which gives them objectives and contents.
Þ Each brand, in any case, must have a star product that represents it,
unequivocally, its meaning and its values.

THE BRAND MUST FULFILL THE FOLLOWING FUNCTIONS:

OTHER ASPECTS THAT MAKE THE BRAND STRONGER:

Þ Quality and origin certifications
Þ Legal guarantees

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IMPORTANCE OF THE BRAND

Þ The brand represents a relationship between buyer and seller based on trust and
fulfillment of promises and common values. This relationship is frail and
dynamic. You have to take care of it constantly.
Þ The brand is the main difference for products, services and organizations and
builds progressively relationships with clients and consumers.
Þ Brands are hard to copy.
Þ It represents another step in the differentiation process.

2. EVOLUTION OF THE BRAND

The brands have gone from being a business function of differentiating themselves from
the competition to develop a value function for each of the protagonists of the
marketing process.

The brand has gone through four stages of evolution:

1. BRAND AS FORMAL DIFFERENTIATION OF PRODUCTS

Þ A name, term, symbol, or design, or a combination of them, which seeks to

identify the goods or services from a vendor or group of sellers and differentiate
them from the competition.
Þ Product-centric concept of the brand.
Þ MARKETING 1.0

2. BRAND AS LEGAL PROTECTION

Þ Brand is a sign or set of signs certifying the origin of a product or service and
differentiating it from competition.
Þ It is aimed to protect the current policies of mark that traded with the
assignment and the sale of trademark rights.
Þ It is a means to fight against the increase of copies and fakes.

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3. BRAND AS SET OF EMOTIONAL ATTRIBUTES

Þ A basket of specific attributes that gives the buyer not only the basic service of
the product category, but also a range of additional services, which may be very
different in nature: aesthetic, social, ethics ...
Þ The brands are a kind of positive prejudices strongly established in the culture,
only understandable from the emotional plane.
Þ Consumer-centric concept of the brand.
Þ MARKETING 2.0

4. BRAND AS VALUE

Þ The value of the brand is the strategic approach under which the concept of
brand acquires meaning in today's markets.
Þ Enterprises are beginning to understand the brand as an asset capable of
providing value and grow by itself to the company.
Þ Value-centric concept of the brand.
Þ MARKETING 3.0

3. BRANDS ELEMENTS

The brand is composed of four elements:

BRAND IDENTITY
Þ Unique combination of functional and mental associations that the brand
whishes to create and maintain. It represents what the brand ideally means in
the mind of the consumer. It implies a potential promise.

BRAND IMAGE
Þ The set of features and ideas that customers connect in their minds with a part.

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Dirección de Marketing - 5º E3 A

BRAND POSITIONING
Þ Emphasizing the distinctive characteristics that make it different from its
competitors and appealing to the public. The aim is to identify, to take
possession of a strong purchasing rationale that gives us real or perceived
advantage.
Þ Unique selling proposition: McDonald’s has made itself to be the family friendly
low cost restaurant in the fast food business. We have a narrow scope for a
customer base and a low cost strategy.

BRAND EQUITY
Þ A set of intangible assets, born in the proccess of interaction between brands
and consumers, by which value is created for the company and the audience.
Þ The possitive differential effect that knowing the brand has on customer
response to the product or service.
Þ FIVE MAIN ELEMENTS OF BRAND EQUITY
• Brand awareness (brand knowledge: recall & recognition)
• Perceived quality
• Brand associations other than quality (imagery, feelings, emotions, trust, etc.)
• Brand loyalty
• Proprietary assets (protection from competition: patents, intellectual
properties, relationships & trademarks)

4. BRAND DECISIONS

Brand decisions are related to the a implementation and development of the brand
strategy. Brand policy refers to each concrete action developed to reach the objectives
established by the company strategy.

The most important brand policies are the following:

1. BRAND EXTENSION POLICY

Þ It consists of applying an already existing brand from the company to launch new
products offered by the organisation.
Þ It usually happens on the same market or sector, however on a different product
category. We use the credentials of our brand.
Þ Objective: using all the experiences and image of a brand and its quality to
launch new products in different categories under the same umbrella brand.
Þ Risk: if the new product does not satisfy successfully the needs of consumers or
lacks of the right marketing policies it could damage our brand image.

2. CO-BRANDING POLICY

Þ It consists of the joint (link) of two or more brands, whether they are of the same
company or not.

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Dirección de Marketing - 5º E3 A

Þ Objective: getting a higher value, a better image or a clear differentiation of the

product, through the union and combination of their previous existing emotional
or functional benefits.
Þ Risk: both brands should take advantage of the association. Balance is important
in the mid and long term, as an unbalanced joint venture usually leads to its
dissolution.

