MARKETING PLANNING & STRATEGY

Rahul GandhiCongress launched him as their marketing weaponHe has added a new constituency the youth Shows freshness , sincerity , positivity all of which is a rare combination amongst the politiciansPolitical scion gifted with a glorious smile

Virgin MobileDecided to target youngistan focused exclusively on youthFocus on communication where the youth gets around not necessarily rebels ..they find a wayIntroduced many first including ..get paid to receive a call -Cut clutterIt has achieved a 92 % awareness , and 69 % consideration a year since its launch

Rakhi SawantFrom an item girl she became the biggest start for NDTV imagineAs a brand she is brash , crude , willingly flaunts her unsophisticationHer appeal connected with the masses

Sun Tze on StrategyKnow your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.

Strategic Marketing Planningis the managerial process of developing and maintaining a strategic fit between the organization's objectives and resources and its changing market opportunities.

Strategic MarketingMarketing Strategy is a series of integrated actions leading to a sustainable competitive advantage.John Scully

Corporate MissionBroad purposes of the organizationGeneral criteria for assessing the long-term organizational effectivenessDriven by heritage & environmentMission statements are increasingly being developed at the SBU level as well

Examples of Corporate MissionSINGAPORE AIRLINES is engaged in air transportation and related businesses. It operates world-wide as the flag carrier of the Republic of Singapore, aiming to provide services of the highest quality at reasonable prices for customers and a profit for the company

Examples of Corporate Mission (contd)MARRIOTTS Mission Statement:We are committed to being the best lodging and food service company in the world, by treating employees in ways that create extraordinary customer service and shareholder value

Corporate CultureThe most abstract level of managerial thinkingHow do you define culture?What is the significance of culture to an organization?How does marketing affect culture in the organization?

Corporate Objectives & GoalsAn objective is a long-range purpose Not quantified and not limited to a time periodE.g. increasing the return on shareholders equityA goal is a measurable objective of the businessAttainable at some specific future date through planned actionsE.g. 10% growth in the next two yearsSMART

STRATEGIC MANAGEMENT

Insights and hard work deliver results What types of strategies are used by organizations? How are strategies formulated and implemented in strategic management?

Investors RelationsBusiness Strategy PlanSalesforceHR, Training & Recruiting PlanFDA RegulationsMarketing Strategy PlanCertificate ProgramSalesCapitalInfrastructurePublic OfferingProduction & LogisticsLegalFinancial PlanBusiness Strategy covers all basic goals and objectives of the businessManagementOperationsFinancial ControllingProject Management

All stakeholders will benefit from the business strategy approachBusiness StrategyOperational Business PlanProject Management PlanInterviewing and Briefing of AgenciesMarketing Strategy PlanAgency 1Agency 2Agency 3Management SupportCommunicating and implementing Management ordersStructuring business operationsTeamInvestorsCustomersRe-sellersRevenue: Sales and DistributionPotential BuyersSalespeople

Momentum develops the Marketing Strategy and prepares the tactics to the market

Market

Marketing Strategy Plan

ManagementPromotion PolicyProduct MixPricing PolicyTacticsSales & DistributionMomentumAgencyArtefill Marketing Dept.PositioningBrandingObjectivesTarget MarketCommunication

Marketing Planning is a step-by-step processMarket ResearchCommunicationPositioningBrandingTarget market DefinitionStrategyTacticsMarketing Strategy DevelopmentCompetition An.Bus. Review

The Role of Strategy

Funnel

PURPOSE OF STRATEGYTo set the future direction for the organisation.

To state how it is to create value to customers.

To identify what product/s and in which markets the firm will invest its resources.

To describe how it is to perform better than competition.

STRATEGY HELPS IN:Defining the scope of business.

Finding Strategic Fit between organisation and its environment.

Identifying a Sustainable Competitive Advantage (SCA).

Guiding the allocation of resources.

HIERARCHY OF STRATEGY

3 LEVELS OF STRATEGYCorporate The overall goals of the business; often expressed in financial terms

Competitive/Business (SBU)How to compete in individual product-markets and support the corporate strategy

Functional Functional strategies for the organisations functional areas in support of SBUs and corporate strategies

What is a Strategic Business Unit? (SBU)A set of products or product lines With clear independence from other products or product lines for which a business or marketing strategy should be designed

Types Of Strategies

Strategy is a comprehensive plan for achieving competitive advantage. Organizations use strategy at the corporate, business and functional levels. Growth and diversification strategies focus on expansion. Restructuring and divestiture strategies focus on consolidation. Global strategies focus on international business initiatives. E-business strategies focus on using the Internet for business transactions.

Types Of StrategiesStrategy a comprehensive plan guiding resource allocation to achieve long-term organization goals. Strategic Intent focuses organizational energies on achieving a compelling goal. Competitive Advantageoperating in successful ways that are difficult to duplicate

Corporate StrategiesCorporate StrategySets long-term direction for the total enterpriseBusiness StrategyIdentifies how a strategic business unit or division will compete in its product or service domainFunctional StrategyGuides activities within one specific area of operations

Corporate Strategies

Growth And Diversification StrategiesGrowth StrategyExpansion through current operationsConcentrationExpansion within an existing business areaDiversificationExpansion occurs by entering new business areasVertical IntegrationExpansion by acquiring existing suppliers or distributors

Restructuring and Retrenchment Strategies RetrenchmentChanges operations to correct weaknessesLiquidationAn extreme form of retrenchment wherein the business closes and sells off its assetsRestructuringReduces the scale or mix of operationsDownsizingDecreases the size of operationsDivestitureSells off part of the organization to focus on core businesses

Global StrategiesGlobalization StrategyAdopts standardized products and advertising for use worldwideMultidomestic StrategyCustomizes advertising and products to best fit local needsTransnational StrategySeeks efficiencies of global operations with attention to local markets

E-Business StrategiesE-Business Strategies Focus on Using the Internet for Business TransactionsB2B Business Strategies use IT and Web portals to vertically link organizations with members of their supply chains.B2C Business Strategies use IT and Web portals to vertically link organizations with members of their customers.

Strategic Management

Strategy formulation begins with the organizations mission and objectives. SWOT analysis identifies strengths, weaknesses, opportunities, and threats. Porters five forces model examines industry attractiveness. Porters competitive strategies model examines business or product strategies. Portfolio planning examines strategies across multiple businesses or products. Strategic leadership activates organizations for strategy implementation.

Strategic Management

Strategic management the process of formulating and implementing strategies. Strategy Formulation the process of creating strategies Strategy Implementation the process of putting strategies into action.

Strategic Management

Strategy FormulationMission StatementThe reason for the organizations existence in societyOperating ObjectivesSpecific results that organizations attempt to achieve

Common Operating Objectives of Organizations Profitability Market share High-quality workforce Cost efficiency Product and service quality Innovativeness Social responsibility

Market-oriented: Strategy based upon the needs & wants of the marketplaceEstablishes a profitable market position: End goal of strategy to make a profit in the for-profit sector or to meet alternate metrics (NFP sector) Establishes a sustainable market position: Marketing strategy not about one-off transactions. Aim is to find a place in the marketForces that determine industry competition: Complex mix of ingredients that create the marketing whirlwindContinuously creating & developing CA: Find a spot where, if need be, the primary challenges can be tackledPotential sources that exist in a firms value chain: What value any organisation wants to create using its available marketing resources

STRATEGIC PLANNING MODEL

THE INTER-RELATIONSHIP BETWEEN MARKETING AND CORPORATE STRATEGYINFORMSDIRECTSGUIDESCONTROLS

ACHIEVESSUPPORTSOPERATIONALISECorporate StrategySpecifying the organisations missionAllocating resourcesDefining Organisational objectivesMarketing StrategyIdentifying product market/s to compete inSelecting market segments to targetDeveloping the marketing mix

OPERATIONAL vs STRATEGIC MARKETING Operational MarketingAction-orientedExisting opportunitiesNon-product variablesStable environmentReactive behaviourDay-to-day managementMarketing department Strategic MarketingAnalysis-orientedNew opportunitiesProduct market variablesDynamic environmentProactive behaviourLonger range managementCross-functional organisation

STRATEGIC MARKETING MANAGEMENT PROCESSSMM process aims to answer a complete set of strategic questions:

Where are we now?Where we want to go?How might we get there?How can we ensure arrival?

STRATEGIC MARKETING MANAGEMENT PROCESS

STRATEGIC ANALYSISStrategic analysis is concerned with understanding the strategic position of the organisation in terms of its external environment, internal resources & competencies, and the expectations and influence of stakeholders

WHERE ARE WE NOW? Analysis of Current SituationWhat are the major trends and possible changes in the marketing environment?

Who are our competitors? How can we make ourselves different from competition?

Who are our target customers & what are their needs?

