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Mktg Mgmt: Segments, Environments & SWOT

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Zeeshan Ahmad

MARKETING MANAGEMENT BOOK SLIDES 2

Education
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Marketing Management
What IsMarketing “Meeting NeedsProfitability” Marketing is anorganizational function and set of processesfor creating, communicating & delivering value to customers and for managing customerrelationships in waysthat benefit the organization &its stakeholders
What isMarketing Management The art and Scienceof choosing target markets and getting, keepingand growing customers through creating, delivering and communicating superior customer value
Marketing Concept Production Concept Service Concept Selling Concept Product Concept Marketing Concept Holistic Concept Internal Marketing Integrated Marketing Relationship Marketing Performance Marketing
Modern Marketing Every Employeeis a Marketer Internal Communication Experience Concept Green Marketing
FactorsInfluencingMarketing Conc ept Growth of Population Changing Conceptof Family More DisposableIncome More DiscretionaryIncome TechnologyAdvancement Media Credit Facility
Nature OfMarketing It is a legal processby which ownership istransferred It is a system of interacting businessactivities It is a managerial function of organizing and directing businessactivities that facilitates the movement ofgoods from producers to consumers It is a Philosophy based on consumer orientationand satisfaction It hasdual objectives- Profit Makingand Consumer Satisfaction
Marketers are involved with marketing ten types of entities: Services Events Experiences Persons Places Properties Organizations Information Ideas Physical Goods ScopeOf Marketing
Who Markets Marketers and Prospects Eight Demand states are possible Negative Demand Nonexistent Demand Latent Demand Declining Demand Irregular Demand Full Demand Overfull Demand Unwholesome Demand ScopeOf Marketing
Study of Consumerwants andneeds Study of BuyerBehavior Product Planning and development Pricing Policies Distribution Promotion ConsumerSatisfaction Marketing Control ScopeOf Marketing
What isa Market Markets includes both place and region in which buyers and sellers are in free competition with eachother
Classificationof Markets On the basis ofArea On the basis of Time On the basis of Transaction On the basis of Regulation On the basis of volumeof Business On the basis of Natureof Goods
DifferenceBetweenMarketing and S elling Marketing Selling Focuses on Customer Needs Focuses On SellersNeeds Begins before Production Begins after Production Continues After Sales Comes To an End aftersale of Product Philosophy of Business Routine Process Profits through customer satisfaction Profits through Sales Volume Long Term Perspective Short Term Perspective Customer First Product First
Marketing Management Tasks Developing Marketing Strategies and Plan Capturing Marketing Insights Connecting with Customers Building Strong Brands Shaping the Market offerings Delivering Value Communicating Value Creating LongTerm Growth
Marketing Environment Factorswhich affect Marketing Environment:- SocialForces Sociological Factors PsychologicalFactors Anthropological Factors Economic Factors Consumer Competition Price Political Forces Ethical Forces PhysicalForces Technological Forces
Marketing Environmentcontd….. Macro Environment Demographic Factors Economic Factors Competition Social and Cultural Forces Political and LegalForces Technology Micro Environment Market Suppliers Marketing Intermediaries
Environmental Scanning What is theGoal behind Environmental Scanning Technological Environment Political Environment Economic Environment Cultural Environment Demographic Environment
Methodsusedfor Environmental S canning SWOT Analysis Scenario Building Cross Impact Analysis Delphi Method
SWOTANALYSIS A SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a tool used to provide a general or detailed snapshot of a company's health. Think of your SWOTas a tune-up that every business needs periodically to diagnose and fix what’s a problem, what’s on the verge of breaking down, or what’s already broken and needs replacement--so that you can keepthe businesshumming—even better than ithasin the past. SWOToffers professional managers an effective evaluative technique to aid the decision makingprocess. It can not find the solution for you, but it will ensure that issuesare: identified, classified and prioritized clearly, showing the problem interms of key underlying issues.Decision makers can then seethe answer. It's a four-part approach to analyzing a company's overall strategy or the strategy of its businessunits. All four aspects must be considered to implement a long-range plan ofaction.
SWOTANALYSIS Another example is Dell Computer Corp., which is agreat example of how an ITcompany canuseaSWOTanalysisto carve out astrong businessstrategy, according toGlazer. Dell recognized that its strength wasselling directly to consumers and keeping its costs lower than those ofother hardware vendors. Asfor weaknesses,the company acknowledged that it lacked solid dealer relationships. Identifyingopportunities wasan easier task. Dell looked at the marketplace and sawthatcustomers increasingly valued convenience and one-stop shopping and that they knew what they wanted to purchase.
SWOTANALYSIS Dell also sawthe Internet asapowerful marketing tool. On the threats side, Dell realized that competitors like IBM and CompaqComputer Corp. had stronger brand names, which put Dell in aweaker position with dealers. Dell put together abusinessstrategy that included masscustomization and just-in-time manufacturing (letting customers designtheir own computers and custom-building systems). Dell also stuck with its direct salesplan and offered saleson the Internet.
Analyzingthe Macroenvironment Successful companies recognize and respond profitably to unmet needs and trends. Companies could make a fortune if they could solve any of these problems: a cure for cancer; chemical cures for mental diseases; desalinization of seawater; nonfattening, tasty nutritious food; practical electric cars; and affordablehousing. Needsand Trends Atrend is a direction or sequence of events that has some momentum and durability. Trends are more predictable and durable than fads. A trend reveals the shapeof the future and provides manyopportunities. A fad is "unpredictable, short-lived, and without social, economic, and political significance." A company can cash in on a fad, but this is more a matter of luck and good timing than anything else. Megatrends have been described as "large social, economic, political and technological changes [that] are slow to form, and once in place, they influence us for some time— between seven and ten years, or longer."
Identifying the Major Forces Companies and their suppliers, marketing intermediaries, customers, competitors, and publics all operate in a macroenvironment of forces and trends that shapeopportunities and posethreats. Theseforces represent "noncontrollables," which the company must monitor and to which it must respond. In the economic arena, companies and consumers are increasingly affected by globalforces the steep decline of the stock market, its effect on living of people Within the rapidly changing global picture, the firm must monitor six major forces: demographic, economic, social-cultural, natural, technological, andpolitical-legal.
TheDemographicEnvironment Worldwide Population Growth PopulationAgeMix EthnicandOther Markets EducationalGroups HouseholdPatterns GeographicalShiftsin Population
Other Major Macroenvironments Social-Cultural Environment Views of themselves Views of others Views of organizations. Views of society Views of nature. Views of the universe. HIGHPERSISENCEOFCORECUL TURALV ALUES EXISTENCEOFSUBCUL TURES SHIFTSOFSECONDARYCUL TURALV ALUESTHROUGHTIME EconomicEnvironment IncomeDistribution SAVINGS,DEBT,ANDCREDITAVAILABILITY OUTSOURCINGANDFREETRADE
Political-Legal Environment INCREASEIN BUSINESSLEGISLA TION GROWTHOFSPECIAL-INTERESTGROUPS TechnologicalEnvironment Accelerating paceof change INCREASEDREGULATIONOFTECHNOLOGICALCHANGE VARYINGR&D BUDGETS UNLIMITEDOPPORTUNITIESFORINNOVATION Natural Environment Shortage Of Materials IncreasedEnergyCosts ANTI-POLLUTIONPRESSURES ChangingRoleof Government
Introduction General approach Conditions for effective segmenting Basis of segmentation
Introduction Markets consists of buyers &buyers differ in one or morerespects. Wants Purchasing power Geographical location Buying attitudes
CONDITIONS ForEffective Marketing Measurable. Accessibility. Optimum size. Differentiable Actionable
PATTERNSof MarketSegmentation: A) HOMOGENEOUS PREFERENCES: -A market where all the consumershave roughly the same preferences. -Market shows no natural segments -We would predict that existing brands would be similar &cluster in the centre
Contd… B) DIFFUSED PREFERENCES : - At the other extreme consumer preferences may be scattered through out the space. - thatshows consumers vary greatly in their preferences. The first brand to enter the market is likely to position in the centre to appeal to most of the people.
Contd… The second competitor could locate next to the first brand &fight for marketshare OR It could locate in a corner to attract a customer group that was not satisfied with the centre brand.
Contd… C) CLUSTERED PREFERENCES : - the market mightreveal distinct preference clusters called Natural Market Segments.
Contd… The first firm in this market has three options: (a It might position itself in the centre hoping to appeal to all the groups. (Undifferentiated marketing). (b It might position itself in the largest market segment (Concentrated marketing). (c It might develop several brands, each positioned in a different segment. ( Differentiated marketing )
RATIONALEOFMARKETSEGMENTATION Facilitates proper choice of target market. Facilitates tapping of the target market Adapting the offer to the target market. Makes the marketing effort more efficient & economic Helps identify less satisfied segments & concentrate on them Benefits the customers aswell.
BASISOFSEGMENTATION A.ConsumerCharacteristic Approach GEOGRAPHIC : Region : pacific, mountain. City or Metro size: under 5000,above40000. Density: urban, suburban, rural climate :Northern , southern
DEMOGRAPHIC: Age Gender Family size Family life cycle Income Occupation Education Religion Race Nationality
PSYCHOGRAPHIC Social class: upper-upper, lower uppers, upper middles, middle class, working class, upper lowers, lower lowers. Life style : freaky, trendy, ethnic Personality : Dominance, Authoritarian, ambitious
B.ConsumerResponse Approach . Benefit response – T aspects of efficiency, prestige, durability, economy or resale value. . Usage Response- Heavy, Medium, light and non-user. . Loyalty response- Most loyal, moderately loyal,and fickle-minded.
Conti… Occasion response- regular occasion,special occasion. User status - non user, ex user, potential user, first time user, regular user
Target Marketing Target market is one which the marketing efforts are directed towards. The factors that play significant role in the process of targeting are: 1.Segment’s attractiveness 2.Keeping competitors at distance 3.The company objectives and resources
Alternative Market TargetingStrategies Undifferentiated Marketing: Entire market servewith one product. Example : American carmanufacturers Differentiated Marketing: Local market with variety of products. Concentrated Marketing : focuses on only one or a few segments.
Strategic PlanningIn Marketing Strategicplanningisthe formal considerationof an organization'sfuture course.Allstrategicplanningdealswith at least oneof three key questions: "What dowe do?" "Forwhomdowe do it?" "Howdowe excel?“ CorporateandDivisionStrategic Planning Definingthe corporatemission Establishingstrategicbusiness units Assigningresourcesto each SBU Assessinggrowthopportunities
Defining Corporate Mission: Todefine its mission, a company should address Peter Drucker's classic questions:21 What is our business? Who is the customer? What is of value to the customer? What will our businessbe?What should our businessbe?Thesesimple- sounding questions are among the most difficult a company willever have to answer. Good mission statements have three major characteristics.First, they focus on a limited number ofgoals. Second,mission statements stress the company's major policies and values. Theynarrow the range of individual discretion sothat employees act consistently on important issues. Third, they define the major competitive sphereswithin which the company will operate:
Establishingstrategic businessunits: Companies often define their businessesin terms of products: Theyare in the "auto business"or the "clothing business." But Levitt argues that market definitions of a businessare superior to productdefinitions. Large companies normally manage quite different businesses,each requiring its own strategy. General Electric classified its businesses into 49 strategic businessunits (SBUs).AnSBUhasthree characteristics: It is a single businessor collection of related businessesthat canbe planned separately from the rest of thecompany. It hasits own set ofcompetitors. It hasa manager who isresponsiblefor strategic planning andprofit performance and who controls most of the factors affectingprofit.
AssigningResourcesto eachSBU:Oncethe organization defines its SBU’sthen they must decide how to allocate resourcestoeachSBU. GE/McKinseyclassifies eachSBU’saccording to the extend of competitive advantage and attractiveness of theindustry Another model the BCG’sGrowth ShareMatrix usesrelative shareand annual rate of market growth asa criteria to make investment decisions Assessinggrowth opportunities: Assessinggrowth opportunities involves planning new businesses,downsizing, or terminating older businesses.Thecompany's plans for existing businessesallow it to project total salesand profits. If there is a gap between future desired salesand projected sales,corporate management will have to develop or acquire new businessesto fill it.
BusinessUnit Strategic Planning Marketing Opportunity Analysis(MOA) Can the benefits be articulated to a target market? Can the target market be reached with cost-effective media and trade channels? Does the company have the critical capabilities to deliver the customer benefits? Canthe company deliver thesebenefits better than any actual or potential competitors? Will the rate of return meet the required threshold of investment?
4-49 Opportunity andThreat Matrices
BusinessUnit Strategic Planning Internal EnvironmentalAnalysis (Strength/WeaknessAnalysis) Goal Formation Strategic Formulation Strategy
BusinessUnit Strategic Planning Porter’s Generic Strategies Overall cost leadership Differentiation Focus
Travelocity’s Web site helps the consumer plan the whole vacation – flights, lodging, and car rental.com
Operational Effectiveness and Strategy Strategic group Strategic alliances BusinessUnit Strategic Planning 4-53
BusinessUnit Strategic Planning Marketing Alliances Product or service alliances Promotional alliances Logistical alliances Pricing collaborations Partner Relationship Management, PRM Program Formulation and Implementation 4-54
BusinessUnit Strategic Planning Feedback and Control 4-55
TheMarketing Process Steps in the Planning Process The marketing process Analyzing Market Opportunities Developing Marketing Strategies Planning Marketing Programs Managing the Marketing Effort Annual-plan control Profitability control Strategic control 4-56
Figure 4-10: Factors Influencing Company Marketing Strategy
ProductPlanning:TheNature andContentsof aMarketing Plan Contents of the Marketing Plan Executive Summary Current Marketing Situation Opportunity and issue analysis Objectives Marketing strategy Action programs Financial projections Implementation controls
Sample Marketing Plan: Sonic Personal Digital Assistant Current Marketing Situation Opportunity and IssueAnalysis Objectives Action Programs Financial Projections ProductPlanning:TheNature andContentsof aMarketing Plan 4-59
Implementation Controls Marketing Strategy Positioning Product Management Pricing Distribution Marketing Communications Marketing Research 4-60 ProductPlanning:TheNature andContentsof aMarketing Plan
INTENSIVE GROWTH Corporate management's first course of action should be a review of opportunities for improving existing businesses. Ansoff proposed a useful framework for detecting new intensive growth opportunities called a "product-market expansion grid. The company first considers whether it could gain more market share with its current products in their current markets (market-penetration strategy). Next it considers whether it can find or develop new markets for its current products (market-development strategy). Then it considers whether it can develop new products of potential interest to its current markets (product- development strategy). Later it will also review opportunities to develop new products for new markets (diversification strategy.
INTEGRATIVEGROWTHbackward, forward, or horizontal integration within its industry. For example, drug company giant Merck hasgone beyond just developing and selling ethical pharmaceuticals. It purchasedMedco, a mail-orderpharmaceutical distributor in 1993, formed a joint venture with DuPont to establish more basic research, and another joint venture with Johnson& Johnsonto bring someof its ethical products into the over-the- counter market. Media companies have long reaped the benefits of integrative growth. Hereis how one businesswriter explains the potentialthat NBCcould reap from its merger with Vivendi Universal Entertainment to become NBCUniversal. Admittedly a far-fetched example, it gets acrossthe possibilities inherent in this growth strategy
DIVERSIFICATIONGROWTH:Diversification growth makes sensewhen good opportunities can be found outside the present businesses.Agood opportunity is one in which the industry is highly attractive and the company hasthe right mix of businessstrengths tobe successful. Forexample, from its origins asan animated film producer, Walt DisneyCompany hasmoved into licensing characters for merchandised goods, entering the broadcast industry with its own DisneyChannel aswellas ABCand ESPNacquisitions, and developed themeparks and vacation and resortproperties
DOWNSIZINGANDDIVESTINGOLDERBUSINESSES Companies must not only develop new businesses;they must also carefully prune, harvest, or divest tired old businessesin order to release needed resourcesand reduce costs. Weak businessesrequire a disproportionate amount of managerial attention. Managers should focus on growth opportunities, and not fritteraway energy and resourcestrying to salvage hemorrhagingbusinesses. Heinzsold its 9-Livesand Kibbles 'n Bits pet food,StarKist tuna, College Inn broth, and All-in-One baby formulas to Del Monte in 2002 after years of stagnant sales, to allow it to focus on its core brands in ketchup, sauces,and frozen foods
Market Targeting Once the firm has identified its market- segment opportunities, it has to decide how many and which ones to target. Marketers are increasingly combining several variables in an effort to identify smaller, better-defined target groups. Thus, a bank may not only identify a group of wealthy retired adults, but within that group distinguish several segments depending on current income, assets, savings, and risk preferences. This has led some market researchers to advocate a needs-based market segmentation approach.
Effective Segmentation Criteria Not all segmentation schemes are useful. For example, table salt buyers could be divided into blond and brunette customers, but hair color is undoubtedly irrelevant to the purchase of salt. To be useful, market segments must rate favorably on five key criteria: Measurable. The size, purchasing power, and characteristics of the segments can bemeasured. Substantial. The segments are large and profitable enough to serve. A segment should be the largest possible homogeneous group worth going after with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars for people who are under four feettall. Accessible. The segments can be effectively reached and served. Differentiable. The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs. If married and unmarried women respond similarly to a sale on perfume, they do not constitute separate segments. Actionable. Effective programs can be formulated for attracting and serving the segments
Evaluating and Selecting the MarketSegments In evaluating different market segments, the firm must look at two factors: the segment's overall attractiveness and thecompany's objectives and resources. After evaluating different segments, the company can consider five patterns of target market selection: Single-Segment Concentration Selective Specialization Product Specialization MARKET SPECIALIZATION Full market Coverage MANAGING MULTIPLE SEGMENTS Differentiated marketing Cost
Product specialization M1 M2 M3 P1 P2 P3 Selective specialization M1 M2 M3 P1 P2 P3 Full market coverage M1 M2 M3 P1 P2 P3 Market specialization M1 M2 M3 P1 P2 P3 P1 P2 P3 Single-segment concentration M1 M2 M3 P = Product M = Market
SegmentbySegmentInvasionPlan A company would be wise to enter one segment ata time. Competitors must not know to what segment (s) the firm will move next. Segment-by-segment invasion plans. Three firms, A, B, and C,have specialized in adapting computer systems to the needsof airlines, railroads, and truckingcompanies. CompanyAmeets all the computer needsof airlines. Company Bsells large computer systemsto all three transportation sectors. Company Csells personal computers to trucking companies
Customer Groups Railroads Truckers Airlines Large computers Product Varieties Personal computers Mid-size computers Company B Company C Company A
Whereshould company Cmovenext?Arrows havebeenaddedto the chart to show the planned sequenceof segment invasions. CompanyCwill next offer midsize computers to trucking companies. Then,to allay company B's concernabout losing somelarge computer businesswith trucking companies, C'snext move will beto sell personal computers torailroads. Later, Cwill offer midsize computers to railroads. Finally, it may launch a full-scale attack on company B'slarge computer position in trucking companies. Of course,C'shidden planned movesare provisional in that much dependson competitors' segment movesand responses. Unfortunately,, too many companies fail to develop a long-term, invasion, plan. PepsiCois an exception. It first attacked Coca-Colain the grocery market, then in the vending-machine market, then in the fast- food market, and soon. Acompany's invasion plans canbethwarted when it confronts blocked markets. Theproblem of entering blocked markets calls for a megamarketing approach. Megamarketing is the strategic coordination of economic,psychological, political, and public relations skills, to gain the cooperation of a number of parties in order to enter or operate in a given market. Pepsiusedmegamarketing to enter the Indianmarket.
