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Marketing

March 2007 This presentation is best viewed in fullscreen- press F5 now...

THE 4 Cs
The Macro-environmental Context Competitive Trends, Strengths and Weaknesses The Needs, Wants, Characteristics of Customers The Companys Resources, Capabilities and Strategies

The Macro Context


Political-Legal Economic Socio-Cultural Technological Physical Demographic

Identify and Prioritise Monitor Info Sources Anticipate and Respond (opp/threat matrix)

Competitive Situation

Levels Of Analysis

Importance of critical success factor fit Driving Forces


Generic Type Product Class Product Type

Product Life-Cycle (IGSMD)

Changes In: Key Buyer Segments Cost and efficiency levels Growth Rate Diffusion of Proprietary Knowledge Govt. Regulation/Deregulation

Competitive Situation (contd.)

Porters 5 Forces

Diffusion mediated by

Diffusion of Innovation Theory


Threat of New Entrants Rivalry Among Existing Competitors Buyer Bargaining Power Supplier Bargaining Power Substitutability

Risk Relative Advantage Ease of Trial Communicability of Info Compatibility Relative Simplicity

Innovators 2.5% Early Adopters 13-14%

Early Majority 34% Late Majority 34% Laggards 16%

CHASM>>>>>>>>

Identify main competitors at all 3 levels of classification

Company Context

Scope

Mission Statement: what cust. needs are and what firm must do to satisfy Ethics Statement Performance Dimension Measure/ Index Target/ Hurdle Time Frame Sustainable: employ superior resources in superior way Growth objectives- Ansoff Portfolio-BCG MkAt/ComPos Value Based Planning- DCF/IRR Resource based Identity/ brand based Knowledge Based

Levels of Strategy

Goals and Objectives


Competitive Advantage

Corporate (what business are we in?) Business (how do we compete it this business?) Marketing (how do we compete in this product market?)

Resource Allocation

Synergy

Models for Company Context

Growth: Ansoff

Market Penetration (E/E) Product Development (E/N) Market Development (N/E) Diversification (N/N)

Resource Allocation: BCG or Mkt Attr/ Comp. Pos


Stars (H/H) Cash Cows (L/H) Question Marks (H/L) Dogs (L/L)

Porters Generic Strategies


Cost Leadership Differentiation Broad/ Narrow Focus

Miles And Snow

Prospector

Defender

Broad Product Market periodic redefinition Values being first mover Responds rapidly to signals of opporttunity Competes by stimulating and meeting new mkt opportunities, may not stay in all mkts Locate & maintain secure position in stable area Ltd range of offerings Protects domain with LC/ Diff. Not at forefront of new product development Maintain stable ltd offerings, but follows set of promising new developments in its industry Seldom 1st mover, but often 2nd/3rd into a product mkts related to its industry A bit silly No real defined strategy; reacts to outside forces only

Analyser

Reactor

Customer Context: Consumers

Types of Buying situation for consumers:

Complex Decision-Making Limited Decision- Making Brand Loyalty Inertia High Involvement- risk, social/ego needs Low Involvement- variety, inertia, impulse, evaluate after purchase Ways to increase involvement:

Involvement levels

Link product to involving issue/ situation Important new feature to an unimportant product

High Involvement Process


Recognise the Need Information Search


Increased by situational, product, personal factors Sources: Personal, Commercial, Public Evoked set Attributes: cost, availability, social, performance

Evaluation of Alternatives

Purchase Post-Purchase evaluation

Feeds back into INFO SEARCH in future

Factors Affecting Consumers

Personal & Psychological

Social Influences

Perception: exposure- attention- retention. Selectivity, perceptual defence Memory: short- & long-term Needs & Attitudes: multidimensional. Compensatory (Fishbein) and NonCompensatory models Changing Attitudes: change importance consumers attach to one or more attributes, add salient attribute to existing set, more extensive advertising & promotion Demographics & Lifestyle: influence nature of needs, ability to buy, perceptions of attributes
Culture: set of beliefs, attitudes, behaviours shared by society Subculture: exists within culture (geographic, ethnic, racial, religious) Social Class Reference Groups

Fishbein Model

Attitude A =Consumer's overall attitude towards Brand A. B i =Consumer's belief concerning the extent to which attribute i is associated with Brand A. I i =The importance of attribute i to the consumer when choosing a brand to buy. k =The total attributes considered by the consumer when evaluating alternative brands in the product category. i =Any specific product attribute.

