marketing management 2

Marketing Management

Unit 2

Nature and concept of marketing plan A Marketing Plan is a written strategy for selling the

products/services of a new business. It is a reflection of how serious a company is in meeting the competition head on, with strategies and plans to increase market share and attract customers. An effective Marketing Plan is backed by carefully collected market, consumer and competitor information, sometimes citing professional advice.

Why Prepare a Marketing Plan?A good Marketing Plan will help you to improve your odds against more experienced competitors and newly emerging ones. The Plan enables you to recognize and take action on any trends and consumer preferences that other companies have overlooked, and to develop and expand your own select group of loyal customers now and into the future.

The Plan also shows to others that you have carefully considered how to produce a product that is innovative, unique and marketable- improving your chances of stable sales and profits - reasons for investors to financially back you.

Marketing environment

Marketing Environment

Successful Companies take outside- Inside view of the business

Recognition of new Opportunities & Threats presented by the environment

Need is to continuously monitor & adapt to the environment

All successful companies recognize & respond profitably to unmet needs & Trends

The Marketing Environment

Consists of the outside actors and forces that affect a company’s ability to develop and maintain

successful transactions with its target customers.

It has two parts: The microenvironment (actors and forces close to

the company). The macroenvironment (larger societal forces).

Environmental forces affecting the organization, as well as its suppliers and customers

SuppliersSuppliersOrganization• Marketing department• Other departments• Employees

CustomersCustomers

• Demographicshifts

• Culturalchanges

• Macroeconomicconditions

• GDP• Inflation• Saving / Spending• Consumer

income• Stock market

• Changingtechnology

• Impact oftechnology

• Alternativeforms ofcompetition

• Componentsof competition

• Increasingforeigncompetition

• Laws protectingcompetition

• Laws affectingmarketing mixactions

• Self-regulation• Consumerism

Social Economic Technological Competitive Regulatory

Environmental forces

The Marketing Environment

The Microenvironment

Company: Managers working with top management and other departments.

Suppliers: firms and individuals who provide the resources needed by the organization to produce its goods and services.

Marketing intermediaries: firms that help the company promote, sell, and distribute its goods to final buyers, e.g., travel trade intermediaries.

The Marketing Environment

The Microenvironment

g Marketing services agencies: marketing research firms, advertising agencies, media firms, and marketing consultants.

g Financial intermediaries: banks, credit companies, insurance companies, and other finance companies.

The Marketing Environment

The Macroenvironmentconsists of seven major forces:

1. Competition2. Demographic environment3. Economic environment4. Natural environment5. Technological environment6. Political environment7. Cultural environment

1.Components of Competition

Entry and Exit Barriers

Product Differentiation

Number of Sellers

Market Power

Availability of substitutes

Power of Buyers and Suppliers

Continuum of Competition

• # of sellers

• Product

• Barriers

• Mkt power

• many sellers

• Homogeneous

• No barriers

• None

• Large

• Differentiated

• No barriers

• Little

• Few

• Similar

• High

• Lots

• One

• Unique

• Huge

• Infinite

BASIS OFCOMPARISON

PURECOMPETITION

MONOPOLISTICCOMPETITION OLIGOPOLY MONOPOLY

Number of sellersMany One

2. Demographics is . . . .2. Demographics is . . . .

describing the population according

to selected characteristics such as

their age, sex, ethnicity, income, and

occupation.

describing the population according

to selected characteristics such as

their age, sex, ethnicity, income, and

occupation.

Demographic Environment

Size & growth rate of PopulationPopulation Age MixEthnic Population MixHousehold PatternsShift from Mass markets to Micro

markets

The Marketing Environment

Demographic Environment Trends

Changing age structure of population The changing Indian family Geographic shifts in population Better-educated and more white-collar

population Increasing diversity

The Marketing Environment

3. Economic Environment Trends

Changes in income Changing consumer spending patterns Global economic patterns Income Distribution Saving, Debt and Credit Availability

The Marketing Environment

4. Natural Environment

Natural Resources and Raw Materials Availability

Ecology and Conservation of resources

5. Technological Forces

Technology is a major environmental force and refers to inventions or innovations from applied science or engineering research.

Some of the most dramatic technological changes occurring now are: the declining cost and size, and increasing

power, of microprocessors; the convergence of television, personal

computer, and telephone technologies; the pervasive trend toward

“connectedness” through the World Wide Web;

the emergence of biotechnology as a key component of the economy.

