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1. PRODUCTION - EASY AVAILABILITY AND LOW COST 2. PRODUCT - SUPERIOR PRODUCTS, INNOVATIVE FEATURES
Other
Departments
Communications
Channels
Internal Marketing
Integrated Marketing
Integrated Marketing
Ethics Environment
Legal
Community
Customers
Channel
Partners
MEANS
SUPERFLUOUS SELLING
ENDS
WHAT IS MARKETING
ALL ACTIVITIES DESIGNED TO GENERATE AND FACILITATE EXCHANGE OF PRODUCTS AND VALUES INTENDED TO SATISFY HUMAN NEEDS AND WANTS. MARKETING MANAGEMENT IS THE PROCESS OF PLANNING AND EXECUTING THE CONCEPTION, PRICING, PROMOTION, AND DISTRIBUTION OF IDEAS, GOODS, AND SERVICES TO CREATE EXCHANGE THAT SATISFY INDIVIDUAL AND ORGANIZATIONAL GOALS.
MARKETERS TASK
DEMAND MANAGEMENT (Level, Timing & Composition) STATES OF DEMAND NEGATIVE - Redesign Mix NO DEMAND Connect Benefits to Need LATENT Measure FALLING Creative Remarketing IRREGULAR - Use Synchro Marketing FULL Maintain OVERFULL Use Selective Demarketing UNWHOLESOME Use Laws, Fear, Price Hike, Reduced Availability
NEEDS Deprivation of basic satisfaction WANTS specific satisfiers of need DEMAND-wants backed by ability and willingness to buy PRODUCTS- anything( Physical good, service,person, idea0 that can satisfy a need or want UTILITY & VALUE &-SATISFACTION EXCHANGE-A value creating process TRANSACTION-Trade of values between parties RELATIONSHIPS-relationship marketing V/s transaction marketing
MARKETING
PRODUCTS
SERVICES
PERSONS
PLACES
ACTIVITIES
IDEAS
Marketing Mix
Target market Product Product variety Quality Design Features Brand name Packaging Price Promotion Sizes List Price Sales promotion Services Discounts Advertising Warranties Allowances Sales force Returns Payment period Public relations Credit terms Direct marketing
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MARKETING MIX - 7 PS
PACE (PROCESS)
PROOF OF PERFORMANCE
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People
- Employees Recruiting Training Motivation Rewards Teamwork - Customers Education Training
Physical evidence
Facility design Equipment Signage Employees dress - Other tangibles Reports Business cards Statements Guarantees
Process
- Flow of activities Standardized Customized - Number of steps Simple Complex - Customer involvement
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1. STATED NEED - PRODUCT DEMANDED E.g. INEXPENSIVE CAR 2. REAL NEED - FUNCTIONAL BENEFIT DESIRED E.g. LOW MAINTENANCE COST
PERCEIVED PERFORMANCE
< EXPECTATIONS
DISSATISFIED/ UNHAPPY
PERCEIVED PERFORMANCE
> EXPECTATIONS
DELIGHTED
DELIGHTED CUSTOMERS HAVE EMOTIONAL AFFINITY WITH BRAND & HENCE LOYALTY. EXPECTATIONS BASED ON PAST BUYING EXPERIENCE, ADVERTISEMENTS, FRIENDS, COMPETITORS EXPECTATIONS, PRICE, BENCHMARKING. EXPECTATIONS DIFFER BASED ON PRODUCT, CUSTOMER.
Cautions to be exercised in C.S. surveys Definition in detail Manipulation by customers and managers
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Prospects
Disqualified Prospects
Advocates
Partners
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EXCELLENT PRODUCT IS OF NO USE IF IT FAILS TO MEET CUSTOMER NEEDS. A COMPANY SHOULD BE SKILLED IN MARKET ENGINEERING NOT JUST PRODUCT ENGINEERING.
CUSTOMER DELIVERED VALUE is the difference between total customer value and total customer cost. TOTAL CUSTOMER VALUE is the bundle of benefits customers expect from a given product or service. TOTAL CUSTOMER COST is the bundle of costs customers expect to incur in evaluating, obtaining, and using the product or service.