Organisational Customers
Differences for Org. Mkts:

Demand:

Demographics:

Derived demand Cyclical, more erratic Relatively inelastic Fewer customers Larger customers Geographically concentrated

Purchasing processes and Relationships:

Professional buying specialists following prescribed procedures Close buyer-seller relationships Multiple buying influences More likely to buy on specifications

Org. Buyers and Situations

Participants in the Process

Users Influencers Gatekeepers Buyers Decision-Makers


Straight Rebuy Modified Rebuy New Product purchase

Types Of Buying Situation


Process For New-Task Buying

Recognise Problem/ Need

Info Search about Products/ Suppliers


Derived Demand Requirements Planning Determining Product Specifications


Value Analysis Make/Buy decisions Info about potential suppliers Vendor Analysis

Evaluation and Selection of Suppliers

Purchase Decision

Post-purchase Evaluation and Feedback

Purchasing Contract JIT system

Types of Product for Org. Mkts

Raw Materials Component Parts and Materials Installations Accessory Equipment Operating Supplies Business Services

The Next Steps


Forecasting Marketing Research Segmentation and Targeting Positioning

Forecasting Methods

Statistical and Quantitative Methods Observation Surveys Analogy Judgement Market Tests Each have pros and cons SWAG!

Points About Forecasting

Use Multiple Methods Types of Bias:


Anchoring Incentive Sandbagging

Make Assumptions Explicit Forecasts should converge; ensuring greater accuracy. If they diverge, debate the various assumptions

Market Research Process


Identify Managerial Problem and Research Objectives Determine Sources and Types of Information

Design The Research


Primary/Secondary sources Qualitative/Quantitative

Collect Data

Collection Methods: observation, survey, experiments Contact Methods: face2face, fax, email, internet, phone, mail NON-RESPONSE BIAS Sampling Methods: probability (random), non-probability Be aware of collector bias Chain Ratio Method

Analyse Data

Report Findings To Decision-Makers

Market Segmentation
Objectives of Segmentation:

Identify homogenous segment that differs from other segments Specify criteria to define segment

Geographic Demographic Geodemographic Behavioural (consumer needs, general- class, lifestyle, product-related) Innovative

Determine Segment size and Potential

Target Marketing Process

Choose Criteria to measure Mkt attractiveness and competitive position


Weigh Each Factor (total weights should add to 1.0) Rate Segments on Each Factor 1-10 and plot on Matrix Project Future Positions of Each Segment Choose Segment; Allocate Resources

Mkt Att: Unmet Needs, size and growth rate, macro trends Comp. Pos: opportunity for CA, firm and competitor capabilities and resources, industry attractiveness

Targeting Strategies

Mass Market Strategy Niche Market Strategy Growth Market Strategy

Positioning

Physical Positioning

Objective physical characteristics Physical comparisons an essential step; may reveal opportunities for a new product entry Limitation: does not provide complete picture as positioning ultimately takes place in customers mind. Attitudes toward a product may be based on social or psychological aspects not amenable to objective comparison

Perceptual Positioning

Consumers can evaluate product better on what it does rather than what it is Subjective: influenced by factors other than physical properties e.g. way product is presented, past experience, opinions of others

Positioning Levers

Simple physically based attributes: price, power, quality, size Complex physically based attributes: speed of a PC, roominess of a car, user-friendliness Abstract attributes: influenced by physical characteristics but not related to them; sexiness of a perfume, prestige of a car

The 7-Step Positioning Process


Identify Relevant Set of Competing Products Identify Determinant Attributes


Features, benefits, parentage, manufacturing process, ingredients, endorsements, comparison, proenvironment, price-quality relationship DETERMINANT attributes are the ones that play a major role in helping customers differentiate among alternatives- typically only a small number