What competitive advantages and core competences do we have?

STRATEGIC CHOICEStrategic choice involves understanding the underlying bases guiding future strategy, and generating strategic options for evaluation and selecting from among them

Johnson and Scholes (1999)

WHERE WE WANT TO GO? Strategic ChoiceA set of interrelated strategic decisions about:

Strategic direction (generic strategy)Product/s to offer Market/s to target Competitive stance to take Positioning strategy

STRATEGIC IMPLEMENTATIONStrategic implementation is concerned with the translation of strategy into organisational action through organisational structure & design, resource planning and the management of strategic change

Johnson and Scholes (1999)

HOW MIGHT WE GET THERE? Plan Marketing ActivitiesDesign the Marketing Mix to support the chosen strategy and achieve strategic objectives.

Decide on tactics for positioning products in the chosen markets.

Define targets & time frame.

Identify who will be responsible for different tactics.

HOW CAN WE ENSURE ARRIVAL?Measure, Evaluate & Control ActivitiesMethods of control and evaluation.

Not only at the end of the time frame but on a regular basis.

Ease of measurement depends on the types of activities implemented.

Measurement reveals effectiveness of evaluation & helps decide if contingencies must be put in action.

VALIDITY OF SMM MODEL?Rational, formalized, systematic

Orderly thinking

Deliberate, logical response to changes in the environment

Top down approach

Think THEN act & formulate THEN implement

Identify actions which need to be undertaken

MARKETING ENVIRONMENT

4 Main Ways of Approaching Marketing StrategyTHINKING FIRSTSEEING FIRSTDOING FIRSTSIMPLE RULESCOMPETITIVEMARKETINGSTRATEGY

ENVIRONMENTAL ANALYSISEnvironmental scanning is the process of gathering information about the various forces in the environment. It involves observation, perusal of secondary sources, such as business, trade, government and general interest publications and marketing research.

Environmental analysis is the process of assessing and interpreting the information gathered through market intelligence and environmental scanning.

MACRO (REMOTE) ENVIRONMENT: PEST MODELPEST: Political Factors, Economic Factors, Socio-cultural Factors, Technological Factors

A framework that assists in analyzing the external (remote) environment and identifying the existing opportunities & threats

STRATEGIC FIT

Strategic Fit is the effective match and management of the environmental opportunities and threats while taking into account the organisation strengths and weaknesses

STRATEGIC FIT Drawing upon the strategic analysis undertaken previously, strategic managers have to:

Find strategic fit between what the environment wants and what the organisation has to offer, and between what the organisation needs and what the environment can provide

Identify and assess alternative ways in which their organisation can use its specific strengths to capitalise on opportunities and/or minimise threats, and invest in available opportunities to overcome its weaknesses

SWOT ANALYSIS Integrates the internal and external environmental analysisNot just a list of SWOT variables!

SWOT/TOWS Matrix can be helpful

SWOT/TOWS analysis is the alternative ways in which an organisation can use its specific strengths to capitalise on opportunities or to minimise threats and invest in available opportunities to overcome its weaknesses

SWOT (TOWS) MATRIX

STRATEGY FORMULATIONSWOTSWOT Analysis Identifies Organizations Strengths, Weaknesses, Opportunities, and ThreatsCore CompetencyA special strength that gives an organization a competitive advantage

STRATEGY FORMULATIONPorters Five Forces

STRATEGY FORMULATIONPorters Five Forces

Porters Competitive Strategies Differentiation Strategy Offers products and services that are uniquely different from the competitionFocused Differentiation Strategyoffers a unique product to a special market segment. Cost Leadership StrategySeeks to operate at lower costs than competitorsFocused Cost Leadership Strategyuses cost leadership and target needs of a special market.

STRATEGY FORMULATIONPorters Five ForcesCOMPETITIVE ANALYSIS

STRATEGY FORMULATIONBoston Consulting Group (BCG)BCG MatrixAnalyzes business opportunities according to growth rate and market share

Ansoffs Product-Market GridCurrent productsNew productsCurrent MktsNew MktsMkt penetrationstrategyMkt developmentstrategyProduct developmentstrategyDiversificationstrategy

A way to analyze a company's competitive position in comparison to the offerings of competitors. As with Porter's Generic Strategies, Bowman considers competitive advantage in relation to cost advantage or differentiation advantage. There are six core strategic options

STRATEGIC MANAGEMENTStrategy ImplementationStrategic Leadership the capability to inspire people to successfully engage in a process of continuous change, performance enhancement, and implementation of organizational strategies.

Marketing at the SBU LevelStrategic MarketingStrategic Marketing requiresDetailed understanding of market needs, and Proactive use of competitive intelligence at the corporate as well as SBUs levelsStrategic Marketing Focuses on what the firm do best at the SBU levelTo secure and maintain a sustainable competitive advantage

Key Elements of Marketing Strategy FormulationThe strategic 3 Cs Customers, Competitors & the CorporationEnvironment analysis -- PESTStrategic Marketing DecisionsWhere to competeHow to competeWhen to compete

A Viable Marketing StrategyMust have a clearly defined market Must have a good match between corporate strengths and market needsMust have significant positive differentiation in the key success factors of the business

WHERE WE WANT TO GO? Strategic DecisionsStrategic decisions at the corporate level Developing/re-stating mission statementDirectional strategyResource allocationStrategic decisions at the SBU levelChoosing Generic Strategy: Cost leadership strategy, Differentiation strategy, Focus strategy: Cost focus & Differentiation focusStrategic decisions at the functional level Products to offerMarket segments to targetMarket position tactics

DIRECTIONAL (Grand) STRATEGIES

Growth StrategiesConcentrationVertical GrowthHorizontal Growth

DiversificationConcentricConglomerate

Stability StrategiesPause/Proceed with cautionNo ChangeProfit

Retrenchment strategies TurnaroundCaptive CompanySell-Out/DivestmentBankruptcy/Liquidation

The Competitive EnvironmentInformation on CompetitorsCompetitive BarriersCompetitive RivalsCompetitor AnalysisKinds of MarketsKeyConceptsin theCompetitiveEnvironment

What is Competitive Advantage?Competitive advantage is a companys ability to perform in one or more ways that competitors cannot or will not match. Philip KotlerIf you dont have a competitive advantage, dont compete. Jack Welch, GE

Other Characteristics of Competitive AdvantageSubstantialityIs it substantial enough to make a difference?SustainabilityCan it be neutralized by competitors quickly?Ability to be leveraged into visible business attributes that will influence customers(Source: Strategic Marketing Management, Aakers)

Seeking Competitive AdvantagesPositions of advantageSuperior customer valueLower relative total costPerformance advantagesCustomer satisfaction, Loyalty, Market Share, ProfitSources of advantagesSuperior skills & knowledge, Superior resources, Superior business process

COMPETITIVE POSITION TACTICS

Marketing StrategyAttacker(smaller)Defender(bigger)PositionDefensePreemptiveDefenseCounteroffensiveContractionDefenseFlanking DefenseMobile DefenseFlank AttackFrontalAttackEncirclementBypassGuerilla Attack

Information seeking ?Emotions , feelingsTruth ,realityCritical thinkingOptimisticForward lookingfuturisticCreative thinkingOverviewSequence of thinkinggoLook aroundStop, exitCREATIVE THINKING6 HATSTRAFFIC LIGHTS

SamsungLaunched 225 products in 2009 against 2000 the year beforeIt is closing the gap effectively with technology breakthrough / products customized to Indian needsThey made an exclusive 32 LED TV for Indian customers as Indians have smaller roomsThey target to lead in product innovation space & be relevant to consumers

AircelTill 2006 it was just in 2 circles with 2.2 million consumersPositioning was on non-voice uses pay bills/book tickets/network with friendsMonthly susbscriber additions have doubled from 600,000 6 months ago to 1.4 million

Gajni

Before 25th DecemberFirst Look: Ghajini's marketing started way back from March 20when he came out on the premier of RACE with his new BALD look. It actually gave the perfect sneak peek at the two looks of Aamir in the movie.Notice the jacket and rolled up half sleeves?Did anyone say Sanjay Singhania?

And then in November, this photo shot across leading dailies and Aamir without even showing his face and his 8 packs instantly became the talk of the town.

The 8 pack promotion: October 2007 and remember SRK and the ho-hallah around his 6 pack abs.It was only around that time that Aamir silently started working on his own, and just to make it better, he added a pair and made it eight!The fact that the man now had a 8 pack and a fantastic body, he decided to show the world how he got it! Up came the videos with 'Making of Aamir's 8 pack' on all news and entertainment channels.Videos similar to this you tube got thousands of visits! He even went a step ahead and called a press conference to introduce his trainer and explain his diet chart!

