MARKETING STRATEGY

MARKETING STRATEGY IS THE SOLUTION TO PROVIDE SUPERIOR CUSTOMER VALUE TO THE TARGET MARKET

STRATEGY FORMULATION
        

STARTING POINT-----MARKET ANALYSIS

CONSUMER COMPANY COMPETITION CONDITION

MARKET SEGMENTATION-THE 2ND STEP
 

THE THREE MAJOR SEGMENTS COULD BE

1.THE GEOGRAPHIC SEGMENT 2.THE DEMOGRAPHIC SEGMENT 3.THE PSYCHOGRAPHIC SEGMENT 4.BEHAVIORAL SEGMENT

Cont..
 

MARKET ANALYSIS

COMPETITION: -Michael Porter’s Five Forces Analysis -Value Chain Analysis -SWOT Analysis

Michael Porter’s Five Forces Model

THREAT OF NEW ENTRANT DEPENDS UPON: -economies of scale -Capital /investment requirement -Customer switching costs -Access to distribution channel -Access to technology -Brand loyalty -Degree of retaliation from existing players -Government policies

THREAT OF SUBSTITUTES DEPENDS UPON: -quality of the substitute -Buyer’s willingness to substitute -Relative price and performance of substitutes -Switching costs to substitutes

BARGAINING POWERS OF SUPPLIERS DEPENDS UPON: -concentration of suppliers Vs the buyers -branding of the supplier -suppliers threat to integrate forward -quality n service -switching cost of the suppliers

BARGAINING POWER OF BUYERS DEPENDS UPON: -concentration of buyers VS the suppliers -products represents a significant amount of buyer’s costs or purchases -differentiated/undifferentiated product -switching costs to the buyers -buyers threat of backward integration -information update of the buyers

INTENSITY OF RIVALRY DEPENDS UPON: -structure of competition;numerous competitors vs clear cut market leader -degree of product differentiation -structure of industry costs;high fixed costs leading to price cutting -exit barriers; high leads to intense rivalry

VALUE CHAIN –MICHAEL PORTER
IDENTIFIES 9 WAYS TO CREATE MORE CUSTOMER VALUES THROUGH PRIMARY AND SECONDARY ACTIVITIES PRIMARY ACTIVITIES: 1. INBOUND LOGISTICS 2. OPERATIONS 3. OUTBOUND LOGISTICS 4. MARKETING AND SALES 5. SERVICE 6.

Cont….
SECONDARY ACTIVITIES: 6.FIRM INFRASTRUCTURE 7.HUMAN RESOURCE MANAGEMENT 8.TECHNOLOGICAL DEVELOPMENT 9.PROCUREMENT

Framework for competitor analysis
       

Future goals

current strategy

competitor’s response profile

Assumptions

capabilities

FUTURE GOALS: Business Unit Goals -financial goals -values and beliefs -organisational structure -control and incentive system
 

Parent Company -current sales of the parent company -overall goals -strategic relevance of the business unit to the parent company -diversification plans PORTFOLIO ANALYSIS -BCG -GE
  

ASSUMPTIONS • Competitor’s assumptions about itself • Competitor’s assumptions about the industry CURRENT STRATEGY-competitor’s key operating policies in each functional area of the business
  

CAPABILITIES -assessment of competitor’s strengths and weakness in varied areas -core capabilities of the competitor’s in each of the functional areas -Ability to grow -quick response capability -Staying power
 

COMPETITOR’S RESPONSE PROFILE -is the competitor satisfied with its current position? -what likely moves or strategy shifts will the competitor make? -where is the competitor vulnerable? -what will provoke the greatest and most effective retaliation by the competitor?