An Environmental Scan of the India Technological Trends

Information Age Focus increased use of information and

communication technology – cell phones / teleconferences (ads)

growing focus on the internet as consumers and businesses go online

expanded computer power growing use of electronic money or “e-cash” File Sharing Growing concern about privacy

The Marketing Environment

6. Political Environment

Increased legislation and regulation affecting business

International legislation Government intervention in natural resource

management Changing government agency enforcement Growth of public-interest groups Increased emphasis on ethics and socially

responsible actions

The Marketing Environment

7. Cultural Environment

Beliefs, Values and Lifestyles Persistence of cultural values Subcultures

The Marketing Environment

Responding to the Marketing EnvironmentThree basic options:

Passively accept the marketing environment and do not try to change it.

Adopt an environmental management perspective; take aggressive action to affect the publics and forces in the environment.

Use the technique of environmental scanning

Controllable and uncontrollable factors effecting marketing decision

The four controllable factors of the marketing mix: Product, Price, Promotion, Place

It can be manipulated to develop an effective marketing plan, but what can companies do about the uncontrollable factors? Successful marketers focus on these aspects of marketing, as well.

Competition. It is important for marketers to understand their competition’s marketing mix. This involves looking at what they are doing and how they go about doing it. This allows you to see what they could be doing better, and use that information within your marketing strategy. And depending on your size, you may be able to influence your competition when you make the most of your signature strengths.

Economy. The current economy must also be taken into consideration. Luxury items may not do as well in a hurting economy. You can see the opportunities available to offer the most affordable product. Your marketing strategy will need to be adjusted in order to maintain or increase your market position in challenging circumstances.

Regulations. Changes in current laws and regulation are also key factors for companies to keep into consideration. As laws and regulations change, what kinds of products are allowed, how they are produced, exporting and importing regulations, and shipping can change drastically. There could be barriers of trade, such as quotas restricting the amount of imports or tariffs that would affect the entire market and, perhaps, necessitate and complete change in strategy which to a nimble company can create new opportunities.

Technology. Having the latest technology can reduce costs, improve the quality of your product, and make marketing more effective. This can allow you to better target your customer, produce more efficiently, and create innovative products. As technology changes, your product or service may become obsolete, like the many manufacturers of buggy whips after the invention of the automobile. It is the role of marketers to monitor the marketplace and changing technology and to adapt to those changes.

Social. Marketing can be improved by paying attention to current social trends, such as concern for the environment and going “green”. Knowing what is most important to your customers will allow you to fine tune your marketing strategy to better target customers and create the kind of products and services they.

Analyzing latest trends in political, economic, socio-culture and technical environment

PEST Analysis:

P – PoliticalE – EconomicalS – Socio culturalT – Technological

Used as decision making tool at the time of launch of new product/business/model/strategy

POLITICAL:

•Government type and stability •Freedom of press, rule of law and levels of

Bureaucracy Corruption

•Regulation and de-regulation trends •Social and employment legislation •Tax policy, and trade and tariff controls •Environmental and consumer-protection legislation •Likely changes in the political environment

ECONOMIC:

•Stage of business cycle •Current and project economic growth, inflation and interest rates •Unemployment and labor supply •Labor costs •Levels of disposable income and income distribution•Impact of globalization •Likely impact of technological or other change on the economy •Likely changes in the economic environment

SOCIO – CULTURAL:

-Population growth rate and age profile -Population health, education and social mobility, and attitudes to these -Population employment patterns, job market freedom and attitudes to work -Press attitudes, public opinion, social attitudes and social taboos -Lifestyle choices and attitudes to these Socio-Cultural changes

TECHNOLOGICAL:

-Impact of emerging technologies

-Impact of Internet, reduction in communications costs and increased remote working

-Research and Development activity

-Impact of technology transfer

PEST ANALYSIS – AVIATION SECTOR ( INDIA)

POLITICAL:

-Liberalization of the Sector

- Excise Duty and Sales Tax on Aviation Turbine Fuel

- Modernization of Airports

- Interface form Other Agencies

- Entry Barriers for New Players

ECONOMICAL:

- Contribution to Economy

- Rising Fuel Costs

- Investments in the Sector

SOCIAL:

- Developments in Airport Cities

- Employment Opportunities

- Ensuring a Level Playing Field

- Safety Regulation

TECHNOLOGICAL:

- Growth of Electronic Ticketing

- Satellite based Navigation Systems

- Technical Cooperation with EU

PEST ANALYSIS – TATA buys JAGUAR

POLITICAL:- Strong tax incentives for inbound investors- Strong political motivation for globalization- Strong reputation and trust- Adaptive legislative framework- Negative effect on the IT industry after 2009 as the government’s initiative of Tax holiday under STPI expires (Thinking Street 2007).