Consumer behavior is the study of how individuals, groups,and organizations select, buy, use, and dispose of goods, services, ideas, or experiencesto satisfy their needsandwants. Studying consumers provides cluesfor improving or introducing products or services, setting prices, devisingchannels, crafting messages,and developing other marketing activities.
HowAndWhyConsumers Buy Model of Customer Buyer Behavior
FactorsAffectingConsumerBehavior: Culture Subculture • Groupsof people withshared value systems based on common life experiences. • Hispanic Consumers • African American Consumers • AsianAmerican Consumers • Mature Consumers Culture is the Most BasicCauseof aPerson'sWants and Behavior. The fundamental determinant of a person’s wants and behaviors acquired through socialization processes with family and other key institutions.
SocialClass • Society’s relatively permanent & ordered divisions whose members share similar values, interests, andbehavior. • MeasuredbyaCombination of:Occupation, Income, Education, Wealth and Other Variables. FactorsAffectingConsumerBehavior: Culture
Subcultures Nationalities: Indian Religions: Hindu, Sikh,Muslim, Geographic regions: East,West, North, South Special interests: Business,Service,Army
Roles and Status Most Important Consumer Buying Organization Groups Membership, Reference, or Aspirational Family
Characteristicsof SocialClasses Within aclass,people tend to behavealike. S ocial class conveys perceptions of inferior or superior position. Class may be indicated by a cluster of variables (occupation, income, wealth). Classdesignation is mobile over time. Upper uppers, Lower uppers, Upper middles, Middle class, Upper lowers, Lower lowers, Working class
SocialFactors Reference groups Social roles Statuses Family
Family Family of Orientation Religion Politics Economics Family of Procreation Everyday buying behavior
ReferenceGroups Membership: groups having direct influence onperson Primary: withwhom interaction is fairly continuously & informally e.g. family,friend Secondary: with whom interaction is formal &requires less continuous interaction Aspirational: the group which person hopes tojoin Dissociative: the group which personrejects
ConsumerBuying Process
Problem Recognition (awareness of need)-- The buying processstarts when the buyer recognizes a problem or need. Theneed can be triggered by internal or external stimuli. With an internal stimulus, one of the person's normal needs—hunger, thirst, sex—rises to a threshold level and becomes a drive; or a need can be aroused by an external stimulus difference between the desired state and the actual condition. Deficit inassortment of products. Hunger--Food. Hunger stimulates your need to eat. Canbe stimulated by the marketer through product information--did not know you were deficient? I.E.,seea commercial for a new pair ofshoes,stimulates your recognition that you need a new pair ofshoes.
Information search-- Anaroused consumerwill beinclined to searchfor moreinformation. Wecan distinguish between two levels of arousal. Themilder search state is called heightened attention. At this level a personsimply becomesmore receptive to information about aproduct Internal search,memory. External searchif you need more information. Friendsand relatives (word of mouth). Marketer dominated sources;comparisonshopping; public sourcesetc. A successfulinformation search leavesa buyer withpossible alternatives, the evokedset. Hungry, want to go out and eat,evoked set is chinese food Turkish food KFC,PizzaHut etc
Evaluation of Alternatives— How doesthe consumerprocesscompetitive brand information and make a final value judgment? No single processis usedby all consumersor by one consumer in all buying situations. Thereare several processes,the most current models of which seethe processas cognitively oriented. That is, they seethe consumerasforming judgments largely on a consciousand rational basis. Needto establish criteria for evaluation, features the buyer wants or doesnot want. Rank/weight alternatives or resumesearch.Maydecide that you want to eat something spicy, Indian gets highest rank etc. If not satisfied with your choice then return to the searchphase.Can you think of another restaurant? Lookin theyellow pagesetc. Information from different sourcesmay be treateddifferently. Marketers try to influence by "framing"alternatives.
Purchasedecision--Choose buying alternative, includes product, package,store, method of purchaseetc.
Post-PurchaseEvaluation— After the purchase, the consumer might experience dissonancethat stems from noticing certain disquieting features or hearing favorable things about other brands, and will be alert to information that supports his or her decision. Marketing communications should supply beliefs and evaluations that reinforce the consumer'schoice and help him or her feel good about thebrand. Outcome: Satisfaction or Dissatisfaction. CognitiveDissonance,have you made the right decision. Thiscan be reduced by warranties, after salescommunication etc. After eating an indian meal, may think that really you wanted a chinese meal instead.
ProductMix Theproduct mix is the set of all products offered for sale by a company. Bajaj Electricals a household name in India, hasalmost ninety products in its portfolio ranging from low value items like bulbs to high priced consumer durables like mixers and luminaries and lighting projects .The number of products carried by a firm at a given point of time is called its product mix.
Constituentsof AProductMix Product Line: A set of related products sold by a single company. Depth : measures the number of products that are offered within each product line. Satisfies several consumer segments for the same product, maximizes shelf space, discourages competitors, covers a rangeof prices and sustains dealer support. High cost in inventory etc. Width : measures the number of product lines a company offers. Enables a firm to diversify products, appeals to different consumer needs and encourages one stop shopping. Length :It refers to the total number of Items Produced by a company in all the product lines.
ProductLineDecision Factors on which the decision to change a product depends are: Changes in Market Demands: Populationgrowth, Increase in purchasing power. Competition: Firm may need to counter Competition by adding a new product Marketing Influences: Product may be added to Increase sales (New Market or expanding present ones) second, to better use of resources i.e. salesmen, warehouse or branch office. Product influence: Increase Capacity will leadto reduction in NET PRODUCTION COST. Financial Influences: May Add or Drop a product because of Financial Condition of a company.
ProductLineStrategies Expansion Of Product Mix: Increasing the number of lines or adding depth to a existing line can help expansion of product mix. Contracting or Dropping a product: Dropping a product is difficult, even if pruning of the product the product fails the a company may drop a product. Alteration of Existing products: Alteration in design, shape, color, flavor, texture or packaging may infuse a life in theproduct. e.g. SX4 Diesel. Development of New Uses of Existing Products: e.g. AMWAYproducts used for different purposes.
ProductPositioning Components Of Product Positioning Perceptual Mapping Product Benefits Segmentation Product Categories
PerceptualMapping (Product Positioning) This is Marketing research technique in which consumer's views about a product are traced orplotted (mapped) on achart. Respondents are asked questions about their experience with the product in terms of itsperformance, packaging, price, size, etc. Theses qualitative answers are transferred to a chart (called a perceptual map) using a suitable scale(such as theLikert scale), and the results are employed in improving the product orin developing a new one
ProductBenefit (ProductPositioning) Benefits of a product facilitateconsumers in decision making and reduce the uncertainty in their minds. They encapsulate its identity, origin, specificity and guarantee. Product Benefit can be converted to brand benefits to gain the following strategic relevance in marketing: Brand aims to segment the market Brand helps in brandbuilding Brand helps in innovations
Segmentation(Product Positioning) An Understanding of market dimensions to the marketing manager is an importantfactor in product management. In market segmentation, consumersare grouped in terms of the market dimensions and then the firm attempts to match the needsof different consumer group through compatible market inputs encompassingPRODUCTPRICEPLACE ANDPROMOTION
ProductCategories(Product Positioning) The nature of a product is found tohave considerable impact on the method of productpositioning. Consumer Goods:Products that are purchasedfor consumption by the average consumer.Alternatively called final goods, consumer goods are the end result of production and manufacturing and are what a consumer will seeon the store shelf. Clothing, food, automobiles and jewelry are all examples of consumer goods. Basicmaterials suchascopper are not considered consumer goods becausethey must be transformed into usableproducts. Industrial goods: products or servicespurchased for usein the production of other goods or services, in the operation of a business,or for resale to other consumers. Industrial products include heavy machinery, raw materials, typewriters, tools,and cashregisters
ProductMarket Mix Strategy - Ansoff drew up a growth vector matrix, describing a combination of a firm’s activities in current and new market, with existing and new products. Theproduct-market mix strategy is illustrated in diagrambelow:
Current productsandcurrent market: market penetration Market penetration: the firmseeksto: Maintain or increaseits shareof the current market with current products. Securedominance of growth markets. Restructure a mature market by driving outcompetitors. Increaseusageby existing customer. Presentproductsandnew markets:market development New geographical areas and export markets Different package sizesfor food and other domestic itemssothat those who buy in bulk and small quantities are cateredfor. New distribution channels to attractnew customers (e.g. organic foods sold in supermarkets not just specialistshops) Differential pricing policies to attract different types of customer and create new market segments.
New productsto presentmarkets:productdevelopment Advantage –Product developmentforcescompetition to innovate, new comersto the market might bediscouraged. Thedrawbacks include the expenseand the risk. New productsandnewmarkets: diversification occurs when a company decides to make new products for new markets. It has to have a clear idea of what it hopes to gain from diversification. There are two types of diversification, related and unrelateddiversification. Growth- new products and new markets should be selected which offer prospects for growth, which theexisting product market mix doesnot. Investingsurplus– funds not required for other expansion needs: but thefunds could be returned to shareholders. Thefirmsstrengthsmatchesthe opportunityif – outstanding new products have beendeveloped by the company’s research and development department. Theprofit opportunities from diversification arehigh.
Relateddiversification Horizontal integration refers to ‘development intoactivities which are competitive with or directly complementary to a company’s present activities.’ Sonywith its play station started to compete in computer games. Vertical integration occurswhena companybecomesitsown; .a supplier of raw materials, components or services(backward vertical integration) .b Distributor or salesagent (forward vertical integration), for example: where a manufacturer of synthetic yarn begins toproduce shirts from the yarn instead of selling it to other shirt manufacturers. Advantageof vertical integration a. Tosecuresupply of components or raw materials with more control. Supplier bargaining power isreduced. .b Strengthen the relationships and contacts of the manufacturer with the final consumer of the product. .c Win a share of the higherprofits. .d Pursuea differentiation strategy moreeffectively. .e Raisebarriers to entry.
Disadvantagesof vertical integration a. Over-concentration - Acompany places too many bets on ‘a same end-market product’ b. Thefirm fails to benefit from any economiesof scaleor technical advancesin the industry to which it has diversified. This is why in the publishing industry most printing is subcontracted to the specialist printing firms, who can work machinery to capacity by doing work for manyfirms. Unrelated diversification - conglomeratediversification Unrelated diversification or conglomerate diversification is very unfashionable now – but it has been a key strategy for many companies in Asia.
Advantagesof conglomerate diversification a. Riskspreading – entering new products into new markets offers protection against failure of current products andmarkets. b.High profit opportunities –Ability to move into high growth profitable industries especially important if current industry is indecline. c. Escape– from the present businessif competition is toohot! d. Better accessto capital markets. e.No other way to grow – expansion in the existing industry might lead to monopoly and governmentinvestigation f. Usesurplus cash g. Exploit under-utilized resources h. Obtain cashor other financialadvantages i. Usea company’s image reputation in one market to buildproducts and servicesin another market.
Disadvantages of conglomeratediversification a. Thedilution of shareholders earnings if diversification is intogrowth industries with high P/Eratios. b.Lackof a common identity and purpose in a conglomerate organization. Aconglomerate will besuccessfulonly if it hashigh quality of management and financial ability at head office where diverse operations are brought together. c. Failure in one businesswill drag down therest. d. Lackof managementexperience e.Nogood for shareholders – shareholders can spread risk by buying sharesin companiesin different industries.
MARKETINGMIX Product Price Place Promotion
Marketing Mix Determination PRODUCT WHAT SIZE SHAPE ANDTHE FEATURE’s SHOULD THE PRODUCT HAVE. HOW SHOULD ITBE PACKAGED WHAT ASPECT OF SERVICEIS MOST IMPORTANT TO CONSUMERS HOW IT IS TO BE DESIGNED
Marketing Mix Determination PRICE PRICE SENSITIVITY OF CONSUMERS PRICE AWARENESS NEW PRODUCTLAUNCH LIST PRICE DISCOUNTS,ALLOWANCES AND PAYMENT METHODS
Marketing Mix Determination PLACE DISTRIBUTION PROCESS RELATED ISSUES CONSUMER’S LOYALTY. WHAT TYPE OF RETAILOUTLET SHOULD SELL. LOCATION AND IN WHAT NUMBERS
Marketing Mix Determination PROMOTION ADVERTISING PERSONAL SELLING PUBLICITY DIRECT MARKETING
Marketing Mix Determination PROMOTION IDENTIFY TARGET MARKET REGION SPECIFIC CONSUMER ATTENTION COLOUR AND CONTRAST SIZE MEDIUM EXPENDITURE
Packaging,Labeling, Warranties & Guarantees
Packagingisdefined asall the activities of designingand producingthe container for a product Primary Package S econdary Package Shipping Package FactorsContributing to growing useof packaging: SELFSERVICE CONSUMERAFFLUENCE COMPANY& BRANDIMAGE INNOVATIONOPPURTUNITY
labeling Label identifies the product or brand Grade the Product Promote- Through attractive graphics Describe the product
Warranties and Guarantees Warranties are formal statements of expected product performance by the manufacturer Extended warranties Guarantee:Apromiseor an assurance,especiallyonegivenin writing, that attests to the qualityor durability of a productor service Apledge that somethingwill be performed in a specifiedmanner
Themeaningof a product 121 A product is a set of tangible and intangible attributes, which may include packaging, color, price, quality and brand, plusthe seller’sreputation and services. Consumers are buying want-satisfaction in the form of the benefits they expectto receivefrom the product.
Contd… Anything that canbe offered to amarket for attention, acquisition, useor consumption and which createsutility Physical objects, services, events, persons, places, organizations, ideas or mixes of all theseentities Ex.Acar, aDVDplayer, avacation, Coffee, investment servicesetc. 122
Attributes comprisinga product Services Company’s reputation Color Warranty Design Packaging Brand Price Physical Traits Quality Product 123
LEVELSOFPRODUCT 124 Corebenefit: What consumerreally wantsto buy expectations of the customer Actualbenefit: the corebenefit turned into product. features, design,packaging,quality level, brand name…(allare carefullycombinedto deliver the core benefit)
Augmentedproduct: 125 Delivery and credit, Installation, Warranty, After-sale service offering additional consumer services and benefits. consumers see product as complex bundles of benefits that satisfy their needs. When developing products, marketers first must identify the core consumer needs the product will satisfy. They must then design the actual product and find ways to augment it in order to create the bundle of benefits that will provide the most satisfying customer experience…
CLASSIFICATION OFPRODUCT ConsumerProducts Convenience goods Shoppinggoods Specialty goods Unsoughtgoods Industrial Products Raw Materials Fabricating materials and parts Installations Accessoryequipment Operating supplies 126
Consumer products: Bought by the final consumer forpersonal consumption. Industrial product: Bought by the individuals or organizations forthe further processing or for usein conducting a business. …adeskpurchased by aperson for personal useis a consumer product, the samebought by an entrepreneur for his industry is an industrialproduct, …. 127
Consumer products Convenienceproducts Frequently purchased products. Low customer involvement. Low price more outlets. Masspromotion from producer Ex.detergent, toothpaste, magazinesetc. b) Shopping products Lessfrequently purchased . Much planning andshopping effort, comparison of brands on price quality andstyle. Higher price fewer outlets. Advertising andpersonnel selling by both producer andreseller. Ex.Television, fridge etc. 128
c) Specialtyproducts Strong brand preference and loyalty , special purchase effort, little comparison. Low price sensitive. High price,one or afew outlets in alocality only. Carefully targeted promotion by both producer andreseller. ex. Luxury goods like Rolexwatches, BMW carsetc d) Unsought products Little product awareness,(if aware, negative interest or little) Price and distribution varies.Aggressive advertising and personal selling by producer andreseller. ex. Life insurance etc. 129
Industrial Products Materials andparts: Rawmaterials (farm and natural): wheat, cotton,,fish petroleum etc. Manufactured parts &materials: iron, yarn, wires, cement, tires, castingsetc. b) Capital items: Industrial items that aid in buyers productions or operations. Major purchases suchasbuildings & fixed equipment (generators, super computers). Accessories like hand tools, fax machines, desks,computersetc. 130
a) Supplies and services: Operating supplies: lubricants, coal, paper, pencil Repair and maintenance items: paint, nail,brooms. Supplies are the convenience products of industrial field. b) Services: Maintenance and repair services: window cleaning, computer repair etc Advisory services: Legal,Management consulting,, advertising. Servicesare supplied under contract 131
New ProductDevelopment Process Role Product Mix Matches the changing environmental conditions. CompareNew and DevelopingSegmentsof the Market Fillingexcesscapacity AchievingLongterm growth and profit.
New ProductDevelopment Process Idea Generation SalesPersonnel Marketing Personnel R& D Team TopManagement executives Production department EmployeeSuggestions
Idea Screening Theobjectisto eliminate unsound conceptsprior to devotingresourcesto them. Thescreenersshouldaskseveral questions: Will the customerin the target market benefit from the product? What isthe sizeandgrowth forecastsof the market segment/targetmarket? What are the industrysalesandmarket trends(idea isbased on)? Isit technicallyfeasibleto manufacture the product? Will the productbeprofitable when manufacturedanddeliveredto the customerat the target price?
ConceptDevelopmentand Testing Developthe marketing andengineering details Investigateintellectual property issuesandsearchpatent data bases Whoisthe target market andwhoisthe decisionmaker in the purchasingprocess? What productfeatures mustthe product incorporate? What benefitswill the productprovide? Howwill consumersreact to the product? Howwill the productbeproducedmostcost effectively? Provefeasibility throughvirtual computeraidedrendering, andrapid prototyping What will it costto produceit? Testingthe Conceptbyaskinga sampleof prospective customerswhat they thinkof the idea.