CONDITION
 

MACRO ENVIRONMENT

Ø DEMOGRAPHIC ENVIRONMENT Ø SOCIO-CULTURAL ENVIRONMENT Ø ECONOMIC ENVIRONMENT Ø POLITICAL ENVIRONMENT Ø NATURAL ENVIRONMENT Ø TECHNOLOGICAL ENVIRONMENT Ø LEGAL ENVIRONMENT

COMPANY
Internal Appraisal -BCG -GE McKinsey -SWOT Strategies in terms of 4 Ps: -Product -Price -Place -Promotion

PRODUCT

AN OFFERING THAT SATISFIES THE NEEDS OF THE CUSTOMER

Major tasks in Product Management
 

I. MANAGING THE PLC :--

STAGES:INTRODUCTION GROWTH MATURITY DECLINE
 

NEW PRODUCT DECISIONS
SIGNIFICANCE OF NEW PRODUCT: • MEETING CHANGES IN CONSUMER DEMAND • MAKING NEW PROFITS • COMBATING ENVIRONMENTAL THREATS NEW PRODUCTS CAN BE: • NEW ARISING OUT OF TECHNOLOGICAL INNOVATION • NEW DUE TO MARKET-ORIENTED MODIFICATIONS

STAGES IN NEW PRODUCT DEVELOPMENT
• • • • • • • • • IDEA GENERATION IDEA SCREENING CONCEPT TESTING MARKETING STRATEGY BUSINESS/MARKET ANALYSIS PRODUCT DEVELOPMENT MARKET TESTING COMMERCIALISATION

STRATEGIES AT VARIOUS STAGES
INTRODUCTION:-strategies to be aimed at • Attracting customers by raising awareness of, and interest in the product through advertising, public relations and publicity efforts that stress key product features and benefits. • Inducing customers to try and buy the product through the use of various sales tools and pricing activities. • Strengthening and expanding channel and supply chain relationships to gain sufficient product distribution to make the accessible to target market. •
 

• Setting pricing objectives that will balance the firm’s need to recoup the investment with the competitive realities of the marketplace

GROWTH –strategies to be aimed at • Improving product quality,adding new product features and style • Entering new market segments • Increasing distribution coverage • Shift from product awareness advertising to product preference advertising •
 

• Finding an ideal balance between price and demand as the price elasticity becomes more important as product moves towards the maturity stage

MATURITY strategies to be aimed at • Generating cash flow • Holding market share • Stealing market share • Increasing share of customers •
 

DECLINE –options available are • Postpone the decline • Accept its decline
 

II. APPRAISAL OF THE PRODUCT LINE

• ALTERING THE LENGTH OF THE LINE THROUGH:
– STRETCHING THE LINE -UP or DOWN – LINE FILLING – LINE PRUNNING

 

III. MANAGING BRAND EQUITY

• BRAND EQUITY- TOTAL WEIGHTAGE THE CUSTOMER GIVES TO THE BRAND • BRAND =  BASIC PRODUCT+NAME+LOGO+MARKETING STRATEGY STAGES OF BRANDING:  1.BRAND AWARENESS  2.BRAND ACCEPTANCE  3.BRAND PRIORITY  4.BRAND LOYALTY

NAMING THE BRAND • INDIVIDUAL BRAND NAMES  ex: Breeze, Camay • FAMILY/UMBRELLA BRAND  ex: Lakme, Ponds • COMPANY NAME AS BRAND NAME  ex: Godrej, Tata , BPL • MIDDLEMEN’S/STORE BRAND/PRIVATE LABEL  ex: Shopper’s Stop, Pantaloons
 

NEED FOR BRANDING • MARKET IDENTITY • LEGAL PROTECTION • CUSTOMER LOYALTY • PROFIT MARGINS • SEGMENTATION • BARGAINING CAPACITY • CORPORATE IMAGE
 

PRICING

MONETARY VALUE IN RETURN OF PRODUCT/SERVICE

OCCASIONS OF PRICING:1. SETTING A PRICE OF A NEW PRODUCT 2. INTRODUCTION OF EXISTING PRODUCT IN A NEW MARKET 3. RESETTING /ADJUSTING THE CURRENT PRICE
 