Television appearances With the TV channels filled with Ghajini promos, Aamir went into overdrive with his interviews, which came in by the day on every news and entertainment channel. Not to forget the guest appearances on reality shows, which is now a sort of a norm.

Offline Promos at Theaters 'Theater personnels with Ghajini hair cut' act that he did on the release onRab neBana di Jodi.Simply Fantastic. Imagine going to a cinema hall to watch RNBDJ and you watch all these Aamir Khan look alikes and his life size cut outs. You almost wish that you had come to watch Ghajini!

Co brandingTata Skystarted running Ghajini specials complete with behind-the-scenes stories of the upcoming film.Samsunglaunched special Ghajini edition mobile phones of L700 and M200 models. These handsets have preloaded with Ghajini ringtones, pictures and songs. Tata Indicomstarted with a outbound dialer service with Khan's pre-recorded voice.

Co brandingVan Heusenlaunched Ghajini's apparels in their stores all across India and is backing it with in-store campaigns and giant posters of Khan dressed in formal attire. Van Heusen also organized a fashion show wherein models along with Aamir sported the Ghajini look.Add a little big of jig and a bit ofGuzarishand he had all the TV channels beaming again!

Viral SMS campaign

Remember the chain SMS which threatened to reveal what could possibly be the climax of the film? For those who were not on the mailing list, here it goes...Someone killed Aamirs girlfriend and he lost his memory. Then he tries to find out the killer. Suspense Aamir himself is the killer. Now enjoy Ghajini!

I bet this one was proposed by someone at Tata Indicom!!!

Digital PromotionWith so much happening offline, something had to be done online to. And Ghajini makers had that well covered.

Websites like www.rememberghajini.com, www.findghajini.com and www.wallofsuspects.com were built to drive curiousity levels around the movie and provide a movie like experience on the Internet. Add tothat a3D PC gameand a number of mobile games and applications, and you have the digital space busy. Not to forget that he has his own popularblog, which was a constant source of dope for all those waiting for Ghajini to release.

Final Week ControversyJust to cap it all, we had this 'Ghajini Release Stayed' court notices which threatened to stop the release of the immensely anticipated film a day before 25th December. Naturally, this became breaking news with minute to minute tracking on the latest updates.And after much drama, when the permission was granted, it was like a whole nation had taken a sigh of relief and they could all breath again!

10 month Campaign, where we saw Aamir from 8 pack fighting machine to turning in to a barber on the streets of Delhi, is a real case study in motion picture marketing.

To hear from the horse's mouth : With Ghajini we've opened with the highest number of screens ever. So the marketing needed to have depth and width, so we needed to be very aggressive with the marketing of the film.

After 25th December:

100% opening day collections with over 1500 printsOver 90 crore business by the end of first SundayExpected 120 crore by end of first weekBest Ever OpeningTop film of 2008 already

The end resultIt raked in Rs 90 crores in the ist weekend of its releaseMarketing cost was Rs 7.5 crore and the global box office off-take Rs 260 croreThey honestly told the consumers what to expect through a major use of IMC Aamirs physical appearance , the haircut , the in cinema visibility ; ushers having a similar haircutThe audience was prepared for what they were going to see

The Marketing Concept

Utility and Marketing

Customer ValueCostsBenefits One customers views may vary from another customers view, so firm may not be able to satisfy everybody Customer value concept takes the customers point of view, but customers may not explicitly weigh costs and benefits

The Marketing Management Process

The Four Ps of the Marketing Mix

Strategy Decision Areas

Marketing Strategy Planning Process

SWOT Analysis

Segmentation Targeting Positioning Perceptual MappingSTP

Steps in Market Segmentation, Targeting, and Positioning

Basic Market-Preference Patterns

Market Aggregation The Strategy of Mass MarketingAdvantages & Disadvantages Product Differentiation

Step 1. Market SegmentationLevels of Market SegmentationMass MarketingSame product to all consumers (no segmentation)Segment MarketingDifferent products to one or more segments(some segmentation)MicromarketingProducts to suit the tastes of individuals and locations (complete segmentation)Niche MarketingDifferent products to subgroups within segments(more segmentation)Local MarketingTailoring brands/ promotions to local customer groupsIndividual MarketingTailoring products/ programs to individual customers

Steps in the Market Segmentation ProcessDetermine Market Boundaries

Decide Which Segmentation Variables to Use Collect and Analyze Segmentation Data Develop a Profile of Each Segment Target Segments to be Served

Design a Marketing Plan

Bases for Segmenting Consumer Markets

Step 1. Market SegmentationBases for Segmenting Business MarketsBasesfor SegmentingBusinessMarketsDemographicsPersonalCharacteristicsSituationalFactorsOperatingCharacteristicsPurchasingApproaches

Effective Segmentation MeasurableAccessibleSubstantialDifferentialActionable

Descriptive BasesAge

Gender Income Occupation Education Family Size or Family Life Cycle Religion or Nationality

Geographic BasesRegion

Density Climate Population

Behavioral BasesUser Status & Brand Loyalty

Personality/Lifestyle Social Class Occasion Readiness to Buy

Benefits Sought Usage Rate

Step 2. Market TargetingEvaluating Market SegmentsSegment Size and GrowthAnalyze sales, growth rates and expected profitability for various segments.

Segment Structural Attractiveness Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers.Company Objectives and ResourcesCompany skills & resources relative to the segment(s).Look for Competitive Advantages.

Five Patterns of Target Market Selection

Step 2. Market TargetingMarket Coverage StrategiesSegment 1Segment 2Segment 3Segment 1Segment 2Segment 3CompanyMarketingMixCompanyMarketingMixCompanyMarketing Mix 1CompanyMarketing Mix 2CompanyMarketing Mix 3MarketA. Undifferentiated MarketingB. Differentiated MarketingC. Concentrated Marketing

Step 2. Market TargetingChoosing a Market-Coverage StrategyCompany ResourcesProductVariability

Products Life-Cycle Stage

Market VariabilityCompetitorsMarketing Strategies

Positioning is the act of designing the companys offering and image to occupy a distinctive place in the the target markets mind. P 298

The BCG CompetitiveAdvantage MatrixVolumeFragmentedStalematedSpecialized

Product DifferentiationFormFea-turesPerfor-manceQualityConform-anceQualityDura-bilityRelia-bilityRepair-abilityStyleDesign

Services DifferentiationDeliveryOrderingEaseMaintenance& RepairCustomerTrainingInstallationCustomerConsulting

DifferentiationPersonnelChannel

Image DifferentiationMediaAtmosphereSymbolsEvents

Differences WorthEstablishingAffordableSuperiorProfitablePreemptiveDistinctiveImportant

Perceptual Map

Positioning StrategiesProduct Attributes

Benefits, Problem Solutions & Basic Needs Price & Quality Specific Use Against Other Products

Product User

Against a Competitor

Push-Pull Strategies

A Model of Buyer Behavior5-5

5-6The PSSP Hierarchy of Needs

5-13The Consumer Problem Solving Process

Levels of Problem Solving

Brand identity

Brand equity

Brand relationship spectrum

Unique characteristics of services

Markup chainin channels17-Key Factors That Influence Price Setting

Strategic Pricing OptionsSuccessfulPricingVariationsin ValueReverseCost-PlusPOSPriceSensitivityIndividual?Bundled?CompetitorReactionEmotionCustomerCosts

Pricing Objectives

Strategy Planning for PricePricingobjectivesGeographicterm who paystransportationand howDiscounts andallowancesto whom andwhenPrice levelsover productlife cyclePriceflexibility

Distribution Options*Direct

InternetTelephoneMailCatalogueOwn channelSalesforce

OwnAnother firmsContractIntermediary

FranchiseWholesalerAgent/MerchantDistributorPartner*More limited for services

The Transporting Function

Types of Retailers

Types of Wholesalers

Four Examples of Basic Channels of Distribution for Consumer Products

Identifying a Target MarketSelecting a Product StrategySelecting a Customer Service StrategySelecting a Pricing StrategyChoosing a LocationBuilding a Promotional StrategyCreating a Store AtmosphereHow Retailers Compete

Price and Distribution StrategiesMarket LeaderDistribution in placePrice main weaponPremium priceVariety of optionsMarket NicheStay with marketsAdd nichesPremium priceSelective distributionMarket ChallengerFocus on flanksDirect or indirect attackMarket FollowerCloningSet lower prices

Marketing Information Systems

Product Development

Overestimation of Market SizeProduct Design ProblemsProduct Incorrectly Positioned, Priced or AdvertisedCosts of Product DevelopmentCompetitive Actions

To create successful new products, the company must: understand its customers, markets and competitors develop products that deliver superior value to customers.PRODUCT DEVELOPMENT

New Product Development ProcessIdea Generation and ScreeningConcept Development and TestingMarketing StrategyBusiness AnalysisProduct DevelopmentTest MarketingCommercialization

Systematic Search for New Product IdeasInternal sourcesCustomers CompetitorsDistributorsSuppliers

Process to spot good ideas and drop poor onesCriteria Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

Marketing Research Process

Sources of Data

1. Develop Product Ideas into AlternativeProduct Concepts2. Concept Testing - Test theProduct Concepts with Groupsof Target Customers3. Choose the Best One

Part Two - Short-Term:Products Planned PriceDistributionMarketing Budget

Part Three - Long-Term:Sales & Profit GoalsMarketing Mix Strategy

Marketing Strategy Statement Formulation

Part One - Overall:Target MarketPlanned Product PositioningSales & Profit Goals Market Share

Business Analysis

Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives If Yes, Move to Product Development If No, Eliminate Product Concept

StandardTest Market

Full marketing campaignin a small number of representative cities.