CO-BRANDING TYPES BASED ON:

Þ Knowledge and awareness: it pursues a quick acknowledgement of the new

product reaching consumers of the forming brands.
Þ Values: brands want to associate the other's brand values or positioning, and try
to multiply their image or value assets together.
Þ Ingredients: manufacturers associate brands in order to improve products by
sharing the best technologies from both brands.
Þ Complementary capacity: partners share their key success factors
and create a product to have a long-lasting presence in the marketplace.

TO IMPLEMENT A CO-BRANDING POLICY WE MUST BE SURE TO COMPLY WITH SOME

BASIC PRINCIPLES:

Þ Brands must be complementary, and it must offer the product a way of

improving its mix somehow.
Þ There must be a relationship and some common links between users or
consumers of both brands.
Þ Brands must also be homogeneous in terms of market share, awareness,
prestige, international exposure or lifecycle.

3. BRAND FRANCHISING POLICY

Þ Group of industrial property rights, intellectual property assets, related to

brands, commercial names, logos, utility models, design, know-how or patents
that may be exploited for the selling of products or services to final users.
Þ It implies an agreement or a contract by which a company (franchiser) allows
other company (franchisee) in exchange of the payment of some fee, the right
to exploit a franchise to commercialize some type of products and/or services.
Þ Objective: to achieve a better and faster growth with a minimum investment.

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Dirección de Marketing - 5º E3 A

4. BRAND LICENSING POLICY

Þ It is a contractual agreement by which a company allows other to use its brand,

logo, patent or another intangible asset related to a product, promotion or
service, in exchange for a royalty.
Þ The brand becomes an exchange object that can be used for commercial,
financial, transactional and almost unlimited purposes between different
companies.
Þ Whereas in the franchise policy we give away a product produced by our
company to be used under our brand, in the licensing the object is the brand
itself, not just a product.

CREATE VALUE FOR:

Þ Buyer: the brand to be integrated under the new company brand's portfolio,
augmenting its value by means of synergies, links to other company brands or
business model relations.
Þ Licensing company: the financial revenues and royalties. The competitive
advantages a licensed brand can offer to the company (i.e.: not having factories,
become available in a new channel…).

5. BRAND PORFOLIO STRATEGIES

BRAND PORTFOLIO: set of brands that a company manages, both internal brands and
those external that are somehow linked to the internal ones.

OBJECTIVES OF THE BRAND PORTFOLIO

Þ Achieving synergies within the portfolio and assigning resources that fully
support the company's strategy.
Þ Leverage the brands: brands with potential for future extensions or launches.
Brands to milk or retire.
Þ Allows to adapt and create new brands in order to maintain a competitive
advantage a dynamic brand portfolio.
Þ Develop and consolidate strong brands: ensure each brand a right level of
resources to guarantee its success.
Þ It must clarify the product's offering.

BRAND PORTFOLIO STRATEGY: brand portfolio strategy defines the structure of the
company’s brands, its depth, the interaction and interrelation levels among them and
the roles assigned to each of the brands.

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CHARACTERISTICS OF A GOOD BRAND PORTFOLIO STRATEGY

Þ Each brand must have a clearly defined purpose that increases business winning
synergies.
Þ The portfolio strategy must ensure the needed level of resources allocation for
current and future brands.
Þ It must be coherent with the strategic objectives of the company.
Þ Strategic challenges for future growth must be a focus for our portfolio strategy.
Þ It must establish a clear focus for the brands.

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TEMA 6. CUSTOMER MANAGEMENT.

Customer management program is an effective way to analyze all of the relationships inside your customer,
identify the best way to touch new contacts, and leverage these new contacts into additional revenue.

Customer-centric companies are adept at building customer relationships, not just products; they are skilled
in market engineering, not just product engineering.

1. The relevance of the Fourth “P”. Place.

Concept. It is the place where a product is going to be bought or acquired by the buyer/consumer/user.

There are infinite different channels, and we must be sure that the one we chose is the best for our positioning
and segment.

It involves all the processes and decisions of distribution and logistics (integrated or via agents, retailers,
wholesalers…).

Types of distribution channels:

• Direct (i.e.: Apple Store online)

• Conventional. Several manufacturers and several retailers.
• Vertical Channel. Ie: Nespresso shops, franchises.
• Horizontal Channel. Several Producers united in just one channel (McDonald´s in Walmart stores,
Coca Cola and Nestea in vending channels).
• Multichannel System. One Manufacturer and several channels. I.e.: L´Oréal

Reasons for channel selection:

• Controlling the image of the product or service (make-up, luxury products, frigo).
• Economic reasons (cost, finance, solvency).
• Overall mix and strength offered in the channel. Conflicts (lidl, el corte inglés).
• Geographic or cultural reasons (different countries, Canary Islands).
• Product properties (cold storage, need of qualified sales support, expiry date…).