BusinessAnalysis Estimatelikelysellingpricebaseduponcompetition andcustomer feedback Estimatesalesvolumebaseduponsizeof market and suchtoolsasthe Fourt-Woodlockequation Estimateprofitability andbreak-even point
Beta TestingandMarket Testing Producea physicalprototype or mock- up Testthe product(and its packaging)in typical usagesituations Conductfocusgroupcustomer interviewsor introduceat trade show Make adjustmentswherenecessary Producean initial runof the product andsellit in a test market area to determine customeracceptance
TechnicalImplementation New program initiation FinalizeQuality management system Resourceestimation Requirement publication Publishtechnicalcommunicationssuchas data sheets Engineeringoperations planning Department scheduling Suppliercollaboration Logisticsplan Resourceplan publication Program review and monitoring Contingencies- what-if planning
Commercialization Launchthe product Produceandplace advertisementsandother promotions Fillthe distribution pipelinewith product Criticalpath analysisis mostusefulat this stage
ReasonsForAddingANew Product ExcessCapacityAsareason Profit asa criterion of OptimumProduct-Line Diversification asresponse to change Company’sStrong point Forward-Backward integration
AdoptionProcess FiveStages Awareness-Theconsumerbecomesaware of the innovationbut lacks information about it. Interest-Theconsumerisstimulated to seekinformation aboutthe innovation. Evaluation-Theconsumerconsiderswhether to try the innovation. Trial-Theconsumertries the innovationto improvehisorherestimate of itsvalue. Adoption-Theconsumerdecidesto makefull andregularuseof the innovation.
ProductLife Cycle Productlife cyclemanagement (or PLCM)is the successionof strategies usedby businessmanagement asa productgoes through its life cycle.Theconditionsin whicha productissold(advertising, saturation) changesovertime andmustbe managedasit movesthrough its succession of stages.
Market introduction stage costs are veryhigh slow sales volumes to start little or no competition demand has tobe created customers have to be prompted to try the product makes no money at this stage
Growth stage costs reduceddue to economies ofscale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market increased competition leads to price decreases
Maturity stage costs are lowered asa result of productionvolumes increasing and experience curve effects • salesvolume peaksandmarket saturation isreached • increasein competitorsentering the market • pricestend to drop duetothe proliferation of competing products • brand differentiation andfeature diversification is emphasized to maintain or increase marketshare Industrial profits godown
Saturation anddecline stage costs become counter-optimal salesvolume decline or stabilize prices, profitability diminish profit becomesmore a challenge of
Branding What isa Brand “Aname, term, sign,symbol,or designor a combinationof these, intendedto identifythe goods& servicesof oneselleror groupof sellers& to differentiate themfrom thoseof the competitors.” Givesa visualidentificationinthe mindsof customers.
Abrandcandeliver upto four levelsof meaning: Attributes. Abrandfirst bringsto mind certain productattributes. e.g. Mercedes Benefits. Customersdonot buyattributes, they buybenefits. Values. Abrandalsosayssomethingabout the buyers' values.ThusMercedesbuyers value highperformance, safety and prestige. Personality. Abrandalsoprojectsa personality. Motivation researchers sometimesask,'If this brandwere a person, what kindof personwould it be?
BrandEquity Brandsvary in the amount of power and value they havein the marketplace Somebrandscommanda highdegreeof brand loyalty. The world's top brandsincludesuch superpowersasMcDonald's, Coca-Cola, Disney,Kodak,SonyandMercedes-Benz Brand equity refersto the marketing effects andoutcomesthat accrueto a productwith its brand name comparedwith thosethat would accrueif the sameproductdidnot havethe brand name Thissuggeststhat marketing strategy should focusonextendingloyal customer lifetime -value, with brand managementservingas an essentialmarketing tool.
BrandElementChoice Criteria Memorability: Meaningfulness: Likability: Transferability: Amazon, Exxon Adaptability: logos and characters can be given a new look or a new design to make them appear more modern and relevant
BrandingDecision Fourgeneral strategies are often used Individual Names: Procter& Gamble(INDIA) hasseveral individual brandsin different productcategories,Vicks,Ariel andtide, Head& ShouldersandPampers.KingfisherAirlines, after acquiringAir Deccan,a low – costairline, modifiedthe brand nameto SimpliflyDeccan,andretained it asa separate brand, partly to protect the equity ofkingfisher. Blanket Familynames: Thispolicyisfollowed byTata. The blanket family salt, tea, coffee, automobiles, andsteel. Developmentcostare lower with blanket names because there’snoneedto run“name”researchor spendheavilyon advertising to create recognition. Salesof the new product are likely to bestrongif the manufacturer’s name isgood. Corporate– Image.
BrandingDecision Fourgeneral strategies are often used Separate family names for the product : TheAditya Birla Group in India follows this policy to a great extent. It usesseparate family names for its various products. Hindalco for aluminum. UltraTechfor cement, Grasim for suitings. Corporate names combined with individual product names: Kellogg combines corporate and individual names in Kellogg’s RiceKrispies, Kellogg’s Raisin Bran, and Kellogg’s CornFlakes,asdo Honda, Sony and Hewlett – Packard for their products. Thecompany name legitimizes, and the individual name individualizes, the newproduct.
PromotionMix Thespecificmixof advertising,personalselling,salespromotionand publicrelationsthat a companyusesto pursueits advertising and marketing objectives
PromotionMix Advertising:Anypaid form of non-personalpresentation and promotionof ideas,goodsor servicesbyan identified sponsor Personalselling.Oral presentationina conversationwith oneor moreprospectivepurchasersfor the purposeof makingsalesand buildingcustomer relationships. Salespromotion.Short-term incentivesto encouragethe purchaseor saleof a productor service. Publicrelations. Buildinggoodrelationsbydoingfavorable publicity,buildingupa goodcorporate image, andhandlingor headingoff unfavorablerumors,storiesand events.
AdvantagesandDisadvantagesof Each Element of the Promotional Mix Mix Element Advantages Disadvantages Advertising • Good for building awareness • Wide reach • Repetition of main brandand product positioning helpsbuild customer trust • Impersonal - cannot answer alla customer's questions • Not goodat getting customersto make afinal purchasingdecision PersonalSelling • Highly interactive • Excellent for communicating complex / detailed product information andfeatures • Relationships canbe built up • Costly- employing asales force hasmany hidden costsin addition to wages • Not suitable if there are thousands of importantbuyers SalesPromotion • Canstimulate quick increasesin salesby targeting promotional incentives on particularproducts • Good short term tacticaltool • If used over the long-term, customers may get used to the effect • Toomuch promotion maydamage the brandimage PublicRelations • Often seenasmore "credible" - since the messageseemsto be coming from athird party (e.g. magazine, newspaper) • Cheapway of reachingmany customers • Riskof losing control -cannot always control what other people write orsayabout your
Developing Price Strategies and Programs
Sell value, not price. Kotler on Marketing
Nine Price-Quality Strategies
PriceShouldAlignwith Value
Settingthe Price Step 1: Selecting the pricingobjective Survival Maximize current profits Maximize their marketshare Market-penetration pricing Best when: Market is highly price-sensitive, and alow price stimulates market growth, Production and distribution costs fallwithin accumulated production experience,and Low price discourages actual andpotential competition
Settingthe Price Step 2: Determining Demand Price sensitivity Total Costof Ownership(TCO)
Settingthe Price Tom Nagle offers this list of factorsassociated with lower pricesensitivity Theproduct is more distinctive Buyers are lessaware of substitutes Buyers cannot easily compare the quality ofsubstitutes Theexpenditure is asmaller part of the buyer’s totalincome Theexpenditure issmallcomparedto the total costof the end product Part of thecost is borne by another party Theproduct isusedin conjunction with assetspreviously bought Theproduct isassumedto havemore quality, prestige,or exclusiveness Buyers cannot store the product
1 6-1 63 Settingthe Price Estimating DemandCurves Price Elasticity of Demand Inelastic Elastic Price indifference band
Settingthe Price Step 3: Estimating Cost Types of Costand Levelsof Production Fixed costs (overhead) Variable cost Total cost Average cost Accumulated Production Experience curve (Learning curve)
1 6-1 65 Settingthe Price Differentiated Marketing Offers Activity-based cost(ABC) accounting Target costing Step 4: AnalyzingCompetitors’ Cost, Prices, and Offers
Settingthe Price Step 5: Selecting aPricing Method Markup Pricing Unit Cost= variable cost +(fixed cost/unit sales) Markup price Markup price= unit cost/ (1 – desired returnon sales) Target-Return Pricing Target-return price= unit cost +(desired return Xinvestment capital)/unitsales
Perceived value Price buyers Value buyers Loyal buyers Value-in-use price Break-even volume Break-even volume =fixed cost / (price – variable cost) Perceived-Value Pricing Break-EvenChartfor Determining Target- ReturnPriceandBreak-Even Volume Settingthe Price
Settingthe Price Value Pricing Everyday low pricing(EDLP) High-low pricing Going-Rate Pricing Auction-Type Pricing English auctions (ascending bids) Dutch auctions (descendingbids) Sealed-bid auctions Group Pricing
Settingthe Price Step 6: Selecting the FinalPrice Psychological Pricing Referenceprice Gain-and-Risk-Sharing Pricing Influence of the Other MarketingElements Brands with average relative quality but high relative advertising budgets charged premium prices Brands with high relative quality and high relative advertising budgets obtained the highestprices Thepositive relationship between high advertising budgets and high prices held most strongly in the later stages of the product life cycle for marketleaders
Settingthe Price Brands with average relative quality but high relative advertising budgets charged premium prices Brands with high relative quality and high relative advertising budgets obtained the highestprices The positive relationship between high advertising budgets and high prices held most strongly in the later stages of the product life cycle for market leaders Company Pricing Policies Impact of Price on OtherParties
Adaptingthe Price Geographical Pricing (Cash,Countertrade, Barter) Countertrade Barter Compensation deal Buyback arrangement Offset Price Discounts andAllowances
PriceDiscountsand Allowances Cash Discount: A price reduction to buyers who pay bills promptly. A typical example is “2/10, net 30,” which means that payment is due within 30 days and that the buyer can deduct 2 percent by paying the bill within 10 days. Quantity Discount: A price reduction to those who buy large volumes. A typical example is “$10 per unit for less than 100 units; $9 per unit for 100 or more units.” Quantity discounts must be offered equally to all customers and must not exceed the cost savings to the seller. They can be offered on each order placed or on the number of units ordered over a given period.
Adaptingthe Price Promotional Pricing Loss-leader pricing Special-event pricing Cashrebates Low-interest financing Longer payment terms Warranties and servicecontracts Psychological discounting
Adaptingthe Price Discriminatory Pricing Customer segment pricing Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing
Adaptingthe Price Product-mix pricing Product-Line Pricing Optional-Feature Pricing Captive-Product Pricing Captive products Two-Part Pricing By-Product Pricing Product-Bundling Pricing Pure bundling Mixed bundling
Managing Integrated Marketing Communications
Kotler onMarketing Integrated marketing communications is away of looking at the whole marketing processfrom the viewpoint of the customer.
1 9-1 78 Marketing CommunicationsMix Advertising SalesPromotion Public Relations and Publicity Personal Selling Direct and InteractiveMarketing
CommonCommunication Platforms Advertising Print and broadcast ads Public Relations Press kits Personal Selling Sales presentation Direct Marketing Catalogs Packaging- outer Sales Promotion Contests, games, sweepstakes, lotteries Premiums and gifts Speeches Sales meetings Mailings Packaging inserts Sampling Seminars Incentive programs Telemarketing Motion pictures Fairs and trade shows Annual reports Samples Electronic shopping TheCommunication Process
Elementsin the CommunicationProcess
TheCommunicationProcess Target audience may not receive the intended messagefor any of threereasons: Selective attention Selective distortion Selective retention
TheCommunication Process Fiske and Hartley have outlined factors that influencecommunication: The greater the influence of the communication source, the greater the effect on therecipient Communication effects when they are in line are greatest with existing opinions, beliefs, anddispositions
TheCommunication Process Communication can produce the most effective shifts on unfamiliar, lightly felt, peripheral issues that do not lie at the core of the recipient’s value system. Communication is more likely to be effective if the source is believed to have expertise, high status, objectivity, or likeability, but particularly if the source haspower and can be identified with. The social context, group, or reflective group will mediate the communication and influence whether or not the communication isaccepted.
Stepsin Developing Effective Communication
DevelopingEffective Communications Identify the TargetAudience Image analysis Familiarity scale Favorability scale Never Heardof Heardof Only Knowa LittleBit Knowa Fair Amount KnowVery Well Very Unfavorable Somewhat Unfavorable Indifferent Somewhat Favorable Very favorable
Decidingonthe Marketing CommunicationsMix The Promotional tools Advertising GeneralQualities: Public presentation Pervasiveness Amplified expressiveness Impersonality SalesPromotion Benefits: Communication Incentive Invitation
Decidingonthe Marketing Communications Mix Public Relations and Publicity Distinctive qualities: High credibility Ability to catch buyers offguard Dramatization Personal Selling Distinctive qualities: Personal confrontation Cultivation Response
Decidingonthe Marketing Communi cationsMix Direct Marketing Distinctive qualities: Nonpublic Customized Up-to-date Interactive
Decidingonthe Marketing Communications Mix Factors in setting the MarketingCommunications Mix Type of ProductMarket Advertising’s role in businessmarkets: Advertising can provide an introduction to the company and its products If the product embodies newfeatures, advertising can explain them Reminder advertising is more economicalthan sales calls
Decidingonthe Marketing Communi cationsMix Advertisements offering brochures andcarrying the company’s phone number are an effective way to generate leads for salesrepresentatives. Sales representatives can use tear sheets of the company’s ads to legitimize their company and products. Advertising can remind customers of how touse the product and reassure them about their purchase.
Decidingonthe Marketing Communications Mix Levitt found that: Corporate advertising that can build upthe company’s reputation will help the sales representatives Salesrepresentatives from well-known firms have an edge, but ahighly effective presentation from alesser knowncompany’s rep can overcome that edge Company reputation helps most whenthe product iscomplex
Decidingonthe Marketing Communications Mix Gary Lilien found that: The average industrial company sets its marketing budget at 7 percent ofsales Industrial companies spent a higher-than-average amount on advertising if their products had higher quality, uniqueness, or purchase frequency, or if there was customer growth Industrial companies set a higher-than-average marketing budget when their customers were more dispersed or the customer growth ratewas higher
Decidingonthe Marketing Communications Mix Effectively trained consumer salesforcecan make four important contributions: Increased stock position Enthusiasm building Missionary selling Key account management Buyer-Readiness Stage
Cost-Effectivenessof Different P r o m ot ional Tools
Managing the SalesForce Theoriginal and oldestform of direct marketing isthe field sales call. U.S. firmsspendovera trillion dollars annuallyonsalesforcesandsalesforce materials— morethan they spendon anyother promotional method. companiesare trying to increasethe productivityof the salesforcethrough better selection,training, supervision, motivation, and compensation.
Theterm salesrepresentative coversa broadrange of positions. Sixcanbe distinguished: 1.Deliverer-Asalespersonwhose major task is the delivery ofa product (water, fuel,oil). 2.Ordertaker -Asalespersonwho acts predominantly asan inside order taker or outside ordertaker. 3.Missionary-Asalespersonwho is not expected or permitted to take an order but whose major task is to build goodwill or to educate the actual or potentialuser. 4.Technician- Asalespersonwith a high level of technical knowledge. 5. Demandcreator -Asalespersonwho relies on creative methods for selling tangible products (vacuumcleaners, cleaning brushes, household products) or intangibles (insurance, advertising services,or education). 6.Solution vendor - A salesperson whose expertise is in the solving of a customer's problem, often with a system of the company's products and services(for example, computer and communicationssystems).
SalesForceObjectivesandStrategy SpecificTasksPerformedbySalesForce Prospecting. Searchingfor prospects, or leads. Targeting. Deciding how to allocate theirtime among prospects and customers. Communicating. Communicating information about the company's products andservices. Selling.Approaching, presenting, answering questions, overcoming objections, andclosing sales. Servicing. Providing various servicesto the customers—consulting on problems, rendering technical assistance, arranging financing, expeditingdelivery. Information gathering. Conductingmarket research and doing intelligence work. Allocating. Deciding which customers will get scarceproducts during product shortages.
RecruitingandSelecting Representatives One survey revealed that the top 27 percent of the sales force brought in over 52 percent of the sales. The average annual turnover rate for all industries is almost 20percent. Sales force turnover leads to lost sales, costs of finding and training replacements, and often a strainon existing salespeople to pick up the slack What is the Challenge? Right Person for the Right Job!!!! Test is taken interview is taken, personality tests are done, past history is checked
SalesRepProductivity How many calls should a company make on aparticular account each year? Someresearch hassuggested that today's salesreps are spending too much time selling to smaller, lessprofitable accounts when they should be focusing more of their efforts on selling to larger, more profitableaccounts. NORMSFORPROSPECTCALLS 25 percent of their time prospecting and to stop calling on a prospect after three unsuccessfulcalls Using SalesTime Efficiently Tocut costs, reduce time demands on their outside sales force, and take advantage of computerand telecommunications innovations, many companies have increased the sizeand responsibilities of their inside sales force Inside salespeople are of threetypes Technical support people Salesassistants Telemarketers
Motivating SalesRepresentatives Salesmanagers must be able to convince salespeople that they can sell more by working harder or by being trained towork smarter. Salesmanagers must be able to convince salespeople that the rewards for better performance are worth the extraeffort. marketers reinforce intrinsic andextrinsic rewards of all types Oneresearch study that measured the importance of different rewards found that the reward with the highest value was pay, followed by promotion, personal growth,and senseof accomplishment Theleast-valued rewards were liking and respect, security, and recognition.
EvaluatingSalesRepresentatives SOURCESOFINFORMATION Salesreports Personal observation Salesperson self-reports Customer letters and complaints Customersurveys,and conversationswith othersales representatives. Thesereports provide raw data from which sales managers canextract keyindicators of sales performance: (1) average number of salescalls per salespersonper day, (2) average salescall time per contact, (3) average revenueper salescall, (4) average cost per salescall, (5) entertainment cost per salescall, (6) percentage of orders per hundred salescalls,(7) number of new customers per period, (8) number of lost customers per period, and (9) salesforce cost asa percentage of total sales.