SimulatedTest Market

Test in a simulated shopping environmentto a sample of consumers.Controlled Test Market

A few stores that have agreed to carry newproducts for a fee.

TimeThe Adoption Curve

The Adoption CurveInnovators: First to Adopt, Eager to TryYoung, Well-Educated, MobileSeek Info from non-salesperson SourcesEarly AdoptersOpinion LeadersGreater Contact with SalespeopleWord-of-Mouth

The Adoption CurveEarly Majority: Avoid Risk, Try Only if Others Have Usually are Not Opinion LeadersLate Majority:Cautious About New Ideas, Older and More Set in Their WaysMore Subject to Peer Pressure

The Adoption CurveLaggards:Suspicious of New IdeasDo Things the Way that They Have Always Been Done

The Product Life Cycle

Defining Product

Strategy Planning for Advertising

Basic Promotion MethodsTargetMarketPricePromotionPlaceProductSalesPromotionPersonalSellingPublicityAdvertisingMassSelling

MARCOMS Strategic Process

PESTLE

Competitors

SWOT

Strategic Intent/Objectives

Segment/Target

Position

Proposition

Creative Execution

Media Classes

Media Execution

Contingency

Post-Test

Pre-Test

AUDIT

STRATEGY

OPERATIONS

International

Brand Wheel

KeyReward

Values

Benefits

Features

Preference, but not loyalty

Relationship & loyalty

Personality

Core of the claim

The TaskIsolate, in a simple statement why the advertising will have worked:Increase salesGenerate leadsIncrease/maintain shareStop declineJustify priceAnnounce/LaunchCorporate reputation

Expand the Problem to a Higher LevelProduct Definition:Make the central benefit salient (again?)Performance Superiority:Solve a problem or better fulfill a desireEmotional:Help brand matter to the consumerCultural Identification:Make the brand part of consumers worldParadigm Shift:Alter the consumers definition of category

Types of MARCOMS Objectives Exposure message to ... Create 40% awareness amongst... Create attitude/opinion that... Increase preference amongst... Encourage trial amongst... Re-enforce loyalty amongst..

ExposureThe desired level of frequency (OTS = Opportunity to See) and coverage to achieve the advertising objectivesMost agencies seek an average of 2-3 OTSs amongst the target market in order to give advertising a chance to work

Describe Who Were Talking ToA person, not a targetBeyond reports - talk to customersPaint a personal pictureWhats really important to them?

Sources of a Propositionproduct characteristicsuser characteristicsways of using the producthow product is madesurprising points about the productprice characteristicsimage characteristicssatisfying psychological/physiological needsproduct heritagedisadvantages of non-usedirect comparisons with rivalsproduct comparisonsnewsworthinessgeneric benefits

What Proposition Will Do This?Specific core benefit brand deliversKey emotion, reason or blendKeep it singular

A good propositionGives creatives an angle or way inForces a strategic choiceIs single-minded not all encompassingIs based on a truth (Rational or Emotional)Is original, or expressed in an original wayIs liberating not limitingIsnt an end-line

MARCOMS Overview

Media Scheduling1. Reach2. Creative Scope3. Media History4. Location5. Distribution Channels6. Budget

Budgeting1. JUDGEMENTAL METHODS Arbitrary Affordable2. OBJECTIVE and TASK3. MEASUREMENT ROI IncrementalQuantitative Models4. PERCENTAGE OF SALES % Last Years Sales % Anticipated Sales Unit Sales5. SHARE OF VOICE Competitive Absolute Competitive Relative

Marketing AuditMarketing audit is a comprehensive, systematic, independent, and periodic examination of a companysor business unitsmarketing environment, objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending a plan of action to improve the companys marketing performancePhilip Kotler

Characteristics of Marketing AuditComprehensiveMust cover all marketing areasSystematicSequential diagnostic steps IndependentInternal & external auditorsPeriodicPerformed at regular intervals

Marketing Audit ProcedureMarketing environment auditMarketing strategy auditMarketing organization auditMarketing system auditMarketing productivity auditMarketing function auditMarketing excellence reviewEthical and social responsibility review

Basic Steps in ControlSet standards of performance (these are typically in the form of goals or objectives)Evaluate the reality of what occurs against these stepsTake corrective or reinforcing action where required

Steps in the Control ProcessSet Standardse.g. Marketing Objective is to attain 25% market share2. Evaluate Standards Against RealityPossible Outcome 1:15% market sharePossible Outcome 2:35% market share3. Take ActionCorrectiveActionReinforcingAction

Nature of ControlAnnual Plan control looks at the objectives set in the annual marketing plan, evaluates these against the actual results achieved, and takes corrective or reinforcing action when necessaryFinancial or Expense control considers the financial parameters and objectives set by a firm in its annual marketing plan, and the corrective or reinforcing actions needed to attain theseThe purpose of strategic control is to ensure that the organization is maximizing the opportunities that exist in its business environment. Strategic control often takes the form of a marketing audit

Marketing Strategy Formulation-Implementation Grid

StrategyFormulation

StrategyImplementation

Poor

Poor

Adequate

Adequate

Success

Failure

Rescueor Ruin

Trouble

Figure 13.2: The Marketing Strategy Formulation-Implementation Grid

BarriersThe marketing strategy is implicit, not explicit, and peoplecannot implement what they dont know The marketing strategy is developed in isolation and people cannot implement what they do not understand Not everyone is a good strategic marketing thinkerThe marketing strategy is developed by an external consultantThe marketing strategy has unanticipated consequences(Robert, 1991)

Process Model

Figure 13.3: A Process Model of Competitive Advantage (Day and Wensley, 1988)

SourcesSuperior SkillsSuperior Resources

SourcesSuperior SkillsSuperior Resources

Outcomes Customer satisfactionCustomer LoyaltyMarket ShareROI

Reinvestment

Loop in the ModelHard expressed in numbers that can easily be calculated, compared and trackedHowever they are historical a good way of tracking the past, but a rather inadequate indication of the futureThey are not good diagnostics of strategic healthBy comparison measures of customer satisfaction and loyalty are soft, and impression based but they are about the futureThe astute firm will reinvest the financial outcomes of competitive advantage in the sources of competitive advantage itself, namely superior skills and/or superior resourcesThis activity closes the loop in the model, and suggests that managing for competitive advantage is indeed a process that is continually renewed, revived and refreshed

Customer EquityThe outcomes of ROI and Market Share are hard but historicalThe outcomes of Customer Satisfaction and Customer Loyalty are future-oriented but softThe ideal marketing control variable would be a single outcome that is both hard (a number that can be expressed financially) and future (customer) orientedCustomer Lifetime Value (CLTV), which in turn leads to Customer Equity, is that single appropriate outcome

Customer Lifetime Value

Figure 13.4: A Simple Spreadsheet for the Calculation of CLTV

Increasing CLTVIncreasing retention rate, or increasing customer life (i.e. the number of years a customer can remain a customer)Increasing Sales to a Customer, either by increasing the firms share of the customers purchases, or by increasing the customers referral rateCutting the Costs of serving a customer

Corporate CultureThe Clan culture, which emphasises teamwork and cooperationThe Adhocracy culture, which emphasizes entrepreneurship and creativityThe Hierarchy culture, which emphasizes order, regulations and rulesThe Market culture, which emphasizes competitiveness and goal achievement(Deshpande, Farley and Webster, 1993)

Mission statements may be developed at the SBU level in order to make sense, especially for large organization with diverse business interests e.g. NTUC INCOME and NTUC Fairprice

There are as many types of strategies as there are plans. Every plan has its own objectives, strategies and tactics.Here is an overview showing the elements that need to be planned out.

They all provide interdependencies and constraints that determine the overall business strategy.

I broke them down into these four main areas to show you the overall elements of \-------------------Piece by piece

----------

Extended arm of managementMomentum is a resource to the whole team.This diagram shows that the three elements are

In this slide you can see the

Once the business strategy (which is an on-going document of course) is determined, then the project plan is developed and constantly updated.