Channel selection policies:

• Intensive. This alternative involves all the possible channels that can be used to distribute the
product. For example, KitKat.
• Selective. The firm selects some outlets to distribute its products. For example, Sony.
• Exclusive. Only one distributor is used in a specific geographical area. For example, Ferrari.

Channel strategies:

• Push strategy. Ensuring the customer is aware of your brand at the point of purchase. Taking the
product to the customer. For example, Donuts.

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 • Pull strategy. Motivating customers to seek out your brand in an active process. getting the customer
to come to you. For example, Coca-Cola.

2. Commercial Distribution.

Distribution is the marketing tool which makes the connection between production and consumption.

Its objective is that the product is delivered to the final consumer or industrial buyer in the quantity demanded
at the time needed in the place where they want to buy it at a reasonable price.

A distribution system can hold several different channels.

A company can sell its products through different channels at the same time.

Examples:

• Channel 1: direct to consumer: online sales through owned website.

• Channel 2: Mondelez sells its products to Mercadona (retailer) and Mercadona then sells them to final
consumers.
• Channel 3: Nestlé sells its products to Makro (wholesaler, cash&carry), who resells them to a local
grocery store, who then finally sells them to final consumers.
• Channel 4: Safilo hires agents (not employees) who have the exclusivity in one territory to sell Carrera
sunglasses. They can sell to wholesaler who then sell to opticians (retailers), and opticians sell to
consumers.

The longer the channel, the lower the control over the commercialization of the products (portfolio, prices,
placement, communication). Obviously, there are reasons why we need intermediaries: specialization,
capillarity (reaching high number of points of sale without the need of your own sales force as we benefit from
the sales capabilities of an intermediary).

Agents of the distribution system. The customers of the manufacturers are normally distributors too:

8
 • A wholesaler is an intermediary whose main characteristic is selling to retailers, other wholesalers, or
manufacturers, but never to the consumer or final user. The classical functions of a wholesaler are:

CLASSICAL FUNCTIONS

• PURCHASE OF GOODS FROM THE PRODUCER OR ANOTHER

WHOLESALER
• A GROUPING AND PRODUCT STANDARDIZATION
• TRANSPORT OF GOODS
• STORAGE AND PRESERVATION OF PRODUCTS
• DEVELOPMENT, PROMOTION AND SALE OF PRODUCTS
• DELIVERY TO THE RETAILER OR TO ANOTHER WHOLESALER
• LOANS AND FINANCING TO CUSTOMERS
• RISKS ASSUMPTIONS

Example: Makro is a type of wholesaler (cash&carry), they have their own stores where
retailers and horeca professionals can buy the products.

There are wholesalers who focus on specific businesses (e.g., beer, gum&candy)
supplying to different retail environments (bars, kiosks...). Some deliver the product to the retailer;
some others have their own stores and retailers need to drive there to pick the order (Makro).

Also, the wholesalers advises the retailer about:

ADVISES RETAILER ABOUT

• FEATURES AND INFO ON PRODUCTS AND INNOVATIONS

• TOP SELLING PRODUCTS AND ROTATIONS
• STOCK AND ORDER MANAGEMENT
• COMMERCIAL AND ADMINISTRATIVE MANAGEMENT

• Retailers. The retailer or detail channel sells the products to the final consumer. they are the final link
in the chain and has the best access to buyers and consumers. They can influence in boosting, slowing
down or altering the marketing activities of the manufacturer or wholesaler.

CLASSIFICATION

• ACCORDING TO THE ACTIVITY OR PRODUCTS SOLD

• ACCORDING TO THE PROPERTY OR LEVEL OF IMPLICATION 9
• ACCORDING TO THE LOCATION
• ACCORDING TO THE STRATEGY (WITH RETAIL STORE)
• SALE WITHOUT ESTABLISHMENT OR STORE.
 Examples of retailers: Mercadona, El Corte Inglés, Sephora, Amazon, Carrefour, Walmart.

• Wholesalers vs retailers.

The objective of commercial distribution is to add more value to better satisfy consumer needs.

3. FMCG (Fast-Moving Consumer Goods) Products and Distribution.

Current situation of the FMCG market:

• The distribution chain is adding more and more value to consumers.

• Retailers are increasing their contribution to added value.
• Manufacturers and retailers have chosen a concentration strategy to provide that added value to
consumers.
• Shrinking of the distribution chain.
• Price has become the most differentiating factor.