THE PROCESS…..
• • • • SELECTING THE PRICING OBJECTIVES DETERMINING THE DEMAND ESTIMATING COST ANALYSING COMPETITOR’S COSTS,PRICES AND OFFERS • SELECT A PRICING METHOD • SELECTING THE FINAL PRICE

SELECTING THE PRICING OBJECTIVES

THE COMPANY FIRST DECIDES WHERE IT WANTS TO POSITION ITS MARKET OFFERING. THE CLEARER A FIRM’S OBJECTIVES, THE EASIER IT IS TO SET PRICE. Survival. Maximum current profit. Maximum market share. Maximum market skimming. Product-quality leadership

• • • • •

Demand estimation
Factors contributing to Price sensitivity: • Unique Value effect • Substitute Awareness effect • Difficult Comparison effect • Total expenditure effect • End-Benefit effect • Shared Cost effect • Sunk Investment Effect • Price Quality effect • Inventory effect

Measuring demand curves: -controlled experimentation -Direct probing -Statistical analysis of past data Demand is likely to be less elastic under the following conditions: • There are few or no substitutes or competitors. • Buyers do not readily notice a higher price. • Buyers are slow to change their buying habits. • Buyers think the higher prices are justified.
   

• Costs set the floor to the price. • Competitors’ prices and the price of substitutes provide an orienting point. • Customers’ assessment of unique features establish the price ceiling.

• There are five price-setting methods:
• • • • •

Markup pricing. Target-return pricing. Perceived-value pricing. Value pricing. Going-rate pricing.

Other price adaptations
a) Price discrimination  customer segment pricing  Trade discrimination  Location pricing  Time pricing b) Discounts  Cash discount  Quantity discount  Trade discount  Seasonal discount
 

c) Promotional pricing
     

Loss Leader pricing Special event pricing Longer payment terms Low interest financing Warranties and service contracts Product line pricing Captive product pricing Two part pricing Product bundling pricing

d) Product mix pricing
   

DISTRIBUTION NETWORK
• Know what work marketing channels perform • Know how channels should be designed • Know what decisions companies face in managing their channels • Know how companies should integrate channels and manage channel conflict

NEED FOR A DISTRIBUTION SYSTEM
GENERAL DISCREPANCY EXISTING : • SPATIAL DISCREPANCY • TEMPORAL DISCREPANCY • NEED TO BREAK THE BULK • NEED TO PROVIDE ASSORTMENT • INFORMATION GAP

ENTITIES
  

1)PHYSICAL DISTRIBUTION 2) MARKETING CHANNELS

PHYSICAL DISTRIBUTION
1.TRANSPORTATION  -MODE:air,rail,road,water,pipeline
     

-ROUTING -COST

….cont.
2. WAREHOUSING  a. Critical storage points
       

nos.

Location

b. Inventory control-costs ordering carrying stockout

MARKETING CHANNELS

MOST PRODUCERS DO NOT SELL THEIR GOODS DIRECTLY TO THE FINAL USERS; BETWEEN THEM STANDS A SET OF INTERMEDIARIES PERFORMING A VARIETY OF FUNCTIONS These intermediaries constitute a marketing channel

 
  

SET OF INDEPENDENT ORGANISATIONS INVOLVED IN THE PROCESS OF MAKING A PRODUCT OR SERVICE AVAILABLE FOR USE/CONSUMPTION.