PRODUCT SERVICE PERSONNEL IMAGE CUSTOMER DELIVERED VALUE MONETARY VALUE TIME COST ENERGY COST PSYCHIC COST TOTAL CUSTOMER COST TOTAL CUSTOMER VALUE
5
6 7
PROACTIVE MARKETING Salesperson contacts from time to time with suggestions about improved product uses or new products
PARTNERSHIP MARKETING Company works continuously with customer to discover ways to effect customer savings or help customer perform better.
Accountable
Reactive
Proactive
Accountable
Partnership
Proactive
Accountable
COST OF ACQUISITION
Service Encounters or Moments of Truth Service encounters are the building blocks of service quality & satisfaction - Every experience with product, service or person which allows customer to judge/ form impressions about the quality of service is a moment of truth. - It takes 10 good moments of truth to wipe one bad moment of truth. - Disney Corporation 74 service encounters in amusement park. Marriott Hotels - 4 of the top 5 factors come into play in first 10 minutes of guests stay. Types of service encounters- remote, phone, face to face. - In remote - tangible evidence & technical quality important. - In phone- process quality - In face to face - customer also play role.
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P1
P2 P3 P4
+ +
Products
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I. External Awareness Market share (volume or value) Relative price (market share value/volume) Number of complaints (level of dissatisfaction) Customer satisfaction Distribution/availability Total number of customers Perceived quality/esteem Loyalty/retention Relative perceived quality
II. Internal Awareness of goals Commitment to goals Active innovation support Resource adequacy Staffing/skill levels Desire to learn Willingness to change Freedom to fail Autonomy Relative employee satisfaction
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Percentage of win-back customers to average number of customers. Percentage of customers falling into very dissatisfied, dissatisfied, neutral, satisfied, and very satisfied categories. Percentage of customers who say they would repurchase the product. Percentage of customers who say they would recommend the product to others. Percentage of target market customers who have brand awareness or recall. Percentage of customers who say that the companys product is the most preferred in its category. Percentage of customers who correctly identify the brands intended positioning and differentiation. Average perception of companys product quality relative to chief competitor. Average perception of companys service quality relative to chief competitor.
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STRATEGIC PLANNING
STRATEGIC PLANNING
MARKET-ORIENTED STRATEGIC PLANNING - is the managerial process of developing and maintaining a viable fit between the organizaitons objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape and reshape the companys business and products so that they yield target profits and growth.
Thus strategic planning is concerned with 1. 2. 3. Treating business as an investment portfolio. Building game plan for each business based on industry position opportunity, resources, mission, objectives. Future potential and not just current potential.
Implementing Organizing
Division planning
Diagnosing results
Business planning
Product planning
Shaped by History, current preferences of owners and management, market environment, resources, distinctive competences. Provides sense of purpose, direction, and opportunity.
Good mission statements, limited number of goals and values and major competitive scopes.
Provides direction for 10 12 years.
Stars
Question Marks
Cash Cow
Dogs
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1.
An unbalanced portfolio would have too many dogs or question marks and/or too few stars and cash cows.
2.
3.
Each business is rated in terms of two major dimensions, market attractiveness and business strength. 1. MARKET ATTRACTIVENESS Overall market size,,mkt growth rate,profit margin,competitive intensity,inflationary vulnerability.,technological requiremnets,environmental impact..
2.
STRENGTH OF SBU / FIRM = Market share,share growth,product quality,brand reputation,distribution network,promotion effectiveness,production capacity,productive effeciency,R&D performance,managerial personnel,
Each of these factors is assigned weights and business is measured of 5 point scale.
(a)
Classification
Medium
Weak
3.67
2.33
diaphragms
1.00 5.00
Relief values
3.67
2.33
1.00
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(B) Strategies
BUSINESS STRENGTH PROTECT POSITION
Invest to grow at maximum digestible rate. Concentrate effort on maintaining strength. BUILD SELECTIVELY Invest heavily in most attractive segments. Build up ability to counter competition. Emphasize productivity by raising productivity. INVEST TO BUILD Challenge for leadership. Build selectively on strengths. Reinforce vulnerable areas
SELECTIVITY / MANAG FOR EARNING
BUILD SELECTIVELY Specialize around limited strength. Seek ways to overcome weaknesses. Withdraw if indications of sustainable growth are lacking.
