marketing management 2
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Marketing Management
Unit 2
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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.
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Marketing environment
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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
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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).
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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
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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.
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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.
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The Marketing Environment
The Macroenvironmentconsists of seven major forces:
1. Competition2. Demographic environment3. Economic environment4. Natural environment5. Technological environment6. Political environment7. Cultural environment
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1.Components of Competition
Entry and Exit Barriers
Product Differentiation
Number of Sellers
Market Power
Availability of substitutes
Power of Buyers and Suppliers
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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
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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.
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Demographic Environment
Size & growth rate of PopulationPopulation Age MixEthnic Population MixHousehold PatternsShift from Mass markets to Micro
markets
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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
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The Marketing Environment
3. Economic Environment Trends
Changes in income Changing consumer spending patterns Global economic patterns Income Distribution Saving, Debt and Credit Availability
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The Marketing Environment
4. Natural Environment
Natural Resources and Raw Materials Availability
Ecology and Conservation of resources
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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.
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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
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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
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The Marketing Environment
7. Cultural Environment
Beliefs, Values and Lifestyles Persistence of cultural values Subcultures
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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
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Controllable and uncontrollable factors effecting marketing decision
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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.
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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.
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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.
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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.
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Analyzing latest trends in political, economic, socio-culture and technical environment
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PEST Analysis:
P – PoliticalE – EconomicalS – Socio culturalT – Technological
Used as decision making tool at the time of launch of new product/business/model/strategy
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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
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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
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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
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TECHNOLOGICAL:
-Impact of emerging technologies
-Impact of Internet, reduction in communications costs and increased remote working
-Research and Development activity
-Impact of technology transfer
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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
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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
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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
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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
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Concept of market potential & market share
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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.
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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
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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
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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
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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,
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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
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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
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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
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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
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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
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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
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Consumer Markets & Buying Behaivor
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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.
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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.
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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.
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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.
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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.
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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.
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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
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Organizational Market & Buying Behavior
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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
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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.
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Market demographics: Organizational buyers, when compared with buyers of consumer goods, are: Fewer in number. Larger. Geographically concentrated.
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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.
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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.
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Participants in the organizational purchasing process: Users Influencers Gatekeepers Buyers Deciders
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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.
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Organizational Buyers – Manufacturers, Wholesalers, Retailers, Government Agencies
They buy goods and services for their own use or for resale.
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Types of organizations
Industrial • Manufacturers • Mining • Construction• Farms, Timber & Fisheries• Services• Finance • Transportation • Not-for-profit
Reseller• Wholesalers• Retailers
Government• Federal• State• Local agencies
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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.
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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.
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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