Basics of Marketing Management
Prof. Dr. Michael Nagel | Head of Department of International Business | Baden-Wuerttemberg Cooperative State University | Germany | May 2013 |
Prof. Dr. Michael Nagel 2 Basics of Marketing Management
Basics of Marketing Management Personal introduction
Prof. Dr. Michael Nagel
Current positions v Head of Department of International Business & Professor of International Business at DHBW Stuttgart v Senior Advisor at BearingPoint (formerly: KPMG Consulting)
Focus areas of expertise v International Management, Strategic Management, Marketing, Business Consulting
Project and consulting experience v Various national and international projects in the automotive, machinery, service, chemical, pharmaceutical
and oil and gas industry v International working experience e.g. in the following countries: China, Russia, Singapore, South Africa, UK, USA
Professional background v Dean of the Faculty of Business Administration, Head of Bachelor Betriebswirtschaftslehre, and Professor of
International Business & Marketing at Provadis School of International Management & Technology (Frankfurt/Main) v Senior Manager at BearingPoint and Director for Growth Management and Global Market Expansion v Project Manager in a consultancy and in an international MBA-program focusing on emerging markets (BRIC) v Lecturer and Postdoctoral Research Fellow at the Universities in Tübingen, Ludwigsburg, Potsdam and Berlin
Prof. Dr. Michael Nagel 3 Basics of Marketing Management
n Positive attitude
n Active participation
- Lots of questions
- Attention to detail
- Effort to the end
- Examples from your own areas
n Time management
- Start time
- Breaks
n Mobile phones off
n Laptops open only when needed
n …
Basics of Marketing Management Code of conduct
Prof. Dr. Michael Nagel 4 Basics of Marketing Management
n
n
n
n
n
Basics of Marketing Management Expectations …?
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Basics of Marketing Management Objectives
n Introduction to the marketing management process
n Introduction to all aspects of marketing
- Strategic marketing planning
- Product planning and development
- Pricing
- Promotion planning
- Distribution
n Fun
Prof. Dr. Michael Nagel 7 Basics of Marketing Management
Marketing management process
Basics (I)
Theoretical perspective
Internal perspective (III)
External perspective (II)
Strategic marketing
Operational marketing
Market research
Knowledge of basic concepts, ideas and terms
Knowledge of influencing factors of buying beaviour
Marketing-controlling
Marketing- organisation
Setting the scene for marketing Marketing management process
Prof. Dr. Michael Nagel 8 Basics of Marketing Management
Setting the scene for marketing What is a market?
The following stakeholders have an important influence on market activities:
n Buyers
n Companies
n Sales partners
n Public institutions
n Lobbyists
We define a market as any place where supply meets demand, thus leading to the formation of prices. Supply and demand can meet at a physical location (e.g. in a store or at a trade fair) or at a virtual location
(e.g. on the internet or by telephone).
Prof. Dr. Michael Nagel 9 Basics of Marketing Management
A B
C D
Market potential
Market volume
Sales volume
Setting the scene for marketing Markt potential, market volume, sales volume
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ca. 1900-1920
Sales
ca.1920-1950 ca. 1950-1980 ca. 1990-today ca. 1980-1990
Sales
Advertising
Marketing Implementation
Market/Customer Oriented
Management
Sales decisions
Communication decisions
Pricing decisions
Product decisions
Marketing Mix
Sales decisions
Communication decisions
Pricing decisions
Product decisions
Marketing Mix
Vertriebspolitik
Kommunikations- politik
Preispolitik
Produktpolitik
Marketing Mix
Marketing Implementation
From sales orientation to market and customer oriented management
Setting the scene for marketing Development of the marketing concept
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Marketing management process
Basics (I)
Theoretical perspective
Internal perspective (III)
External perspective (II)
Strategic marketing
Operational marketing
Market research
Knowledge of basic concepts, ideas and terms
Knowledge of influencing factors of buying beaviour
Marketing-controlling
Marketing- organisation
Key aspects of marketing strategy Marketing management process
Prof. Dr. Michael Nagel 13 Basics of Marketing Management
Key aspects of marketing strategy Strategy – on which organisational level?
Corporate Level
Business Level
Corporate Level
Business Unit Level
Functional Level
What & Where ?
How ?
What is our (set of) business and where do we want to be (to invest) in?
How do we want to position ourselves in the market and against our competitors?
How should we compete in the chosen businesses?
How can each function contribute to our competitive advantages of each
business?
