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Marketing Management
Prof.Srini.R.Srinivasan
KJSIMSR
1prof.Srini.R.Srinivasan-KJSIMSR
2
Flow of the Presentation• Introduction to Marketing Planning
• Marketing Planning
• MKIS and MR
• The Marketing Environment & Competitor Analysis
• Buyer Behaviour
• Strategic Development
• Product Decisions
• Pricing Decisions
• Channel & Distribution Tactics
• Promotion Decisions
• Implementation
• Segmentation
• Targeting
• Positioningprof.Srini.R.Srinivasan-KJSIMSR
3
Environmental Audit
Marketing Mix Marketing Plans
Portfolio Analysis Segmentation TargetingPositioning
Marketing and the Marketing Concept
Consumer Buyer Behaviour
Marketing Mix
Promotion
Product
Price
Place/Channel
Marketing Environmen
t
PEST Analysis
SWOT Analysis
Five Forces Analysis
Ansoff's Matrix
Boston Matrix
Bowman's Strategy Clock
Porter's Generic Strategies
Objectives
Strategies
Marketing Plans
Control
Internal Marketing
Segmentation
Targeting
Positioning
prof.Srini.R.Srinivasan-KJSIMSR
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Introduction to Marketing Planning
prof.Srini.R.Srinivasan-KJSIMSR
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Definitions of marketing
‘Marketing is the management process that identifies, anticipates and satisfies customer
requirements profitably’
The Chartered Institute of Marketing
prof.Srini.R.Srinivasan-KJSIMSR
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‘The right product, in the right place, at the right time, and at the
right price’ Adcock et al
prof.Srini.R.Srinivasan-KJSIMSR
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‘Marketing is the human activity directed at satisfying human needs
and wants through an exchange process’
Kotler 1980
prof.Srini.R.Srinivasan-KJSIMSR
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‘Marketing is a social and managerial process by which individuals and groups obtain
what they want and need through creating, offering and exchanging
products of value with others’Kotler 1991
prof.Srini.R.Srinivasan-KJSIMSR
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Implications of marketing
• Who are our existing / potential customers?
• What are their current / future needs?
• How can we satisfy these needs?• Can we offer a product/ service that the customer
would value?
• Can we communicate with our customers?
• Can we deliver a competitive product of service?
• Why should customers buy from us?
prof.Srini.R.Srinivasan-KJSIMSR
10
The marketing concept
• choosing and targeting appropriate customers
• positioning your offering
• interacting with those customers
• controlling the marketing effort
• continuity of performance
prof.Srini.R.Srinivasan-KJSIMSR
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Successful marketing requires:
• Profitable
• Offensive (rather than defensive)
• Integrated
• Strategic (is future orientated)
• Effective (gets results) Hugh Davidson 1972
prof.Srini.R.Srinivasan-KJSIMSR
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Stage One - Situation Analysis • Marketing environment • Laws and regulations • Politics • The current state of technology • Economic conditions • Sociocultural aspects • Demand trends • Media availability • Stakeholder interests • Marketing plans and campaigns of competitors • Internal factors such as your own experience and resource availability • Also see tools for internal/external audit:
• SWOT • PEST
• Porter's Five Forces• Marketing Environment
prof.Srini.R.Srinivasan-KJSIMSR
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Stage Two - Set marketing SMART Objectives
• Specific - Be precise about what you are going to achieve • Measurable - Quantify you objectives • Achievable - Are you attempting too much? • Realistic - Do you have the resource to make the objective happen
(men, money, machines, materials, minutes)? • Timed - State when you will achieve the objective (within a month?
By February 2010?)
If you don't make your objective SMART, it will be too vague and will not be realized. Remember that the rest of the plan hinges on the objective. If it is not correct, the plan will fail.
prof.Srini.R.Srinivasan-KJSIMSR
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Stage Three - Describe your target market.
• Which segment? How will we target the segment? How should we position within the segment?
• Why this segment and not a different one? (This will focus the mind).
• Define the segment in terms of demographics and lifestyle. Show how you intend to 'position' your product or service within that segment. Use other tools to assist in strategic marketing decisions such as Boston Matrix , Ansoff's Matrix , Bowmans Strategy Clock, Porter's Competitive Strategies, etc.
prof.Srini.R.Srinivasan-KJSIMSR
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Stage Four - Marketing Tactics • Convert the strategy into the marketing mix (also known as
the 4Ps). These are your marketing tactics. • Price Will you cost plus, skim, match the competition or
penetrate the market? • Place Will you market direct, use agents or distributors, etc? • Product Sold individually, as part of a bundle, in bulk, etc? • Promotion Which media will you use? e.g sponsorship, radio
advertising, sales force, point-of-sale, etc? Think of the mix elements as the ingredients of a 'cake mix'. You have eggs, milk, butter, and flour. However, if you alter the amount of each ingredient, you will influence the type of cake that you finish with.
prof.Srini.R.Srinivasan-KJSIMSR
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Stage Five - Control
• Remember that there is no planning without control. Control is vital.
• Start-up costs• Monthly budgets • Sales figure • Market share data • Consider the cycle of control • Finally, write a short summary (or synopsis) which is placed at
the front of the plan. This will help others to get acquainted with the plan without having to spend time reading it all. Place all supporting information into an appendix at the back of the plan.
prof.Srini.R.Srinivasan-KJSIMSR
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Marketing management process
• Analysis/Audit - where are we now?
• Objectives - where do we want to be?
• Strategies - which way is best?
• Tactics - how do we get there?
• (Implementation - Getting there!)
• Control - Ensuring arrival
prof.Srini.R.Srinivasan-KJSIMSR
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Why is marketing planning necessary?
• Systematic futuristic thinking by management
• better co-ordination of a company’s efforts
• development of performance standards for control
• sharpening of objectives and policies
• better prepare for sudden developments
prof.Srini.R.Srinivasan-KJSIMSR
19
Definitions of marketing
‘Marketing is the management process that identifies, anticipates and satisfies customer
requirements profitably’
The Chartered Institute of Marketing
prof.Srini.R.Srinivasan-KJSIMSR
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‘The right product, in the right place, at the right time, and at the
right price’ Adcock et al
prof.Srini.R.Srinivasan-KJSIMSR
21
‘Marketing is the human activity directed at satisfying human needs
and wants through an exchange process’
Kotler 1980
prof.Srini.R.Srinivasan-KJSIMSR
22
‘Marketing is a social and managerial process by which individuals and groups obtain
what they want and need through creating, offering and exchanging
products of value with others’Kotler 1991
prof.Srini.R.Srinivasan-KJSIMSR
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Marketing Planning
prof.Srini.R.Srinivasan-KJSIMSR
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Implications of marketing
• Who are our existing / potential customers?
