Marketing

March 2007This presentation is best

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THE 4 Cs

The Macro-environmental ContextCompetitive Trends, Strengths and WeaknessesThe Needs, Wants, Characteristics of Customers

The Company’s 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

Generic Type Product Class Product Type

Importance of critical success factor fit Driving Forces

Changes In: Key Buyer SegmentsCost and efficiency levelsGrowth Rate

Diffusion of Proprietary Knowledge Govt. Regulation/Deregulation

Product Life-Cycle (IGSMD)

Competitive Situation (contd.) Porter’s 5 Forces

Threat of New Entrants Rivalry Among Existing

Competitors Buyer Bargaining Power Supplier Bargaining Power Substitutability

Diffusion of Innovation Theory

Innovators 2.5% Early Adopters 13-14%

CHASM>>>>>>>> Early Majority 34% Late Majority 34% Laggards 16%

Diffusion mediated by… Risk Relative Advantage Ease of Trial Communicability of Info Compatibility Relative Simplicity

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

Goals and Objectives Performance Dimension Measure/ Index Target/ Hurdle Time Frame

Competitive Advantage Sustainable: employ superior resources in

superior way Growth objectives- Ansoff

Resource Allocation Portfolio-BCG MkAt/ComPos Value Based Planning- DCF/IRR

Synergy Resource based Identity/ brand based Knowledge Based

Levels of Strategy Corporate (what business are

we in?) Business (how do we

compete it this business?) Marketing (how do we

compete in this product market?)

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)

Porter’s Generic Strategies

Cost Leadership Differentiation Broad/ Narrow Focus

Miles And Snow Prospector

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 Defender

Locate & maintain secure position in stable area Ltd range of offerings Protects domain with LC/ Diff. Not at forefront of new product development

Analyser 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 Reactor

A bit silly No real defined strategy; reacts to outside forces only

Customer Context: Consumers Types of Buying situation for consumers:

Complex Decision-Making Limited Decision- Making Brand Loyalty Inertia

Involvement levels High Involvement- risk, social/ego needs Low Involvement- variety, inertia, impulse, evaluate after purchase Ways to increase involvement:

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

Evaluation of Alternatives Evoked set Attributes: cost, availability, social, performance

Purchase Post-Purchase evaluation

Feeds back into INFO SEARCH in future

Factors Affecting Consumers Personal & Psychological

Perception: exposure- attention- retention. Selectivity, perceptual defence

Memory: short- & long-term Needs & Attitudes: multidimensional. Compensatory (Fishbein) and

Non-Compensatory 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

Social Influences 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:

Derived demand Cyclical, more erratic Relatively inelastic

Demographics: 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

Types Of Buying Situation Straight Rebuy Modified Rebuy New Product purchase

Process For New-Task Buying Recognise Problem/ Need

Derived Demand Requirements Planning Determining Product Specifications

Info Search about Products/ Suppliers Value Analysis Make/Buy decisions Info about potential suppliers

Evaluation and Selection of Suppliers Vendor Analysis

Purchase Decision Purchasing Contract JIT system

Post-purchase Evaluation and Feedback

Types of Product for Org. Mkts Raw Materials Component Parts and Materials Installations Accessory Equipment Operating Supplies Business Services

The Next Steps…

ForecastingMarketing Research

Segmentation and TargetingPositioning

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

Primary/Secondary sources Qualitative/Quantitative

Design The Research Collection Methods: observation, survey, experiments Contact Methods: face2face, fax, email, internet, phone, mail NON-

RESPONSE BIAS Sampling Methods: probability (random), non-probability

Collect Data Be aware of collector bias

Analyse Data Chain Ratio Method

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

resources, industry attractiveness

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

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

customer’s 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

Value Proposition More recent development Contains:

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 DecisionsPrice Decisions

Distribution ChannelsIntegrated 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 QualityGoods: Features Performance Reliability Durability Aesthetics Serviceablilty Conformance Perceived Quality