INTERMEDIARIES:
TYPES OF MARKETING INTERMEDIARIES • CFAs • Distributor/wholesaler • Retailer exclusive:owned or franchise shop in shop • commission agents
 

FUNCTIONS
a)Information-Potential & current customers  -Competitors  -Forces in the mktg. environment b)Promotion c)Negotiation d)Risk taking(financial,credit terms,storage,pilferage) e)Transactional efficiency  financing to the manufacturer  service provider  presale  post sale  assist in introducing new product

LEVELS OF CHANNEL

 


  


 


 

ZERO LEVEL manufacture consumer eg: EUREKA forbes ONE LEVEL Presence of one intermediary Manufactures---- retailer agents distributor --- consumer Eg. Automobiles TWO LEVELS Manufacture wholesaler- retailer- consumer Eg. FMCG products THREE LEVELS Manufacture agents wholesaler- retailer- consumer Eg. agricultural products

CHANNEL DESIGN DECISIONS
1.ESTABLISH CHANNEL OBJECTIVE  -market coverage
 

-control objectives -ensuring minimum effort exerted by the consumer in procuring the product -quality objective

 

…cont.
2.DETERMINING THE TYPES OF CHANNELS TO BE USED.
 

- Largely depends on the channel objectives of the firm.

 

3.

IDENTIFY CHANNEL ALTERNATIVES
i)Intensity of distribution
• Exclusive( one area, one shop ) • Selective ( products available in few shops) • Intensive ( every retail shop has the product )


 

ii) Proximity to end users. iii) Existing distribution practices competitive analysis).

(by

4. EVALUATE THE ALTERNATIVES.
– Economic criteria

cost Vs value
– time period taken by a channel to deliver – control criteria – channel availability

5. SELECTING THE FINAL CHANNEL MEMBER
– they should stick to your terms and conditions. – Motivate them – Train them – Resolve channel conflicts.

CHANNEL CONFLICTS
TYPES OF CONFLICT AND COMPETITION • Vertical channel conflict means conflict between different levels within the same channel. • Horizontal channel conflict involves conflict between members at the same level within the channel. • Multi-channel conflict exists when the manufacturer has established two or more channels that sell to the same market.

CAUSES
• • • • Goal incompatibility. Unclear roles and rights. Improper communication. Lack of autonomy

CONFLICT MANAGEMENT METHOD
1. INSTITUTIONAL APPROACHES  JOINT MEMBERSHIP OF ASSOCIATION  EXCHANGE OF EXECUTIVES  COOPTATION
 

2. THIRD PARTY MECHANISM  MEDIATION  ARBITRATION

Integration of channels
VMS HMS MULTI-CHANNEL MARKETING

COMMUNICATION MIX

PRODUCTFEATURES,SIZE,SHAPE,FINISH,PACKAGING,L ABE-LLING,BRAND NAME,COMPANY NAME.

  

PRICE- QUALITY EQUATION PRICE-STATUS EQUATION PLACE-STORE IMAGE,STORE- LEVEL MERCHANDISING

PROMOTION:• PERSONAL SELLING • PUBILC RELATIONS • ADVERTISING • SALES PROMOTION

PERSONAL SELLING- PAID PERSONAL COMMUNICATIONTHAT ATTEMPTS TO INFORM CUSTOMERS ABOUT PRODUCTS AND PERSUADE THEM TO PURCHASE THOSE PRODUCTS. FACE TO FACE TRANSACTION BETWEEN A SALESMAN AND A PROSPECTIVE CUSTOMER
• • • • KNOWLEDGE& EXPERTISE BETTER OUTLOOK & PERSONALITY EFFECTIVE COMMUNICATION SKILLS A CONVINCING MESSAGE

FACTORS SUPPORTING PROMOTION

PUBLIC RELATIONS-TRACKS PUBLIC ATTITUDES, IDENTIFIES ISSUES THAT MAY ELICIT PUBLIC CONCERN, AND DEVELOPS PROGRAMMES TO CREATE AND MAINTAIN POSITIVE RELATIONSHIP BETWEEN A FIRM AND ITS STAKEHOLDERS.
• • • • • • SPONSORSHIP NEWS(PRESS RELEASE) FEATURE ARTICLE PRESS CONFERENCE EVENT MANAGEMENT SOCIAL CAUSE

CAN WIN IN YOUR FAVOUR THROUGH

ADVERTISING—TELLING & SELLING

ANY PAID FORM OF NON-PEROSNAL COMMUNICATION OR PROMOTION BY AN IDENTIFIED SPONSOR. 5 Ms OF ADVERTISING

  