This is an on-going process and the project plan helps the management to structure the business operations and make better decisions based on analytical approaches and updated information.Management needs to communicate this effectively to the stakeholders. Momentum supports this activeley ( we will get a little bit deeper into this later)

Last you see that the Marketing Strategy Plan is developed as well, derived out of the Business Strategy and influencing the project managementmaking sure that all stakeholders are informed and meet their objectives.At this part, the Marketing Strategy touches a lot of people with different skills, different relationships and locations.

Momentum is the extended arm of the Management on top of this operation.

Graph We are not a Marketing AgencyWe bring your vision into a planWhich then goes to Agency and PartnersDevelop Presentations, Agendas, Briefing Memorandum

Advantage: Detailed, big picture, long-term consistent with Management goals

Components of Marketing Strategy PlanPositioningResearchCommunicationDistribution PolicyProduct MixPricing PolicyOnline Strategy

At Business ReviewAssessment, strenght weakness, existing

Competition AnalysisDirect, but also indirect competitors, also over time/future

Target Market, whose needs do we meet, who make the decision (based on pull-vs. push strategy)

PositioningPositioning Map, based on competitors and products benefits

CommunicationWhat are the key messages, who are the best messengers, what are the channels to use to promote that, also over time

Consistent with overall business strategyKeep in mind that a strategy is how to achieve the objective. Many people confuse the strategy with the objective.The internet is making it harder to find ways that are difficult to duplicate. Everyone has more easy access to information than ever before. Strategies follow the same organizational structure as objectives.It is important that the functional strategies support each other as well as the Division and Corporate strategies.All of these are growth strategies. Its a matter of how you plan to grow.All of these strategies are decline or going out of business strategies.These are all strategies for participating in global markets. Again, its a matter of how you wish to do it.E-Business is replacing older technologies such as the fax and telephone as a means of communication.Whatever model is used, the strategy chosen must be one that can be implemented with a minimum disruption to the organization. There are many processes for developing strategies. Key to which process is used and which strategy is chosen is the ability to implement the strategy.Be careful, if your business is doing well, there may be no need to changing your strategy. Changing strategies can be very difficult and dangerous.Many of these objectives depend on whether your goal is growth, status quo or decline.SWOT analysis has been a much used model. However, with the environment changing more and more rapidly, it may be less useful in the future.Porters five forces provide a unique and thorough way to view your position. Each of these forces provide different strategies for achieving your objectives.Wal-Mart is the best example of a cost leadership position and they know how to leverage it.Wal-Mart gains its cost leadership position through a proprietary inventory and ordering system that allows the company to buy the right products at the right time from the right people.It is important to remember that even cash cows need to be fed. Under investing in the cows can be very dangerous.Strategic leadership can be learned. It helps if you have some natural leadership ability to start with.A-Mei, the Taiwanese pop diva sang the Taiwanese anthem at President Chen Shui-bians May inauguaration (2000) and raise a political storm. China withdrew her Sprite soft drink ads from TV, newspapers and billboards across the country, almost jeopardising her contract with Coca-cola. Spokesman for Coca-cola was quoted as saying that the company was informed of the withdrawal a day before A-Mei even performed at the inauguration.

Puyuma pop star, A-Mei, in a recent Sprite commercial, dances and sings in the old colonial powers quarter of Shanghai. She sings a chorus of "give me true feeling" in Mandarin to promote the product of an American multinational corporation. This ad and her music videos are screened on Hong Kong's TVB, MTV, and on channels of Rupert Murdoch's Star TV Group. Bit 2 In an August 1999 article "China's crazy about A-Mei" by New York Times News Service reporter Seth Faison, A-Mei is described as being "Taiwanese" and No. 1 in China. Feth describes A-Mei's sell out concerts in Beijing as "overpowering any consideration of the current battle over" Taiwan's sovereignty. This is in reference to the latest spat between Taiwan and the PRC due to President Lee's "state to state" relations comments. Bit 3 The shifting images of A-Mei (Chinese name Chuang Hui-mei) are quite market responsive. She has been called a "pop diva", Taiwan's Mariah Carey and other related labels. She is a superstar by regional commercial criteria, her 5 CDs released thus far having sold millions of copies along with concert videos and VCDs. Her brand of cultural products has become well known throughout East Asia. She has large advertising contracts with Fuji Film and Sprite. In general, she's done well commercially. Summary OverviewThe competitive environment affects the number and types of competitors the marketing manager must face -- and how they may behave. Prudent managers choose strategies that avoid head-on competition and/or plan for competition when it is inevitable.Key Concepts of the Competitive EnvironmentKinds of Markets. Economists identify four basic kinds of market situations. Understanding the differences among each type of market situation is helpful for planning: Monopoly. In a monopoly, one company serves the entire customer base. Such circumstances are rare, and in the US, often subject to government regulation. Monopolistic Competition. Here a number of different firms offer marketing mixes that at least some customers see as different. Each firm attempts to monopolize its own target market but competition still exists. Changing customer tastes may affect how different consumers see each offering and various alternatives may be considered substitutes. Oligopoly. Here a small number of firms control the market. Their marketing mixes may overlap but demand is sufficient to sustain them. Barriers to competitive entry are high. Pure Competition. Here a large number of firms compete with essentially similar (commodity) products. Price is typically the determining factor in making a purchase.Competitor Analysis. This is an organized approach for evaluating the strengths and weaknesses of current or potential competitors marketing strategies.Competitive Rivals. Most marketing managers narrow competitor analysis to concentrate on a few rivals -- the firms that will be the closest competitors. A key concern for marketing managers is to anticipate future competition.Competitive Barriers. Competitor analysis also considers barriers -- the conditions that make it difficult or impossible for a firm to compete in a given market.Information on Competitors. Marketing managers should seek out information on competitive practices. Although competitors marketing plans are typically secret, publicly available news stories and events coverage may provide clues to new strategic moves by competitors. This slide relates to the material on pp. 82-85 and Overhead 38.Summary OverviewThis slide and lecture material provide an introduction to the marketing concept. Additional information contrasts the production and marketing orientations and reviews the difficulties involved in adopting the marketing concept.The Marketing ConceptMarketing Concept. The marketing concept means that the organization aims all its efforts at satisfying its customers -- at a profit.Production Orientation. Specific businesses and their managers may still focus on more narrow concerns than satisfying customers. A typical example is the focus on a production orientation -- making whatever products are easy to produce and then trying to sell them.The Importance of Profit. Profits refer to the difference between a firms revenue and its total costs. Identifying, developing, and implementing the products and product changes that consumers demand requires that the company be profitable. Profits provide the resources to pay for satisfying customers.Adoption of the Marketing Concept. While consumer product companies adopted the marketing concept early on, many industrial products companies still have failed to do so. More surprisingly, many service companies, such as banks, have also been slow to adopt a philosophy of total commitment to customer satisfaction--but this has changed dramatically in recent years.Customers point of view. To better understand what it takes to satisfy a customer, its useful to take the customers point of view.Customer value reflects benefits and costs. Customer value is the difference between the benefits a customer sees from a market offering and the costs of obtaining those benefits.This slide relates to the material on pp. 29-30.Instructors Note: This slide corresponds to Exhibit 2-1 on p. 30 and Transparency 8. See also Transparency 9 and Overheads 10-12.There are several slides in this series; see student handout pagesThis slide relates to the material on pp. 5-6 and corresponds to Exhibit 1-1 on p. 6 and Transparency 1.Summary OverviewUtility is the power to satisfy human needs. All aspects of business are focused to either create utility or support specialists who do. The five types of utility illustrated on the slide underscore the importance of different functional areas (production and marketing) working together to create utility.Types of Utility Created by Production with Guidance from MarketingForm. Form utility is provided when someone produces something tangible.Task. Task utility is provided when someone performs a task for someone else.Teaching Tip: You may want to link form to goods and task to services on the product-type continuum here.Types of Utility Created by MarketingTime. Time utility involves providing goods and services when consumers want them.Place. Place utility involves providing goods and services where consumers want them.Example: A convenience store offers 24 hour shopping (time utility), close to home (place utility).Possession. Possession utility involves having ownership (possession) or the right to use and/or consume a good or service.Teaching Tip: Time and Place utility create a convenience for consumers. Possession can also create convenience but may have symbolic dimensions as well. Example: The possession of a Mercedes-Benz may make the owner feel good about her accomplishments, and ultimately, herself. Summary OverviewThe marketing management process refers to the planning, implementation, and control of marketing activities. As indicated on the slide, these activities are continuous and decisions made in the past in one area can have implications on the other areas as well.The Marketing Management ProcessThe ongoing process of marketing management requires attention to three key areas:Planning. Planning is required because marketing managers must seek attractive new opportunities. Customers needs and wants change. Marketing managers must anticipate such changes and plan how the firm will move to meet them with satisfying products. At the company-wide level, this is called strategic (management) planning -- the managerial process of developing and maintaining a match between an organizations resources and its market opportunities. Implementation. Implementation is the process of putting marketing plans into action. Control. Control deals with assessing and evaluating marketing performance. Marketing managers are responsible for seeing to it that an implemented strategy is working. Goals and objectives are typically set and one or more measures of progress are taken to assess performance. When performance falls short of expectations, it is up to the marketing manager to take corrective action.This slide relates to the material on p. 38.Instructors Note: This slide corresponds to Exhibit 2-4 on p. 38 and Transparency 10.Summary OverviewIt is useful to categorize all the variables in the marketing mix into four basic ones of Product, Place, Promotion, and Price. These Four Ps are combined in differing ways to match the offer made by a company to the needs and wants of different target markets.Instructors Note: Remind students that the customer is not part of the marketing mix. Then lead them in discussion to identify why: Because the four Ps are controllables for the marketer -- customer behavior is not.