Collect Data about Cust. Perceptions on Competitive Set Determine Current Positions of Competitive Set Analyse Current Positions (Product Positioning)

Perceptual Map/ Positioning Grid

Determine Custs most Preferred Combo (Market Positioning) Examine fit between Segments and Positions Write Positioning Statement or Value Proposition

For Internal use- springboard for marketing strategy/mix

Positioning Process Outcomes

Positioning Statement

Succinct statement that identifies target mkt, product category and unique benefit
More recent development Contains:

Value Proposition

Target Market Benefits offered Price range relative to competitors

Both positioning statement and value proposition must contain benefits rather than features, not vague Must reflect Unique Selling Proposition (USP)

The 4 Ps
Product Decisions Price Decisions Distribution Channels Integrated Promotion Decisions

Product Decisions

Types of Product:

Convenience: toothpaste, soap, magazines, horror comics, flick knives, food items Shopping: TVs, cars, appliances, homes Speciality: Musical instruments, some brands of clothing Unsought: medical insurance, personal liability insurance, Amway, encyclopaedias

Customer perceptions of features and benefits is more important than seller perceptions Product Quality and Features Decisions:

Dimensions of Quality and Empathic Design (next slide) Branding Decisions


Brand Name, mark, trademark Individual Branding, Family Branding, Co-branding, store brands, Private Labelling

Packaging Decisions Service and Warranty Decisions

Dimensions Of Quality
Goods:

Services

Features Performance Reliability Durability Aesthetics Serviceablilty Conformance Perceived Quality

Tangibles Reliability Responsiveness Empathy Assurance


Observe Customers in their own environment Capture Data (visual, audio, sensory) Reflection and Analysis Brainstorm For Solutions Develop Prototypes

Empathic Product Design


Managing Product Lines

Line Filling

Adding products within the present range Campbell's adds chicken soup to its soup line lengthening product line outside its current range of variables eg. Quality/price Upward stretch: Campbell's adds really posh game soup to its line Downward stretch: Campbell's adds nasty cheap value soup to range Introduce product that differs substantially form current offerings Risky business: Campbell's introduces Campbell's Curry Use brand name established in one product class as vehicle to enter another

Line Stretching

Line Extensions

Brand Extensions

Dropping Products Product Systems


Selling a Product and selling complementary goods as a package Printers and ink cartridges, vacations and sightseeing tours etc

New Product Development

Stage-Gate System

Tasks At The Gates

Idea Initial Screen GATE 1 Preliminary Assessment Secondary Screen GATE 2 Business Case Decision on Business Case GATE 3 Development Post-Development Review GATE 4 Testing and Validation Pre-Commercialisation Review GATE 5 Full Product Launch Post Launch Review
Cross-Disciplinary: market, technical, manufacturing and service experts

Gate 1: Strategic Fit Gate 2: Assess Mkt & technical feasibility Gate 3: Decide from full 4Cs, positioning, targeting analysis Gate 4: Review features and Marketing Plan Gate 5: Test Market
Milestones set at each gate to encourage quick movement Resource commitments set along the way so inadequate resources do not hold up product Mkt analyses and technical progress proceed concurrently

Managing the Process


Staffing The Gates


Pricing Decision Process

Set Strategic Pricing Objective


Maximise Growth: Penetration Pricing Maximise Profit: Skimming, Harvesting, Social Objectives, Survival Maintain Differentiation: Premium price to cover RD, promotion exp. And custs will pay more for high quality PED, establish D-Curve by regression analysis, lab tests, store tests FC, VC, absorption vs. ABC Difficult: reverse engineering, mkt share-costs relationship Cost Oriented: BEP, Mark-up, Target Return Competition Oriented: Going Rate, Competitive Parity, Price Leader, Discount/Premium

Estimate Demand and Perceived Value

Estimate Costs

Analyse Competitor Costs and Price

Select Method For Calculating Price


Set Price Set Pricing Structure


Geographic- FOB, freight absorption, uniform delivered Global Adjustments Discounts and Allowances: trade, quantity, cash, price-off, coupon Differential Pricing- time, location, segment Product-Line Adjustments: cross elasticity, bundles