Consequences of looking only for price:

• Discounts: one of the most success ensuring formulas (e.g., Mercadona: everyday low prices).
• Private label development (mercadona, dia, sephora).
• Buying groups development (ifa).
• Logistic tasks mainly done by retailers´ logistic platforms (ie. Crf or eci large logistic platforms for all
kind of goods).

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 • Cultural changes: understanding of manufacturers pressure and retailers’ aggressive policies.

Retailers traditionally bought the products, merchandised them in store (post marketing = instore marketing).

Retailers tend to integrate tasks that traditionally were exclusive from manufacturers.

New manufacturers-retailers relationship. Retailers gain strength via:

• Product development.
• Productive capacity purchase from traditional or small manufacturers (private label).
• Marketing/ trade marketing.
• Holistic logistics and platform development. Stock and cash management improvement.

Trade Marketing is a team which plays an intermediary role between marketing (focused on consumers, long
term, above the line communication-TV) and sales (focused on customers-retailers, short term results, in store

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promotions and visibility). Trade Marketing adapts the company strategy to the different retailers’ strategies,
so we can maximize our presence in the retailer’s stores (which we can’t control). Some of the activities are:

• Product and portfolio recommendations: priorities and business proposals to retailers, to list the right
skus.
• Prices: the arrange the pricing strategy, aligning company strategy with retailers’ strategies.
• Promotions: they create promotional calendars for the different channels, optimizing the promo
budget, ensuring harmony in the market, and maximizing incrementalities.
• In store: they develop point of sales materials to maximize our product visibility and conversion.

In a nutshell, Trade Marketing teams are advisors for our sales teams, the help Sales team to develop
customized customer marketing plans.

4. Main retailers in the FMCG Market in Spain.

Nielsen classifies the different store formats according to their size:

• Hypermarkets: >2,500 sqm (e.g., Carrefour, Alcampo, Eroski, Hipercor). There are around 450
hypermarkets in Spain.
• Large Supermarkets: 1000 to 2,499 sqm (e.g., Mercadona).
• Medium Supermarkets: 400 to 999 sqm (e.g., Caprabo).
• Small Supermarkets: 100 to 399 sqm (e.g., Dia).

4.1. Hypermarkets.

Hypermarkets represent 15% of FMCG sales and are losing market share.

4.2. Supermarkets.

There are around 18,000 supermarkets in Spain (including Mercadona and discounters which are classified as
supermarkets by Nielsen), and they are gaining market share, driven by Mercadona success.

Excluding discounters, the weight of private label is very low.

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Lately, top retailers like Carrefour and Día are developing convenience stores (often small supermarkets 100
to 399 sqm), urban store formats with convenience portfolios (ready to eat food, beverages and spirits, bread,
fresh products), long opening hours.

Carrefour has double the number of stores in the last 5 years, thanks to the success of Carrefour Express
stores, helping compensate negative trend of their traditional hypermarket business.

4.3. Discounters.

Private label represents 60% to 80% of their sales.

4.4. Specialists.

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 4.5. HORECA.

4.6. Distributors.

5. Designing a distribution channel.

The longer the channel the lower the control. Steps to follow in order to design a distribution channel:

• Who are we? Company profile and customers. What is your mission, products to be worked with,
what type of clients are suitable, desired services and target customers.

• What do we expect from our channel? Objectives. Market coverage (intense, exclusive, or selective
distribution), sales, strategies, image, positioning, and customer satisfaction.
• What channel restrictions might stop us? There are constraints that may limit the different channel
choices and options: product (prestige, price, novelty, seasonality, design), intermediaries (add or
eliminate levels in the chain), competition (same category, vertical integration), environment and
market (retailer´s porter and Pestel).
• What will our channel look like? Clarify the functions, determine the intermediaries to be chosen,
number of intermediaries, ownership of intermediaries.
• Which are the different alternatives that we have?

14
• Final selection of the channel.
• Channel follow-up. Motivation, control, improvements, etc. We need to watch it closely.

15
TEMA 7. PRICING.

1. Importance and role of price.

Price is the sum of money for which anything is bought, sold, or offered for sale.

Pricing is a core component of brand positioning and a key driver of financial performance.

Price is a powerful key but difficult to get right:

• The right price positioning reinforces the proposition.

• Start with what is right for consumers, customers, and competition and not what your margin target
is – cost-plus pricing is wrong.
• 60% shoppers do not know the actual
price of the product they have just
bought – even when asked at the
fixture.
• Shoppers balance their perception of
price against the desirability of the
brand.
• Promotions shift lots of product in the
short term but do not affect buyer
behavior. Use promotions carefully –
they are the cocaine of marketing.