• What are their current / future needs?
• How can we satisfy these needs?• Can we offer a product/ service that the customer
would value?
• Can we communicate with our customers?
• Can we deliver a competitive product of service?
• Why should customers buy from us?
prof.Srini.R.Srinivasan-KJSIMSR
25
The marketing concept
• choosing and targeting appropriate customers
• positioning your offering
• interacting with those customers
• controlling the marketing effort
• continuity of performance
prof.Srini.R.Srinivasan-KJSIMSR
26
Successful marketing requires:
• Profitable
• Offensive (rather than defensive)
• Integrated
• Strategic (is future orientated)
• Effective (gets results) Hugh Davidson 1972
prof.Srini.R.Srinivasan-KJSIMSR
27
Stage One - Situation Analysis • Marketing environment • Laws and regulations • Politics • The current state of technology • Economic conditions • Sociocultural aspects • Demand trends • Media availability • Stakeholder interests • Marketing plans and campaigns of competitors • Internal factors such as your own experience and resource availability • Also see tools for internal/external audit:
• SWOT • PEST
• Porter's Five Forces• Marketing Environment
prof.Srini.R.Srinivasan-KJSIMSR
28
Stage Two - Set marketing SMART objectives
• Specific - Be precise about what you are going to achieve • Measurable - Quantify you objectives • Achievable - Are you attempting too much? • Realistic - Do you have the resource to make the objective happen
(men, money, machines, materials, minutes)? • Timed - State when you will achieve the objective (within a month?
By February 2010?)
If you don't make your objective SMART, it will be too vague and will not be realized. Remember that the rest of the plan hinges on the objective. If it is not correct, the plan will fail.
prof.Srini.R.Srinivasan-KJSIMSR
29
Stage Three - Describe your target market.
• Which segment? How will we target the segment? How should we position within the segment?
• Why this segment and not a different one? (This will focus the mind).
• Define the segment in terms of demographics and lifestyle. Show how you intend to 'position' your product or service within that segment. Use other tools to assist in strategic marketing decisions such as Boston Matrix , Ansoff's Matrix , Bowmans Strategy Clock, Porter's Competitive Strategies, etc.
prof.Srini.R.Srinivasan-KJSIMSR
30
Stage Four - Marketing Tactics • Convert the strategy into the marketing mix (also known as
the 4Ps). These are your marketing tactics. • Price Will you cost plus, skim, match the competition or
penetrate the market? • Place Will you market direct, use agents or distributors, etc? • Product Sold individually, as part of a bundle, in bulk, etc? • Promotion Which media will you use? e.g sponsorship, radio
advertising, sales force, point-of-sale, etc? Think of the mix elements as the ingredients of a 'cake mix'. You have eggs, milk, butter, and flour. However, if you alter the amount of each ingredient, you will influence the type of cake that you finish with.
prof.Srini.R.Srinivasan-KJSIMSR
31
Stage Five - Control
• Remember that there is no planning without control. Control is vital.
• Start-up costs• Monthly budgets • Sales figure • Market share data • Consider the cycle of control • Finally, write a short summary (or synopsis) which is placed at
the front of the plan. This will help others to get acquainted with the plan without having to spend time reading it all. Place all supporting information into an appendix at the back of the plan.
prof.Srini.R.Srinivasan-KJSIMSR
32
Marketing management process
• Analysis/Audit - where are we now?
• Objectives - where do we want to be?
• Strategies - which way is best?
• Tactics - how do we get there?
• (Implementation - Getting there!)
• Control - Ensuring arrival
prof.Srini.R.Srinivasan-KJSIMSR
33
Why is marketing planning necessary?
• Systematic futuristic thinking by management
• better co-ordination of a company’s efforts
• development of performance standards for control
• sharpening of objectives and policies
• better prepare for sudden developments
prof.Srini.R.Srinivasan-KJSIMSR
34
MKIS & MR
prof.Srini.R.Srinivasan-KJSIMSR
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Marketing Information Systems
• Marketing Research• What is Marketing Research?
• Process
• Terminology
• Techniques
• MKIS - Marketing Information Systems • What is MKIS
• Components of an electronic MKIS
prof.Srini.R.Srinivasan-KJSIMSR
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Marketing Research
‘the systematic gathering, recording and analysing of data about problems relating to
the marketing of goods and services’
American Marketing Association
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The most basic marketing question is:“What do our customers or potential customers really value?”
A well researched and considered answer to that question provides The foundation for the rest of the marketing program: segmentation &Targetting, new product development, product management, brand Management, channel management, mktg. Communications and evenThe structures of the mktg organisation.
prof.Srini.R.Srinivasan-KJSIMSR
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Market Research Vs. Marketing Research
Market research and marketing research are often confused. 'Market' research is simply research into a specific market. It is a very narrow concept. 'Marketing' research is much broader. It not only includes 'market' research, but also areas such as research into new products, or modes of distribution such as via the Internet. Here are a couple of definitions:
prof.Srini.R.Srinivasan-KJSIMSR
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The Marketing Research ProcessSet objectives
Define research Problem
Assess the value of the research
Construct a research proposal
Specify data collection method
Specify techniques of measurement
Select the sample
Data collection
Analysis of results
Present in a final report
prof.Srini.R.Srinivasan-KJSIMSR
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Terminology of Marketing Research
• Primary data - collected firsthand• Secondary data - already exists, desk
research• Quantitative research - statistical basis• Qualitative research - subjective and
personal• sampling - studying part of a ‘population’ to
learn about the whole
prof.Srini.R.Srinivasan-KJSIMSR
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Marketing Research Techniques• Interviews
• face-to-face
• telephone
• postal questionnaire
• Mystery Shopping• Attitude measurement
• cognitive component (know/believe about an act/object)
• affective component (feel about an act/object)
• conative component (behave towards an object or act)
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• Likert scale• strongly agree• agree• neither agree nor disagree• disagree• strongly disagree
• Semantic differential scales - differences between words e.g. practical v impractical
• Projective techniques• sentence completion• psychodrama (yourself as a product)• friendly martian (what someone else might do)
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• Group discussion and focus group• Product Tests• Use of Internet• Postal research questionnaires• Diary panels - sources of continuous data• In-home scanning - hand-held light pen to scan
barcodes• Telephone research• Observation
• home audit• direct observation
• In-store testing
prof.Srini.R.Srinivasan-KJSIMSR
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Secondary Research
Secondary (or desk) research uses data that has been collected for other objectives than your own i.e. it already exists. There are a number of such sources available to the marketer, and the following list is by no means conclusive:
prof.Srini.R.Srinivasan-KJSIMSR
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• Trade associations National and local press Industry magazines National/ international governments Web sites Informal contacts Trade directories Published company accounts Business libraries Professional institutes and organisations Omnibus surveys Previously gathered marketing research Census data Public records
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What is MKIS?