Distribution Channels

Distribution Objectives

Product Availability Meet Customer Service Requirements Promotional Effort Mkt Information Cost Effectiveness Flexibility
Entry Strategies

Global Channels

Export Contractual FDI Domestic Middlemen Foreign Middlemen

Channel Designs

Channel Alternatives

For Consumer Goods

For Organisational Goods

Distribution Decisions
Types Of Institution

Channel Management

Merchant Wholesalers Agent Middlemen Retailers Nonstore Retailers

Vertical Marketing Systems


Corporate Contractual Administered Relational

Strategies
Intensive Selective Exclusive Must decide about cost effectiveness, promotional activity, flexibility

Control

Push Strategy Pull Strategy

Trade Promotions

Increase Increase Increase Increase

repurchase Cust Service Local Promotion Effort Personal Selling Effort

Integrated Promotion Process


Define The Target Audience Set Promotional Objectives


Define target audience Define how attitudes, perception, behaviour should change How quickly change should occur Degree of change expected

Set Promotional Budget


As % of Sales Competitive Parity Objective and Task approach


Components to use Activities within components Vehicle to use (PUSH vs. PULL) Research, Sales Trends, Redemption Rates

Design The Promotion Mix


Evaluate Results

The Promotion Mix 1


Advertising

Set Objectives Budgets And Media Types: Reach And Frequency


Traditional Media TV Radio Print Media Out-Of-Home New Media Banner Ads Search Keywords Portal Deals Email (Spam!)

Develop Creative Strategy

USP, Source, Emotional Appeal


Before Tests (Recall and Sales) and After Tests (Recognition and Recall)

Evaluate Effectiveness

The Promotion Mix 2

Personal Selling

Facilitate most efficient allocation of effort Account Mgt Policies Deployment Decisions Targets/Quotas based on forecast demand Other Points

Cust service becoming increasingly important Sales Cycle Technology enhancements Recruitment, Training and Compensation are the key to performance Evaluation of Performance: sales analysis, cost analysis, behavioural analysis

Sales Promotions

Trade Promotions, Sampling, Contests and Sweepstakes (eg on washing powder) Credible, cheap, can use to deal with shocks, BUT no control

Public Relations

Marketing Strategies
For New Markets For Growing Markets For Mature And Declining Markets

New Market Entry Strategies


Pioneer

Follower

Advantages

Advantages

First Choice of Segments and Positions Define The Rules Of The Game Distribution Advantages Economies of Scale and Experience High Switching Costs for Early Adopters Possible Positive Network Externalities

Ability to take advantage of: Pioneers positioning mistakes Pioneers product mistakes Pioneers marketing mistakes Pioneers limited resources The latest technology Leapfrog the Pioneer with superior: Product technology Product quality Customer service Larger Entry Scale than Pioneer

Determinants of Success

Determinants of Success

Large Entry Scale Broad Product Line High Product Quality Heavy Promotional Expenditures Increase awareness and willingness to buy Increase ability to buy

Marketing Programme:

Strategic Marketing Programmes For Pioneers

Mass Market Penetration


Objective: to capture and maintain commanding share of new product mkt Appropriate when barriers to entry exist, or pioneer has resources/competences that most competitors cannot match. Also appropriate if network effects possible, or slow growth to begin with Marketing Programme: heavy primary demand advertising, sales force effort, sales promos, broad product line, free trial etc, penetration pricing, trade promos, intensive distribution Objective: to focus pioneering efforts on a particular segment Appropriate when firm has ltd resources, when new mkt expected to grow quickly and number of different segments to appeal to, few barriers to entry Marketing Programme: as above but selective demand, all focused on one segment Objective: maximise per-unit profits and recoup cost as quickly as possible- cover costs for new product development Appropriate if few barriers to entry, no network effects, no switching costs Marketing Programme: little/no additional product development, narrow product line, skimming price, limited advertising, sales force focus on most profitable customers, limited/adequate distribution

Niche Penetration

Skimming and Early Withdrawal


Growth Market Strategies


For Market Leaders

Fortress/ Position Defence Strategy: best when custs have relatively homogenous needs, firms offering has high level of awareness/preference in mass mkt.