Price setting decision process:

2. Price and the 4-C Model.

Identify key trends (by market force: consumers, customers, competitors, and company) and assess impact to
your ability to take price changes.

We have to take into consideration these 4 Cs when building our pricing policy.

16
This a questionnaire to reflect on our pricing strategy considering the 4C model:

3. Basics of pricing.
3.1. Average and relative price index.

Prices in the marketplace are dynamic and change frequently. It is important that our pricing objectives and
measurements are set in a relative sense, against our competitors.

Some of the pricing tools explained in this deck work with an index of the category with 100 being the average.
If your index is above 100, it means that your brand is more expensive than the average.

The objective of a price index is to check if our price is above or below the market average or the competition
average. Index>100 means our product is more expensive. Index<100 means it is more affordable.

We will study 2 different indices:

17
The higher the market share, the more difference between average and relative price index.

3.2. Demand curve.

Demand curves plot the relationship between price and demand (consumption). If prices goes up, deman d
goes down. This is definitely the case for consumer products.

3.3. The price piano.

The price piano refers to all the viable price points in a given category, each representing value to a different
consumer segment.

Sometimes companies have different brands for the same category in their portfolio, each of them competing
with different prices. Despite the risk of cannibalization (meaning to compete against ourselves), we maximize
our consumer base by targeting different segments.

18
 4. Pricing tools.
4.1. Price elasticity and optimum profit curve.

Price elasticity explains how much our volume market share changes when we change our price. Elasticity on
1,5 means that 1% increase in prices will mean -1,5% in our volume market share.

Watch out: the change in volume market share is %, not percentual points, e.g., from 10% down to 10%x(1-
1,5%) = 10% X 0,985= 9,85%.
20%
%Change in volume market share

15%
10%
5%
0%
-5%
-10%
-15%
Elasticity = 1.5
-20%
-25%
-30%
-10% -5% 0% 5% 10% 15%

%Change in relative price index

Optimum profit curve: increasing prices could be a good business, even if we lose volume share, as long as we
increase our profit. If we go too far, absolute profit will decrease. This depends on the elasticity in the specific
market.

Optimum Profit

When a brand increases price, it loses volume share. Value share goes down less, because
each unit sold brings in more revenue – and profit may actually go up. Most brands have
a price which yields the maximum profit – you need to know where your optimum price
is.

Sunsilk Shampoo Australia

2% 12%
0%
10%
-2%
Value/volume share
Change in profit

-4% 8%
-6%
6%
-8%
-10% 4%
-12%
2%
-14%
-16% 0%
-20% -10% 0% 10% 20%
Change in relative price vs current

Profit Volume share Value Share

4.2. Price-quality chart.

Because most shoppers are not consciously aware of the price of the products they buy, the decision is made
on their perception of price traded off against desirability.

19
 120 Confidence limits on desirability Brands that are outside confidence
Premium
limits are significantly high or low in
price/desirability ratio.
115 Good value
More resilient to competitor
110 price changes
Masterfoods ABOVE BELOW
position of position of
strength weakness
Continental
Desirability Index

105
Bertolli
Kantong
Mid-
market
100
Leggo's Consumers see Consumers see
Maggi
the brand as the brand as
95 good value and poor value. It is
are unlikely to a compromise
Campbells San Remo
reevaluate their between
choice if performance
90
competitors and price.
Heinz prices change. Consumers are
Poor value more likely to
85 reevaluate their
Less resilient to choice if
competitor price competitors
80 Economy prices change.
changes
80 90 100 110 120

Perceived Average Price Index

4.3. Perceived vs actual price.

Most shoppers are not consciously aware of the price of the products they buy, their purchase decision is
made on their perception of price rather than the actual price.
Confidence limits for the line of best fit

Price perceived higher ABOVE BELOW

s position of position of
than Actual ion lity
140

pt ea
strength weakness

erce ing r
P ch
Dove at
Perceived Average Price Index

m
120 àOpportunity to • through over-
raise the price promotion
Sanex (consumers are
• be careful not to trained to buy at the
Ushuaia alert consumers to lower price)
Nivea the disparity, or we
100
may prompt them to • or poor quality
Tahiti Monsavon re-evaluate the
à Check Price
Palmolive Le Petit Marseillais
brand.
Quality Chart in
• be cautions with order to determine
80 price promotions which and take
(don’t cut too deep) corrective action.

DOP
60 Price perceived lower than Actual

60 80 100 120 140

Supplier: Millward Brown
Average Price Index

4.4. Pricing action matrix.

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TEMA 8. COMMUNICATION.