‘MKIS (MIS) is a set of procedures and methods for the regular, planned collection, analysis and presentation of information for
use in marketing decisions’
American Marketing Association
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The components of a computerised MKIS
Model Bank
Data Bank
StatisticalBank
MKISDisplay
unitMarketingManager
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The components of a computerised MKIS
• Data bank - raw data e.g historical sales data, secondary data
• Statistical bank - programmes to carry-out sales forecasts, spending projections
• A model bank - stores marketing models e.g Ansoff’s matrix, Boston Matrix
• Display unit - VDU and keyboard
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The Marketing Environment & Competitor Analysis
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The Marketing Environment and Competitor Analysis
• SWOT analysis
• PEST analysis
• Five forces analysis
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SWOT analysis
• Strengths (internal)
• Weaknesses (internal)
• Opportunities (external)
• Threats (external)
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INTERNAL
EXTERNAL
PAST FOCUS
FUTURE ORIENTED
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PEST analysis
• Political factors
• Economic factors
• Socio-cultural factors
• Technological factors
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The Model
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Political/legal
• Monopolies legislation
• Environmental protection laws
• Taxation policy
• Employment laws
• Government policy
• Legislation
• Others?prof.Srini.R.Srinivasan-KJSIMSR
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Economic Factors
• Interest Rates
• Inflation
• Employment
• Disposable income
• Business cycles
• Energy availability and cost
• Others?prof.Srini.R.Srinivasan-KJSIMSR
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Sociocultural factors
• Religion• Demographics• Distribution of income• Social mobility• Lifestyle changes• Consumerism• Levels of education• Others?
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Technological
• New discoveries and innovations• Speed of technology transfer• Rates of obsolescence• Internet• Information technology• Others?
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Source: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1980, p. 4.
Threat ofThreat ofsubstitutessubstitutes
Potentialentrants
Threat ofThreat ofentrantsentrants
Suppliers
BargainingBargaining powerpower
Substitutes
Buyers
BargainingBargaining powerpower
COMPETITIVE RIVALRY
Five forces analysis
Complementors
As Suggested byAndrew GroveEx-CEO Intel Corporation“Only The Paranoid Survive”
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Five Forces Analysis: Key Questions and Implications
• What are the key forces at work in the competitive environment?
• Are there underlying forces driving competitive forces?
• Will competitive forces change?• What are the strengths and weaknesses of
competitors in relation to the competitive forces?• Can competitive strategy influence competitive forces
(eg by building barriers to entry or reducing competitive rivalry)?
prof.Srini.R.Srinivasan-KJSIMSR
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The MODEL
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Volume Vs. Margin Analysis
Normal Profits
Normal ProfitsSubnormal Profits
Superprofits
Mar
gins
Low
Low
Volume
High
High
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The threat of entry.
• Economies of scale e.g. the benefits associated with bulk purchasing.• The high cost of entry e.g. how much will it cost for the latest
technology?• Ease of access to distribution channels e.g. Do our competitors have
the distribution channels sewn up?• Cost advantages not related to the size of the company e.g.
personal contacts or knowledge that larger companies do not own or learning curve effects.
• Will competitors retaliate? • Government action e.g. will new laws be introduced that will weaken
our competitive position?• How important is differentiation? e.g. The Champagne brand cannot
be copied. This desensitises the influence of the environment.
prof.Srini.R.Srinivasan-KJSIMSR
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The power of buyers
• This is high where there a few, large players in a market e.g. the large grocery chains.
• If there are a large number of undifferentiated, small suppliers e.g. small farming businesses supplying the large grocery chains.
• The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another.
prof.Srini.R.Srinivasan-KJSIMSR
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The power of suppliers• The power of suppliers tends to be a reversal of the power of
buyers. • Where the switching costs are high e.g. Switching from one
software supplier to another. • Power is high where the brand is powerful e.g. Cadillac,
Pizza Hut, Microsoft. • There is a possibility of the supplier integrating forward e.g.
Brewers buying bars. • Customers are fragmented (not in clusters) so that they have
little bargaining power e.g. Gas/Petrol stations in remote places.
prof.Srini.R.Srinivasan-KJSIMSR
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The threat of substitutes
• Where there is product-for-product substitution e.g. email for fax Where there is substitution of need e.g. better toothpaste reduces the need for dentists.
• Where there is generic substitution (competing for the currency in your pocket) e.g. Video suppliers compete with travel companies.