Pur
chas
ing
Logi
stic
s
Pro
duct
ion
Sal
es
etc
Prof. Dr. Michael Nagel 14 Basics of Marketing Management
Key aspects of marketing strategy Levels of strategy
CORPORATE STRATEGY
BUSINESS STRATEGY
FUNCTIONALSTRATEGY
Corporate Head Office
Division A Division B
R&D
HR
Finance
Production
Marketing/ Sales
R&D
HR
Finance
Production
Marketing/ Sales
Example: Daimler Chrysler
Example: Mercedes
Benz
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Key aspects of marketing strategy How clear is the strategy of your company?
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Key aspects of marketing strategy We tend to get a little confused with the following terms/definitions
Vision Mission
(Mission Statement)
Strategy
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Key aspects of marketing strategy What is a vision?
n A vision is an almost impossible dream (Philip Kotler)
n The vision is …
- The vision is the general statement of the long term business perception of the company
- A concrete picture of the future, near enough, that we can still see the realization of it, but far enough, that we can motivate the staff for a new reality
- Defines a future state about 10 years in the future
- Something that might change over time
n The vision ain’t …
- no Utopia
- no extrapolation from the past
- no definition of precise objectives
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Key aspects of marketing strategy What is a mission?
n I am on a mission! (Are you too?)
n The mission is …
- Mission is the purpose or
- The main job of an organization (think of Star Trek)
- It’s usually only one single sentence or phrase
n The mission ain’t …
- not always positive
- something graved in stone that does not change
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Key aspects of marketing strategy What is a strategy?
n The strategy is …
- a coordinated set of activities
- which shall determine the positioning towards defined stakeholders
- It refers to the external relation of an organizational (business) unit
n The strategy ain’t …
- nothing fancy
- no rocket science
- nothing that requires a Harvard degree
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Key aspects of marketing strategy Strategy development process
External Analysis
Aggregation (e.g. SWOT)
Internal Analysis
Strategy Implementation
Vision, Mission
Corporate Strategy
Business Unit Strategy
Functional Area Strategy
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Key aspects of marketing strategy External analysis: PEST
Environmental influences
Political n Political stability n Operational restrictions n Discriminatory restrictions n Laws and regulations
Economic n Growth/inflation rates n Currency movements n GDP per capita n Unemployment rate
Socio-Cultural n Language, religion n Values and attributes n Tastes and preferences n Material culture
Technological n Communication patterns n ISDN n Internet n Infrastructure
PEST Framework
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Key aspects of marketing strategy External analysis: Porter’s Five Forces
SUPPLIERS
POTENTIAL ENTRANTS SUBSTITUTES
Customers
INDUSTRY COMPETITORS
Rivalry among existing firms
Bargaining power of suppliers
Bargaining power of customers
Threat of
new entrants
Threat of
substitutes
Polit
ical
Ec
onom
ical
Social
Technological
Prof. Dr. Michael Nagel 23 Basics of Marketing Management
Key aspects of marketing strategy External analysis: Competitors
Performance Level
Performance level
Pric
e le
vel
Price level Today
Future (target)
Price level 1 = cheapest competitor in the market Price level 5 = most expensive competitor in the market
Benchmark of the competitor in all other criteria of the buying decision (quality, service, availability, …) Performance level 1 = worst competitor in the market Performance level 5 = best competitor in the market
= Positioning of the competitors
Example
Pric
e le
vel
1
2
3
4
5
1 2 3 4 5
Price Level
3 5
4
6
1 2
Performance
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Key aspects of marketing strategy External analysis: Customers (Kano-Model)
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Key aspects of marketing strategy Internal analysis: Value Chain
Value chain of a company
Company Infrastructure
Human Resources Management
Research and Development
Procurement
Inbound Logistics
Primary Activities
Supp
ort A
ctiv
ities
Production Outbound Logistics
Marketing, Sales & Distribution
Service
Profit Margin
Finances/Controlling
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Key aspects of marketing strategy Internal analysis: Product Life Cycle
1 Date of introduction 4 Initial loss (development costs) 2 Sales maximum 5 Profit threshold 3 Increase due to, e.g., 6 Profit maximum
product enhancements 7 Re-entry into loss zone
Introduction Saturation Maturity Growth
Profit
Time
Sales
7
4
1 5
3 6
2
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Key aspects of marketing strategy Internal analysis: Resources and Capabilities
3. Relative performance in a competitive environment
Factor 1
Factor 4
Factor 5
Factor 6
Factor 3
Relative performance
Impo
rtan
ce
high
low
low high
1. Importance/requirements of the market
2. Absolute assessment and competitive performance from a market point of view
Factor 2
Factor 1
Factor 4
Factor 5
Factor 6
Factor 3
Factor 2 Factor 1
Factor 2
Factor 3
Factor 4
Factor 5
Factor 6
1 2 3 4 5 1 3 5
Scale: 1 = less important 5 = very important Scale: 1 = very bad 5 = excellent
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Key aspects of marketing strategy Combine internal & external aspects: SWOT
Internal View
Assets/HR/ Operations
Products
Strengths & Weaknesses
Know-How
Co-operations/ Partner
External View
Customers
Market
Opportunities & Threats
Competitors
Government/ Regulations
Opportunities Threats
Strengths (I) SO-Strategies (II) ST-Strategies
Weaknesses (III) WO-Strategies (IV) WT-Strategies
SWOT-Analysis
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Key aspects of marketing strategy SWOT: guiding principles
Opportunities Threats
Strengths
(I) SO-Strategies Use strengths, in order to exploit opportunities on the market.