Flanker Strategy: in conjunction with fortress. Launch modified product offering to capture untapped segments, prevent competitor from tapping. Must strengthen primary brand at same time Confrontation Strategy: only of you have no choice. Meet or Beat cometitors offering. Try to re-establish CA eroded by challengers attack with renewed investment in process improvements to resduce unit costs Market Expansion Strategy: more aggressive and proactive version of flanker strategy. Appropriate for fragmented mkts where leader has resources to pursue various product offerings Contraction or Strategic Withdrawal: may have ltd resources, withdraw from weaker segments and concentrate on areas where strongest. Best if mkt is fragmented.

Actions to improve cust satisfaction and loyalty: quality control, continuous improvements, reduce costs to discourage low-cost competitors, advertising focus on improving cust perception of their product, selective not primary demand, encourage repeat purchase from existing customers Actions to encourage & simplify repeat purchase: maximise availability, org mkts may try to negotiate contracts, agreed prices etc

Growth Market Strategies


Share-Growth Strategies For Followers

Frontal Attack Strategy: best when mkt is homogenous, with few untapped segments. Need superior resources AND way to obtain sustainable CA over competitors. Best way is to differentiate product price war can be dangerous esp. if dont have a cost advantage Leapfrog Strategy: attempt to gain CA by introducing a technologically superior product that significantly outperform or offer more desirable benefits. Often inhibits immediate retaliation due to incumbents resource/technology commitments. To be successful must have the superior technonlogy and the marketing resources to promote, distribute its product Flanking And Encirclement Strategies: flank appropriate for mkts with 2 or more distinct segments, encirclement best for highly fragmented mkts. Both strategies involve targeting segments where mkt leader is not strong. Guerilla Attack: when competitors are well established and segments are penetrated, may be reduced to surprise slaps in the face for incumbents eg targeting specific custs in geographic areas, local advertising blitzes, short-term sales promos. Difficult for incumbent to match discounts as costs the more in absolute s.

Shakeout!

Characteristics of Shakeout

Growth begins to slow Overcapacity Difficulty of maintaining differentiation Growing pressure on costs and profit Increased intensity of competition
Failure to anticipate transition No clear CA as growth slows Assumption that an early advantage will insulate firm from price/service competition Sacrificing market share for short run profits

Strategic Traps during Shakeout


Strategic Choices in Mature Mkts


Analyser and Defender strategies most appropriate at this stage Maintaining Differentiation:

Product Quality: must understand what dimensions of quality custs perceive to underlie differences across product in a category, and ensure that their product represents the best of these dimensions Service Quality: must meet or exceed target custs service quality expectations and do it more consistently than competitors. Improving perceptions, must concentrate on 5 gaps:

Cust expectations-----Marketers perceptions Management perceptions-----Service quality specifications Service quality specifications-----Service delivery Service delivery-----External communications Perceived Service-----Expected service

Maintaining A Low Cost Position:


Experience curve most common source of low cost No-frills product, innovative product design, cheaper raw materials, innovative processes, low-cost distribution, reductions in overhead

Mature Market Strategies

Strategies for Maintaining Market Share:

In early part of maturity, should strive to maximise flow of profits over remaining life of product mkt, therefore should maintain and protect mkt share- use strategies as before-fortress, flanker etc. Niche Strategy also appropriate for a target segment too small to appeal to large competitors Increased Penetration Strategy: discover why nonusers are uninterested in the product; enhance products value to potential custs by adding new features/benefits, line extensions, or product systems, or enhanced Service offerings. Must promote improvements to increase awareness among nonusers, increase availability. Extended Use Strategy: increase frequency of use. Move inventories closer to point of use, increase package size, promote alternative uses (recipes on packs, Kellogg's Crunchy Nut-Get home have some). Modified line extensions may also encourage. Market Expansion Strategy: appropriate in heterogeneous fragmented market. Aims at underdeveloped/untapped segments. Best for share leader. May not find in domestic mkt: move abroad. Also could find new application segments, or produce private label brands.