• We could always do without e.g. cigarettes.
prof.Srini.R.Srinivasan-KJSIMSR
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Competitive Rivalry
• This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. This is why it is always seen in the center of the diagram.
prof.Srini.R.Srinivasan-KJSIMSR
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Consumer Behaviour
prof.Srini.R.Srinivasan-KJSIMSR
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Buyer Behaviour
• Dominant Family Purchase - Cozenza 1985• Demographic Factors• The Consumer Buying Process• Maslow’s hierarchy of needs• UK socioeconomic classification scheme• Types of buyer behaviour• The Buying Decision Process• Organisational Buyer Behaviour
prof.Srini.R.Srinivasan-KJSIMSR
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Dominant Family Purchase - Cozenza 1985
PRODUCT DOMINANT DECISION
MAKER
TYPICAL DECISION
Women’s casualclothing
Wife Price, style
Vacations Syncratic (both) Whether to go, where
Men’s casual clothing Husband Type, price, style
Life insurance Husband Company, coverage
Homeowner’sinsurance
Husband Company, coverage
Household appliances Wife Style, brand, price
prof.Srini.R.Srinivasan-KJSIMSR
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Demographic Factors• Age• Stage in family life cycle• Occupation• Economic circumstances• Lifestyle• social influence variables
• family background• reference groups• roles and status
prof.Srini.R.Srinivasan-KJSIMSR
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The Consumer Buying Process
Consumer
Purchase Decisions
Product Choice
Location Choice
Brand Choice
Other Choices
Psychological Inputs
Culture
Attitude
Learning
Perception
Based on Cohen (1991)
Marketing Inputs
Product
Price
Promotion
Place
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Maslow’s Hierarchy of Needs
Physiological
Safety
Social
Esteem
Self Actualisation
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UK socioeconomic classification scheme
Class name Social status Occupation of head of household
% of population
A Upper middle Higher managerial,administrative or professional
3
B Middle Intermediate managerial,administrative or professional
14
C1 Lower middle Supervisors or clerical, juniormanagerial, administrative or
professional27
C2 Skilled working Skilled manual workers 25
D Working Semiskilled and unskilledworkers
19
E Those at lowest levels ofsubsistence
Pensioners, widows, casual orlower-grade workers
12
prof.Srini.R.Srinivasan-KJSIMSR
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Types of buyer behaviour
• Complex buyer behaviour e.g. Intel Pentium Processor
• Dissonance-reducing behaviour (brand reduces after-sales discomfort)
• Habitual buying behaviour e.g. salt - little difference
• variety seeking behaviour - significant brand differences e.g soap powder
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The Buying Decision Process
• recognition of the need e.g a new PC
• choice of involvement level (time and effort justified) e.g. two week ends
• identification of alternatives e.g. Dell, PC World
• evaluation of alternatives I.e. price, customer service, software support, printer/scanner package
• decision - choice made e.g Epsom • action e.g buy Epsom model from
Comet• post-purchase behaviour I.e. use,
breakdowns, etc
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Consumer Spending Vs Age
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Organisational Buyer Behaviour
‘The decision-making process by which formal organisations establish the need for
purchased products and services, and identify, evaluate, and choose among
alternative brands and suppliers’
Kotler and Armstrong 1989
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Characteristics of organisational buyer behaviour
• Organisation purpose - Goodyear Tyres• Derived demand - follows cars and lorries• Concentrated purchasing - stockholdings of rubber• Direct dealings - large purchaser of basic rubber -
no intermediaries• Specialist activities - learns about the product• Multiple purchase influences - DMU - Decision
making unit
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Strategic Development
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Strategic Development
• Product Life Cycle (Revisited in ‘Product’)
• Bowman’s Competitive Strategy Options
• New Product Development (NPD)
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Initial Customer Segments
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PLC Characteristics
prof.Srini.R.Srinivasan-KJSIMSR
85prof.Srini.R.Srinivasan-KJSIMSR
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Five stages of the PLC
• Product development - sales are zero, investment costs are high
• Introduction - profits do not exist, heavy expense of product introduction
• Growth - rapid market acceptance and increasing profits
• Maturity - slowdown in sales growth. Profits level-off. Increase outlay to compete
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• Decline - sales fall-off and profits drop
• Descriptive Model
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Demand Life Cycle
Time
Sal
es Need
T2
T1
prof.Srini.R.Srinivasan-KJSIMSR
89Time
Sal
es
Need
Product-Form Life Cycles
P1
P2
P3
prof.Srini.R.Srinivasan-KJSIMSR
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Product Has Life Cycle….
• Limited life
• Pass through distinct stages
• Profits rise/fall with stages
• Each stage requires different marketing resource strategies*---------
Also financial, manufacturing, purchasing and human resource.
prof.Srini.R.Srinivasan-KJSIMSR
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Product Life Cycle Stages
Introduction: Slow sales, profits nil
Growth: Market acceptance, profits improve
Maturity: Sales Slowdown, Profits stabilize or decline
Decline: Sales/ profits show downward drift
prof.Srini.R.Srinivasan-KJSIMSR
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Product Life Cycle
Time
Sal
es &
Pro
fits
($
$$)
Profit
Sales
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Other Shapes of the PLC
Time
Sal
es V
olu
me
Time
Sal
es V
olu
me
Growth-slump-maturity
Cycle-recycle pattern
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Other Shapes of the PLC
Time
Sal
es V
olu
me
Scalloped Pattern
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Style, Fashion & Fad Life Cycles
Time
Sal
es V
olu
me
Style
Time
Sal
es V
olu
me
Fashion
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Time
Sal
es V
olu
me
Fad
Style, Fashion & Fad Life Cycles
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Marketing Strategies Throughout The PLC
Introduction
Marketing Pioneers
• Advantages
• Risks
Growth
Sustaining Sales
• Improve Quality/Add features
• New models/Flanker Brands
• Lower prices to attract next layer of $$$ sensitive buyers
prof.Srini.R.Srinivasan-KJSIMSR
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Marketing Strategies Throughout The PLC
Maturity Stage
Market Modification
Volume = # brand users x usage rate
# of brand users
• Convert non-users
• Enter new market segments
• Win competitors’ customers
Volume
• More frequent use
• More usage per occasion
• New & more varied usesprof.Srini.R.Srinivasan-KJSIMSR
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Marketing Strategies ThroughoutThe PLC
Maturity
Product Modification
• Quality & Feature Improvement
Marketing Mix Modification
Prices, Distribution, Advertising
Sales Promotion, Personal Selling, Services
Decline
• Increase Firm’s Investment, Maintain
• Decrease investment selectively
• Harvest
• Divestprof.Srini.R.Srinivasan-KJSIMSR
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PLC exercise
• The Ford Escort
• The Mini Cooper
• The Internet Phone
• Cadbury’s Fuse
• The Boeing 747
• The Millennium Dome
• KIT KATprof.Srini.R.Srinivasan-KJSIMSR
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Family Life Cycle
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Source: Based on the work of Cliff Bowman. See C.Bowman and D.Faulkner. Competitive and Corporate Strategy, Irwin, 1996.