ECONOMIC:- Strong technical skills- Strong export base- Strong infrastructure links- Competitive labour cost model- Adaptive investment authority to technological investments- Highly mobile work force

SOCIAL:

- Strong science and educational culture- Strong management culture- Adaptive English speaking population

TECHNOLOGICAL:

- Strong R & D culture and facilities- Strong tie-ups with western technology companies- Adaptive to new technologies

Concept of market potential & market share

Do you know how successfully your newly developed product will sell on the market?

Planning, development and introduction of new products is always associated with uncertainty.

Specific knowledge regarding potential target consumers and their probable spending on the new product provides you with more certainty concerning the market success of new product developments.

We can offer you precise and reliable information in this area after conducting a market potential analysis.

Definition and Goals Market potential describes the maximum

capacity of a defined market for a specific product / a service within a defined time period.

In this context market refers to the total of all potential consumers with a certain need or desire who are willing or able to satisfy this need or this desire through the purchase of products / services.

The sales potential can then be derived from the results of the market potential analysis.

Market potential consists of the upper limit of total demand which would theoretically be converged on at (infinite) rise of marketing expenditures of all relevant providers (see figure).

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Total demand(per time period)

Market potential

Market minimum

Market expenditures of the entire industry

Applications

Market potential analyses are especially used for growth or unsaturated markets for which “market size” cannot simply be estimated through the actual market volume.

Market potential analysis offers decision support for specific questions for which such as: Exploration of potential (target) markets

Determination of company locations Evaluation of ideas (screening) Designation of

sales areas

Market share

Market share is the portion or percentage of sales of a particular product or service in a given region that are controlled by a company. example, there are 100 widgets sold in

a country and company A sells 43 of them, then company A has a 43% market share

Market Share

Or – you sold widgets for a total cost of $860 and the people in the country spend a total of $2,000 on the same widgets, then the market share is $860/$2,000 or 43% The two different methods of calculating

market share won't always provide the same answer,

Market Share

Market share is used by businesses to determine their competitive strength in a sector as compared to other companies in the same sector

Method 1 – Number of Buyers

Estimate the total number of buyers in your market and determine how successful your competition is

Per month, estimate the number of people that will buy your product or service This is your percentage

Method 1 – Number of Buyers

Ex/ Organic Coffee HouseNumber of Tim Horton’s – 3040Market Share = 76% of Coffee and Baked

GoodsTim’s Sells 3 million cups a day

3,000,000/ 3,040 = 987 cups sold per day per store

987* 30 days = 29,605 per month 29,605 / .76 = 38,954 cups a month for a store

to have 100% market share in their area

Method 1 – Number of Buyers

Our Organic Coffee House should get 2% of the market, based off of the following data… (trends that support your business) 2% of total market share or 779 cups sold a day 38,954 * 0.02 = 779 cups sold a day

Method 2 – Percent of Sales

Total Market Share of top 5 competitors and average last five years of sales

Ex/ Organic Coffee House Top Five Competitors

Tim Horton’s – 76% - Sales $14 billion Starbucks – 7% - Sales $1.3 billion Timothy’s Coffees World Inc – 4% - Sales $736

million Second Cup – 2% - Sales $386 million William's – 1.5% - Sales $276 million

Method 2 – Percent of Sales

I think we can have a market share of 0.05% based on the following data … (trends…) Market share of 0.05% = $ 9.2 million

sales

Consumer Markets & Buying Behaivor

Concept

The consumer market pertains to buyers who purchase goods and services for consumption rather than resale. However, not all consumers are alike in their tastes, preferences and buying habits due to different characteristics that can distinguish certain consumers from others.

These particular consumer characteristics include various demographic, psychographic, behaviorialistic and geographic traits.

Marketers usually define these consumer characteristics through market segmentation, the process of separating and identifying key customer groups.

Demographic Characteristics

Characteristics of consumer markets based on demographics include differences in gender, age, ethnic background, income, occupation, education, household size, religion, generation, nationality and even social class.

Most of these demographic categories are further defined by a certain range.

Psychographic Characteristics Psychographic characteristics of consumers include

interests, activities, opinions, values and attitudes. Obviously, many magazines are geared toward a

consumer's interest. For example, prenatal magazines target expectant mothers

who are interested in learning more about caring for a baby.

Additionally, consumer activities can include participation in martial arts or basket weaving.