Territory: Midland Sales Representative:JohnSmith 2006 2007 2008 2009 Net salesproductA $251,300 $253,200 $270,000 $263,100 Net salesproductB 423,200 439,200 553,900 561,900 Net salestotal 674,500 692,400 823,900 825,000 Percentof quotaproductA 95.6 92 88 84.7 Percentof quotaproductB 120.4 122.3 134.9 130.8 Grossprofits productA $50,260 $50,640 $54,000 $52,620 Grossprofits productB 42,320 43,920 55,390 56,190 Grossprofitstotal 92,580 94,560 109,390 108,810 Salesexpense $10,200 $11,100 $11,600 $13,200 Salesexpenseto total sales(%) 1.5 1.6 1.4 1.6 Numberof calls 1,675 1,700 1,680 1,660 Costpercall $6.09 $6.53 $6.90 $7.95 Averagenumberof customers 320 24 328 334 Numberof new customers 13 14 15 20 Numberof lost customers 8 10 11 14 Averagesalesper customer $2,108 $2,137 $2,512 $2,470 Averagegrossprofit per customer $289 $292 $334 $326
Viral Marketing Marketing phenomenon that facilitates and encourages people to pass along a marketing message. Viral marketing describes any strategy that encourages individuals to pass on a marketing message to others, creating the potential for exponential growth in the message's exposure and influence It can be delivered by word of mouth or enhanced by the network effects of the internet. Viral promotions may take the form of video clips, interactive flash games, brandable Software, images, or text messages
History There is debate on the origination and the popularization of the term viral marketing, though some of the earliest uses of the current term are attributed to the Harvard Business School graduate Tim Draper and faculty member JeffryRayport. Among the first to write about viral marketing on the Internet was the Media critic Douglas Rushkoff. The assumption is that if such an advertisement reaches a "susceptible" user, accepts the idea) that user becomes "infected" (i.e., and shares the idea with others "infecting them," in the viral analogy's terms
Notable Examples Popularized in the 1960s and '70s is essentially a form of viral marketing inwhich representatives gain income through marketing products through their circle of influence and give their friends a chanceto market productssimilarly The ClassicHotmail.com Example Theclassicexample of viral marketing is Hotmail.com, one of the firstfree Web-basede-mail services.Thestrategy is simple: Giveaway free e-mail addressesand services, Attach a simple tag at the bottom of every free message sent out: "Get your private, free email at http://www.hotmail.com"and, Thenstand back while people e-mail to their own network offriends and associates, Who seethe message, Signup for their own free e-mail service,andthen Propel the messagestill wider to their ownever-increasing circles of friends and associates. Liketiny wavesspreading ever farther from a single pebble dropped into a pond, a carefully designedviral marketing strategy ripples outward extremely rapidly.
Typesof Viral Marketing Pass-along: A message which encourages the user to send the message to others. The crudest form of this is chain letters where a message at the bottom of the e-mail prompts the reader to forward the message Incentivized viral: A reward is offered for either passing a message along or providing someone else's address. This can dramatically increase referrals. However, this is most effective when the offer requires another person to take action. Undercover: A viral message presented as a cool or unusual page, activity, or piece of news, without obvious incitements to link or pass along. In Undercover Marketing, it is not immediately apparent that anything is being marketed. "Edgy Gossip/Buzz marketing" ads or messages that create controversy by challenging the borders of taste or appropriateness. Discussion of the resulting controversy can be considered to generate buzz and word of mouth advertising. Prior to releasing a movie, some Hollywood movie stars get married, get divorced, or get arrested, or become involved in some controversy that directs conversational attention to them. User-managed database: Users create and manage their own lists of contacts using a database provided by an online service provider. By inviting other members to participate in their community, users create a viral, self-propagating chain of contacts that naturally grows and encourages others to sign up as well.
Network Marketing Thesimplest explanation of network marketing is thatit is a method of marketing that utilizes independent representatives to reach potential customers that a company otherwise would not reach with traditional online or offline marketing methods.
Howdidnetwork marketin gstart? Network marketing hasbeenaround for nearly fifty years. It started in the US,and the first major modern network marketing businesswas formed in 1959. Thiscompany was created by businesspartners RichDeVosand JayVanAndel, originally with just one single product and a new and unique businessvision. Theyregarded conventional salesjobs asunfair - being paid only oncefor the work that they did evenwhen the company continued to make a profit from their labors for many yearsafterwards.
SoDeVosand VanAndel broke away and formed their own company, returning a few years later with enough money to buy out theiroriginal employers and incorporate the vitamin business into their growing corporation. Their company is now a multi-billion dollar business operating in virtually every developed country in the world. Within a few short years, many more companies followed in their footsteps and now network marketing is responsible for a turnover of tens of billions of dollars in the US alone.
Word-of-mouthcommunication Most influential for consumer decisionmaking Comesfrom an independent source Often based on experience Canbe negative and positive But, how can marketers act onit? Until now, it was difficult to ascertain who is talking to who? Onecould not easily reach “opinion leaders”. Onecould act on w.o.m. only on the aggregate usingbroad proxies to identify opinionleaders Psychographics Demographics Etc.
What haschanged? We have refined data on consumercommunities. Social network data: people designate friends(e.g. MySpace.com) Telecom data: people talk to friends,people designate preferred contacts (e.g.Skype) We have new technology to analyze thedata Hardware Software We can act on the data (viralmarketing) Sendmessagesto key people in the network Avoid marketing “noise” (blanket SMSpromotion)
What network marketersdo? Find communities in complex networks(Skype, Myspace, Telecom traffic data) to target withbrands/content to discriminate w.r.t.price/advertising Find “key people” who (i)connect communities, (ii) hold communitiestogether to initiate new product/servicediffusion toensure best return on direct (viral) marketing to refine CRMtechniques
ENTIRE NETWORK SELECTED GROUPS FROM THE NETWORK
Membersclassifiedin termsof their role (value) in the communities.
Advantages 100%data availability One-time setupcost,low marginal cost Variety of uses: Promotion CRM Advertising
CASE: East European socialnetwork site • Problem: How existing membersinfluence new onesjoining the site? • What was done: Describedpeople’s adoption behavior asa function of their personal networks anddemographics • Keyinsight: Fastadopters are people with densenetworks (not large networks
CASE: Middle-Easterntelecomcompany (10 million customers) • Problem: Identify highlyConnected/ influential customers to be targeted by direct marketing for cross-selling another service • What was done: Identified thetop 10,000 targets • Insights: Toptargets may not bethe oneswho have most connections
EventMarketing The activity of designing or developing a themed activity, occasion, display, or exhibit (such asa sporting event, music festival, fair, or concert) to promote a product,cause, or organization. Also called event creation.
EventMarketing Planning Plan Event Planning Concept Objectives Strategies Execution Evaluation and Measurement Advertising and PR Strategy
EventConcept Event Concept and Design Theme Venue $ Resources Timing Rooms & Layout Technical & A/V Suppliers Accomodations Number of and extent of decisions depends on size and scope of the event.
EventObjectives Objectives are essential in order to justify investment. Some possible objectives include: • Size of audience reached • Ability to reach target • Sponsor recognition levels • Potential sales • Economic Impact Objectives are included in an event proposal along with organizational details and a timeline.
EventMarketing Strategies An event is much like a product so the marketing strategies are similar. • Define the product (the event) • Establish price • Distribution (of tickets) • Marketing Communications
Marketing Communications Branding Advertising Strategy Name, logo, color, and image. Event needs a consistent look. Message and media strategy to create interest and reach target effectively. PR Strategy Press releases and conferences in pre-event stage.
EventMarketing Execution Delineating all of the details associated with the event. • Site Selection • Staging • Catering andAccommodations • Staffing • Operations and Logistics • Safety and Security
Followingthem canensurea c ost effective implementation of the eventmarketing. If the event is meant to market a certain product, then it is necessary to ensure that the purchase decision-maker attends the event. Make sure you get participant contact information before the event as well as after. Other value-added benefits that can be expected from the show organizer include Before the event is undertaken, the cost effectiveness of promoting the product through the event should be questioned by asking yourself event qualifying questions around the “who" instead of the “how many” The giveaways at the event should be relevant to the business being promoted through the event. And make sure you don't give something away for free just for the heck of it. The location chosen for the event is perhaps the most important aspect. Make sure you don't purchase a cheap booth at a popular exhibition because there are strong chances that no one will be visiting you, since your booth will be tucked away hidden from all eyes
DirectMarketing Direct marketing is the useof consumer-direct (CD)channels to reach and deliver goods and servicesto customers without using marketing middlemen. Thesechannels include direct mail, catalogs, telemarketing, interactive TV,kiosks, Web sites, and mobile devices.
Objectivesof direct marketing Direct ordering. Providinginformation. Visit generation. Trial generation.
TheRangeof Direct Marketing Techniques
Direct mail - material distributed via the postal service to a recipient’s home or businessto promote a product/service. Direct response advertising - standard broadcastand print media designed to generate a directresponse, e.g an order or personalvisit. Telemarketing - a direct personal, verbal approachvia somekind of written or visualmethod. Mail order - the purchase ofproducts featured in advertising or selected from acatalogue. Teleshopping - home basedshopping.
Direct-mail marketing haspassedthrougha numberof stages: E "Carpet bombing." Direct mailers gather or buy as many names as possible and send out a mass mailing. Usually the response rate is very low. Database marketing. Direct marketers mine the database to identifyprospects who would have the most interest in an offer. a Interactive marketing. Direct marketers include a telephone number and Web address, and offer to print coupons from the Web site. Recipients can contact the company with questions. The company usesthe interaction as an opportunity to up-sell, cross-sell, and deepen the relationship. BReal-time personalized marketing. Direct marketers know enough about each customer to customize and personalizethe offer andmessage.
Generate leads. Screenleads before follow up. Arrange opportunities for representatives. Direct sales. Encourage cross/ upselling. Dealer support. Account servicing. Market research. Test marketing. Applications of telemarketing
Useof Telemarketing New businessand lead generation 28% Customer care 26% Customer service 26% Brand loyalty 14% Crisis management 6%
Traditional strengthsof mail order
Weaknessesof traditional mail order catalogues Lackof speed. Downmarket image. Lackof targeting. Agencysystem
CatalogMarketing In catalog marketing, companies maysend full-line merchandise catalogs, specialty consumer catalogs, and businesscatalogs, usually in print form but also sometimes as CDs,videos, oronline. Catalogs are a huge business—about 71 percent of Americans shopfrom homeusing catalogs by phone, mail, andInternet.
Other Media for Direct-ResponseMarketing TELEVISION: is usedby direct marketers in severalways: Direct-response advertising -Somecompanies prepare 30- and 60-minute infomercials that attempt to combine the sell of commercials with the draw of educational information and entertainment. Infomercials can be seenas a crossbetween a sales call and a television ad and cost roughly $250,000 to $500,000 tomake. At-home shopping channels - Sometelevision channels are dedicated to selling goods andservices. Videotext and interactive TV-Theconsumer's TVset is linked with a seller's catalog by cable or telephone lines. Consumerscan place orders via a special keyboard device connected to thesystem.
KIOSKMARKETING Akiosk is a small building or structure thatmight housea selling or information unit. Thename describesnewsstands, refreshment stands, and free-standing carts whose vendors sell watches, costume jewelry, and other items. Thecarts appear in busand rail stations and along aisles in a mall. Theterm also coverscomputer-linked vending machines and "customer-order-placing machines" in stores, airports, and otherlocations.
Interactive Marketing Interactive Marketing refers to the evolving trendin marketing whereby marketing hasmoved from a transaction-based effort to aconversation. The Internet provides marketers and consumerswith opportunities for much greater interaction and individualization. Companies in the past would send standard media—magazines, newsletters, ads—to everyone. Todaythese companies can sendindividualized content and consumersthemselves can further individualize the content. Todaycompanies can interact and dialogue with much larger groups than ever in the past
TheBenefitsof Interactive Marketing It is highly accountable and its effects can beeasily traced. TheWeb offers the advantage of "contextual placements." Marketers can buy adsfrom sitesthat are related to their offerings, aswell asplace advertising basedon contextual keywords from online searchoutfits likeGoogle. Web can reach people when they have actually started the buyingprocess
Designingan Attractive Web Site A keychallenge isdesigninga site that isattractive onfirst viewing and interesting enoughto encouragerepeat visits. Rayport and Jaworskihaveproposedthat effective Web sites feature sevendesignelements that they call the 7Cs Context.Layoutand design. Content.Text, pictures,sound,andvideothe site contains. Community.Howthe siteenablesuser-to-user communication. Customization.Site'sability to tailor itself to different usersorto allow usersto personalizethe site. ECommunication.Howthe siteenablessite-to-user, user-to-site, or two-way communication. Connection.Degreethat the siteislinkedto other sites. Commerce.Site'scapabilitiesto enablecommercial transactions.
GreenMarketing According to the American Marketing Association “green marketingis the marketing of products that are presumed tobe environmentally safe”. Thusgreen marketing incorporates a broad range of activities, including product modification, changes to the production process, packaging changes, aswell asmodifying advertising
The green marketing has evolved over a period of time. According to Peattie (2001), the evolution of green marketing has three phases. • First phase as Ecologic : and during this period all marketing activities were concerned to help environment problems and provide remedies for environmental problems. • Second phase was "Environmental" green marketing and the focus shifted on clean technology that involved designing of innovative new products, which take care of pollution and waste issues. • Third phase was "Sustainable" green marketing. It came into prominence in the late 1990s and early 2000. Evolution of Green Marketing
As resources are limited and human wants are unlimited, it is important for the marketers to utilize the resources efficiently without waste as well as to achieve the organization's objective. So green marketing is inevitable. There is growing interest among the consumers all over the world regarding protection of environment. Worldwide evidence indicates people are concerned about the environment and are changing their behavior. As a result of this, green marketing has emerged Why Green Market ing?
Companies that develop new and improved products and services with environment inputs in mind give themselves access to new markets, increase their profit sustainability, and enjoy a competitive advantage over the companies which are not concerned for the environment. Benefitsof Green Marketing
Green Marketing Mix The 4 P's of green marketing are that of a conventional marketing but the challenge before marketers is to use 4 P's in an innovative manner. Product The ecological objectives in planning products are to reduce resource consumption and pollution and to increase conservation of scarce resources (Keller man, 1978). Price Price is a critical and important factor of green marketing mix. Most consumers will only be prepared to pay additional value if there is a perception of extra product value. This value may be improved performance, function, design, visual appeal, or taste. Green marketing should take all these facts into consideration while charging a premium price. Promotion There are three types of green advertising: - Ads that address a relationship between a product/service and the biophysical environment Those that promote a green lifestyle by highlighting a product or service Ads that present a corporate image of environmental responsibility Place The choice of where and when to make a product available will have significant impact on the customers. Very few customers will go out of their way to buy green products.
Channel Management
TheRoleof Marketing Channelsi nM arketingStrategy Channels provide the meansby which the firm movesthe goods and servicesit produces to ultimate users Facilitate the exchange processby cutting the number of contactsnecessary Adjust for discrepancies in the market’s assortment of goods and servicesviasorting Standardize exchange transactions Facilitate searchesby both buyers andsellers
Typesof Marketing Channel
13-249
ChannelStrategy Decisions Selection of a MarketingChannel Factors which impact the selection of a marketing channelinclude: Marketfactors Customer Preference Geography Competitors Productfactors Life cycle Product Complexity Product Sizeand Weight Producer/Manufacturerfactor Company Objective Company Resources Desire Of control
DeterminingDistribution Intensity Intensivedistribution: channel policy in which a manufacturer of a convenienceproduct attempts to saturate themarket Selective distribution: channel policy in which a firm chooses only a limited number of retailers to handle its productline Exclusivedistribution: channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products in a particular geographicarea
CausesOfChannelConflict Goal Incompatibility Unclear Rolesand Rights Differences In perception Intermediaries dependency on manufacturer TypesOf Conflict Vertical Channel Conflict e.g. General Motors vs.Dealers Horizontal Channel Conflict e.g. PizzaInn franchisee complaint on substandard productsused. Multichannel conflict ( sameproduct sold bydifferent channels ) CONFLICT 13-252
AchievingChannelCooperation Channel Cooperation, achieved via effective cooperation among channel members, is the desired antidote to channelconflict It is Best achieved when all channel members regard themselves ascomponents of the same organization 13-253
Vertical Marketing Systems Vertical marketing system(VMS): planned channel system designed to improve distribution efficiency and cost effectiveness by integrating various functions throughout the distribution chain Administered marketing system: VMS that achieves channel coordination when a dominant channel member exercises its power e.g. Kodak,Gillette Corporate marketing system: a VMS in which a single owner operates at each stage in its marketing channel Contractual marketing system: VMS thatcoordinates channel activities through formal agreements among channel members like: Wholesaler-Sponsored Voluntary Chains Retail Cooperatives ( Grocery Store, Hardware) Franchises 13-254
Making ChannelManagement Decisions Channel management decisions can greatly affect the successor failure of a business,becausethe partnersthat you decide to work with and the effort you put into managing them will determine how your businesscomes acrossto the public. There are certain trade offs when you chooseto utilize channel salesto market and distribute your product. Of course, channel salesare usually cost-effective, which is why businessesrely on salespartners to sell their product. Thelossof complete control over how your product is marketed is the drawback, but with a good partner management program you can make sure your company is represented the way you want itto be.