LIMITED EXPANSION Protect existing program. OR HARVEST Concentrate investments Look for ways to expand without high risk;otherwise, in segments where profitability is good and minimize investment and risks are relatively low. rationalize operations.
MANAGE FOR EARNINGS
PROTECT AND REFOCUS Manage for current earnings. Concentrate on attractive segments. Defend strength.
Strong
Protect position in most profitable segments. Upgrade product line. Minimize investment. Medium
DIVEST Sell at time that will maximize cash value. Cut fixed costs and avoid investment meanwhile.
Weak
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When gap between future desired sales and projected sales, then three options. 1. INTENSIVE GROWTH current business 2. INTEGRATIVE GROWTH build or acquire businesses related to the companys current businesses. 3. DIVERSIFICATION GROWTH opportunities in unrelated business.
GROWTH STRATEGIES
INTENSIVE GROWTH (Ansoffs Product / Market Expansion Grid ) INTEGRATIVE GROWTH Backward, Forward, Horizontal DIVERSIFICATION GROWTH Concentric (Same technology / Marketing synergy), Horizontal (Appeals to current customers), Conglomerate (No relationship to the companys current technology, products, or markets).
Current Product
New Product
Current Markets
3. Productdevelopment strategy
New Markets
2. Marketdevelopment strategy
(Diversification Strategy)
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1. 2. 3.
4.
5. 6. 7.
STRATEGY FORMULATION
PROGRAM FORMULATION IMPLEMENTATION FEEDBACK AND CONTROL
A MARKETING OPPORTUNITY - is an area of buyer need in which a company can perform profitably. OPPORTUNITIES - can be classified according to their attractiveness and their success probability.
AN ENVIRONMENTAL THREAT - is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to deterioration in sales or profit. Threats should be classified according to their seriousness and probability of occurrence.
GOAL FORMULATION
STRATEGY FORMULATION
OVERALL COST LEADERSHIP firms should be good at engineering, purchasing, manufacturing and distribution.
DIFFERENTIATION on key customer benefit area e.g. services, quality, style, technology. FOCUS on narrow market segment and pursue either cost leadership or differentiation. CLEAR STRATEGY IMPORTANT - Dont be middle of the roaders Firms pursuing same strategy in same to market constitute strategic group.
STRATEGIC ALTERNATIVES
Market Development
Market Penetration
New segments
Convert nonusers
Existing Customers
Competitors customers
New product developments
PROGRAM FORMULATION - Develop programs in line with strategy e.g. Technology leadership strengths R&D, gather technological intelligence, develop leading edge products, train technical sales force, develops ads to communicate technology leadership. IMPLEMENTATION The McKinsey 7-S Framework(Hardwarestrategy,structure,systems and Software-Style, Staff, Skills, Shared Values) FEEDBACK & CONTROL - Need to review and revise implementation, programs, strategies, or even objectives.
MARKETING PROCESS
Involves 1. 2. 3. 4. Analysing Marketing Opportunities Developing marketing strategies (Differentiating and positioning) Developing marketing programs (Marketing mix) Managing marketing effort through
- Strategic control (Appropriateness of companies marketing strategy to market conclusions through marketers audit).
CO-ORDINATES FUNCTIONAL AREAS OF ORGANISATION ALLOCATES RESOURCES EFFICIENTLY HELPS PRODUCT ATTAIN MARKET POSITION COMPETITIVE
TO, 1. 2. 3. Define current situation facing the product (and how we got there) Define problems and Opportunities Establish objectives
4.
5. 6. 7.
III.
IV.
Objectives
1. 2. 3.
4.
5. 6. 7. 8. 9.
Structure
Length of plan Frequency of planning Number of courses of action considered Who sees the plan Insufficient senior management leadership
MARKETING ENVIRONMENT
OUTSIDE - IN VIEW TO TRACK TRENDS, OPPORTUNITIES & THREATS FOLLOWED BY MARKET RESEARCH TO DETERMINE AN OPPORTUNITYS PROFIT POTENTIAL.