1. Importance and role of communication.

Communication is the process by which information is exchanged between individuals through a common
system of symbols, signs, or behaviour.

To be strategic, communication must transmit brand positioning:

• Clearly: growing advertising saturation adversely affects human capacity to decode complicated
messages.
• Consistently: same in every touchpoint.
• Continuously: new paradigm “always on”.

Such strategic communication will enable us to:

• Attract new customers.

• Foster relationships with existing customers to a) maximize client value and b) generate positive word
of mouth to attract additional new clients.

Communication involves decoding (human perceptions), because strongest ever advertising noise makes
effective communication increasingly difficult. So, it is necessary that effective communication should
minimize the positioning gap.

Different consumers require different communication strategies. The graph below shows how awareness
evolves, and loyalty is achieved. Different communication should be addressed to consumers in the various
stages.

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Consumer attraction vs consumer retention. Traditional advertising mainly aimed at new customer
attraction. Even high advertising saturation makes it costly and inefficient.

• Retention focuses on minimizing out-switching.

• Thus, reducing the need to continuously overspend on in-switching.

Customer relationship management (CRM) focuses on:

• Deep customer knowledge.

• Personalized offers optimising return on
investment.
• Long term relationships with client.

2. The future of communication.

2.1. One to many.

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 2.2. One to one.

Drivers:

• Advertising saturation and aversion.

• Audience fragmentation.
• Internet: the new audiovisual content platform.
• Ad-blocking technology.
• Mobile devices: stronger audience fragmentation.

Key facts:

• if you are the leader (initiator) in the conversation you will focus on: ‘who is the person? what is their
agenda? what are the results to achieve from the conversation? how can I do my best to achieve these
results?’
• if you are the follower in the conversation, you will probably ask similar questions, but you may also
add: ‘how can I do my best to contribute and make it a positive conversation?’

2.3. One to few.

Drivers:

• Humans tend to group together in tribes.

• Internet stimulates tribe grouping and development.
• Communities of common interest accelerate diffusion of products and ideas.
• The reason: peer credibility.
• Brand stands out as facilitator, not an intruder (from push to pull).

3. New media scenario.

The traditional brand communication process is as follows:

• Research target (strategic planning).

• Come up with creative idea.
• Design the message and produce the ad.
• Select media channels and buy space to air ad.

Some problems of brand communication are:

• Problem 1: ad saturation jeopardized message efficacy.

• Problem 2: traditional model implies limited airtime.

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 • New communications model: POE (Paid + Owned + Earned
Media): This new model follow those steps:
• RESEARCH TARGET (STRATEGIC PLANNING)
• PRODUCE AD CAMPAIGN + BRAND CONTENT
• ADS AIRED IN PAID MEDIA + CONTENT AIRED IN OWNED MEDIA
• CONTENT ECHOED BY EARNED MEDIA

About paid media:

• Raises awareness.
• Good message control, but clutter and lack of credibility.
• Difficult to predict and monitor (word of mouth).
• Growing importance of micro-targeting: Facebook ads (in-depth profile tracking), and context
targeting google ad sense.

About owned media (Social media profiles on Instagram, twitter, Facebook, YouTube):

• Always “on”.
• Message control: duration, repetition, fresh messages.
• Instant reaction is possible if necessary.
• Lives on (“eternal footprint on the web”).

About earned media (Social media conversations, foros):

• Highest credibility.
• Out of brand control, can be negative.
• Difficult to predict and monitor (word of mouth).
• Allows two-way dialogue.
• We start from zero audience: takes time to scale.

4. Customer and ROI: Customer lifetime value.

Customer lifetime value is the net profit contribution of the customer to the firm over time.

• It allows us to monitor profitability of long-term relationships with our clients.

• Communication investment must be justified, not by initial purchase, but all future income coming
from that client.
• In financial terms: present value of future cash flows attributed to customer during his/her entire
relationship with brand.

CLV = (UNIT REVENUE X ESTIMATED LIFE RE-PURCHASES) – OPERATING EXPENSES – CAC

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 • CAC (cost of acquisition): should never cause clv to become a negative value.

How much should we spend in brand communication? In practice, brand splits clients in segments according
to their income and buyer life expectations.

In the phase of customer acquisition, is very important to do not overspend.

In the phase of customer retention, is very important to minimize churn rate (% of most profitable customers
leaving us).

Why is the customer lifetime value important?

• Basic for CRM.

• Very common in online marketing (see amazon example).
• Allows us to fix the optimal level of investments in communication activity.
• Allows us to select customers for specific communication strategies.
• Allows us to predict and monitor customer loyalty.

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TEMA 9. DIAGNOSIS.