This slide relates to the material on p. 41.Instructors Note: This slide corresponds to Exhibit 2-7 on p. 41 and Transparency 14.Decision Areas of the Four PsProduct. The product is often a tangible good that customers buy, but it can also be an intangible service, such as tax and legal preparations. Product-area decisions involve the characteristics of various kinds of products. While exceptions arise, generalizations about product classes can be learned that help marketers develop different product mixes quickly.Place. Place refers to where a product is made available to target market customers. In addition, place decisions also involve making products available when customers want them. A channel of distribution refers to the series of firms or persons between the producer of the product and the final user or consumer.Promotion. Promotion involves telling the target market about the product. Key tools of promotion include: Personal Selling. This involves direct communication between sellers and potential customers, either face-to-face or over the phone. Mass Selling. Mass selling communicates with large numbers of customers at the same time. Advertising, its main form, is any paid form of nonpersonal presentation of ideas, goods, and services by an identifying sponsor. Sales Promotion. This refers to the other types of promotion that marketers use to stimulate interest, trial, or purchase by final consumers or others in the channel.Price. In setting a price, marketing managers must consider the kind of competition in the target market as well as possible customer reactions to different price levels.This slide relates to the material on pp. 41-42.Instructors Note: This slide corresponds to Exhibit 2-8 on p. 41 and Transparency 15. See also Transparency 13 and Overhead 17.Summary OverviewMarketing strategy planning tries to match opportunities to the companys resources and its objectives. A key feature of successful marketing strategy planning is identifying attractive opportunities uniquely fitted to the strengths of the firm.Attractive OpportunitiesBreakthrough Opportunities. The best opportunities come when innovators develop hard-to-copy marketing strategies that will be profitable for a very long time.Teaching Tip: For a long time, Intel had a competitive advantage and high profits because most of the popular software was designed to work only on Intel computers. Competitive Advantage. With or without a breakthrough opportunity, long run success requires competitive advantage -- that is, having a marketing mix that the target market sees as better than a competitors mix.Differentiation. This means that the firms marketing mix if distinct from and better than what is available from a competitor. Differentiation often requires that the firm fine-tune all of the elements of its marketing mix to the specific needs of a distinctive target market.SWOT Analysis. This analysis highlights advantages and disadvantages and is a useful aid for identifying relevant screening criteria and for zeroing in on a feasible strategy. It identifies and lists the firms strengths and weaknesses and its opportunities and threats. Then, these can be compared with the pros and cons of different strategies that are considered.This slide relates to the material on pp. 52-54.Instructors Note: This slide corresponds to Exhibit 3-1 on p. 54 and Transparency 22. See also Transparency 21 and Overheads 20-21.This slide can be reused through the course to reinforce to students how individual topics relate to the big picture.Summary OverviewSWOT analysis identifies and lists the firms strengths and weaknesses and its opportunities and threats. A good SWOT analysis helps the manager focus on a strategy that takes advantage of opportunities and strengths while avoiding its weaknesses and threats. Strengths and weaknesses are internal to the company; opportunities and threats are external factors. As part of a review at this stage, its useful to emphasize again that the marketing manager is not just trying to develop some strategy, but rather a strategy that gives the firm a competitive advantage--and offers superior customer value--because it takes advantage of strengths and opportunities while also addressing (or avoiding) weaknesses and threats.SWOT AnalysisStrengths. Strengths are those things a firm does well. It may be a process, a patent, or some other product-related activity. But it might also be extraordinary customer service, delivery, or channel support. Weaknesses. Weaknesses are areas where the firm performs some activities less-well than competitive firms. These are areas where the firm needs to improve -- or at least not compete head-to-head with better performing organizations. Discussion Note: Over the long-run, they may even be activities that match the competition but not the expectations for performance held by customers.Opportunities. Opportunities are events, conditions, or situations in the external environment that are particularly well-suited or attractive to the way a firm does business or is planning to do business. The firm does not control the existence of opportunities, but it tries to match its strengths to opportunities that emerge, are emerging, or will emerge within the planning period.Threats. Threats are events, conditions, or situations in the external environment that are NOT particularly well-suited or attractive to the way a firm does business or is planning to do business. Companies try to avoid threats or minimize their impact.This slide relates to the material on pp. 421-422. See also Transparency 22 and Overhead 21.Instructors Note: The lecture script provides extra-textual discussion material on SWOT for extended in-class discussion.Summary OverviewThere is no one right promotion blend for all situations. Accordingly, marketing managers must constantly examine each situation and adapt promotion tools to best address the needs of target customers in that particular situation.Key Considerations for Integrating Promotion PlansPromotion Push. Pushing a product (through a distribution channel) means using normal promotion tools to help sell the whole marketing mix to possible channel members. This helps build channel commitment and cooperation and can take several forms: Promotion to Middlemen. This form relies on personal selling where the salesperson meets face-to-face with middlemen to explain the promotion and answer questions. The direct contact of this approach helps emphasize the importance of the promotion to the company. Push within a Firm. This is an internal marketing effort designed to heighten awareness of promotion objectives and opportunities among the firms own employees, particularly salespeople.Promotion Pull. Pulling means getting customers to ask middlemen for the product. This typically involves use of mass selling tools. Customers, who are aware of a product, seek it out in retail locations. Sales and the resulting order to restock ask the middlemen to get even more of the product.While it is possible to use either a push or pull strategy exclusively, using some combination of the methods is much more common.This slide relates to the material on pp. 308-309.Instructors Note: This slide corresponds to Exhibit 13-6 on p. 309 and Transparency 100. See also Overheads 151-152.Summary OverviewSeveral behavioral sciences contribute to the marketers understanding of why consumers behave as they do. The basic model of consumer behavior shown on the slide integrates many of these influences. Teaching Tip: Economics and psychology are often cited as sources for marketers but marketing also derives a great deal of knowledge about consumer behavior from sociology, anthropology, and communication theory. Economic Models of Consumer BehaviorNeeds. Economists often assume that consumers are people who know all the facts and logically compare choices in terms of cost and value received to get the greatest satisfaction for their time and money.Economic Needs. Economic needs are concerned with making the best use of a consumers time and money-- from the consumers point of view. Although useful, this view is probably too simplistic to cover all consumer behavior. Consequently, marketers try to identify sets of factors affecting the choices consumers make. These include psychological variables, social influences, events in the purchase situation.Understanding MotivationNeeds. Needs are the basic forces that motivate a person to do somethingWants. Wants are learned needs, that is, they are needs expressed as a desire for a particular need-satisfier: I need food; I want a hamburger.Drive. A drive is a strong internal stimulus that encourages action to reduce a need. When a drive is strong enough, it compels a person to seek satisfaction for a need and often in the form of a preferred want.This slide relates to the material on pp. 110.Instructors Note: This slide corresponds to Exhibit 5-2 on p. 110 and Transparency 45. See also Transparency 45 and Overheads 57-58.Summary OverviewMany different levels of needs can appeal to or motivate a person. The PSSP pyramid on the slide helps apply motivation theory to the particular needs of consumers and marketing managers trying to develop marketing mixes to meet those needs.PSSP Hierarchy of NeedsThinking of needs as being linked to one of these four levels helps explain why some marketing mix variations work in one context and not in another. But other influences also come into play which is why marketers dont rely solely on motivation theory for understanding and responding to consumer behavior.Physiological Needs. Physiological needs are the most basic needs people experience. These include biological needs for food, drink, rest, and sex.Safety Needs. Safety needs come into play next. These are concerned with protection and physical well-being.Social Needs. Social needs are concerned with love, friendship, social status and esteem. These are derived from a persons interactions with others.Personal Needs. Personal needs are concerned with an individuals need for personal satisfaction, unrelated to what others do. They include self-esteem, fun, and freedom.