  

MISSION –ADVERTISING OBJECTIVES AREAS WHERE OBJECTIVES CAN BE SET: INTRODUCTION OF NEW PRODUCTS MARKET EXPANSION REMINDING TO CUSTOMERS BUILDING UP CORPORATE & BRAND IMAGE AIDING THE TOTAL SELLING FUNCTION STIMULATING IMPULSE BUYING

• • • • • •

 

MONEY—ADVERTISING BUDGET

DIFFERENT METHODS: • COMPETITIVE PARITY METHOD • AFFORDABILITY • PERCENTAGE OF SALES/TURNOVER • OBJECTIVE- TASK METHOD • PAST SALES –ADVERTISING EXPENDITURE

 

MESSAGE

SHOULD BE • SIMPLE • CREATE A BANDWAGON EFFECT

    

MEDIA REACH FREQUENCY TYPES:PRINT NEWSPAPER MAGAZINES TRADE JOURNALS DIRECT MAILS AUDIO/VISUAL/ELECTRONIC RADIO TV INTERNET CINEMA CASSETTES –AUDIO/VISUAL EXPOSURE

• • • •

• • • • •

OUTDOOR • HOARDINGS • POSTERS • NEON LIGHTS • FAIRS & EXHIBITIONS • TRANSIT ADVERTISING • BALLOONS • LOUDSPEAKER ANNOUNCEMENTS

 

MEASUREMENT:

• DAR TEST-DAY AFTER RECALL • TEST MARKET METHOD

SALES PROMOTION:DIRECT AND IMMEDIATE INDUCEMENT. MARKETING NEEDS SERVED BY SALES PROMOTION:• NEW PRODUCT INTRODUCTION • UNLOADING ACCUMULATED INVENTORY • GETTING NEW ACCOUNTS • GETTING BACK LOST ACCOUNT • PERSUADING DEALERS TO BUY MORE

TOOLS AND TECHNIQUES OF SALES PROMOTION:• DEMONSTRATIONS • TRADE FAIRS AND EXHIBITIONS • COUPONS AND FREE SAMPLES • CONTESTS • MERCHANDISING /DISPLAY • SALES PROMOTION ON INTERNET

STDP
STDP-SEGMENTING  TARGETING  DIFFERENTIATING  POSITIONING

SEGMENTATION
MASS MARKETING The process in which the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers. SEGMENT MARKETING Serving to a group of customers who share a similar set of needs and wants.
   

Basis of identifying segments
1.Geographic Segmentation 2.Demographic Segmentation 3.Psychographic Segmentation 4.Behavioral Segmentation

GEOGRAPHIC SEGMENTATION It calls for dividing the market into different geographical units.

Geographic variables • region of the world or country, East, West, South, North, Central, coastal, hilly, etc. • country size/country size : Metropolitan Cities, small cities, towns. • Urban, Semi-urban, Rural. • climate Hot, Cold, Humid, Rainy.
   

DEMOGRAPHIC SEGMENTATION Demographic variables • age • gender Male and Female • family size • family life cycle • education Primary, High School, Secondary, College, Universities. • income • occupation • socioeconomic status • religion • nationality • language

PSYCHOGRAPHIC SEGMENTATION The buyers are divided into different groups on the basis of lifestyle or personality or values

Psychographic variables • personality • lifestyle • value • attitude
 

 

BEHAVIORAL SEGMENTATION

Behavioral variables • benefit sought • product usage rate • User status • brand loyalty • readiness to buy stage
    

REQUIREMENTS OF A SEGMENT
DAMAS Differentiable Actionable Measurable Accessible Substantial

Effective Targeting Requires…
• Identify and profile distinct groups of buyers who differ in their needs and preferences. • Select one or more market segments to enter. • Establish and communicate the distinctive benefits of the market offering.