Trainingand MotivatingC hannel Members CoercivePower RewardPower Legitimate power Expertpower Referent power
Marketing Logistics Planning, implementing, and controlling the physical flows of materials and final goods from points of origin to points of use. • Nature of MarketLogistics • • • • • • • • Supplychain - manage activities - salesforecasting Planning Inventory management Packaging Warehousing Shipping Transportation Warehousing
• • • • • Major - 30-40%of total costs Breakout - transportation37% Inventory 22% Warehousing21% Other 20% Market LogisticsObjective Right good at right place at right time for least cost M =T+FW+VW+ S where M= total market logisticscost T=total freight cost FW=total fixed warehouse cost VW=total variable warehousecost S=total costs of lostsales Costsof MarketLogistics
• Order processing • order to remittance cycle- elapsedtime betweenan order placement andpayment • Warehousing • Storage • distribution • automated • Inventory • service increases - inventory costsincreases • re-order point • how much: order processing costsvs.inventory carrying costs just in time productionmethods Market LogisticsDecisions
• Transportation • Medium • Speed • Frequency • Dependability • Capability • Availability • Traceability • Cost
SelectingthePricingObj ective Step:1Selectingthe Pricing Objectives •Survival •Maximum CurrentProfit •Maximum Market Share •Maximum Market Skimming •Product Quality Leadership Step 2: Determining Demand •Price Sensitivity •Estimating Demand Curves Surveys PriceExperiments • • • StatisticalAnalysis • Price Elasticity of Demand
262 Step3- Estimatingcosts Typesof Costs Variable Costsand Fixed Costs Accumulated Production Target Costing Step4- AnalyzingCompetitor'sCost’s,Pricesand Offers Step5- Selectinga PricingMethod Markup Pricing MP=Unit Cost/(1-desired return onSales) Target Return Pricing TRP=UnitCost+{DesiredReturnxInvestedCapital/Unit Sales} Perceived Value Pricing Value Pricing Going Rate Pricing Auction TypePricing Step-6 Selecting the FinalPricing

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Mktg Mgmt: Segments, Environments & SWOT

  • 2. What IsMarketing “Meeting NeedsProfitability” Marketing is anorganizational function and set of processesfor creating, communicating & delivering value to customers and for managing customerrelationships in waysthat benefit the organization &its stakeholders
  • 3. What isMarketing Management The art and Scienceof choosing target markets and getting, keepingand growing customers through creating, delivering and communicating superior customer value
  • 4. Marketing Concept Production Concept Service Concept Selling Concept Product Concept Marketing Concept Holistic Concept Internal Marketing Integrated Marketing Relationship Marketing Performance Marketing
  • 5. Modern Marketing Every Employeeis a Marketer Internal Communication Experience Concept Green Marketing
  • 6. FactorsInfluencingMarketing Conc ept Growth of Population Changing Conceptof Family More DisposableIncome More DiscretionaryIncome TechnologyAdvancement Media Credit Facility
  • 7. Nature OfMarketing It is a legal processby which ownership istransferred It is a system of interacting businessactivities It is a managerial function of organizing and directing businessactivities that facilitates the movement ofgoods from producers to consumers It is a Philosophy based on consumer orientationand satisfaction It hasdual objectives- Profit Makingand Consumer Satisfaction
  • 8. Marketers are involved with marketing ten types of entities: Services Events Experiences Persons Places Properties Organizations Information Ideas Physical Goods ScopeOf Marketing
  • 9. Who Markets Marketers and Prospects Eight Demand states are possible Negative Demand Nonexistent Demand Latent Demand Declining Demand Irregular Demand Full Demand Overfull Demand Unwholesome Demand ScopeOf Marketing
  • 10. Study of Consumerwants andneeds Study of BuyerBehavior Product Planning and development Pricing Policies Distribution Promotion ConsumerSatisfaction Marketing Control ScopeOf Marketing
  • 11. What isa Market Markets includes both place and region in which buyers and sellers are in free competition with eachother
  • 12. Classificationof Markets On the basis ofArea On the basis of Time On the basis of Transaction On the basis of Regulation On the basis of volumeof Business On the basis of Natureof Goods
  • 13. DifferenceBetweenMarketing and S elling Marketing Selling Focuses on Customer Needs Focuses On SellersNeeds Begins before Production Begins after Production Continues After Sales Comes To an End aftersale of Product Philosophy of Business Routine Process Profits through customer satisfaction Profits through Sales Volume Long Term Perspective Short Term Perspective Customer First Product First
  • 14. Marketing Management Tasks Developing Marketing Strategies and Plan Capturing Marketing Insights Connecting with Customers Building Strong Brands Shaping the Market offerings Delivering Value Communicating Value Creating LongTerm Growth
  • 15. Marketing Environment Factorswhich affect Marketing Environment:- SocialForces Sociological Factors PsychologicalFactors Anthropological Factors Economic Factors Consumer Competition Price Political Forces Ethical Forces PhysicalForces Technological Forces
  • 16. Marketing Environmentcontd….. Macro Environment Demographic Factors Economic Factors Competition Social and Cultural Forces Political and LegalForces Technology Micro Environment Market Suppliers Marketing Intermediaries
  • 17. Environmental Scanning What is theGoal behind Environmental Scanning Technological Environment Political Environment Economic Environment Cultural Environment Demographic Environment
  • 18. Methodsusedfor Environmental S canning SWOT Analysis Scenario Building Cross Impact Analysis Delphi Method
  • 19.
  • 20. SWOTANALYSIS A SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a tool used to provide a general or detailed snapshot of a company's health. Think of your SWOTas a tune-up that every business needs periodically to diagnose and fix what’s a problem, what’s on the verge of breaking down, or what’s already broken and needs replacement--so that you can keepthe businesshumming—even better than ithasin the past. SWOToffers professional managers an effective evaluative technique to aid the decision makingprocess. It can not find the solution for you, but it will ensure that issuesare: identified, classified and prioritized clearly, showing the problem interms of key underlying issues.Decision makers can then seethe answer. It's a four-part approach to analyzing a company's overall strategy or the strategy of its businessunits. All four aspects must be considered to implement a long-range plan ofaction.
  • 21. SWOTANALYSIS Another example is Dell Computer Corp., which is agreat example of how an ITcompany canuseaSWOTanalysisto carve out astrong businessstrategy, according toGlazer. Dell recognized that its strength wasselling directly to consumers and keeping its costs lower than those ofother hardware vendors. Asfor weaknesses,the company acknowledged that it lacked solid dealer relationships. Identifyingopportunities wasan easier task. Dell looked at the marketplace and sawthatcustomers increasingly valued convenience and one-stop shopping and that they knew what they wanted to purchase.
  • 22. SWOTANALYSIS Dell also sawthe Internet asapowerful marketing tool. On the threats side, Dell realized that competitors like IBM and CompaqComputer Corp. had stronger brand names, which put Dell in aweaker position with dealers. Dell put together abusinessstrategy that included masscustomization and just-in-time manufacturing (letting customers designtheir own computers and custom-building systems). Dell also stuck with its direct salesplan and offered saleson the Internet.
  • 23. Analyzingthe Macroenvironment Successful companies recognize and respond profitably to unmet needs and trends. Companies could make a fortune if they could solve any of these problems: a cure for cancer; chemical cures for mental diseases; desalinization of seawater; nonfattening, tasty nutritious food; practical electric cars; and affordablehousing. Needsand Trends Atrend is a direction or sequence of events that has some momentum and durability. Trends are more predictable and durable than fads. A trend reveals the shapeof the future and provides manyopportunities. A fad is "unpredictable, short-lived, and without social, economic, and political significance." A company can cash in on a fad, but this is more a matter of luck and good timing than anything else. Megatrends have been described as "large social, economic, political and technological changes [that] are slow to form, and once in place, they influence us for some time— between seven and ten years, or longer."
  • 24. Identifying the Major Forces Companies and their suppliers, marketing intermediaries, customers, competitors, and publics all operate in a macroenvironment of forces and trends that shapeopportunities and posethreats. Theseforces represent "noncontrollables," which the company must monitor and to which it must respond. In the economic arena, companies and consumers are increasingly affected by globalforces the steep decline of the stock market, its effect on living of people Within the rapidly changing global picture, the firm must monitor six major forces: demographic, economic, social-cultural, natural, technological, andpolitical-legal.
  • 26. Other Major Macroenvironments Social-Cultural Environment Views of themselves Views of others Views of organizations. Views of society Views of nature. Views of the universe. HIGHPERSISENCEOFCORECUL TURALV ALUES EXISTENCEOFSUBCUL TURES SHIFTSOFSECONDARYCUL TURALV ALUESTHROUGHTIME EconomicEnvironment IncomeDistribution SAVINGS,DEBT,ANDCREDITAVAILABILITY OUTSOURCINGANDFREETRADE
  • 27. Political-Legal Environment INCREASEIN BUSINESSLEGISLA TION GROWTHOFSPECIAL-INTERESTGROUPS TechnologicalEnvironment Accelerating paceof change INCREASEDREGULATIONOFTECHNOLOGICALCHANGE VARYINGR&D BUDGETS UNLIMITEDOPPORTUNITIESFORINNOVATION Natural Environment Shortage Of Materials IncreasedEnergyCosts ANTI-POLLUTIONPRESSURES ChangingRoleof Government
  • 28. Introduction General approach Conditions for effective segmenting Basis of segmentation
  • 29. Introduction Markets consists of buyers &buyers differ in one or morerespects. Wants Purchasing power Geographical location Buying attitudes
  • 31. PATTERNSof MarketSegmentation: A) HOMOGENEOUS PREFERENCES: -A market where all the consumershave roughly the same preferences. -Market shows no natural segments -We would predict that existing brands would be similar &cluster in the centre
  • 32. Contd… B) DIFFUSED PREFERENCES : - At the other extreme consumer preferences may be scattered through out the space. - thatshows consumers vary greatly in their preferences. The first brand to enter the market is likely to position in the centre to appeal to most of the people.
  • 33. Contd… The second competitor could locate next to the first brand &fight for marketshare OR It could locate in a corner to attract a customer group that was not satisfied with the centre brand.
  • 34. Contd… C) CLUSTERED PREFERENCES : - the market mightreveal distinct preference clusters called Natural Market Segments.
  • 35. Contd… The first firm in this market has three options: (a It might position itself in the centre hoping to appeal to all the groups. (Undifferentiated marketing). (b It might position itself in the largest market segment (Concentrated marketing). (c It might develop several brands, each positioned in a different segment. ( Differentiated marketing )
  • 36. RATIONALEOFMARKETSEGMENTATION Facilitates proper choice of target market. Facilitates tapping of the target market Adapting the offer to the target market. Makes the marketing effort more efficient & economic Helps identify less satisfied segments & concentrate on them Benefits the customers aswell.
  • 37. BASISOFSEGMENTATION A.ConsumerCharacteristic Approach GEOGRAPHIC : Region : pacific, mountain. City or Metro size: under 5000,above40000. Density: urban, suburban, rural climate :Northern , southern
  • 38. DEMOGRAPHIC: Age Gender Family size Family life cycle Income Occupation Education Religion Race Nationality
  • 39. PSYCHOGRAPHIC Social class: upper-upper, lower uppers, upper middles, middle class, working class, upper lowers, lower lowers. Life style : freaky, trendy, ethnic Personality : Dominance, Authoritarian, ambitious
  • 40. B.ConsumerResponse Approach . Benefit response – T aspects of efficiency, prestige, durability, economy or resale value. . Usage Response- Heavy, Medium, light and non-user. . Loyalty response- Most loyal, moderately loyal,and fickle-minded.
  • 41. Conti… Occasion response- regular occasion,special occasion. User status - non user, ex user, potential user, first time user, regular user
  • 42. Target Marketing Target market is one which the marketing efforts are directed towards. The factors that play significant role in the process of targeting are: 1.Segment’s attractiveness 2.Keeping competitors at distance 3.The company objectives and resources
  • 43. Alternative Market TargetingStrategies Undifferentiated Marketing: Entire market servewith one product. Example : American carmanufacturers Differentiated Marketing: Local market with variety of products. Concentrated Marketing : focuses on only one or a few segments.
  • 44. Strategic PlanningIn Marketing Strategicplanningisthe formal considerationof an organization'sfuture course.Allstrategicplanningdealswith at least oneof three key questions: "What dowe do?" "Forwhomdowe do it?" "Howdowe excel?“ CorporateandDivisionStrategic Planning Definingthe corporatemission Establishingstrategicbusiness units Assigningresourcesto each SBU Assessinggrowthopportunities
  • 45. Defining Corporate Mission: Todefine its mission, a company should address Peter Drucker's classic questions:21 What is our business? Who is the customer? What is of value to the customer? What will our businessbe?What should our businessbe?Thesesimple- sounding questions are among the most difficult a company willever have to answer. Good mission statements have three major characteristics.First, they focus on a limited number ofgoals. Second,mission statements stress the company's major policies and values. Theynarrow the range of individual discretion sothat employees act consistently on important issues. Third, they define the major competitive sphereswithin which the company will operate:
  • 46. Establishingstrategic businessunits: Companies often define their businessesin terms of products: Theyare in the "auto business"or the "clothing business." But Levitt argues that market definitions of a businessare superior to productdefinitions. Large companies normally manage quite different businesses,each requiring its own strategy. General Electric classified its businesses into 49 strategic businessunits (SBUs).AnSBUhasthree characteristics: It is a single businessor collection of related businessesthat canbe planned separately from the rest of thecompany. It hasits own set ofcompetitors. It hasa manager who isresponsiblefor strategic planning andprofit performance and who controls most of the factors affectingprofit.
  • 47. AssigningResourcesto eachSBU:Oncethe organization defines its SBU’sthen they must decide how to allocate resourcestoeachSBU. GE/McKinseyclassifies eachSBU’saccording to the extend of competitive advantage and attractiveness of theindustry Another model the BCG’sGrowth ShareMatrix usesrelative shareand annual rate of market growth asa criteria to make investment decisions Assessinggrowth opportunities: Assessinggrowth opportunities involves planning new businesses,downsizing, or terminating older businesses.Thecompany's plans for existing businessesallow it to project total salesand profits. If there is a gap between future desired salesand projected sales,corporate management will have to develop or acquire new businessesto fill it.
  • 48. BusinessUnit Strategic Planning Marketing Opportunity Analysis(MOA) Can the benefits be articulated to a target market? Can the target market be reached with cost-effective media and trade channels? Does the company have the critical capabilities to deliver the customer benefits? Canthe company deliver thesebenefits better than any actual or potential competitors? Will the rate of return meet the required threshold of investment?
  • 50. BusinessUnit Strategic Planning Internal EnvironmentalAnalysis (Strength/WeaknessAnalysis) Goal Formation Strategic Formulation Strategy
  • 51. BusinessUnit Strategic Planning Porter’s Generic Strategies Overall cost leadership Differentiation Focus
  • 52. Travelocity’s Web site helps the consumer plan the whole vacation – flights, lodging, and car rental.com
  • 53. Operational Effectiveness and Strategy Strategic group Strategic alliances BusinessUnit Strategic Planning 4-53
  • 54. BusinessUnit Strategic Planning Marketing Alliances Product or service alliances Promotional alliances Logistical alliances Pricing collaborations Partner Relationship Management, PRM Program Formulation and Implementation 4-54
  • 56. TheMarketing Process Steps in the Planning Process The marketing process Analyzing Market Opportunities Developing Marketing Strategies Planning Marketing Programs Managing the Marketing Effort Annual-plan control Profitability control Strategic control 4-56
  • 58. ProductPlanning:TheNature andContentsof aMarketing Plan Contents of the Marketing Plan Executive Summary Current Marketing Situation Opportunity and issue analysis Objectives Marketing strategy Action programs Financial projections Implementation controls
  • 59. Sample Marketing Plan: Sonic Personal Digital Assistant Current Marketing Situation Opportunity and IssueAnalysis Objectives Action Programs Financial Projections ProductPlanning:TheNature andContentsof aMarketing Plan 4-59
  • 60. Implementation Controls Marketing Strategy Positioning Product Management Pricing Distribution Marketing Communications Marketing Research 4-60 ProductPlanning:TheNature andContentsof aMarketing Plan
  • 61.
  • 62. INTENSIVE GROWTH Corporate management's first course of action should be a review of opportunities for improving existing businesses. Ansoff proposed a useful framework for detecting new intensive growth opportunities called a "product-market expansion grid. The company first considers whether it could gain more market share with its current products in their current markets (market-penetration strategy). Next it considers whether it can find or develop new markets for its current products (market-development strategy). Then it considers whether it can develop new products of potential interest to its current markets (product- development strategy). Later it will also review opportunities to develop new products for new markets (diversification strategy.
  • 63.
  • 64. INTEGRATIVEGROWTHbackward, forward, or horizontal integration within its industry. For example, drug company giant Merck hasgone beyond just developing and selling ethical pharmaceuticals. It purchasedMedco, a mail-orderpharmaceutical distributor in 1993, formed a joint venture with DuPont to establish more basic research, and another joint venture with Johnson& Johnsonto bring someof its ethical products into the over-the- counter market. Media companies have long reaped the benefits of integrative growth. Hereis how one businesswriter explains the potentialthat NBCcould reap from its merger with Vivendi Universal Entertainment to become NBCUniversal. Admittedly a far-fetched example, it gets acrossthe possibilities inherent in this growth strategy
  • 65. DIVERSIFICATIONGROWTH:Diversification growth makes sensewhen good opportunities can be found outside the present businesses.Agood opportunity is one in which the industry is highly attractive and the company hasthe right mix of businessstrengths tobe successful. Forexample, from its origins asan animated film producer, Walt DisneyCompany hasmoved into licensing characters for merchandised goods, entering the broadcast industry with its own DisneyChannel aswellas ABCand ESPNacquisitions, and developed themeparks and vacation and resortproperties
  • 66. DOWNSIZINGANDDIVESTINGOLDERBUSINESSES Companies must not only develop new businesses;they must also carefully prune, harvest, or divest tired old businessesin order to release needed resourcesand reduce costs. Weak businessesrequire a disproportionate amount of managerial attention. Managers should focus on growth opportunities, and not fritteraway energy and resourcestrying to salvage hemorrhagingbusinesses. Heinzsold its 9-Livesand Kibbles 'n Bits pet food,StarKist tuna, College Inn broth, and All-in-One baby formulas to Del Monte in 2002 after years of stagnant sales, to allow it to focus on its core brands in ketchup, sauces,and frozen foods
  • 67. Market Targeting Once the firm has identified its market- segment opportunities, it has to decide how many and which ones to target. Marketers are increasingly combining several variables in an effort to identify smaller, better-defined target groups. Thus, a bank may not only identify a group of wealthy retired adults, but within that group distinguish several segments depending on current income, assets, savings, and risk preferences. This has led some market researchers to advocate a needs-based market segmentation approach.
  • 68. Effective Segmentation Criteria Not all segmentation schemes are useful. For example, table salt buyers could be divided into blond and brunette customers, but hair color is undoubtedly irrelevant to the purchase of salt. To be useful, market segments must rate favorably on five key criteria: Measurable. The size, purchasing power, and characteristics of the segments can bemeasured. Substantial. The segments are large and profitable enough to serve. A segment should be the largest possible homogeneous group worth going after with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars for people who are under four feettall. Accessible. The segments can be effectively reached and served. Differentiable. The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs. If married and unmarried women respond similarly to a sale on perfume, they do not constitute separate segments. Actionable. Effective programs can be formulated for attracting and serving the segments
  • 69. Evaluating and Selecting the MarketSegments In evaluating different market segments, the firm must look at two factors: the segment's overall attractiveness and thecompany's objectives and resources. After evaluating different segments, the company can consider five patterns of target market selection: Single-Segment Concentration Selective Specialization Product Specialization MARKET SPECIALIZATION Full market Coverage MANAGING MULTIPLE SEGMENTS Differentiated marketing Cost
  • 70. Product specialization M1 M2 M3 P1 P2 P3 Selective specialization M1 M2 M3 P1 P2 P3 Full market coverage M1 M2 M3 P1 P2 P3 Market specialization M1 M2 M3 P1 P2 P3 P1 P2 P3 Single-segment concentration M1 M2 M3 P = Product M = Market
  • 71. SegmentbySegmentInvasionPlan A company would be wise to enter one segment ata time. Competitors must not know to what segment (s) the firm will move next. Segment-by-segment invasion plans. Three firms, A, B, and C,have specialized in adapting computer systems to the needsof airlines, railroads, and truckingcompanies. CompanyAmeets all the computer needsof airlines. Company Bsells large computer systemsto all three transportation sectors. Company Csells personal computers to trucking companies
  • 73. Whereshould company Cmovenext?Arrows havebeenaddedto the chart to show the planned sequenceof segment invasions. CompanyCwill next offer midsize computers to trucking companies. Then,to allay company B's concernabout losing somelarge computer businesswith trucking companies, C'snext move will beto sell personal computers torailroads. Later, Cwill offer midsize computers to railroads. Finally, it may launch a full-scale attack on company B'slarge computer position in trucking companies. Of course,C'shidden planned movesare provisional in that much dependson competitors' segment movesand responses. Unfortunately,, too many companies fail to develop a long-term, invasion, plan. PepsiCois an exception. It first attacked Coca-Colain the grocery market, then in the vending-machine market, then in the fast- food market, and soon. Acompany's invasion plans canbethwarted when it confronts blocked markets. Theproblem of entering blocked markets calls for a megamarketing approach. Megamarketing is the strategic coordination of economic,psychological, political, and public relations skills, to gain the cooperation of a number of parties in order to enter or operate in a given market. Pepsiusedmegamarketing to enter the Indianmarket.