Services Tangibles Reliability Responsiveness Empathy Assurance

Empathic Product Design

Observe Customers in their own environment

Capture Data (visual, audio, sensory)

Reflection and Analysis Brainstorm For Solutions Develop Prototypes

Managing Product Lines Line Filling

Adding products within the present range Campbell's adds chicken soup to its soup line

Line Stretching 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

Line Extensions Introduce product that differs substantially form current offerings Risky business: Campbell's introduces “Campbell's Curry”

Brand Extensions Use brand name established in one product class as vehicle to enter another

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

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

Staffing The Gates Cross-Disciplinary: market, technical,

manufacturing and service experts

Tasks At The Gates 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

Managing the Process 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

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 Estimate Demand and Perceived Value

PED, establish D-Curve by regression analysis, lab tests, store tests Estimate Costs

FC, VC, absorption vs. ABC Analyse Competitor Costs and Price

Difficult: reverse engineering, mkt share-costs relationship Select Method For Calculating Price

Cost Oriented: BEP, Mark-up, Target Return Competition Oriented: Going Rate, Competitive Parity, Price Leader, Discount/Premium

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

Global Channels Entry Strategies

Export Contractual FDI

Channel Designs Domestic Middlemen Foreign Middlemen

Channel Alternatives For Consumer Goods For Organisational Goods

Distribution Decisions Types Of Institution Merchant Wholesalers Agent Middlemen Retailers Nonstore Retailers

Strategies Intensive Selective ExclusiveMust decide about cost

effectiveness, promotional activity, flexibility

Channel Management Vertical Marketing Systems

Corporate Contractual Administered Relational

Control Push Strategy Pull Strategy

Trade Promotions Increase repurchase Increase Cust Service Increase Local Promotion Effort Increase 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

Design The Promotion Mix Components to use Activities within components Vehicle to use (PUSH vs. PULL)

Evaluate Results Research, Sales Trends, Redemption Rates

The Promotion Mix 1Advertising Set Objectives Budgets And Media Types: Reach And Frequency

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

Develop Creative Strategy USP, Source, Emotional Appeal

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

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)

Public Relations Credible, cheap, can use to deal with shocks, BUT no control

Marketing Strategies

For New MarketsFor Growing Markets

For Mature And Declining Markets

New Market Entry Strategies

Pioneer 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

Determinants of Success Large Entry Scale Broad Product Line High Product Quality Heavy Promotional Expenditures

Marketing Programme: Increase awareness and willingness to

buy Increase ability to buy

Follower Advantages

Ability to take advantage of: Pioneer’s positioning mistakes Pioneer’s product mistakes Pioneer’s marketing mistakes Pioneer’s limited resources The latest technology

Determinants of Success Leapfrog the Pioneer with superior:

Product technology Product quality Customer service

Larger Entry Scale than Pioneer

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

Niche Penetration 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

Skimming and Early Withdrawal 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

Growth Market StrategiesFor Market Leaders

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

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

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 cometitor’s offering. Try to re-establish CA eroded by challenger’s 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.

Growth Market StrategiesShare-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 don’t 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

Strategic Traps during Shakeout 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 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-----Marketer’s 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

Strategies For Extending Volume Growth: 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 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

Structural Variables 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#

Types Of Organisational Structure Functional Product Management Market Management Matrix Recent Trends: horizontal organisation, self-directed teams Structure should be adjusted as firm grows and evolves

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

Strategic Control Systems monitor & evaluate a firm’s SBU strategies 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

Objectives & Strategy Audit Assess how appropriate these are, given macro trends

Planning & Control Systems Audit Evaluate adequacy of systems developing new product-mkt entries and control systems

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

Marketing Productivity Audit Profitability of company’s individual products and key accounts

Marketing Functions Audit How adequately firm handles marketing mix elements

Ethical Audit Extent to which company acts in ethical and socially/environmentally responsible way

Product Manager Audit Determine if product managers are channelling efforts in best possible way

Putting It All Together: The Marketing Management Process Integrating Marketing Plans With Company Strategies

4Cs: Company

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

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