Strategies For Extending Volume Growth:

Strategies for Declining Mkts

Relative attractiveness depends on:

Conditions of demand Exit barriers Intensity of future competitive rivalry

Divestment or Liquidation Strategies For Remaining Competitors

Harvesting: generate cash quickly by maximising short term cash flow, avoid additional expenditure. Must hold strong position at start of decline. Maintenance: maintain mkt share until future becomes less uncertain. Once decline becomes inevitable, pursue different strategy to maximise cash flow Profitable Survivor: invest to increase share and establish as industry leader for remainder of decline. May be easy as competitors harvest and exit. Encourage smaller competitors by removing their exit barriers- acquisition Niche Strategy: appropriate where pockets of demand still exist. Focus only on these target custs. Must have strong position to build CA quickly to pre-empt competitors

Implementation & Control


Organising and Planning for Effective Implementation Measuring and Delivering Market Performance

Organising and Planning

Administrative Relationships for SBUs


Business Unit Autonomy Shared Programmes and Resources Evaluation and Reward Systems Formalisation: extent to which detailed rules and procedures are proscribed for tasks and relationships Centralisation: location of decision-making and control Specialisation: division of tasks across positions in a unit# Functional Product Management Market Management Matrix Recent Trends: horizontal organisation, self-directed teams Structure should be adjusted as firm grows and evolves

Structural Variables

Types Of Organisational Structure


Marketing Plan Contents

Situational Analysis

Market Situation Competitive Situation Macro-environmental Situation Past Product Performance Sales Forecast and Key Assumptions

Key Issues: SWOT Objectives


Financial Marketing

Marketing Strategies Marketing Action Plan

Who, What, When, How Much

Projected Profit & Loss Contingency Plans

If competitor enters, if situation/assumptions change

Control System Design 1

Control Systems Design Process

Set Performance Standards Specify Necessary Feedback Data Obtain Needed Data Evaluate Feedback Data- Explain Gap between Planned & Actual Performance Take Corrective Action
monitor & evaluate a firms SBU strategies

Strategic Control Systems

Identify Key Variables: external, and impact of implementing specified strategy Tracking & Monitoring: determine if strategy in on track Strategy Reassessment: set triggers to signal need to reassess

Control System Design 2

Marketing Performance Control Systems

Who Needs What Info


sales analysis by territory, product, customer, order size line item margin and expense analysis

When & How Often is Info Needed? What Media/ Format Should The Info be Presented In What Contingencies Should Be Planned For?

Identify critical assumptions about the future Assign probability of each assumption being right Rank order critical assumptions Tracking/monitoring of action plan Set triggers to activate contingency plan Specify alternative response options

Marketing Audit

Marketing Environment Audit

Analysis of current and future macro-environment Assess how appropriate these are, given macro trends Evaluate adequacy of systems developing new product-mkt entries and control systems

Objectives & Strategy Audit

Planning & Control Systems Audit

Organisation Audit

Structure, how MK dept is organised, synergy between MK units


Profitability of companys individual products and key accounts How adequately firm handles marketing mix elements Extent to which company acts in ethical and socially/environmentally responsible way Determine if product managers are channelling efforts in best possible way

Marketing Productivity Audit

Marketing Functions Audit

Ethical Audit

Product Manager Audit

Putting It All Together: The Marketing Management Process

Integrating Marketing Plans With Company Strategies

4Cs: Company 4Cs: Macro Context 4Cs: Competitive Situation 4Cs: Customers Forecasting & Mkt Research Segmentation, Targeting & Positioning

Opportunity Analysis

Set Marketing Objectives Marketing Strategy Marketing Programme


Product Price Place Promotion

Implementation & Control

Marketing Strategy Case Structure


Introduction Macro PEST analysis Industry Analysis


5 Forces Diffusion of Innovation PLC & Porter/ Miles & Snow Strategies

SWOT analysis to take account of Org. Capabilities Customers Research Segmentation, Targeting, Positioning Marketing Objectives, Marketing Strategy related to PLC 4Ps Control & Conclusion