1. Swot Matrix.

Strategic analysis can be summarized using the swot matrix.

The swot matrix includes environmental elements and company situation (for a sbu or p/m) and thus is the
basis of diagnosis. These are dimensions that represent market attractiveness (external) and competitive
position (internal).

We must consider the main external factors (opportunities and threats) and internal (strengths and
weaknesses).

1.1. Threats.

Danger arisen by an unfavourable trend in the environment. If we do not undertake appropriate marketing
actions, to the loss of market share of the organization or the disappearance of the brand and / or company.

The threat matrix classifies them according to their level of relevance (r) and the probability of happening (p).

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 1.2. Opportunities.

Favourable set of circumstances in a particular market, in which the company could successfully develop
certain marketing activities. Based on a competitive advantage that will generate the highest value for the
consumer.

Opportunity matrix classifies them related to its attractiveness (a) and the probability of success for the
company (s).

1.3. Threats and opportunities. Diap. arriba

1.4. Strengths and weaknesses.

They correspond to the so-called "marketing assets" (based on the success factors): share of market, brand
image, quality image, service, distribution, loyalty, …

Defined by the position of the company based on various factors. Each factor is scored considering its
valuation, using a scale of positions (very strong, strong, average, weak and very weak) and their level of

importance (high, average, and low) while facing a business or a new opportunity.

A strength in a particular factor does not automatically create a competitive advantage. To become an
advantage, it should be related to a main factor, better qualified than the competition and that the difference
is appreciated by the target market.

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We should not necessarily correct all the weaknesses, especially those of little relevance, because our
resources may require application to other weaknesses which are most convenient (relevant) or cost-effective.

A better analysis of the strengths and weaknesses is incorporated in the Marlow model, which divides them
into two groups, depending on whether they are perceived by the consumer (e.g., branding) or not (e.g.,
distribution costs).

1.5. Vulnerability analysis.

It stresses out the negative situation facing and relating the weaknesses and threats.

The worst situation is when there is correspondence between weaknesses and threats. In that kin d of
situations, strategic actions are required to be undertaken to survive.

1.6. Potentiality analysis.

It considers the positive situation, where strengths and opportunities are matched.

The best situation is when there is correspondence between strengths and opportunities. Strategic actions are
proposed to attack and get the best possible results.

2. Competitive advantage.

Competitive advantage means one or more features, attributes or factors of a product or brand (based on
your strengths) which gives certain superiority over competitors.

The concept of competitive advantage includes:

• Perceived (real or illusionary).

• Unique (single un unmatched for a product).
• Relevant (leads to purchase by itself).

The objectives of the analysis of competitiveness are:

• To identify the type of competitive advantage that a product has in a particular market or segment.
• Evaluate the situation of defense (sustainable competitive advantage) to prevent imitations.

A defensible competitive advantage answers to the following questions:

• What are the key success factors in the product market or segment considered?
• What are the strengths and weaknesses of the company in relation to these key factors?
• What are the strengths and weaknesses of the main competitors in relation to the same factors?

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 2.1. Identifying a competitive advantage.
2.1.1. Business model.

Competitive Advantages are identified by analyzing the business model and the key factors for success in each
of the phases of the system.

The business system is a chain (value chain) of the various stages through which a product passes through
from conception and design to consumer availability. The key factors are those aspects that within the
business model, are crucial in obtaining success.

The competitiveness analysis (profile) allows us to set the status for each key-factor and identify those in which
the company has a competitive advantage.

2.1.2. Success factors.

They are the base for the success of a product market. They are those perceived by the market, not those
stressed out by the organization. We use them for comparison against competitors.

Examples: quality, design, line or range, packaging, brand image, …

2.1.3. Competitiveness analysis.

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We need to follow these steps to analyse a competitive advantage:

• Selecting parameters of competitiveness (key-factors).

• Weighting.
• Establishing a rating scale.
• Rate each factor for the enterprise and competition.
• Analysis of strengths and weaknesses: causes. Competitiveness profile design.

3. Diagnosis.

Strategic analysis both external (environment, industry) and internal (segmentation, positioning, product
portfolio, portfolio of technologies ...) must lead to the concrete diagnosis of each key factor considered, and
thus, to the establishment of conclusions, in the form of recommended strategic actions to be undertaken and
evaluated in depth.

The overall diagnosis is determined based on the exploitation of the swot model (or similar) that synthesizes
and summarizes the most important results.

Diagnosis and objectives resulting of the swot analysis must become the support for the process of designing
the marketing strategy.

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TEMA 10. STRATEGIC MARKETING PLAN.

1. Objective setting.

The strategic marketing objectives, based on the corporate or general ones, represent the goal to reach
through the designed strategies to the effect.