This slide relates to the material on pp. 111-112.Instructors Note: This slide corresponds to Exhibit 5-4 on p. 112 and Transparency 47. See also Overhead 59.Summary OverviewIt is often useful to view consumer behavior in terms of specific characteristics of the purchase situation. This can include marketing stimuli and other variables present in the retail environment. It can also include seeing the purchase itself as the culmination of a series of steps that solves a problem for the consumer.Consumer Problem-Solving1. Awareness. Here consumers are attentive to a need or problem and interested in ways to satisfy the need.2. Gathering Information. Here consumers search internal (memory, personal) sources and may investigate external sources (friends, articles, demonstrations) for more information about the problem and/or the kinds of solutions available.3. Evaluating Alternatives. Here consumers decide which different product choices might be capable of solving their problem.4. Choosing a Solution. Here consumers select one ("the best") of the alternatives.5. Evaluating the Decision. During this stage the consumer assesses the outcome of his or her decision.

This slide relates to the material on pp. 122-123.Instructors Note: This slide corresponds to Exhibit 5-9 on p. 123 and Transparency 51.

Summary OverviewThe time, effort, and source of information used in making a purchase can be influenced by the relative level of involvement the consumer experiences.Problem-Solving ContinuumRoutinized Response Behavior. Here a consumer resorts to habit to solve a problem. This is especially appropriate for low-involvement purchases. Limited Problem Solving. Here the consumer is willing to put forth some effort, perhaps to update or add to previous experience or because the problem is moderately important.Extensive Problem Solving. This approach is used for a completely new or important need. Here much information is needed because the consumer has no experience and the decision -- and risk of making a wrong decision -- is important.Grid of Evaluative Criteria. Based on studies of how consumers seek out and evaluate product information, researchers suggest that marketing managers use evaluative grids showing features common to different products (or marketing mixes). Grids encourage managers to view each product as a bundle of features or attributes. Some consumers will reject a product if they see one feature as substandard--regardless of how favorably they regard the products other features.This slide relates to the material on pp. 123-125.Instructors Note: This slide corresponds to Exhibit 5-11 on p. 129 and Transparency 52. See also Overhead 54.

NotesMany firms set a price by just adding a standard markup to the average cost of the products they sell. But this is changing. More managers are realizing that they should set prices by evaluating the effect of a price decision not only on profit margin for a given item but also on demand and therefore on sales volume, costs, and total profit.In Wal-Marts very competitive markets, this approach often leads to low prices that increase profits and at the same time reduce customers costs. For other firms in different market situations, careful price setting leads to a premium price for a marketing mix that offers customers unique benefits and value. But these firms commonly focus on setting prices that earn attractive profits--as part of an overall marketing strategy that satisfies customers needs.

Instructors Note: This slide corresponds to Exhibit 17-1 on p. 394 and Transparency 113.Summary OverviewCompany-level and marketing objectives provide the guidance for setting pricing objectives. Pricing objectives should be explicitly stated because of their effect on the pricing policies adopted by the company. As illustrated on the slide, three types of pricing policies can be identified. Pricing policies also affect other aspects of the marketing mix as marketing managers use strategy planning to support the information communicated to consumers through the products price.Major Pricing ObjectivesProfit-Oriented Objectives. Two types of profit-oriented objectives are common: Target Return Objective. This sets a specific level of profit as an objective. Prices set under this objective may be linked to a specified percentage of sales or return on investment. Profit Maximization. This sets prices to seek as much profit as possible. This may be used to recoup high investment costs or simply as a matter of company policy.Sales-Oriented Objectives. Here pricing supports the objective of increasing sales, without regard to their effects on profit. A focus on sales alone, while sometimes practiced, can cause marketers to overlook the costs associated with delivering those sales. More common now is a focus on market share growth -- which forces the manager to pay attention to competitive action as well. Coupled with a long-run view of the overall market growth rate and attention to costs, this approach can lead to long-term competitive advantages.Status Quo-Oriented Objectives. For firms content with the way things are, two status quo-oriented objectives are often used: Meeting Competition. This stabilizes market prices because neither firm benefits from raising or lower prices. Nonprice Competition. Here aggressive action is taken in the other three areas of the 4Ps, staying clear of price as a competitive battleground.This slide relates to the material on pp. 370-372.Instructors Note: This slide corresponds to Exhibit 16-4 on p. 370 and Transparency 110.Summary OverviewPrice is one of the four major variables a marketing manager controls. Price-level decisions are especially important because they affect both the number of sales a firm makes and how much money it earns. The Price EquationPrice is the amount of money that is charged for something of value. Almost every business transaction in our modern economy involves an exchange of money--the Price--for something.Pricing Objectives and PoliciesMarketing managers must develop specific objectives and policies for Price-level decisions in each of the following areas. Flexibility. Policies should explain how flexible the company will be toward altering the price.Level over the Product Life Cycle. Strategies for dealing with price issues across the product life cycle must be developed.Use of Discounts and Allowances. Where, when, and to whom discounts and allowances are to be offered must be decided.Paying for Transportation. Transportation costs can have a big impact on price and provide the marketing manager with several choices for managing the overall price offer.This slide relates to the material on pp. 368-369.Instructors Note: This slide corresponds to Exhibit 16-1 on p. 368 Transparency 109. See also Overheads 180-181.Summary OverviewTransporting is the marketing function of moving goods. Transportation provides time and place utility. Transportation adds to the delivered cost of products paid by customers. Because transporting often crosses regional, national, or international borders, governments play an important role by developing transportation systems.Transporting Alternatives: Modes of TransportationRailroads. In the U.S., railroads carry more freight over more miles than any other mode. Railcar shipping is slow and limited to where track is laid but is ideal for many bulk and nonperishable goods.Trucks. Trucks are more expensive than railroads as a shipping alternative but they offer tremendous flexibility for connecting buyers and sellers. Almost 75% of U.S. consumer products travel at least part of the way by truck. In countries with good road systems, trucks are also a fast transportation alternative.Water. Water transportation is the slowest mode, but usually the lowest cost way to ship heavy freight. Water transport is also the only feasible way to ship most internationally traded goods.Discussion Note: In large inland shipping lanes like the Mississippi River, barges loaded with goods are sometimes parked to await the best delivery times. This transporting/storing combination can sometimes reduce total costs.Air. Shipping by airplane is the most expensive transporting mode but also the fastest. While shipping expense is higher some costs are lower (less packaging, inventory, delays, or loss by theft). Further, time-sensitive materials and business documents can well be worth the cost of quick delivery.Pipeline. This is something of a specialty mode, limited to goods like oil and natural gas.Mixed Modes. Combining modes can sometimes save costs. Containerization involves grouping individual items into economical shipping quantities and sealing them in protective containers for shipping to their final location. Piggyback Service loads truck trailers on railcars to provide both speed and flexibility.This slide relates to the material on pp. 255-259. See Overheads 111-114.Summary OverviewBefore industrialization, most stores in the US were general stores which carried anything they could sell in reasonable volume. These were replaced by single-line (limited-line) stores that specialized in a product area and offered a wide assortment in that area. The US market now offers many outlets, each seeking to fill customer needs in a specific way.Other Types of Retailers:Specialty Shops. A specialty shop, a type of conventional limited-line store, is usually small and has a distinct personality or shopping environment. Specialty shops focus on a narrow target market they know well with better service, knowledgeable salespeople, and a unique assortment. This combination generally supports higher prices for products.Department Stores. These are larger stores that are organized into many separate departments and offer many product lines. They average about $17.6 million in annual sales, but the number of department stores and their average sales per store are dropping. Supermarkets. Supermarkets are large stores specializing in groceries with self-service and wide assortments. Supermarkets were the earliest retail form to adopt the mass-merchandising concept -- which says that retailers should offer low prices to get faster turnover and greater sales volume.Discount Houses. This retail form started out by offering wide assortments of name brand goods at 20 to 30% off the list price. Discounters had lower costs -- low rent, less convenient locations, and less service, although many have become respectable today.Mass-Merchandisers. These are large, self-service stores with many departments that emphasize soft goods and staples, with low prices and lower margins to get faster turnover.Supercenters (Hypermarkets). These are very large stores (averaging over 150,000 sq. ft. and 50,000 items) that carry groceries and all kinds of routinely purchased goods and services.Warehouse Clubs. Consumers pay a membership fee to shop in these large, bare-bone facilities that carry homogeneous shopping items.Single-Line Mass-Merchandisers. These stores are called category killers because it is so hard for less-specialized retailers to compete.This slide relates to the material on pp. 270-274. Instructors Note: This slide corresponds to Exhibit 12-1 on p. 271 and Transparency 85. See also Overheads 121-122.