PATTERNS OF SELECTING THE TARGET MARKET
Single-segment concentration. Selective specialization. Product specialization. Market Specialization. Full market coverage.

DIFFERENTIATION

THE PROCESS OF ADDING A SET OF MEANINGFUL AND VALUED DIFFERENCES TO DISTINGUISH THE COMPANY’S OFFERINGS FROM COMPETITOR’S OFFERINGS

Differentiation Strategies
• • • • Product Channel Image Price

Product Differentiation
• • • • • • • Product form Features Performance Conformance Durability Reliability Reparability • • • • • Style Ordering ease Delivery Customer training Maintenance

POSITIONING

Act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market

  

CRITERIA FOR SUCCESSFUL POSITIONING
1.CLARITY 2.CONSISTENCY 3.CREDIBILITY 4.COMPETITIVENESS

CORPORATE STRATEGY
1. STABILITY-THE FIRM STRIVES TO MAINTAIN ITS STATUS QUO. 2. EXPANSION-THROUGH INTENSIFICATION,INTEGRATION AND
DIVERSIFICATION

3. DIVESTMENT- SELL OFF OR LIQUIDATE THE NON-DESIROUS
BUSINESS

4. COMBINATION- TWO OR THREE STRATEGY AT A TIME

Stability strategy
• Firm stays with the same businesss,same market-product posture • Does not involve redefinition of the of the business of the corporation • Does not warrant much of fresh investment • Risk is less Conditions under which firms adopt this strategy:

Cont…
• When the firm feels it enjoys a comfortable position in its current business • When the firm’s growth ambitions are modest • When the industry concerned is mature and the firm enjoys a profitable position • This is often adopt this strategy after rapid growth or diversifiation to consolidate its position. • Business that have just come through turmoil.

Expansion strategy
Conditions under which the strategy is adopted: • Corporate ambitions are high • When enormous new opportunities are coming up in the environment. • For fighting competition in the growing business. • When the firm has strong resource base • To counter the vulnerability of a single business position or the position on the PLC. •
  

Routes to expansion: • Intensification  -firm tries to grow in the related areas.  best described by Ansoff product-market grid • Integration  forward  backward  horizontal

Cont….
• Diversification

Ø Concentric— R.P. D.C. Ø Horizontal— D.P. S.C. Ø Conglomerate—D.P. D.C.

Divestment strategy
Conditions under which the strategy is adopted: • When the firm finds that some of its businesses have become unattractive, unprofitable and unviable • Obsolesence • Firms unable to compete in the competitive market • When the business is in the decline stage of PLC.
 

Generic Strategies

Low-cost leadership

Differentiation

Focus

PORTER’S GENERIC STRATEGIES

Competitive Advantage
Lower Cost Broad Target Competitive Scope Narrow Target 3 A. Cost Focus 3 B. Differentiation Focus 1. Cost Leadership Differentiation 2. Differentiation

Cost leadership- achieving leadership in the industry by providing the product at the most reasonable cost. Differentiation: Basis of differentiation• Product itself • Delivery system • Credit facilities • Service factor

REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES
Generic Strategy

 

Commodity Required Skills and Resources

Overall cost  Sustained capital investment and access to capital leadership  Process engineering skills  Intense supervision of labour  Products designed for ease in manufacture  Low-cost distribution system  Strong marketing abilities Product engineering  Creative flare

Differentiation

REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES
CONTD…

 Strong capability in basic research  Corporate reputation for quality or technological leadership  Strong cooperation from channel Focus  Combination of the above policies directed at the particular strategic target

      



Risks associated with each of the generic strategies
Cost leadership: • Competitor’s imitation • Technological changes • Threat of differentiation • Inability to see changes in the market due to over attention paid to cost • inflation

Cont…
Differentiation : • Competitor’s imitations • Change in customer’s needs Focus: • Competitors find submarket within the target. • The segment becomes unprofitable.

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