(II) ST-Strategies Neutralisation or at least mitigation of external threats by deploying internal strengths.
Weaknesses
(III) WO-Strategies Elimination of weaknesses, in order to benefit from new options.
(IV) WT-Strategies Development of defences, in order to ward off external threats, that aim on existing weaknesses.
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Key aspects of marketing strategy Is this what strategy implementation is all about?
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Key aspects of marketing strategy But even if we have a bulk of data – does it help us?
“Strategy Implementation? Yes, its goal driven not measurement driven”
- Bill Holstein, Harvard University
"Measure what is important, don't make important what you can measure“
– Robert McNamara advising his air force chiefs, when he discovered that they were using the number of buildings
destroyed by bombs as a critical success factor
“What gets measured gets done”
– Robert Kaplan, Harvard University
“In god we trust, all others bring data”- W. Edwards Deming
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Key aspects of marketing strategy Getting strategy into action – balance scorecard
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Key aspects of marketing strategy Strategy map (client example)
Achieve sustainable Growth of Market
Capitalization
Empl
oyee
sPr
oces
ses
Cus
tom
ers
Fina
ncia
ls
Increase EBITAOptimize Capital
Employed Grow profitable Sales
Improve ROCE
Create perceived Value Added for the customer
based on competitive and attractive offers
Improve customer relation, image and market presence
Follow key customers
Strengthen technological and commercial competence face to face to the customer
Identify growth segments
Increase market and customer knowledgeAlignment and
optimization of resources and efforts (Regions, Functions, Business
Units)
Increase operational efficiency
Excellence in SEQ and reliability in all
functions
Create motivating and innovative environment
Improve international skills esp. regional management cultureActive HR-
developmentIncrease business, technical and
entrepreneurial competencies
Increase English language skills
Introduce innovative products
and services
Strengthen best practice know how transfer
Ensure availability of products from owned sources
Establish effective regional organization
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Marketing management process
Basics (I)
Theoretical perspective
Internal perspective (III)
External perspective (II)
Strategic marketing
Operational marketing
Market research
Knowledge of basic concepts, ideas and terms
Knowledge of influencing factors of buying beaviour
Marketing-controlling
Marketing- organisation
Product decisions Marketing management process
Prof. Dr. Michael Nagel 36 Basics of Marketing Management
Product mix Price mix Place mix
Markting mix
Corporate strategy
Marketing and sales strategy
Product
n Product innovation n Product variation n Product differentiation n Product elimination n …
Price
n Pricing n Price differentiation n Rebates n … n …
Place
n Sales channels n Sales organisation n Sales logistics n E-Commerce n …
Promotion
n Advertising n Public relations n Sponsoring n Direct marketing n …
Promotion mix
Product decisions Marketing mix
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Product mix Price mix Place mix
Markting mix
Corporate strategy
Marketing and sales strategy
Product
n Product innovation n Product variation n Product differentiation n Product elimination n …
Price
n Pricing n Price differentiation n Rebates n … n …
Place
n Sales channels n Sales organisation n Sales logistics n E-Commerce n …
Promotion
n Advertising n Public relations n Sponsoring n Direct marketing n …
Promotion mix
Product decisions Marketing mix
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Brand
Value added services
Basic services
Packaging / Design of tangible environment
Additional features
Product core (Core features)
Product decisions Components of a product
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Areas of product decisions
Product innovation
Product variation
Product differentiation
Product elimination
Brand management
Product decisions Areas of product decisions
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Product decisions Product decisions: standardisation or adaptation?
Decision
Theodor Levitt’s Assumption
n Marketers are confronted with a homogenous global village
Theodor Levitt’s Advice
n Organisations should develop standardised products
n Market these products around the globe using standardised advertising, pricing and distribution
Theodor Levitt’s Misconception
n Only a few products that follow a standardisation marketing approach
n International markets differ in many aspects
n Needs, preferences, etc. are shaped by culture
Advice
n Adjustment to local requirements à global localisation
As much standardisation as possible – as much adaptation as necessary.