Notes

This slide gives a big-picture view of the major types of wholesalers. There are lots more specialized types, but this will give you a sense of the diversity. Note that a major difference between merchant and agent wholesalers is whether they own the products they sell.

Merchant wholesalers own (take title to) the products they sell. Service merchant wholesalers provide all the wholesaling functions. Limited-function merchant wholesalers provide only some wholesaling functions.

Agent middlemen do not own (take title to) the products they sell. This slide relates to the material on p. 284 and corresponds to Exhibit 12-5 on p. 284 and Transparency 91.

This slide relates to the material on p. 232.Instructors Note: This slide corresponds to Exhibit 10-2 on page 232 and Transparency 16.

Summary Overview

A channel of distribution refers to any series of firms or persons used to move goods from producers to final users.Channel systems can be very short--direct from producer to consumer--or long and complex involving a number of different channel specialists (different types of wholesalers and retailers. The key for understanding the contribution of the channel to better marketing effort is the matching of the best kinds and types of channels for the good or service and the effective management of the channel.

Summary OverviewMarketing Information Systems (MIS) help make information accessible. An MIS is an organized way of continually gathering, accessing, and analyzing information that marketing managers need to make decisions.Understanding MIS: Key Concepts and ConcernsDeveloping Data. The marketing manager should work with the MIS manager in designing what types of data should be included in the system. Although the exact information and questions that will be asked of it may not be known, the general categories of data and information can be identified.Intranet. Many firms even small ones now have their own intranet--a system for linking computers within a company. An intranet works like the Internet.Decision Support System. Some MISs have a decision support system or DSS. A DSS is a computer program that makes it easy for a marketing manager to get and use information while he or she is making decisions. This real time availability helps keep decisions as up-to-date as possible.Search Engine. A search engine is a computer program that helps a marketing manager find information that is needed. Marketing Model. Some DSSs provide managers with the option of even more interactivity. A marketing model is a statement of relationships among marketing variables. It allows a manager to see how answers to questions might change in various what-if situations. Availability. With the growing power of microcomputers and the accompanying PC software, even very small firms can develop an MIS. Availability of technology promises to make more and more firms able to identify changing customer needs quickly.Accessibility. There is a difference between information that is available and information that is readily accessible. Making the information instantly accessible over a computer network can be very useful.This slide relates to the material on pp. 156-158.Instructors Note: This slide corresponds to Exhibit 7-1 on p. 157 and Transparency 60. See also Overheads 75-77.New Product Development ProcessThis CTR corresponds to Figure 9-1 on p. 275 and relates to the discussion on pp. 275-286.Stages in New Product DevelopmentIdea Generation. This stage is the systematic search for new product ideas. Sources for new product ideas include internal sources, customers, competitor's products, distributors & suppliers, and other sources.Screening. This stage focuses on reducing the number of ideas by dropping poor ideas as soon as possible. This helps reduce costs and focus attention more productively.Concept Development and Testing. This stage involves translating ideas into product concepts or detailed versions of the ideas stated in meaningful consumer terms. Concepts are then tested on target consumers.Marketing Strategy. This stage consists of three parts. The first part describes the target market, the second part outlines the product's projected price, distribution, and budget for the first year, the third part describes long-term sales, profit goals, and marketing mix strategy.Business Analysis. This stage reviews the sales, costs, and profit projections for the product to find out if they satisfy overall company objectives.Product Development. This stage involves bringing the product concept into existence as a physical product to ensure that the idea is a workable product.Test Marketing. This is the stage at which the product and marketing program are implemented in one or more realistic market settings.Commercialization. This stage involves actually introducing the new product into the competitive marketplace. In this stage, the company must make decisions involving when to introduce, where, to whom, and how.Summary OverviewMarketing research consists of the procedures used to develop and analyze new information to help marketing managers make decisions. Whereas a MIS or DSS typically makes use of regularly collected recurrent information, marketing research is used to develop unique information to solve a new problem. Marketing research is based upon the principles of the scientific method -- a decision-making approach that focuses on being objective and orderly in testing ideas before accepting them. A key feature of scientific investigation is the development of hypotheses -- educated guesses about likely causes and effects that can be measured objectively to help eliminate unnecessary risk taking in making decisions.The Marketing Research Process1. Defining the Problem. This is the most important and often the most difficult step in the research process. The strategy planning framework of the firm can be useful at this step. A key consideration is to not confuse problems with symptoms.2. Analyzing the Situation. A situation analysis is an informal study of what information is already available in the problem area. At this step it is important to ask colleagues what they know about your problem and to make use of secondary data -- information already gathered for other purposes -- to learn as much as possible about the problem. Developing a research proposal specifying what information will be obtained and how may be appropriate at the end of the situation analysis.3. Getting Problem-Specific Data. Here you plan a formal research project to gather primary data. (Instructors Note: Data collection is covered on the following slide).4. Interpreting the Data. For quantitative research, interpretation is greatly enhanced by use of a computer statistical package such as SPSS/PC+ or SAS.5. Solving the Problem. In this step, you must use what you have learned to take effective action that implements a decision suggested by the research findings.This slide relates to the material on pp. 160-173.Instructors Note: This slide corresponds to Exhibit 7-2 on p. 160 and Transparency 61. See also Overhead 78. This slide and notes materials provide an overview of the research process. Each step is covered further on subsequent slides.Summary OverviewResearchers may need to gather primary and/or secondary data to help solve a problem. Secondary data is available from a number of sources, including internal and external ones. Much secondary data, particularly government information, is relative inexpensive or even free. Also, Internet search engines provide fast and easy access to data. Primary data is developed by the researcher specifically for the current problem and involves some form of observating and/or questioning. Sources of Secondary DataInternal Sources. All companies collect information about their business and much of it can be valuable to the marketing manager. Sales reports, the MIS, purchase orders, and other company documents can supply managers with a great deal of information.External Sources. Many other organizations develop secondary data, including: Libraries and On-line Services. Libraries contain substantial reference materials and usually access to one or more on-line computerized databases designed to search for information quickly. Government. Government data can be useful for estimating the size of markets. Government information is also very inexpensive. Private Companies. Many organizations specialize in developing valuable secondary information. Journals (ex: Sales & Marketing Management, Journal of Global Marketing) can be helpful. Firms like Claritas, Nielsen, and Donnelley Marketing Service can often provide secondary information cheaper than a firm can gather it.Source of Primary DataPrimary data collection also offers several alternatives for obtaining information marketing managers need. Instructors Note: This topic is covered in greater detail on the following slide.This slide relates to the material on pp. 162-165.Instructors Note: This slide corresponds to Exhibit 7-3 on p. 163 and Transparency 62. See also Overhead 79.Test MarketingThis CTR relates to the discussion on pp. 282-284.Test MarketingStandard Test Markets. Under this approach, the company finds a small number of representative test cities, conducts a full marketing campaign in those cities, and then measures and evaluates performance. This provides a real world picture of how the product performs. But there are drawbacks. Standard testing is expensive, long, and tips competitors to company strategy. Controlled Test Markets. This approach uses a research firm that has designated store placement space for their clients. Participating stores receive a fee. Some services like Scantrack (Nielsen) and BehaviorScan (IRI) offer computerized monitoring of individual consumer panels whose television viewing is cross-tabulated with store purchases. Controlled testing is quicker and less expensive than standard testing. Concerns revolve around representativeness of the test markets (small size) and tipping off competitors.Simulated Test Markets. This approach creates a simulated shopping environment by the company or research firm. Consumers are exposed to promotions and then given money to shop with. Purchase patterns are observed and consumers are interviewed afterward by researchers. Simulated test marketing is inexpensive and quick. Representativeness and demand characteristics are concerns and this approach might be used as a pretest for a go-no go decision on further testing.Summary OverviewThe adoption curve shows when different groups accept ideas. Marketers have long observed that the rate of adoption of a new-product idea varies across these different groups. Marketing managers usually vary the promotion effort and message when addressing each group.Adopter CategoriesInnovators. Innovators (3-5%) are the first to buy. Innovators search out product information and rely on impersonal and scientific sources (or other innovators) when making decisions. Early Adopters. Early adopters (10-15%) are well respected by their peers and also often serve as opinion leaders for others. Of all groups, this one has the most contact with salespeople. Because of their influence on others, this group is very important to marketers. High satisfaction among early adopters can aid word-of-mouth information about a product, which is highly credible.Early Majority. The early majority (34%) want to avoid risk and wait to consider a new idea until many early adopters have tried a product and like it. This is a group of deliberate decision makers. They have extensive contact with salespeople, mass media, and early adopter opinion leaders.Late Majority. Whereas the early majority group is deliberate in decision making, the late majority (34%) i