Bowman’s Strategy Clock
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•1 Low price/low added value Likely to be segment specific
•2 Low price Risk of price war and low• margins/need to be cost leader
•3 Hybrid Low cost base and reinvestment in• low price and differentiation
•4 Differentiation• (a) Without price premium Perceived added value by user,• yielding market share benefits• (b) With price premium Perceived added value sufficient to• bear price premium
The Strategy Clock: Bowman’s Competitive Strategy Options
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• 5 Focused differentiation Perceived added value to a particular segment,
warranting price premium
• 6 Increased price/standard
Higher margins if competitors do not value follow/risk of
losing market share
• 7 Increased price/low value
Only feasible in monopoly situation
• 8 Low value/standard price
Loss of market share
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Generic Strategies
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Generic Strategies And Five Forces Model
Industry
Force
Cost Leadership Differentiation Focus
EntryBarriers
BuyerPower
SupplierPower
Threat of
Substitutes
RivalryBetter able to compete on price.
Brand loyalty to keep customers from rivals.
Rivals cannot meet differentiation-focused customer needs.
Generic Strategies
Ability to cut price in retaliation discourages potential entrants.
Customer loyalty can discourage potential entrants.
Focusing develops core competencies that can act as an entry barrier.
Can use low price to defend against substitutes.
Customer's become attached to differentiating attributes, reducing threat of substitutes.
Specialized products & core competency protect against substitutes.
Ability to offer lower price to powerful buyers.
Large buyers have less power to negotiate because of
Large buyers have less power to negotiate because of
Better insulated from powerful suppliers.
Better able to pass on supplier price increases to customers.
Suppliers have power because of low volumes, but a differentiation-
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1. Cost Leadership • The low cost leader in any market gains competitive
advantage from being able to many to produce at the lowest cost. Factories are built and maintained, labor is recruited and trained to deliver the lowest possible costs of production. ‘cost advantage’ is the focus. Costs are shaved off every element of the value chain. Products tend to be ‘no frills.’ However, low cost does not always lead to low price. Producers could price at competitive parity, exploiting the benefits of a bigger margin than competitors. Some organization, such as Toyota, are very good not only at producing high quality autos at a low price, but have the brand and marketing skills to use a premium pricing policy.
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2. Differentiation • Differentiated goods and services satisfy the needs of
customers through a sustainable competitive advantage. This allows companies to desensitize prices and focus on value that generates a comparatively higher price and a better margin. The benefits of differentiation require producers to segment markets in order to target goods and services at specific segments, generating a higher than average price. For example, British Airways differentiates its service. The differentiating organization will incur additional costs in creating their competitive advantage. These costs must be offset by the increase in revenue generated by sales. Costs must be recovered. There is also the chance that any differentiation could be copied by competitors. Therefore there is always an incentive to innovated and continuously improve.
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3. Focus or Niche strategy • The focus strategy is also known as a ‘niche’ strategy.
Where an organization can afford neither a wide scope cost leadership nor a wide scope differentiation strategy, a niche strategy could be more suitable. Here an organization focuses effort and resources on a narrow, defined segment of a market. Competitive advantage is generated specifically for the niche. A niche strategy is often used by smaller firms. A company could use either a cost focus or a differentiation focus. With a cost focus a firm aims at being the lowest cost producer in that niche or segment. With a differentiation focus a firm creates competitive advantage through differentiation within the niche or segment. There are potentially problems with the niche approach. Small, specialist niches could disappear in the long term. Cost focus is unachievable with an industry depending upon economies of scale e.g. telecommunications. prof.Srini.R.Srinivasan-KJSIMSR
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The danger of being ‘stuck in the middle.’
• Make sure that you select one generic strategy. It is argued that if you select one or more approaches, and then fail to achieve them, that your organization gets stuck in the middle without a competitive advantage.
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New- Product Development Process
• New product strategy
• Idea generation
• Idea screening
• Concept development and testing
• Marketing strategy
• Business analysis
• Product development
• Test Marketing
• Commercialisation
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Product Decisions
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Products Decisions
• Product and Service Classification System
• The Product Life Cycle
• Introduction to product matrices
• Boston Matrix (Growth/Share)
• Ansoff’s Matrix (Product Market)
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Product and Service Classification System
• Convenience goods - little effort, relatively inexpensive
• Shopping goods - e.g ‘white goods’, DIY equipment, more expensive, infrequent
• Speciality goods - extensive search e.g Jewellery, gourmet food
• Unsought goods - e.g. double glazing,
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• Industrial goods
• Installations - ‘speciality’ goods of industrial markets - plant and machinery
• Accessories - maintenance and office equipment
• Raw materials
• components
• Business to business e.g. consultants, accountants
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The Product Life Cycle
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The Boston Matrix (Growth/Share Matrix) Market Share
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Market Share
MarketGrowth
High
Low
High Low
FUSEMaverickMiniature Heroes
KIT KATMARS BAR
TOPICBOUNTY
The Boston Matrix - Chocolate Bars
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Diversification
Market Penetration
Market Development
Product Development
Existing Markets New Markets
Exi
stin
g P
rod
uct
sN
ew P
rod
uct
s
Ansoff’s Matrix (Product/Market Matrix)
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Diversification -related or unrelated
E.g. Realignments of the marketing mix
E.g. Geographical expansion
Same outlets and sales strategy - new product
Existing Markets New Markets
Exi
stin
g P
rod
uct
sN
ew P
rod
uct
s
Ansoff’s Matrix (Product/Market Matrix)
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Market Penetration
• Here we market our existing products to our existing customers. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is not altered and we do not seek any new customers.
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Risk Vs Control Graph of International Market Penetration Strategies
DIRECT EXPORTING
Distributors
Agents
Direct Marketing
Franchising
Mgmt. Controls
MANUFACTURING
Own Subsidiary
Acquisition
Assembly
JOINT VENTURES
Strategic Alliances
INDIRECT EXPORTING
Piggybacking
Trading Cos
Export Mgmt Cos
Domestic Purchasing
Risk
Con
trol
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Market Development
• Here we market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of market development.