  • 74.
  • 75. Consumer behavior is the study of how individuals, groups,and organizations select, buy, use, and dispose of goods, services, ideas, or experiencesto satisfy their needsandwants. Studying consumers provides cluesfor improving or introducing products or services, setting prices, devisingchannels, crafting messages,and developing other marketing activities.
  • 76.
  • 77.
  • 78. HowAndWhyConsumers Buy Model of Customer Buyer Behavior
  • 79. FactorsAffectingConsumerBehavior: Culture Subculture • Groupsof people withshared value systems based on common life experiences. • Hispanic Consumers • African American Consumers • AsianAmerican Consumers • Mature Consumers Culture is the Most BasicCauseof aPerson'sWants and Behavior. The fundamental determinant of a person’s wants and behaviors acquired through socialization processes with family and other key institutions.
  • 80. SocialClass • Society’s relatively permanent & ordered divisions whose members share similar values, interests, andbehavior. • MeasuredbyaCombination of:Occupation, Income, Education, Wealth and Other Variables. FactorsAffectingConsumerBehavior: Culture
  • 81. Subcultures Nationalities: Indian Religions: Hindu, Sikh,Muslim, Geographic regions: East,West, North, South Special interests: Business,Service,Army
  • 82. Roles and Status Most Important Consumer Buying Organization Groups Membership, Reference, or Aspirational Family
  • 83. Characteristicsof SocialClasses Within aclass,people tend to behavealike. S ocial class conveys perceptions of inferior or superior position. Class may be indicated by a cluster of variables (occupation, income, wealth). Classdesignation is mobile over time. Upper uppers, Lower uppers, Upper middles, Middle class, Upper lowers, Lower lowers, Working class
  • 85. Family Family of Orientation Religion Politics Economics Family of Procreation Everyday buying behavior
  • 86. ReferenceGroups Membership: groups having direct influence onperson Primary: withwhom interaction is fairly continuously & informally e.g. family,friend Secondary: with whom interaction is formal &requires less continuous interaction Aspirational: the group which person hopes tojoin Dissociative: the group which personrejects
  • 88.
  • 89. Problem Recognition (awareness of need)-- The buying processstarts when the buyer recognizes a problem or need. Theneed can be triggered by internal or external stimuli. With an internal stimulus, one of the person's normal needs—hunger, thirst, sex—rises to a threshold level and becomes a drive; or a need can be aroused by an external stimulus difference between the desired state and the actual condition. Deficit inassortment of products. Hunger--Food. Hunger stimulates your need to eat. Canbe stimulated by the marketer through product information--did not know you were deficient? I.E.,seea commercial for a new pair ofshoes,stimulates your recognition that you need a new pair ofshoes.
  • 90. Information search-- Anaroused consumerwill beinclined to searchfor moreinformation. Wecan distinguish between two levels of arousal. Themilder search state is called heightened attention. At this level a personsimply becomesmore receptive to information about aproduct Internal search,memory. External searchif you need more information. Friendsand relatives (word of mouth). Marketer dominated sources;comparisonshopping; public sourcesetc. A successfulinformation search leavesa buyer withpossible alternatives, the evokedset. Hungry, want to go out and eat,evoked set is chinese food Turkish food KFC,PizzaHut etc
  • 91. Evaluation of Alternatives— How doesthe consumerprocesscompetitive brand information and make a final value judgment? No single processis usedby all consumersor by one consumer in all buying situations. Thereare several processes,the most current models of which seethe processas cognitively oriented. That is, they seethe consumerasforming judgments largely on a consciousand rational basis. Needto establish criteria for evaluation, features the buyer wants or doesnot want. Rank/weight alternatives or resumesearch.Maydecide that you want to eat something spicy, Indian gets highest rank etc. If not satisfied with your choice then return to the searchphase.Can you think of another restaurant? Lookin theyellow pagesetc. Information from different sourcesmay be treateddifferently. Marketers try to influence by "framing"alternatives.
  • 92. Purchasedecision--Choose buying alternative, includes product, package,store, method of purchaseetc.
  • 93. Post-PurchaseEvaluation— After the purchase, the consumer might experience dissonancethat stems from noticing certain disquieting features or hearing favorable things about other brands, and will be alert to information that supports his or her decision. Marketing communications should supply beliefs and evaluations that reinforce the consumer'schoice and help him or her feel good about thebrand. Outcome: Satisfaction or Dissatisfaction. CognitiveDissonance,have you made the right decision. Thiscan be reduced by warranties, after salescommunication etc. After eating an indian meal, may think that really you wanted a chinese meal instead.
  • 94. ProductMix Theproduct mix is the set of all products offered for sale by a company. Bajaj Electricals a household name in India, hasalmost ninety products in its portfolio ranging from low value items like bulbs to high priced consumer durables like mixers and luminaries and lighting projects .The number of products carried by a firm at a given point of time is called its product mix.
  • 95. Constituentsof AProductMix Product Line: A set of related products sold by a single company. Depth : measures the number of products that are offered within each product line. Satisfies several consumer segments for the same product, maximizes shelf space, discourages competitors, covers a rangeof prices and sustains dealer support. High cost in inventory etc. Width : measures the number of product lines a company offers. Enables a firm to diversify products, appeals to different consumer needs and encourages one stop shopping. Length :It refers to the total number of Items Produced by a company in all the product lines.
  • 96. ProductLineDecision Factors on which the decision to change a product depends are: Changes in Market Demands: Populationgrowth, Increase in purchasing power. Competition: Firm may need to counter Competition by adding a new product Marketing Influences: Product may be added to Increase sales (New Market or expanding present ones) second, to better use of resources i.e. salesmen, warehouse or branch office. Product influence: Increase Capacity will leadto reduction in NET PRODUCTION COST. Financial Influences: May Add or Drop a product because of Financial Condition of a company.
  • 97. ProductLineStrategies Expansion Of Product Mix: Increasing the number of lines or adding depth to a existing line can help expansion of product mix. Contracting or Dropping a product: Dropping a product is difficult, even if pruning of the product the product fails the a company may drop a product. Alteration of Existing products: Alteration in design, shape, color, flavor, texture or packaging may infuse a life in theproduct. e.g. SX4 Diesel. Development of New Uses of Existing Products: e.g. AMWAYproducts used for different purposes.
  • 98. ProductPositioning Components Of Product Positioning Perceptual Mapping Product Benefits Segmentation Product Categories
  • 99. PerceptualMapping (Product Positioning) This is Marketing research technique in which consumer's views about a product are traced orplotted (mapped) on achart. Respondents are asked questions about their experience with the product in terms of itsperformance, packaging, price, size, etc. Theses qualitative answers are transferred to a chart (called a perceptual map) using a suitable scale(such as theLikert scale), and the results are employed in improving the product orin developing a new one
  • 100. ProductBenefit (ProductPositioning) Benefits of a product facilitateconsumers in decision making and reduce the uncertainty in their minds. They encapsulate its identity, origin, specificity and guarantee. Product Benefit can be converted to brand benefits to gain the following strategic relevance in marketing: Brand aims to segment the market Brand helps in brandbuilding Brand helps in innovations
  • 101. Segmentation(Product Positioning) An Understanding of market dimensions to the marketing manager is an importantfactor in product management. In market segmentation, consumersare grouped in terms of the market dimensions and then the firm attempts to match the needsof different consumer group through compatible market inputs encompassingPRODUCTPRICEPLACE ANDPROMOTION
  • 102. ProductCategories(Product Positioning) The nature of a product is found tohave considerable impact on the method of productpositioning. Consumer Goods:Products that are purchasedfor consumption by the average consumer.Alternatively called final goods, consumer goods are the end result of production and manufacturing and are what a consumer will seeon the store shelf. Clothing, food, automobiles and jewelry are all examples of consumer goods. Basicmaterials suchascopper are not considered consumer goods becausethey must be transformed into usableproducts. Industrial goods: products or servicespurchased for usein the production of other goods or services, in the operation of a business,or for resale to other consumers. Industrial products include heavy machinery, raw materials, typewriters, tools,and cashregisters
  • 103. ProductMarket Mix Strategy - Ansoff drew up a growth vector matrix, describing a combination of a firm’s activities in current and new market, with existing and new products. Theproduct-market mix strategy is illustrated in diagrambelow:
  • 104. Current productsandcurrent market: market penetration Market penetration: the firmseeksto: Maintain or increaseits shareof the current market with current products. Securedominance of growth markets. Restructure a mature market by driving outcompetitors. Increaseusageby existing customer. Presentproductsandnew markets:market development New geographical areas and export markets Different package sizesfor food and other domestic itemssothat those who buy in bulk and small quantities are cateredfor. New distribution channels to attractnew customers (e.g. organic foods sold in supermarkets not just specialistshops) Differential pricing policies to attract different types of customer and create new market segments.
  • 105. New productsto presentmarkets:productdevelopment Advantage –Product developmentforcescompetition to innovate, new comersto the market might bediscouraged. Thedrawbacks include the expenseand the risk. New productsandnewmarkets: diversification occurs when a company decides to make new products for new markets. It has to have a clear idea of what it hopes to gain from diversification. There are two types of diversification, related and unrelateddiversification. Growth- new products and new markets should be selected which offer prospects for growth, which theexisting product market mix doesnot. Investingsurplus– funds not required for other expansion needs: but thefunds could be returned to shareholders. Thefirmsstrengthsmatchesthe opportunityif – outstanding new products have beendeveloped by the company’s research and development department. Theprofit opportunities from diversification arehigh.
  • 106. Relateddiversification Horizontal integration refers to ‘development intoactivities which are competitive with or directly complementary to a company’s present activities.’ Sonywith its play station started to compete in computer games. Vertical integration occurswhena companybecomesitsown; .a supplier of raw materials, components or services(backward vertical integration) .b Distributor or salesagent (forward vertical integration), for example: where a manufacturer of synthetic yarn begins toproduce shirts from the yarn instead of selling it to other shirt manufacturers. Advantageof vertical integration a. Tosecuresupply of components or raw materials with more control. Supplier bargaining power isreduced. .b Strengthen the relationships and contacts of the manufacturer with the final consumer of the product. .c Win a share of the higherprofits. .d Pursuea differentiation strategy moreeffectively. .e Raisebarriers to entry.
  • 107. Disadvantagesof vertical integration a. Over-concentration - Acompany places too many bets on ‘a same end-market product’ b. Thefirm fails to benefit from any economiesof scaleor technical advancesin the industry to which it has diversified. This is why in the publishing industry most printing is subcontracted to the specialist printing firms, who can work machinery to capacity by doing work for manyfirms. Unrelated diversification - conglomeratediversification Unrelated diversification or conglomerate diversification is very unfashionable now – but it has been a key strategy for many companies in Asia.
  • 108. Advantagesof conglomerate diversification a. Riskspreading – entering new products into new markets offers protection against failure of current products andmarkets. b.High profit opportunities –Ability to move into high growth profitable industries especially important if current industry is indecline. c. Escape– from the present businessif competition is toohot! d. Better accessto capital markets. e.No other way to grow – expansion in the existing industry might lead to monopoly and governmentinvestigation f. Usesurplus cash g. Exploit under-utilized resources h. Obtain cashor other financialadvantages i. Usea company’s image reputation in one market to buildproducts and servicesin another market.
  • 109. Disadvantages of conglomeratediversification a. Thedilution of shareholders earnings if diversification is intogrowth industries with high P/Eratios. b.Lackof a common identity and purpose in a conglomerate organization. Aconglomerate will besuccessfulonly if it hashigh quality of management and financial ability at head office where diverse operations are brought together. c. Failure in one businesswill drag down therest. d. Lackof managementexperience e.Nogood for shareholders – shareholders can spread risk by buying sharesin companiesin different industries.
  • 111. Marketing Mix Determination PRODUCT WHAT SIZE SHAPE ANDTHE FEATURE’s SHOULD THE PRODUCT HAVE. HOW SHOULD ITBE PACKAGED WHAT ASPECT OF SERVICEIS MOST IMPORTANT TO CONSUMERS HOW IT IS TO BE DESIGNED
  • 112. Marketing Mix Determination PRICE PRICE SENSITIVITY OF CONSUMERS PRICE AWARENESS NEW PRODUCTLAUNCH LIST PRICE DISCOUNTS,ALLOWANCES AND PAYMENT METHODS
  • 113. Marketing Mix Determination PLACE DISTRIBUTION PROCESS RELATED ISSUES CONSUMER’S LOYALTY. WHAT TYPE OF RETAILOUTLET SHOULD SELL. LOCATION AND IN WHAT NUMBERS
  • 114. Marketing Mix Determination PROMOTION ADVERTISING PERSONAL SELLING PUBLICITY DIRECT MARKETING
  • 115. Marketing Mix Determination PROMOTION IDENTIFY TARGET MARKET REGION SPECIFIC CONSUMER ATTENTION COLOUR AND CONTRAST SIZE MEDIUM EXPENDITURE
  • 117. Packagingisdefined asall the activities of designingand producingthe container for a product Primary Package S econdary Package Shipping Package FactorsContributing to growing useof packaging: SELFSERVICE CONSUMERAFFLUENCE COMPANY& BRANDIMAGE INNOVATIONOPPURTUNITY
  • 118. labeling Label identifies the product or brand Grade the Product Promote- Through attractive graphics Describe the product
  • 119. Warranties and Guarantees Warranties are formal statements of expected product performance by the manufacturer Extended warranties Guarantee:Apromiseor an assurance,especiallyonegivenin writing, that attests to the qualityor durability of a productor service Apledge that somethingwill be performed in a specifiedmanner
  • 120.
  • 121. Themeaningof a product 121 A product is a set of tangible and intangible attributes, which may include packaging, color, price, quality and brand, plusthe seller’sreputation and services. Consumers are buying want-satisfaction in the form of the benefits they expectto receivefrom the product.
  • 122. Contd… Anything that canbe offered to amarket for attention, acquisition, useor consumption and which createsutility Physical objects, services, events, persons, places, organizations, ideas or mixes of all theseentities Ex.Acar, aDVDplayer, avacation, Coffee, investment servicesetc. 122
  • 124. LEVELSOFPRODUCT 124 Corebenefit: What consumerreally wantsto buy expectations of the customer Actualbenefit: the corebenefit turned into product. features, design,packaging,quality level, brand name…(allare carefullycombinedto deliver the core benefit)
  • 125. Augmentedproduct: 125 Delivery and credit, Installation, Warranty, After-sale service offering additional consumer services and benefits. consumers see product as complex bundles of benefits that satisfy their needs. When developing products, marketers first must identify the core consumer needs the product will satisfy. They must then design the actual product and find ways to augment it in order to create the bundle of benefits that will provide the most satisfying customer experience…
  • 126. CLASSIFICATION OFPRODUCT ConsumerProducts Convenience goods Shoppinggoods Specialty goods Unsoughtgoods Industrial Products Raw Materials Fabricating materials and parts Installations Accessoryequipment Operating supplies 126
  • 127. Consumer products: Bought by the final consumer forpersonal consumption. Industrial product: Bought by the individuals or organizations forthe further processing or for usein conducting a business. …adeskpurchased by aperson for personal useis a consumer product, the samebought by an entrepreneur for his industry is an industrialproduct, …. 127
  • 128. Consumer products Convenienceproducts Frequently purchased products. Low customer involvement. Low price more outlets. Masspromotion from producer Ex.detergent, toothpaste, magazinesetc. b) Shopping products Lessfrequently purchased . Much planning andshopping effort, comparison of brands on price quality andstyle. Higher price fewer outlets. Advertising andpersonnel selling by both producer andreseller. Ex.Television, fridge etc. 128
  • 129. c) Specialtyproducts Strong brand preference and loyalty , special purchase effort, little comparison. Low price sensitive. High price,one or afew outlets in alocality only. Carefully targeted promotion by both producer andreseller. ex. Luxury goods like Rolexwatches, BMW carsetc d) Unsought products Little product awareness,(if aware, negative interest or little) Price and distribution varies.Aggressive advertising and personal selling by producer andreseller. ex. Life insurance etc. 129
  • 130. Industrial Products Materials andparts: Rawmaterials (farm and natural): wheat, cotton,,fish petroleum etc. Manufactured parts &materials: iron, yarn, wires, cement, tires, castingsetc. b) Capital items: Industrial items that aid in buyers productions or operations. Major purchases suchasbuildings & fixed equipment (generators, super computers). Accessories like hand tools, fax machines, desks,computersetc. 130
  • 131. a) Supplies and services: Operating supplies: lubricants, coal, paper, pencil Repair and maintenance items: paint, nail,brooms. Supplies are the convenience products of industrial field. b) Services: Maintenance and repair services: window cleaning, computer repair etc Advisory services: Legal,Management consulting,, advertising. Servicesare supplied under contract 131
  • 132. New ProductDevelopment Process Role Product Mix Matches the changing environmental conditions. CompareNew and DevelopingSegmentsof the Market Fillingexcesscapacity AchievingLongterm growth and profit.
  • 133. New ProductDevelopment Process Idea Generation SalesPersonnel Marketing Personnel R& D Team TopManagement executives Production department EmployeeSuggestions
  • 134. Idea Screening Theobjectisto eliminate unsound conceptsprior to devotingresourcesto them. Thescreenersshouldaskseveral questions: Will the customerin the target market benefit from the product? What isthe sizeandgrowth forecastsof the market segment/targetmarket? What are the industrysalesandmarket trends(idea isbased on)? Isit technicallyfeasibleto manufacture the product? Will the productbeprofitable when manufacturedanddeliveredto the customerat the target price?
  • 135. ConceptDevelopmentand Testing Developthe marketing andengineering details Investigateintellectual property issuesandsearchpatent data bases Whoisthe target market andwhoisthe decisionmaker in the purchasingprocess? What productfeatures mustthe product incorporate? What benefitswill the productprovide? Howwill consumersreact to the product? Howwill the productbeproducedmostcost effectively? Provefeasibility throughvirtual computeraidedrendering, andrapid prototyping What will it costto produceit? Testingthe Conceptbyaskinga sampleof prospective customerswhat they thinkof the idea.