• They are usually multiple, differentiating between primary objectives and secondary objectives
(collateral ones).
• It is obvious that they are related to products and markets and they refer to sales, profit or margin,
and consumers.

Attending to the demand requirements, objectives must be:

• Smart Goals.

• Sales goals. It is a measure of the impact that the company wants to achieve in a particular p/m and
it can be expressed in three different ways:
o IN SALES AMOUNT (€). It is the simplest and most convenient key indicator. It requires
correction by the inflation rate and by the sales composition (product/price).
o IN PHYSICAL UNITS OR VOLUME (VOL.). It is the most representative key indicator of the
activity. The change in the unit of sale has to be considered.
o IN MARKET SHARE (%). It is the most revealing indicator of the productive performance of the
product. It can be expressed in relative terms.

• Profit Goals. It requires the assessment of the sales objectives impact on the company profitability,
and it usually refers to:
o Profit and trade margin.
o Operating profit.
o Return on deployed resources.
It involves a detailed analysis of costs, volume, production, and marketing. According to the revenues
and costs factors, the following relation among factors is applied:

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 • Customer goals. They refer to positioning decisions. Objectives referring to the related environment
(environment improvement) or society (support a cause) can be included. They define the type of
attitude and behavior that you want buyers to adopt with respect to your brand, in defined markets
and timing e.g.:
o To increase the purchasing loyalty rate.
o To achieve a customer turnover level.
o To improve the customer service (reducing complaints, after-sales service time).

Integration of objectives. From the general profitability objectives, marketing objectives are deducted in an
integrated manner:

• A company wants to achieve in the year n a profit of 200.000 €.

• With a net sales margin of 10 %.
• Estimating that price is 200 €/un.
• It must set a sales objective of 2 m €.
• And must sell 10.000 un.
• Which means achieving a market share of 5 % if the global demand is 200.000 un.

2. Strategy setting and selection.

Diagnosis results and marketing defined objectives are the base upon which we must craft our strategic
marketing plan. Important to follow those steps:

2.1. To quantify the difference between objectives-results or strategic gap.

Strategic gap is defined as the difference (distance) between the expected results (baseline alternative) in a
defined period, according to an updated projection, and the established objectives for that period (generally
more ambitious).

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 2.2. To formulate the strategic actions to undertake.

Once the objectives have been set, the adequate strategies to achieve them must be designed, bearing in
mind the results of the strategic analysis.

They are established on the basis of the diagnosis (swot) considering primarily the current or futu re
competitive advantages.

Formulation of strategic actions:

• Strategic actions require a creative and systematic approach, depending on the culture of the
company and the experience of the people involved.
• The strategic actions can also arise at the different stages of the strategic analysis, according to the
situation of each of the analyzed points.
• In this moment it is necessary to specify them according to the following information: Description,
estimated results, required resources, evaluation.

Particular objective can be achieved in multiple ways (actions). E.g., an increase of 10% of the sales could be
achieved, either separately or combined.

Description of strategic actions: every identified strategic action has to appear with the maximum detail. The
aspects that with more frequency are contemplated are the following ones: denomination, responsible,
description, period of performance, purpose, and justification in relation to the objectives that corresponds.

Evaluation of strategic actions: each strategic action is evaluated through two aspects (for the horizon under
consideration):

2.3. To establish the strategic alternatives (different combinations of set-out actions).

Alternative: a combination of certain strategic actions that lead to the objective or objectives chased is called
a strategic alternative. Various combinations (alternatives) can achieve the predetermined goals, so it is
necessary to evaluate them for its subsequent election.

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Every strategic alternative is qualified based on the sum of the evaluations of the actions that comprises and
has to meet the requirement of "filling the gap" versus the alternative basis.

2.4. To select the marketing strategy (among the considered alternative).

The selected marketing strategy between the considered strategic alternatives, is the one that will be applied
and should lead to the achievement of the objectives set.

A comparative analysis, based on different factor can help:

• Election of factors.
• Weighting of factors.
• Rating and evaluation.
• Assignment of probabilities of success.
• Selection of alternative (final strategy)

3. Strategic marketing plan crafting.

Test of validation.

• Opportunity: does the plan represent a defensible competitive advantage?

• Validity: are the hypotheses on which the plan has been built realistic?
• Feasibility: do we have the necessary resources, the "know-how" and the will?
• Coherence: are the elements of the plan consistent with each other?
• Vulnerability: are the risks and factors of success and failure well valued?
• Flexibility: is it possible to change any already established and undertaken action?
• Profitability: are the results of the plan suitable and compatible with the corporate priority objectives?

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