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Product Development
• This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.
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Diversification
• This is where we market completely new products to new customers. There are two types of diversification, namely related and unrelated diversification. Related diversification means that we remain in a market or industry with which we are familiar. For example, a soup manufacturer diversifies into cake manufacture (i.e. the food industry). Unrelated diversification is where we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business.
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Products Decisions
• Product and Service Classification System?
• The Product Life Cycle stages?
• Growth/Share?
• Product Market?
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Pricing Decisions
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Pricing Decisions
• Pricing strategies
• Pricing exercise• Ten ways to ‘increase’ prices
without increasing price - Winkler
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Low High
Low
High
EconomyStrategye.g. Tesco spaghetti
Penetratione.g. Telewest cable phones
Skimminge.g. New film or album
Premiume.g. BA first class
Price
Quality
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Pricing strategies• Premium pricing
• Uses a high price, but gives a good product/service exchange e.g. Concorde, The Ritz Hotel
• Penetration pricing• offers low price to gain market share - then
increases price
• e.g. France Telecom - to attract new corporate clients (or Telewest cable)
• Economy pricing• placed at ‘no frills’, low price
• e.g. Soups, spaghetti, beans - ‘economy’ brands
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• Price skimming• where prices are high - usually during introduction
• e.g new albums or films on release
• ultimately prices will reduce to the ‘parity’
• Psychological pricing• to get a customer to respond on an emotional, rather than
rational basis
• .e.g 99p not £1.01 ‘price point perspective
• Product line pricing• rationale of a product range
• e.g. MARS 32p, Four-pack 99p, Bite-size £1.29
• Pricing variations• ‘off-peak’ pricing, early booking discounts,etc
• e.g Grundig offers a ‘cash back’ incentive for expensive goods
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• Optional product-pricing• e.g. optional extras - BMW famously under-
equipped
• Captive product pricing• products that complement others• e.g Gillette razors (low price) and blades (high
price)
• Product-bundle pricing• sellers combine several products at the same price• e.g software, books, CDs.
• Promotional pricing• BOGOF e.g. toothpaste, soups, etc
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• Geographical pricing• different prices for customers in different parts of
the world
• e.g.Include shipping costs, or place on PLC
• Value pricing• usually during difficult economic conditions
• e.g. Value menus at McDonalds
In deciding which pricing strategy to use must consider the Elasticity of demand for the product
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Ten ways to ‘increase’ prices without increasing price - Winkler
• Revise the discount structure
• Change the minimum order size
• Charge for delivery and special services
• Invoice for repairs on serviced equipment
• Charge for engineering, installation
• Charge for overtime on rushed orders
• Collect interest on overdue accountsprof.Srini.R.Srinivasan-KJSIMSR
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• Produce less of the lower margin models in the line
• Write penalty clauses into contracts
• Change the physical characteristics of the product
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Channel & Distribution
Tacticsprof.Srini.R.Srinivasan-KJSIMSR
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Channel and Distribution Tactics• Bucklin’s definition of distribution• Today’s system of exchange• Channel intermediaries• Six basic channel decisions• Selection consideration• Potential Influence Strategies - Frazier and Sheth
(1989)• Frequencies of use of influence strategies - Frazier
and Summers (1984)
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A channel of distribution comprises a set of institutions
which perform all of the activities utilised to move a product and its title from
production to consumption
Bucklin - Theory of Distribution Channel Structure (1966)
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Negotiation
Promotion
Contact
Transporting and storing
Financing
Packaging
Money
Goods
Today’s system of exchangeP
rod
uce
rsU
sers
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Channel intermediaries - Wholesalers
• Break down ‘bulk’• buys from producers and sell small quantities to
retailers• Provides storage facilities• reduces contact cost between producer and
consumer
• Wholesaler takes some of the marketing responsibility e.g sales force, promotions
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Channel intermediaries - Agents
• Mainly used in international markets
• Commission agent - does not take title of the goods. Secures orders.
• Stockist agent - hold ‘consignment’ stock
• Control is difficult due to cultural differences
• Training, motivation, etc are expensive
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Channel intermediaries - Retailer
• Much stronger personal relationship with the consumer
• Hold a variety of products
• Offer consumers credit
• Promote and merchandise products
• Price the final product
• Build retailer ‘brand’ in the high street
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Channel intermediaries - Internet
• Sell to a geographically disperse market• Able to target and focus on specific segments• Relatively low set-up costs• Use of e-commerce technology (for payment,
shopping software, etc)• Paradigm shift in commerce and consumption
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Six basic channel decisions
• Direct or indirect channels
• Single or multiple channels
• Length of channel
• Types of intermediaries
• Number of intermediaries at each level
• Which intermediaries? Avoid intrachannel conflict
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Selection consideration• Market segment - must know the specific segment and
target customer• Changes during plc - different channels are exploited at
various stages of plc• Producer-distributor fit - their policies, strategies and
image• Qualification assessment - experience and track record
must be established• Distributor training and support• The width and depth of distribution networks will also
decide other strategies like:– How much of branding– How large a production facility to employ– Where to set up the production facility so as to be able to supply to
my target market
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Potential Influence Strategies-Frazier and Sheth (1989)
• Indirect influence strategies - information is merely exchanged with channel member personnel
• Direct unmediated strategies - consequences of a poor response from the market are stressed
• Reward and punishment strategies - given to channel members and their firms
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• Direct unweighted strategy or request - producer’s wishes are communicated . No consequences are applied or mentioned
• Direct mediated strategies - specific action is requested and consequences of rejection are stressed– e.g.1 control of retail pricing– e.g.2 minimum order size– e.g.3 salesperson training– e.g.4 physical layout of store– e.g. 5 territorial and customer restrictions
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Meanuse
Mostfrequentlyused
Tied formostfrequentlyused
Neverused
Informationexchange
49% 62% 6% 8%
Requests 27 13 7 11Recommendations
19 8 7 23
Promises 15 4 9 37Threats 10 1 5 53Legalisticpleas
6 0 3 59
Frazier and Summers (1984)
Frequencies of use of Influence Strategies
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Promotion Decisions
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Promotions Decisions
• Elements in the communication process
• Promotions mix
• The promotions message
• Executions style
• Media choice?