  • 136. BusinessAnalysis Estimatelikelysellingpricebaseduponcompetition andcustomer feedback Estimatesalesvolumebaseduponsizeof market and suchtoolsasthe Fourt-Woodlockequation Estimateprofitability andbreak-even point
  • 137. Beta TestingandMarket Testing Producea physicalprototype or mock- up Testthe product(and its packaging)in typical usagesituations Conductfocusgroupcustomer interviewsor introduceat trade show Make adjustmentswherenecessary Producean initial runof the product andsellit in a test market area to determine customeracceptance
  • 138. TechnicalImplementation New program initiation FinalizeQuality management system Resourceestimation Requirement publication Publishtechnicalcommunicationssuchas data sheets Engineeringoperations planning Department scheduling Suppliercollaboration Logisticsplan Resourceplan publication Program review and monitoring Contingencies- what-if planning
  • 140. ReasonsForAddingANew Product ExcessCapacityAsareason Profit asa criterion of OptimumProduct-Line Diversification asresponse to change Company’sStrong point Forward-Backward integration
  • 141. AdoptionProcess FiveStages Awareness-Theconsumerbecomesaware of the innovationbut lacks information about it. Interest-Theconsumerisstimulated to seekinformation aboutthe innovation. Evaluation-Theconsumerconsiderswhether to try the innovation. Trial-Theconsumertries the innovationto improvehisorherestimate of itsvalue. Adoption-Theconsumerdecidesto makefull andregularuseof the innovation.
  • 142. ProductLife Cycle Productlife cyclemanagement (or PLCM)is the successionof strategies usedby businessmanagement asa productgoes through its life cycle.Theconditionsin whicha productissold(advertising, saturation) changesovertime andmustbe managedasit movesthrough its succession of stages.
  • 143. Market introduction stage costs are veryhigh slow sales volumes to start little or no competition demand has tobe created customers have to be prompted to try the product makes no money at this stage
  • 144. Growth stage costs reduceddue to economies ofscale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market increased competition leads to price decreases
  • 145. Maturity stage costs are lowered asa result of productionvolumes increasing and experience curve effects • salesvolume peaksandmarket saturation isreached • increasein competitorsentering the market • pricestend to drop duetothe proliferation of competing products • brand differentiation andfeature diversification is emphasized to maintain or increase marketshare Industrial profits godown
  • 146. Saturation anddecline stage costs become counter-optimal salesvolume decline or stabilize prices, profitability diminish profit becomesmore a challenge of
  • 147. Branding What isa Brand “Aname, term, sign,symbol,or designor a combinationof these, intendedto identifythe goods& servicesof oneselleror groupof sellers& to differentiate themfrom thoseof the competitors.” Givesa visualidentificationinthe mindsof customers.
  • 148. Abrandcandeliver upto four levelsof meaning: Attributes. Abrandfirst bringsto mind certain productattributes. e.g. Mercedes Benefits. Customersdonot buyattributes, they buybenefits. Values. Abrandalsosayssomethingabout the buyers' values.ThusMercedesbuyers value highperformance, safety and prestige. Personality. Abrandalsoprojectsa personality. Motivation researchers sometimesask,'If this brandwere a person, what kindof personwould it be?
  • 149. BrandEquity Brandsvary in the amount of power and value they havein the marketplace Somebrandscommanda highdegreeof brand loyalty. The world's top brandsincludesuch superpowersasMcDonald's, Coca-Cola, Disney,Kodak,SonyandMercedes-Benz Brand equity refersto the marketing effects andoutcomesthat accrueto a productwith its brand name comparedwith thosethat would accrueif the sameproductdidnot havethe brand name Thissuggeststhat marketing strategy should focusonextendingloyal customer lifetime -value, with brand managementservingas an essentialmarketing tool.
  • 150. BrandElementChoice Criteria Memorability: Meaningfulness: Likability: Transferability: Amazon, Exxon Adaptability: logos and characters can be given a new look or a new design to make them appear more modern and relevant
  • 151. BrandingDecision Fourgeneral strategies are often used Individual Names: Procter& Gamble(INDIA) hasseveral individual brandsin different productcategories,Vicks,Ariel andtide, Head& ShouldersandPampers.KingfisherAirlines, after acquiringAir Deccan,a low – costairline, modifiedthe brand nameto SimpliflyDeccan,andretained it asa separate brand, partly to protect the equity ofkingfisher. Blanket Familynames: Thispolicyisfollowed byTata. The blanket family salt, tea, coffee, automobiles, andsteel. Developmentcostare lower with blanket names because there’snoneedto run“name”researchor spendheavilyon advertising to create recognition. Salesof the new product are likely to bestrongif the manufacturer’s name isgood. Corporate– Image.
  • 152. BrandingDecision Fourgeneral strategies are often used Separate family names for the product : TheAditya Birla Group in India follows this policy to a great extent. It usesseparate family names for its various products. Hindalco for aluminum. UltraTechfor cement, Grasim for suitings. Corporate names combined with individual product names: Kellogg combines corporate and individual names in Kellogg’s RiceKrispies, Kellogg’s Raisin Bran, and Kellogg’s CornFlakes,asdo Honda, Sony and Hewlett – Packard for their products. Thecompany name legitimizes, and the individual name individualizes, the newproduct.
  • 153. PromotionMix Thespecificmixof advertising,personalselling,salespromotionand publicrelationsthat a companyusesto pursueits advertising and marketing objectives
  • 154. PromotionMix Advertising:Anypaid form of non-personalpresentation and promotionof ideas,goodsor servicesbyan identified sponsor Personalselling.Oral presentationina conversationwith oneor moreprospectivepurchasersfor the purposeof makingsalesand buildingcustomer relationships. Salespromotion.Short-term incentivesto encouragethe purchaseor saleof a productor service. Publicrelations. Buildinggoodrelationsbydoingfavorable publicity,buildingupa goodcorporate image, andhandlingor headingoff unfavorablerumors,storiesand events.
  • 155. AdvantagesandDisadvantagesof Each Element of the Promotional Mix Mix Element Advantages Disadvantages Advertising • Good for building awareness • Wide reach • Repetition of main brandand product positioning helpsbuild customer trust • Impersonal - cannot answer alla customer's questions • Not goodat getting customersto make afinal purchasingdecision PersonalSelling • Highly interactive • Excellent for communicating complex / detailed product information andfeatures • Relationships canbe built up • Costly- employing asales force hasmany hidden costsin addition to wages • Not suitable if there are thousands of importantbuyers SalesPromotion • Canstimulate quick increasesin salesby targeting promotional incentives on particularproducts • Good short term tacticaltool • If used over the long-term, customers may get used to the effect • Toomuch promotion maydamage the brandimage PublicRelations • Often seenasmore "credible" - since the messageseemsto be coming from athird party (e.g. magazine, newspaper) • Cheapway of reachingmany customers • Riskof losing control -cannot always control what other people write orsayabout your
  • 157. Sell value, not price. Kotler on Marketing
  • 160. Settingthe Price Step 1: Selecting the pricingobjective Survival Maximize current profits Maximize their marketshare Market-penetration pricing Best when: Market is highly price-sensitive, and alow price stimulates market growth, Production and distribution costs fallwithin accumulated production experience,and Low price discourages actual andpotential competition
  • 161. Settingthe Price Step 2: Determining Demand Price sensitivity Total Costof Ownership(TCO)
  • 162. Settingthe Price Tom Nagle offers this list of factorsassociated with lower pricesensitivity Theproduct is more distinctive Buyers are lessaware of substitutes Buyers cannot easily compare the quality ofsubstitutes Theexpenditure is asmaller part of the buyer’s totalincome Theexpenditure issmallcomparedto the total costof the end product Part of thecost is borne by another party Theproduct isusedin conjunction with assetspreviously bought Theproduct isassumedto havemore quality, prestige,or exclusiveness Buyers cannot store the product
  • 163. 1 6-1 63 Settingthe Price Estimating DemandCurves Price Elasticity of Demand Inelastic Elastic Price indifference band
  • 164. Settingthe Price Step 3: Estimating Cost Types of Costand Levelsof Production Fixed costs (overhead) Variable cost Total cost Average cost Accumulated Production Experience curve (Learning curve)
  • 165. 1 6-1 65 Settingthe Price Differentiated Marketing Offers Activity-based cost(ABC) accounting Target costing Step 4: AnalyzingCompetitors’ Cost, Prices, and Offers
  • 166. Settingthe Price Step 5: Selecting aPricing Method Markup Pricing Unit Cost= variable cost +(fixed cost/unit sales) Markup price Markup price= unit cost/ (1 – desired returnon sales) Target-Return Pricing Target-return price= unit cost +(desired return Xinvestment capital)/unitsales
  • 167. Perceived value Price buyers Value buyers Loyal buyers Value-in-use price Break-even volume Break-even volume =fixed cost / (price – variable cost) Perceived-Value Pricing Break-EvenChartfor Determining Target- ReturnPriceandBreak-Even Volume Settingthe Price
  • 168. Settingthe Price Value Pricing Everyday low pricing(EDLP) High-low pricing Going-Rate Pricing Auction-Type Pricing English auctions (ascending bids) Dutch auctions (descendingbids) Sealed-bid auctions Group Pricing
  • 169. Settingthe Price Step 6: Selecting the FinalPrice Psychological Pricing Referenceprice Gain-and-Risk-Sharing Pricing Influence of the Other MarketingElements Brands with average relative quality but high relative advertising budgets charged premium prices Brands with high relative quality and high relative advertising budgets obtained the highestprices Thepositive relationship between high advertising budgets and high prices held most strongly in the later stages of the product life cycle for marketleaders
  • 170. Settingthe Price Brands with average relative quality but high relative advertising budgets charged premium prices Brands with high relative quality and high relative advertising budgets obtained the highestprices The positive relationship between high advertising budgets and high prices held most strongly in the later stages of the product life cycle for market leaders Company Pricing Policies Impact of Price on OtherParties
  • 171. Adaptingthe Price Geographical Pricing (Cash,Countertrade, Barter) Countertrade Barter Compensation deal Buyback arrangement Offset Price Discounts andAllowances
  • 172. PriceDiscountsand Allowances Cash Discount: A price reduction to buyers who pay bills promptly. A typical example is “2/10, net 30,” which means that payment is due within 30 days and that the buyer can deduct 2 percent by paying the bill within 10 days. Quantity Discount: A price reduction to those who buy large volumes. A typical example is “$10 per unit for less than 100 units; $9 per unit for 100 or more units.” Quantity discounts must be offered equally to all customers and must not exceed the cost savings to the seller. They can be offered on each order placed or on the number of units ordered over a given period.
  • 173. Adaptingthe Price Promotional Pricing Loss-leader pricing Special-event pricing Cashrebates Low-interest financing Longer payment terms Warranties and servicecontracts Psychological discounting
  • 174. Adaptingthe Price Discriminatory Pricing Customer segment pricing Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing
  • 175. Adaptingthe Price Product-mix pricing Product-Line Pricing Optional-Feature Pricing Captive-Product Pricing Captive products Two-Part Pricing By-Product Pricing Product-Bundling Pricing Pure bundling Mixed bundling
  • 177. Kotler onMarketing Integrated marketing communications is away of looking at the whole marketing processfrom the viewpoint of the customer.
  • 178. 1 9-1 78 Marketing CommunicationsMix Advertising SalesPromotion Public Relations and Publicity Personal Selling Direct and InteractiveMarketing
  • 179. CommonCommunication Platforms Advertising Print and broadcast ads Public Relations Press kits Personal Selling Sales presentation Direct Marketing Catalogs Packaging- outer Sales Promotion Contests, games, sweepstakes, lotteries Premiums and gifts Speeches Sales meetings Mailings Packaging inserts Sampling Seminars Incentive programs Telemarketing Motion pictures Fairs and trade shows Annual reports Samples Electronic shopping TheCommunication Process
  • 181. TheCommunicationProcess Target audience may not receive the intended messagefor any of threereasons: Selective attention Selective distortion Selective retention
  • 182. TheCommunication Process Fiske and Hartley have outlined factors that influencecommunication: The greater the influence of the communication source, the greater the effect on therecipient Communication effects when they are in line are greatest with existing opinions, beliefs, anddispositions
  • 183. TheCommunication Process Communication can produce the most effective shifts on unfamiliar, lightly felt, peripheral issues that do not lie at the core of the recipient’s value system. Communication is more likely to be effective if the source is believed to have expertise, high status, objectivity, or likeability, but particularly if the source haspower and can be identified with. The social context, group, or reflective group will mediate the communication and influence whether or not the communication isaccepted.
  • 185. DevelopingEffective Communications Identify the TargetAudience Image analysis Familiarity scale Favorability scale Never Heardof Heardof Only Knowa LittleBit Knowa Fair Amount KnowVery Well Very Unfavorable Somewhat Unfavorable Indifferent Somewhat Favorable Very favorable
  • 186. Decidingonthe Marketing CommunicationsMix The Promotional tools Advertising GeneralQualities: Public presentation Pervasiveness Amplified expressiveness Impersonality SalesPromotion Benefits: Communication Incentive Invitation
  • 187. Decidingonthe Marketing Communications Mix Public Relations and Publicity Distinctive qualities: High credibility Ability to catch buyers offguard Dramatization Personal Selling Distinctive qualities: Personal confrontation Cultivation Response
  • 188. Decidingonthe Marketing Communi cationsMix Direct Marketing Distinctive qualities: Nonpublic Customized Up-to-date Interactive
  • 189. Decidingonthe Marketing Communications Mix Factors in setting the MarketingCommunications Mix Type of ProductMarket Advertising’s role in businessmarkets: Advertising can provide an introduction to the company and its products If the product embodies newfeatures, advertising can explain them Reminder advertising is more economicalthan sales calls
  • 190. Decidingonthe Marketing Communi cationsMix Advertisements offering brochures andcarrying the company’s phone number are an effective way to generate leads for salesrepresentatives. Sales representatives can use tear sheets of the company’s ads to legitimize their company and products. Advertising can remind customers of how touse the product and reassure them about their purchase.
  • 191. Decidingonthe Marketing Communications Mix Levitt found that: Corporate advertising that can build upthe company’s reputation will help the sales representatives Salesrepresentatives from well-known firms have an edge, but ahighly effective presentation from alesser knowncompany’s rep can overcome that edge Company reputation helps most whenthe product iscomplex
  • 192. Decidingonthe Marketing Communications Mix Gary Lilien found that: The average industrial company sets its marketing budget at 7 percent ofsales Industrial companies spent a higher-than-average amount on advertising if their products had higher quality, uniqueness, or purchase frequency, or if there was customer growth Industrial companies set a higher-than-average marketing budget when their customers were more dispersed or the customer growth ratewas higher
  • 193. Decidingonthe Marketing Communications Mix Effectively trained consumer salesforcecan make four important contributions: Increased stock position Enthusiasm building Missionary selling Key account management Buyer-Readiness Stage
  • 195. Managing the SalesForce Theoriginal and oldestform of direct marketing isthe field sales call. U.S. firmsspendovera trillion dollars annuallyonsalesforcesandsalesforce materials— morethan they spendon anyother promotional method. companiesare trying to increasethe productivityof the salesforcethrough better selection,training, supervision, motivation, and compensation.
  • 196. Theterm salesrepresentative coversa broadrange of positions. Sixcanbe distinguished: 1.Deliverer-Asalespersonwhose major task is the delivery ofa product (water, fuel,oil). 2.Ordertaker -Asalespersonwho acts predominantly asan inside order taker or outside ordertaker. 3.Missionary-Asalespersonwho is not expected or permitted to take an order but whose major task is to build goodwill or to educate the actual or potentialuser. 4.Technician- Asalespersonwith a high level of technical knowledge. 5. Demandcreator -Asalespersonwho relies on creative methods for selling tangible products (vacuumcleaners, cleaning brushes, household products) or intangibles (insurance, advertising services,or education). 6.Solution vendor - A salesperson whose expertise is in the solving of a customer's problem, often with a system of the company's products and services(for example, computer and communicationssystems).
  • 197. SalesForceObjectivesandStrategy SpecificTasksPerformedbySalesForce Prospecting. Searchingfor prospects, or leads. Targeting. Deciding how to allocate theirtime among prospects and customers. Communicating. Communicating information about the company's products andservices. Selling.Approaching, presenting, answering questions, overcoming objections, andclosing sales. Servicing. Providing various servicesto the customers—consulting on problems, rendering technical assistance, arranging financing, expeditingdelivery. Information gathering. Conductingmarket research and doing intelligence work. Allocating. Deciding which customers will get scarceproducts during product shortages.
  • 198. RecruitingandSelecting Representatives One survey revealed that the top 27 percent of the sales force brought in over 52 percent of the sales. The average annual turnover rate for all industries is almost 20percent. Sales force turnover leads to lost sales, costs of finding and training replacements, and often a strainon existing salespeople to pick up the slack What is the Challenge? Right Person for the Right Job!!!! Test is taken interview is taken, personality tests are done, past history is checked
  • 199. SalesRepProductivity How many calls should a company make on aparticular account each year? Someresearch hassuggested that today's salesreps are spending too much time selling to smaller, lessprofitable accounts when they should be focusing more of their efforts on selling to larger, more profitableaccounts. NORMSFORPROSPECTCALLS 25 percent of their time prospecting and to stop calling on a prospect after three unsuccessfulcalls Using SalesTime Efficiently Tocut costs, reduce time demands on their outside sales force, and take advantage of computerand telecommunications innovations, many companies have increased the sizeand responsibilities of their inside sales force Inside salespeople are of threetypes Technical support people Salesassistants Telemarketers
  • 200. Motivating SalesRepresentatives Salesmanagers must be able to convince salespeople that they can sell more by working harder or by being trained towork smarter. Salesmanagers must be able to convince salespeople that the rewards for better performance are worth the extraeffort. marketers reinforce intrinsic andextrinsic rewards of all types Oneresearch study that measured the importance of different rewards found that the reward with the highest value was pay, followed by promotion, personal growth,and senseof accomplishment Theleast-valued rewards were liking and respect, security, and recognition.
  • 201. EvaluatingSalesRepresentatives SOURCESOFINFORMATION Salesreports Personal observation Salesperson self-reports Customer letters and complaints Customersurveys,and conversationswith othersales representatives. Thesereports provide raw data from which sales managers canextract keyindicators of sales performance: (1) average number of salescalls per salespersonper day, (2) average salescall time per contact, (3) average revenueper salescall, (4) average cost per salescall, (5) entertainment cost per salescall, (6) percentage of orders per hundred salescalls,(7) number of new customers per period, (8) number of lost customers per period, and (9) salesforce cost asa percentage of total sales.