Standardisation Adaptation
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Product decisions Selected adaptation examples
“Kipferl” became …
“Croissant de Lune” in France
“MR2” had to be changed to “MR” in France
– Adaptation due to language differences – – Adaptation due to values/morals –
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Product decisions Evaluation of adaptation elements – environmental sensitivity
Environmental sensitivity = the extent to which products must be adapted to the needs of different markets
n Insensitive products = do not require significant adaptation to the environments of different markets
n Sensitive products = necessity to address e.g. country-specific cultural and social conditions
high
low
Product adaptation
needed
low high Environmental sensitivity
A company with insensitive products will spend no/less time determining the specific and unique conditions of local markets because the product is universal. The greater a product’s environmental sensitivity the greater the need for adaptation. Intel
processors
Computers
Food
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Product mix Price mix Place mix
Markting mix
Corporate strategy
Marketing and sales strategy
Product
n Product innovation n Product variation n Product differentiation n Product elimination n …
Price
n Pricing n Price differentiation n Rebates n … n …
Place
n Sales channels n Sales organisation n Sales logistics n E-Commerce n …
Promotion
n Advertising n Public relations n Sponsoring n Direct marketing n …
Promotion mix
Pricing decisions Marketing mix
Prof. Dr. Michael Nagel 45 Basics of Marketing Management
Importance of pricing decisions
Saturation Growth markets
Growing price transparency
Globalisation
Quality comparability of related products
Pricing decisions Importance of prices in a complex environment
Prof. Dr. Michael Nagel 46 Basics of Marketing Management
Profit
Costs Revenue - Volume Price *
Most important profit driver –
yet quite often neglected
Pricing decisions Profit drivers
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Pricing decisions Pricing strategies
Price
Time
Skimming Price
Time
Penetration
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Pricing decisions Price differentiation
Price
Volume
Profit
No price differentiation
?
P1
Price
Volume
Price differentiation
Additional Profit
P2
P3
Profit P1
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Pricing decisions Price elasticity
Volume
Price
80
100
10 11
-20%
+10%
Elasticity ε = Δ Volume / Δ Price
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Pricing decisions Definition of the demand function in practice
Definition of the demand function
Survey Observation
Experts (Estimation)
Customers (Conjoint-Analysis)
Pricing experiments
Market data
Prof. Dr. Michael Nagel 53 Basics of Marketing Management
Product mix Price mix Place mix
Markting mix
Corporate strategy
Marketing and sales strategy
Product
n Product innovation n Product variation n Product differentiation n Product elimination n …
Price
n Pricing n Price differentiation n Rebates n … n …
Place
n Sales channels n Sales organisation n Sales logistics n E-Commerce n …
Promotion
n Advertising n Public relations n Sponsoring n Direct marketing n …
Promotion mix
Promotion planning Marketing mix
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Sender Coding Message Decoding Receiver
Noise
Feedback Effect
Promotion planning Communication process
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Promotion planning Coding, decoding and visual illusion
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Promotion planning Coding, decoding and visual illusion
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Promotion planning Coding, decoding and visual illusion
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Promotion planning Coding, decoding and visual illusion
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Promotion planning Process for planning communication decisions
Definition of communication objectives and target groups
Execution of budgetingand media planning
Design of communication measures
Monitoring of communication impact (pretest)
Implementation of communication measures
Monitoring of communication impact (posttest)
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Promotion planning Categorization of communication objectives according to AIDA
Attention Interest Desire Action
Objectives related to potential Objective related to
market success
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Promotion planning Process of budgeting based on communication objectives
Communication Objectives
Communication Measures
Implementation Costs = Provisional Budget
No Budget economically feasible?