• Promotional objectives
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MediaMessageSender Encoding
ResponseFeedback
Noise
Decoding Receiver
Elements in the Communication Process
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• Sender - party sending the message
• Encoding - message in symbolic form
• Message - word, pictures and symbols that the sender transmits
• Media - the communication channel e.g radio
• Decoding - receiver assigns meaning to symbols encoded by the sender
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• Response - reaction of the receiver after being exposed to the to the message
• Feedback - the part of the receiver’s response after being communicated to the sender
• Noise - unplanned static or distortion during the communication process e.g. competitor action (Creature Comforts?)
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Promotions Mix• Personal selling• Telemarketing• Direct mail• Trade fairs and exhibitions• Commercial television• Newspapers and magazines• Radio• Cinema• Point of sale displays• Packaging
CRM Asks to avoid traditional mass mediaWhich are only one way andAdopt dialogue media like:•Telemarketing•Personalised emails•direct mail, •direct sales
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The Promotional Message
Grab ATTENTION
Excite INTEREST
Create DESIRE
Prompt ACTION
AIDA
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Execution styles
• Slice of life e.g. OXO
• Lifestyle e.g. After Eight mints
• Fantasy e.g .Turkish Delight
• Mood or image e.g. Timotei shampoo
• Musical e.g .Gap
• Personality symbol e.g. Richard Branson
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• Technical expertise e.g.Vorsprung durch Technik - Audi
• Scientific evidence e.g. Whiskers
• Testimonial evidence e.g. Ian Botham
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Media choice?
• Marketing objectives
• Definition of problem e.g falling awareness
• Evaluation of different tools
• choice of optimum mix of promotional methods
• Integration into overall marketing communication programme
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Exercise - What beliefs and expectations do you have about the following brands? How far are these due to
promotion as opposed to personal experience?
• Fairy liquid
• Persil washing powder
• Midland Bank
• Virgin Radio
• Nissan
• Tesco
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Promotional objectives• To support sales increases• To encourage trial• To create awareness• To inform about a feature or benefit• To remind• To reassure• To create an image• To modify attitudes
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Implementation
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Implementation
• The implementation process• An action checklist• Total quality and marketing• Managing the organisation/stakeholder interface• Activities to establish and build customer
relationships• Relationship marketing• McKinsey 7-S framework
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MarketingStrategy
Tactical Decisions
Implementing theMarketing Mix
Monitoring Results
Internal Factors
External Factors
Adaptation of strategy/tactics Berman and Evans 1985
The Marketing Implementation Process
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Implementation problems
• Internal problems e.g change of management
• External problems e.g. changing competition
• Poor planning e.g. Hoover’s flight tickets
• Poor intelligence e.g. 1985 Coca-Cola
• Poor execution
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Implementing a programme - an action checklist
• Agree the implementation strategy
• Agree a timeframe
• Draw up detailed implementation plans
• Set up a team of stakeholders
• Establish good project management
• Personalise the case for change
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• Create a sense of purpose and urgency to tackle real problems which have prevented progress in the past
• motivate• be prepared for conflict• Be willing to negotiate• Anticipate stress• Build skills• Build in the capacity for learning• Monitor and evaluate
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Total Quality and Marketing• Quality is what customers say it is.• Juran and TQM
• zero defects• right first time• continuous improvement
• Statistical process control (SPC)• New relationships with suppliers (JIT)• Quality Assurance e.g BS EN ISO 9000
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Managing the organisation/stakeholder interface• External and internal relationships• Accountability of managers• Marketer projects an image and style• Ethical responsibilities towards consumers• Social responsibility
• dangerous products e.g. cigarettes• dishonest marketing and promotion• the abuse of power• the availability of information
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Activities to establish and build customer relationships
• Need for long term relationships• UACCA - ‘expensive’ in promotional terms• Build sales to existing customers• Improving service quality• Auditing the fulfilment of customer needs• Cause a cultural change to a marketing
orientation - Marketing Myopia Levitt (1960)
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Relationship marketing
• The consistent application of up-to-date knowledge of individual customers to product and service design . . . . In order to develop a continuous and long-term relationship’ Cram
• Not mass marketing. Aimed at individual.• Customer retention not attraction• Long term, ongoing relationships• Regular customer contact• Spirit of trust
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Mckinsey 7-S framework
• Strategy
• Structure
• Systems
• Share values
• Style
• Skills
• Staffprof.Srini.R.Srinivasan-KJSIMSR
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Segmentation, Targeting, Positioning
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Segmentation
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Product Market Segmentation
P1
P2
P3
P4
M1 M2 M3 M4
HALLS – (Institutions)WALLS – (Government)MALLS – (Retail)INDIVIDUALS
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Example
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Types of TargettingM1 M2 M3 M4
P1
P2
P3
P4
M1 M2 M3 M4
P1
P2
P3
P4
M1 M2 M3 M4
P1
P2
P3
P4
M1 M2 M3 M4
P1
P2
P3
P4
M1 M2 M3 M4
P1
P2
P3
P4
M1 M2 M3 M4
P1
P2
P3
P4
Full Market Coverage
Multiple Niches
Market SpecialisationProduct Specialisation
Niche Marketing
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Definition
• Segmentation is essentially the identification of subsets of buyers within a market who share similar needs and who demonstrate similar buyer behavior. The world is made up from billions of buyers with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behavior. Such a group is known as a 'segment'.
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Characteristics of a “Good” Segment
• Is the segment viable? Can we make a profit from it? A minimum Level of sales value
• Must have a Minimum volume for me to set up a minimum volume of production.
• Is the segment accessible? How easy is it for us to get into the segment?
• Is the segment measurable? Can we obtain realistic data to consider its potential
• The segment must be Homogeneous from within and Heterogeneous with other segments
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Basis for Segmentation
• by Geography - such as where in the world was the product bought
• by Psychographics - such as lifestyle or beliefs • by Socio-cultural factors - such as class • by Demography - such as age, sex, and so on.
attitudes held
benefits sought
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Targeting
• After the market has been separated into its segments, the marketer will select a segment or series of segments and 'target' it/them. Resources and effort will be targeted at the segment. Its like looking at a dart board or a shooting target. You see that it has areas with different scores - these are your segments. Aiming the dart or the bullet at a specific scoring area is 'targeting'
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POSITIONING
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Positioning
Positioning is the development of a service and a marketing mix to occupy a specific place in the minds of customers within target markets.