  • 202. Territory: Midland Sales Representative:JohnSmith 2006 2007 2008 2009 Net salesproductA $251,300 $253,200 $270,000 $263,100 Net salesproductB 423,200 439,200 553,900 561,900 Net salestotal 674,500 692,400 823,900 825,000 Percentof quotaproductA 95.6 92 88 84.7 Percentof quotaproductB 120.4 122.3 134.9 130.8 Grossprofits productA $50,260 $50,640 $54,000 $52,620 Grossprofits productB 42,320 43,920 55,390 56,190 Grossprofitstotal 92,580 94,560 109,390 108,810 Salesexpense $10,200 $11,100 $11,600 $13,200 Salesexpenseto total sales(%) 1.5 1.6 1.4 1.6 Numberof calls 1,675 1,700 1,680 1,660 Costpercall $6.09 $6.53 $6.90 $7.95 Averagenumberof customers 320 24 328 334 Numberof new customers 13 14 15 20 Numberof lost customers 8 10 11 14 Averagesalesper customer $2,108 $2,137 $2,512 $2,470 Averagegrossprofit per customer $289 $292 $334 $326
  • 203. Viral Marketing Marketing phenomenon that facilitates and encourages people to pass along a marketing message. Viral marketing describes any strategy that encourages individuals to pass on a marketing message to others, creating the potential for exponential growth in the message's exposure and influence It can be delivered by word of mouth or enhanced by the network effects of the internet. Viral promotions may take the form of video clips, interactive flash games, brandable Software, images, or text messages
  • 204. History There is debate on the origination and the popularization of the term viral marketing, though some of the earliest uses of the current term are attributed to the Harvard Business School graduate Tim Draper and faculty member JeffryRayport. Among the first to write about viral marketing on the Internet was the Media critic Douglas Rushkoff. The assumption is that if such an advertisement reaches a "susceptible" user, accepts the idea) that user becomes "infected" (i.e., and shares the idea with others "infecting them," in the viral analogy's terms
  • 205. Notable Examples Popularized in the 1960s and '70s is essentially a form of viral marketing inwhich representatives gain income through marketing products through their circle of influence and give their friends a chanceto market productssimilarly The ClassicHotmail.com Example Theclassicexample of viral marketing is Hotmail.com, one of the firstfree Web-basede-mail services.Thestrategy is simple: Giveaway free e-mail addressesand services, Attach a simple tag at the bottom of every free message sent out: "Get your private, free email at http://www.hotmail.com"and, Thenstand back while people e-mail to their own network offriends and associates, Who seethe message, Signup for their own free e-mail service,andthen Propel the messagestill wider to their ownever-increasing circles of friends and associates. Liketiny wavesspreading ever farther from a single pebble dropped into a pond, a carefully designedviral marketing strategy ripples outward extremely rapidly.
  • 206. Typesof Viral Marketing Pass-along: A message which encourages the user to send the message to others. The crudest form of this is chain letters where a message at the bottom of the e-mail prompts the reader to forward the message Incentivized viral: A reward is offered for either passing a message along or providing someone else's address. This can dramatically increase referrals. However, this is most effective when the offer requires another person to take action. Undercover: A viral message presented as a cool or unusual page, activity, or piece of news, without obvious incitements to link or pass along. In Undercover Marketing, it is not immediately apparent that anything is being marketed. "Edgy Gossip/Buzz marketing" ads or messages that create controversy by challenging the borders of taste or appropriateness. Discussion of the resulting controversy can be considered to generate buzz and word of mouth advertising. Prior to releasing a movie, some Hollywood movie stars get married, get divorced, or get arrested, or become involved in some controversy that directs conversational attention to them. User-managed database: Users create and manage their own lists of contacts using a database provided by an online service provider. By inviting other members to participate in their community, users create a viral, self-propagating chain of contacts that naturally grows and encourages others to sign up as well.
  • 207. Network Marketing Thesimplest explanation of network marketing is thatit is a method of marketing that utilizes independent representatives to reach potential customers that a company otherwise would not reach with traditional online or offline marketing methods.
  • 208. Howdidnetwork marketin gstart? Network marketing hasbeenaround for nearly fifty years. It started in the US,and the first major modern network marketing businesswas formed in 1959. Thiscompany was created by businesspartners RichDeVosand JayVanAndel, originally with just one single product and a new and unique businessvision. Theyregarded conventional salesjobs asunfair - being paid only oncefor the work that they did evenwhen the company continued to make a profit from their labors for many yearsafterwards.
  • 209. SoDeVosand VanAndel broke away and formed their own company, returning a few years later with enough money to buy out theiroriginal employers and incorporate the vitamin business into their growing corporation. Their company is now a multi-billion dollar business operating in virtually every developed country in the world. Within a few short years, many more companies followed in their footsteps and now network marketing is responsible for a turnover of tens of billions of dollars in the US alone.
  • 210. Word-of-mouthcommunication Most influential for consumer decisionmaking Comesfrom an independent source Often based on experience Canbe negative and positive But, how can marketers act onit? Until now, it was difficult to ascertain who is talking to who? Onecould not easily reach “opinion leaders”. Onecould act on w.o.m. only on the aggregate usingbroad proxies to identify opinionleaders Psychographics Demographics Etc.
  • 211. What haschanged? We have refined data on consumercommunities. Social network data: people designate friends(e.g. MySpace.com) Telecom data: people talk to friends,people designate preferred contacts (e.g.Skype) We have new technology to analyze thedata Hardware Software We can act on the data (viralmarketing) Sendmessagesto key people in the network Avoid marketing “noise” (blanket SMSpromotion)
  • 212. What network marketersdo? Find communities in complex networks(Skype, Myspace, Telecom traffic data) to target withbrands/content to discriminate w.r.t.price/advertising Find “key people” who (i)connect communities, (ii) hold communitiestogether to initiate new product/servicediffusion toensure best return on direct (viral) marketing to refine CRMtechniques
  • 214. Membersclassifiedin termsof their role (value) in the communities.
  • 215. Advantages 100%data availability One-time setupcost,low marginal cost Variety of uses: Promotion CRM Advertising
  • 216. CASE: East European socialnetwork site • Problem: How existing membersinfluence new onesjoining the site? • What was done: Describedpeople’s adoption behavior asa function of their personal networks anddemographics • Keyinsight: Fastadopters are people with densenetworks (not large networks
  • 217. CASE: Middle-Easterntelecomcompany (10 million customers) • Problem: Identify highlyConnected/ influential customers to be targeted by direct marketing for cross-selling another service • What was done: Identified thetop 10,000 targets • Insights: Toptargets may not bethe oneswho have most connections
  • 218. EventMarketing The activity of designing or developing a themed activity, occasion, display, or exhibit (such asa sporting event, music festival, fair, or concert) to promote a product,cause, or organization. Also called event creation.
  • 219. EventMarketing Planning Plan Event Planning Concept Objectives Strategies Execution Evaluation and Measurement Advertising and PR Strategy
  • 220. EventConcept Event Concept and Design Theme Venue $ Resources Timing Rooms & Layout Technical & A/V Suppliers Accomodations Number of and extent of decisions depends on size and scope of the event.
  • 221. EventObjectives Objectives are essential in order to justify investment. Some possible objectives include: • Size of audience reached • Ability to reach target • Sponsor recognition levels • Potential sales • Economic Impact Objectives are included in an event proposal along with organizational details and a timeline.
  • 222. EventMarketing Strategies An event is much like a product so the marketing strategies are similar. • Define the product (the event) • Establish price • Distribution (of tickets) • Marketing Communications
  • 223. Marketing Communications Branding Advertising Strategy Name, logo, color, and image. Event needs a consistent look. Message and media strategy to create interest and reach target effectively. PR Strategy Press releases and conferences in pre-event stage.
  • 224. EventMarketing Execution Delineating all of the details associated with the event. • Site Selection • Staging • Catering andAccommodations • Staffing • Operations and Logistics • Safety and Security
  • 225. Followingthem canensurea c ost effective implementation of the eventmarketing. If the event is meant to market a certain product, then it is necessary to ensure that the purchase decision-maker attends the event. Make sure you get participant contact information before the event as well as after. Other value-added benefits that can be expected from the show organizer include Before the event is undertaken, the cost effectiveness of promoting the product through the event should be questioned by asking yourself event qualifying questions around the “who" instead of the “how many” The giveaways at the event should be relevant to the business being promoted through the event. And make sure you don't give something away for free just for the heck of it. The location chosen for the event is perhaps the most important aspect. Make sure you don't purchase a cheap booth at a popular exhibition because there are strong chances that no one will be visiting you, since your booth will be tucked away hidden from all eyes
  • 226. DirectMarketing Direct marketing is the useof consumer-direct (CD)channels to reach and deliver goods and servicesto customers without using marketing middlemen. Thesechannels include direct mail, catalogs, telemarketing, interactive TV,kiosks, Web sites, and mobile devices.
  • 227. Objectivesof direct marketing Direct ordering. Providinginformation. Visit generation. Trial generation.
  • 229. Direct mail - material distributed via the postal service to a recipient’s home or businessto promote a product/service. Direct response advertising - standard broadcastand print media designed to generate a directresponse, e.g an order or personalvisit. Telemarketing - a direct personal, verbal approachvia somekind of written or visualmethod. Mail order - the purchase ofproducts featured in advertising or selected from acatalogue. Teleshopping - home basedshopping.
  • 230. Direct-mail marketing haspassedthrougha numberof stages: E "Carpet bombing." Direct mailers gather or buy as many names as possible and send out a mass mailing. Usually the response rate is very low. Database marketing. Direct marketers mine the database to identifyprospects who would have the most interest in an offer. a Interactive marketing. Direct marketers include a telephone number and Web address, and offer to print coupons from the Web site. Recipients can contact the company with questions. The company usesthe interaction as an opportunity to up-sell, cross-sell, and deepen the relationship. BReal-time personalized marketing. Direct marketers know enough about each customer to customize and personalizethe offer andmessage.
  • 231. Generate leads. Screenleads before follow up. Arrange opportunities for representatives. Direct sales. Encourage cross/ upselling. Dealer support. Account servicing. Market research. Test marketing. Applications of telemarketing
  • 232. Useof Telemarketing New businessand lead generation 28% Customer care 26% Customer service 26% Brand loyalty 14% Crisis management 6%
  • 234. Weaknessesof traditional mail order catalogues Lackof speed. Downmarket image. Lackof targeting. Agencysystem
  • 235. CatalogMarketing In catalog marketing, companies maysend full-line merchandise catalogs, specialty consumer catalogs, and businesscatalogs, usually in print form but also sometimes as CDs,videos, oronline. Catalogs are a huge business—about 71 percent of Americans shopfrom homeusing catalogs by phone, mail, andInternet.
  • 236. Other Media for Direct-ResponseMarketing TELEVISION: is usedby direct marketers in severalways: Direct-response advertising -Somecompanies prepare 30- and 60-minute infomercials that attempt to combine the sell of commercials with the draw of educational information and entertainment. Infomercials can be seenas a crossbetween a sales call and a television ad and cost roughly $250,000 to $500,000 tomake. At-home shopping channels - Sometelevision channels are dedicated to selling goods andservices. Videotext and interactive TV-Theconsumer's TVset is linked with a seller's catalog by cable or telephone lines. Consumerscan place orders via a special keyboard device connected to thesystem.
  • 237. KIOSKMARKETING Akiosk is a small building or structure thatmight housea selling or information unit. Thename describesnewsstands, refreshment stands, and free-standing carts whose vendors sell watches, costume jewelry, and other items. Thecarts appear in busand rail stations and along aisles in a mall. Theterm also coverscomputer-linked vending machines and "customer-order-placing machines" in stores, airports, and otherlocations.
  • 238. Interactive Marketing Interactive Marketing refers to the evolving trendin marketing whereby marketing hasmoved from a transaction-based effort to aconversation. The Internet provides marketers and consumerswith opportunities for much greater interaction and individualization. Companies in the past would send standard media—magazines, newsletters, ads—to everyone. Todaythese companies can sendindividualized content and consumersthemselves can further individualize the content. Todaycompanies can interact and dialogue with much larger groups than ever in the past
  • 239. TheBenefitsof Interactive Marketing It is highly accountable and its effects can beeasily traced. TheWeb offers the advantage of "contextual placements." Marketers can buy adsfrom sitesthat are related to their offerings, aswell asplace advertising basedon contextual keywords from online searchoutfits likeGoogle. Web can reach people when they have actually started the buyingprocess
  • 240. Designingan Attractive Web Site A keychallenge isdesigninga site that isattractive onfirst viewing and interesting enoughto encouragerepeat visits. Rayport and Jaworskihaveproposedthat effective Web sites feature sevendesignelements that they call the 7Cs Context.Layoutand design. Content.Text, pictures,sound,andvideothe site contains. Community.Howthe siteenablesuser-to-user communication. Customization.Site'sability to tailor itself to different usersorto allow usersto personalizethe site. ECommunication.Howthe siteenablessite-to-user, user-to-site, or two-way communication. Connection.Degreethat the siteislinkedto other sites. Commerce.Site'scapabilitiesto enablecommercial transactions.
  • 241. GreenMarketing According to the American Marketing Association “green marketingis the marketing of products that are presumed tobe environmentally safe”. Thusgreen marketing incorporates a broad range of activities, including product modification, changes to the production process, packaging changes, aswell asmodifying advertising
  • 242. The green marketing has evolved over a period of time. According to Peattie (2001), the evolution of green marketing has three phases. • First phase as Ecologic : and during this period all marketing activities were concerned to help environment problems and provide remedies for environmental problems. • Second phase was "Environmental" green marketing and the focus shifted on clean technology that involved designing of innovative new products, which take care of pollution and waste issues. • Third phase was "Sustainable" green marketing. It came into prominence in the late 1990s and early 2000. Evolution of Green Marketing
  • 243. As resources are limited and human wants are unlimited, it is important for the marketers to utilize the resources efficiently without waste as well as to achieve the organization's objective. So green marketing is inevitable. There is growing interest among the consumers all over the world regarding protection of environment. Worldwide evidence indicates people are concerned about the environment and are changing their behavior. As a result of this, green marketing has emerged Why Green Market ing?
  • 244. Companies that develop new and improved products and services with environment inputs in mind give themselves access to new markets, increase their profit sustainability, and enjoy a competitive advantage over the companies which are not concerned for the environment. Benefitsof Green Marketing
  • 245. Green Marketing Mix The 4 P's of green marketing are that of a conventional marketing but the challenge before marketers is to use 4 P's in an innovative manner. Product The ecological objectives in planning products are to reduce resource consumption and pollution and to increase conservation of scarce resources (Keller man, 1978). Price Price is a critical and important factor of green marketing mix. Most consumers will only be prepared to pay additional value if there is a perception of extra product value. This value may be improved performance, function, design, visual appeal, or taste. Green marketing should take all these facts into consideration while charging a premium price. Promotion There are three types of green advertising: - Ads that address a relationship between a product/service and the biophysical environment Those that promote a green lifestyle by highlighting a product or service Ads that present a corporate image of environmental responsibility Place The choice of where and when to make a product available will have significant impact on the customers. Very few customers will go out of their way to buy green products.
  • 247. TheRoleof Marketing Channelsi nM arketingStrategy Channels provide the meansby which the firm movesthe goods and servicesit produces to ultimate users Facilitate the exchange processby cutting the number of contactsnecessary Adjust for discrepancies in the market’s assortment of goods and servicesviasorting Standardize exchange transactions Facilitate searchesby both buyers andsellers
  • 249. 13-249
  • 250. ChannelStrategy Decisions Selection of a MarketingChannel Factors which impact the selection of a marketing channelinclude: Marketfactors Customer Preference Geography Competitors Productfactors Life cycle Product Complexity Product Sizeand Weight Producer/Manufacturerfactor Company Objective Company Resources Desire Of control
  • 251. DeterminingDistribution Intensity Intensivedistribution: channel policy in which a manufacturer of a convenienceproduct attempts to saturate themarket Selective distribution: channel policy in which a firm chooses only a limited number of retailers to handle its productline Exclusivedistribution: channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products in a particular geographicarea
  • 252. CausesOfChannelConflict Goal Incompatibility Unclear Rolesand Rights Differences In perception Intermediaries dependency on manufacturer TypesOf Conflict Vertical Channel Conflict e.g. General Motors vs.Dealers Horizontal Channel Conflict e.g. PizzaInn franchisee complaint on substandard productsused. Multichannel conflict ( sameproduct sold bydifferent channels ) CONFLICT 13-252
  • 253. AchievingChannelCooperation Channel Cooperation, achieved via effective cooperation among channel members, is the desired antidote to channelconflict It is Best achieved when all channel members regard themselves ascomponents of the same organization 13-253
  • 254. Vertical Marketing Systems Vertical marketing system(VMS): planned channel system designed to improve distribution efficiency and cost effectiveness by integrating various functions throughout the distribution chain Administered marketing system: VMS that achieves channel coordination when a dominant channel member exercises its power e.g. Kodak,Gillette Corporate marketing system: a VMS in which a single owner operates at each stage in its marketing channel Contractual marketing system: VMS thatcoordinates channel activities through formal agreements among channel members like: Wholesaler-Sponsored Voluntary Chains Retail Cooperatives ( Grocery Store, Hardware) Franchises 13-254
  • 255. Making ChannelManagement Decisions Channel management decisions can greatly affect the successor failure of a business,becausethe partnersthat you decide to work with and the effort you put into managing them will determine how your businesscomes acrossto the public. There are certain trade offs when you chooseto utilize channel salesto market and distribute your product. Of course, channel salesare usually cost-effective, which is why businessesrely on salespartners to sell their product. Thelossof complete control over how your product is marketed is the drawback, but with a good partner management program you can make sure your company is represented the way you want itto be.
  • 257. Marketing Logistics Planning, implementing, and controlling the physical flows of materials and final goods from points of origin to points of use. • Nature of MarketLogistics • • • • • • • • Supplychain - manage activities - salesforecasting Planning Inventory management Packaging Warehousing Shipping Transportation Warehousing
  • 258. • • • • • Major - 30-40%of total costs Breakout - transportation37% Inventory 22% Warehousing21% Other 20% Market LogisticsObjective Right good at right place at right time for least cost M =T+FW+VW+ S where M= total market logisticscost T=total freight cost FW=total fixed warehouse cost VW=total variable warehousecost S=total costs of lostsales Costsof MarketLogistics
  • 259. • Order processing • order to remittance cycle- elapsedtime betweenan order placement andpayment • Warehousing • Storage • distribution • automated • Inventory • service increases - inventory costsincreases • re-order point • how much: order processing costsvs.inventory carrying costs just in time productionmethods Market LogisticsDecisions
  • 260. • Transportation • Medium • Speed • Frequency • Dependability • Capability • Availability • Traceability • Cost
  • 261. SelectingthePricingObj ective Step:1Selectingthe Pricing Objectives •Survival •Maximum CurrentProfit •Maximum Market Share •Maximum Market Skimming •Product Quality Leadership Step 2: Determining Demand •Price Sensitivity •Estimating Demand Curves Surveys PriceExperiments • • • StatisticalAnalysis • Price Elasticity of Demand
  • 262. 262 Step3- Estimatingcosts Typesof Costs Variable Costsand Fixed Costs Accumulated Production Target Costing Step4- AnalyzingCompetitor'sCost’s,Pricesand Offers Step5- Selectinga PricingMethod Markup Pricing MP=Unit Cost/(1-desired return onSales) Target Return Pricing TRP=UnitCost+{DesiredReturnxInvestedCapital/Unit Sales} Perceived Value Pricing Value Pricing Going Rate Pricing Auction TypePricing Step-6 Selecting the FinalPricing