Yes Budget Approval
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Promotion planning Response patterns
x t , W t x t
W t
t
x t , W t x t
W t
t
x t , W t x t
W t
t
x t , W t x t
W t
t
(a) Delayed total response without wear-out
(c) Delayed successive response without wear-out
(d) Immediate total response with partial wear-out
(b) Immediate total response
with total wear-out
W = Advertising budget at time t t x = Demand at time t t
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Promotion planning Criteria for evaluating the various media
Medium
Evaluation Criteria
Popular magazines
Daily newspapers
Tele-vision Radio Movie
theaters Outdoor Internet
Mobile Phones
Ability to precisely define target group + + + 0 + + + + + + + + + +
Possibility to provide more detailed information / appeal to cognitive aspects
+ + + + 0 0 0 0 0 0
Options for visual representation + + + + + 0 + + + + + + 0
Aural reinforcement 0 0 + + + + + + + + + 0 + 0
Cost-effectiveness + + + 0 + 0 + + + +
+ + + Very positive assessment, + + Positive assessment, + Average assessment, 0 Below-average assessment
Prof. Dr. Michael Nagel 64 Basics of Marketing Management
Promotion planning Communication measures
Print, TV, and Radio Advertising
Outdoor Advertising Internet Advertising
Product Placement
Sponsoring
Corporate Identity
Events Trade Fairs Public Relations
Sales Promotion
Direct Marketing
Mobile Marketing
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Promotion planning Example of activation through physically intensive stimuli
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Promotion planning Example of activation through erotic stimuli
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Promotion planning Examples of using key visuals
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Promotion planning Heidi Klum as celebrity endorser for McDonald’s
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Product mix Price mix Place mix
Markting mix
Corporate strategy
Marketing and sales strategy
Product
n Product innovation n Product variation n Product differentiation n Product elimination n …
Price
n Pricing n Price differentiation n Rebates n … n …
Place
n Sales channels n Sales organisation n Sales logistics n E-Commerce n …
Promotion
n Advertising n Public relations n Sponsoring n Direct marketing n …
Promotion mix
Distribution Marketing mix
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Distribution Overview of sales entities
Sales Entities
E-Commerce-Abteilung
Company-internal Sales Entities
Sales entities independent from the
company
AuthorizedDealers
Affiliated Sales entities
Company-external Sales Entities
(Sales Partners)
Franchise System Partners
Organizational Units IndividualPersons
Manager
Key AccountManager
Head of Sales Department
Wholesalers
Retailers
Field Sales Force
Office Sales Force
Facili-tators
Inter-mediaries
Commission Agents
Broker
Sales Agency
Logistics Service Providers
Field Sales Force Employees
Call Center
E-CommerceDepartment
Commercial Agents
Customer Service
Administrative Back Office
Sales Back Office
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Distribution Direct and indirect sales for selected products
ExclusivelyDirectSales
ExclusivelyIndirectSales
Larg
e-sc
ale
Plan
ts
Med
icat
ions
Bus
ines
s an
d M
anag
emen
t Con
sulti
ng
Logi
stic
sS
ervi
ces
Airp
lane
s
Mac
hine
s
Turn
-Key
Hou
ses
Che
mic
al P
rodu
cts
Sho
ckA
bsor
bers
/ D
ampe
rs
Indu
stria
l Ste
el
Cel
lPho
ne C
ontra
cts
Insu
ranc
e
Airl
ine
Trip
s
Cos
tum
eJe
wel
ry
Aut
omob
iles
Clo
thin
g
Boo
ks
Food
and
Bev
erag
es
Indi
vidu
aliz
edPr
oduc
tion
Mat
eria
ls
Prof. Dr. Michael Nagel 73 Basics of Marketing Management
Distribution Single-tier and two-tier sales channel
Prof. Dr. Michael Nagel 74 Basics of Marketing Management
Distribution Structure of vertical marketing
End Customers
End customer oriented marketing by manufacturer
(E.g. advertisements for the brands being sold)
Trade marketing by manufacturer
(E.g. special conditions for
sales partners, e.g., dealers)
Vertical Marketing Coordinated end customer-
oriented marketing by manufacturers and sales
partners
(E.g. joint sales promotions activities)
Manufacturer
Sales Partners
End customer-oriented marketing (trade marketing)
by manufacturer
(E.g. bonus program for customers)
Prof. Dr. Michael Nagel 75 Basics of Marketing Management
Distribution Areas of conflict between companies and their sales partners
44.6
44.2
31.1
49.3
6.8
8.6
15.9
28.3
36.6
12.0
0 10 20 30 40 50 60
Margin of sales partners
Direct sales without sales partners
End customer pricing on the part of sales partners
Effort and expenses invested in marketing the productsif the product range also contains competitor products
Customer service support for the sales partner
Active market development on the part of the sales partners
Forwarding of market information bythe sales partners
Company‘s termsof payment
Company‘s support of the sales partnersduring trade fairs and exhibitions
Services offered bycompany
For example, 49.3% of the companies surveyed felt that the margin of the sales partners isan area is likely to cause conflict.
%
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Basics of Marketing Management Have a great time and see you soon in Stuttgart
Prof. Dr. Michael Nagel 78 Basics of Marketing Management
Prof. Dr. Michael Nagel
DHBW Stuttgart Blumenstraße 25 70182 Stuttgart
T (+49) 711 1849 545 F (+49) 711 1849 559
[email protected] www.dhbw-stuttgart.de
Basics of Marketing Management Contact data