Opinions and attitudes can be both specific or general. A company may better understand consumer opinions and

attitudes after conducting a focus group, and can use that information to tailor advertising or marketing campaigns.

Consumer values can pertain to how a group of individuals feels about certain social issues, which can be of interest to non-profit or charitable organizations.

Behavioralistic Characteristics Behavioralistic characteristics can also be garnered

through marketing research. Behavioralistic characteristics of consumer markets include

product usage rates, brand loyalty, user status or how long they have been a customer, and even benefits that consumers seek.

Companies like to know how often their consumers visit their restaurants, stores or use their products.

Company marketing departments usually try to distinguish between heavy, medium and light users, whom they can then target with advertising.

Marketers like to know which customers are brand loyalists, as those consumers usually only buy the company's brand.

Geographic Characteristics Consumer markets also have different

geographic characteristics. These geographic characteristics are often based

on market size, region, population density and even climate, according to the article "Market Segmentation" at netmba.com, a online business reference site.

A small retailer may find opportunities in a small market in which larger competitors have no interest.

Companies that sell beachwear will likely sell more products in warmer climates.

Consumers in different regions of the country also have different tastes in food and style.

Consumer markets and buyer behavior

Marketing and environmental stimuli enter the buyers consciousness.

The buyer’s characteristics and decision process lead to certain purchase decisions.

The marketer’s task is to understand what happens in the buyer’s consciousness between the arrival of outside stimuli and the buyers purchase decision.

A consumer buying behavior is influenced by cultural, social, personal and psychological factors.

Cultural factor

Sub-culture

Social class

Social factor

Reference group

Family

Roles and status

Personal factor

Age and stages in life

cycle

Occupation and

economic circumstance

s

Life style

Personality and self concept

Psychological factors

Motivation

Perception

learning

Beliefs and attitudes

Organizational Market & Buying Behavior

The crucial differences from a marketing viewpoint are: The motivations of the buyer: what the

organization will do with the product and the benefits it seeks to obtain.

The demographics of the market. The nature of the purchasing process

and the relationship between buyer and seller.

Comparison of organizational versus consumer markets

Purchase motives—Derived demand Demand for industrial goods and

services is:Derived from the demand for consumer

goods and services.Relatively inelastic.More erratic because small increases or

decreases in consumer demand can, over time, strongly affect the demand for manufacturing plants and equipment.

More cyclical.

Market demographics: Organizational buyers, when compared with buyers of consumer goods, are: Fewer in number. Larger. Geographically concentrated.

Purchasing processes and relationships –Organizational markets are characterized by the following: Use of professional buying specialists

following prescribed procedures. Closer buyer–seller relationships. Presence of multiple buying influences. More apt to buy on specifications.

Companies selling to organizational markets needs to keep one eye on: Possible changes in organizations’

buying behavior for its product. Trends in the underlying consumer

markets.Organizational marketers tend to:

Use direct selling. Be heavy users of “high-involvement”

media.

Participants in the organizational purchasing process: Users Influencers Gatekeepers Buyers Deciders

The organizational buying center The individuals in this group share

knowledge and information relevant to the purchase of a particular product or service.

Marketing implications Which individuals to target. How and when each should be

contacted. What kinds of information and appeals

each is likely to find most useful and persuasive.

Organizational Buyers – Manufacturers, Wholesalers, Retailers, Government Agencies

They buy goods and services for their own use or for resale.

Types of organizations

Industrial • Manufacturers • Mining • Construction• Farms, Timber & Fisheries• Services• Finance • Transportation • Not-for-profit

Reseller• Wholesalers• Retailers

Government• Federal• State• Local agencies

Organization Buying

Derived Demand Demand for industrial products and

services driven by demand for consumer products and services. It is based on expectations of future consumer demand.

Size of order or purchase is typically much larger than that in consumer buying.

Number of potential buyers is usually much smaller than in consumer buying.

Organizations buy products and services for one main reason: To help them achieve their objectives. The buying objective is usually to increase profits through reducing costs or increasing sales.

Organizational Buying Criteria are objectivePriceAbility to meet the quality

specifications required for the itemAbility to meet delivery schedulesTechnical capabilityWarranties and claim policiesPast performance on previous

contractsProduction facilities and capacity

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Problem • Why do I need it? Recognition

Information Search • What exactly is this product?

Analysis of • What options are available? Alternatives

Purchase Decision • How exactly does purchase happen?

Post-purchase • Did I make the right choice? Behaviour

5 Steps in Buyer Decision Process