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Positioning
• Positioning is all about 'perception'. As perception differs from person to person, so do the results of the positioning map e.g what you perceive as quality, value for money, etc, is different to my perception. However, there will be similarities.
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Reasons for Increased Importance of Positioning
1. Perceptual processes of customers They screen out most information2. Greater competition
More organizations competing for share of mind
3. Growing volume of commercial messagesAdvertising and promotion clutter
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Steps Required for Effective Positioning (the five Ds)
Documenting Deciding Differentiating Designing Delivering
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The 5 Ds of Positioning
DocumentingWhat benefits are the most important to your current and potential customers?
DecidingWhat image do you want your current and potential customers to have of your organization?
Differentiation
Which competitors do you want to appear different from, and what are the factors that you will use to make your organization different from them?
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The 5 Ds of Positioning
DesigningHow will you develop and communicate these differences?
DeliveringHow will you make good on what you’ve promised, and how do you make sure that you have “delivered?”
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Positioning Approaches:Six Major Alternatives
Specific product features Benefits, problem solution, or
needs Specific usage occasions User category Against another “product” “Product class” dissociation
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Positioning Map
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Things to think about.• Ensuring that all the levels of your distribution channels project the
same “face” to your customer
• Guerilla marketing
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MARKETING MODELS
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What is a ModelA model is simply a representation. A map, which represents the countryside, is a model, and so is a graph which represents a company's sales over time. In this sense, all our perceptions of reality are "models" since they are only perceptions and not reality itself. Our language is a model, since words are only representations of objects or ideas. Similarly, our numbering system is a model by which quantities of objects or ideas can be represented. These are trivial, but real, distinctions between models and reality.
Models characterize either what currently exists in fact, or what might exist in the future. Marketing models might depict such operations as an existing product distribution system; a consumer's value structure, consumer preference modeling for product choices, or the effects of advertising on consumer awareness, knowledge, attitudes, or intention to purchase.The purpose of a model is typically to provide the manager with a guide for evaluating the effect of a set of input variables. For example, a design engineer for General Motors might model the aerodynamics of a different body design features to determine their impact on airflow and fuel economy. Or a civil or hydraulics engineer designing a dam to hold back a reservoir 200 feet deep might use a model to determine the concrete density and materials necessary to withstand the water pressure at each depth level.
Model builders in the applied or physical sciences often use readily measurable and quantifiable input data. But marketing model builders typically often have only very loose and imprecise inputs. These inputs are often estimates of such unknowns as new product demand, advertising effectiveness, advertising efficiency, optimal sales force allocation, results of a product positioning option, or estimates of pricing strategy. prof.Srini.R.Srinivasan-KJSIMSR
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Characteristics of a good Model• 1. The model must be simple to use and
understand,• 2. It must be robust -- its results must not vary
wildly with small changes to the input data,• 3. It must be easy to communicate with,• 4. It must be easy to control,• 5. It must be adaptable to other products or
situations, and • 6. It must be complete on important details.
Model builders should measure the quality of their models against the criteria of validity and utility. Validity refers to the accuracy of the model in describing and predicting reality. A sales forecasting model which does not forecast sales with reasonable accuracy is probably worse than no sales forecasting model at all.
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Advantages of Modelling• In spite of the complexities of model building, models offer significant benefits.
Perhaps most important is the sensitization process they help develop. Managers must gather and enter the input data, then evaluate the model's outputs. They re-evaluate the input data, modify it, and watch the effect on the model's outputs. By using models in this way, managers become sensitized to recognize and evaluate the elements that are important to making an appropriate decision.
• Modeling activities also force both the manager and the researcher to be critical (and parsimonious) in evaluating the impact of variables that could explain the process. They begin to question assumptions about supposedly influential variables, and begin to discover important new variables.
• Finally, the manager is forced, as part of the variable selection process, to consider the relationships between variables. He or she begins to be aware of interactions between them, and they may begin to recognize that a symbiotic, synergistic, relationship exists between many marketing activities and effects.
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Types of Models• Descriptive
eg: Revenue = Price - Costs
• Prescriptive• Normative
Normative (or, control) models are the most difficult models to construct since these models not only describe and predict, but provide direction about the proper course of action.
• Iconic(which means "image") models are like reality in the sense that they
look like reality. Photographs, maps, architectural miniatures, and rough layouts of advertisements are all iconic models.
• Symbolicsymbolic models do not look like reality, but emulate reality in other ways. They include either
(a) verbal, (b) schematic, or (c) mathematical forms that describe a specific process
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DEVELOPING MARKETING MODELS
Marketing models, like all management science models, are
developed through either inductive or deductive logic which leads to generalization about market
behavior. From these generalizations, sets of premises or theories are developed. These lead to sets of relationships which constitute marketing models.
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CUSTOMER RELATIONSHIP MANAGEMENT
CRMprof.Srini.R.Srinivasan-KJSIMSR
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Basic Model of CRM1. a database of customer activity, analyses of the
database, 2. given the analyses, decisions about which
customers to target, 3. tools for targeting the customers, 4. how to build relationships with the targeted
customers, 5. privacy issues, and 6. metrics for measuring the success of the CRM
program. 7. Creating a Customer Database
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Information needs for the database
• Transactions-complete purchase history with details (price paid, SKU, delivery date).
• Customer Contacts-Touchpoints used by the customer
• Descriptive Information-for segmentation and other data analysis purposes.
• Response to Marketing Stimuli-whether or not the customer responded to a direct marketing initiative, a sales contact, or any other direct contact.
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• The data should also be represented over time
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DIRECTINDIRECT (through channel
Intermediaries)
FR
EQ
UE
NC
Y O
F I
NT
ER
AC
TIO
N (
wit
h cu
stom
ers)
LO
WH
IGH
•Banks,•Retail
Easy to develop database
•FMCG
Hardest to developdatabase
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Limitations
• FMCG: – Lack of systematic information– Millions of customers– Use of indirect means (intermediaries)
• Challenge is to create opportunities for customer interaction
prof.Srini.R.Srinivasan-KJSIMSR
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