MARKETING ENVIRONMENT
I. MAJOR FACTORS - (MACROENVIRONMENT)
A) DEMOGRAPHIC - (BREAKUP & CHANGES IN AGE, INCOME, SEX, EDUCATION, URBAN-RURAL, LIFE EXPECTANCY, OCCUPATION, PERSONS PER HOUSEHOLD).
MARKETING ENVIRONMENT
II.
ACTORS - (MICROENVIRONMENT)
D) CUSTOMERS
E) COMPETITORS F) PUBLIC - ASCI, CONSUMER ACTION GROUP
SSC/HSC NonSSC/HSC
D C C B2
4 Years
E2 E1 D D
Graduate
D C C B1
level
Officers/ ExecutivesJunior Officers/ Executives Middle/Senior B1 B1 B1 B1 A2 A1 A1 C C C B2 B1 A2 A2
65
Pucca
Semi-Pucca
R R4A 4 R3A A
R2 R1 R1
K u c v
Kuccha
R1
R2
R3A
66
Socioeconomic class Urban A1 A2 B1 B2 C D E1 E2 Social(Urban) Rural R1 R2 R3 R4 Subtotal (Rural) Total (Urban + Rural)**
(** Estimated number of households (in thousands) = 198,457
% of Households
(Source: Adapted from The Marketing White book, 2005, pp. 54 [Based on IRS 2003 2004]
Estimated Number of Indian Households by Income Groups 1999-2000 Households (millions) Income Groups (Annual Household Income Rupees at 1999 2000 prices) Up to 40,000 (low) 40,001 -80,000 (lower middle) 80,000-1,20,000 (middle) 1,20,000 1,60,000
Urban
8.2 (16.0) 16.7 (32.5) 11.8 (23.0) 6.9 (13.5) 7.7 (15.0) 51.3 (100)
Rural
56.0 (44.7) 43.7 (34.8) 15.5 (12.3) 5.6 (4.5) 4.5 (3.7) 125.3 (100)
Total
64.2 (36.3) 60.4 (34.2) 27.3 (15.5) 12.5 (7.1) 12.2 (6.9) 176.6 (100) 68
(upper middle)
Above 1,60,000 (high) Total
362
(32.5) 673 (60.4) 78 (7.0) 1,114 (100)
355
(29.7) 747 (62.5) 94 (7.9) 1,194 (100)
343
(27.1) 811 (64.0) 113 (8.9) 1,268 (100)
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TYPES OF COMPETITION
1. WHAT ARE THEIR CURRENT / FUTURE OBJECTIVES - GROW, HOLD, HARVEST, DIVEST.
2. WHAT ARE THEIR CURRENT / FUTURE STRATEGY. 3. WHAT ARE THEIR STRENGTHS / WEAKNESS 4. WHAT ARE THE REACTION PATTERNS
1. BOTH CORPORATE & BRAND LEVEL 2. ANY INVALID ASSUMPTIONS 3. SHARE OF MARKET, MIND, HEART 4. SATISFACTION / DISSATISFACTION AREA
CONSUMER BEHAVIOUR
7 Os FRAMEWORK
Buyers characteristics Marketing stimuli Product Price Place Promotion Other stimuli Economic Technological Political Cultural
Buyers decisions Product choice Brand choice Dealer choice Purchase timing Purchase amount
PERSONAL
CULTURAL
SOCIAL
REFERENCE
AGE AND LIFE CYCLE STAGE OCCUPATION ECONOMIC CIRCUMSTANCES LIFESTYLE PERSONALITY AND SELFCONCEPT
PSYCHOLOGICAL MOTIVATION
PERCEPTION LEARNING BELIEFS AND ATTITUDES
CULTURE SUBCULTURE
BUYER
SOCIAL CLASS
BUYING ROLES
INITIATOR
INFLUENCER
DECIDER PURCHASER USER
High Involvement
Low Involvement
COMPLEX
VARIETY SEEKING
WB
HABITUAL
WB
PROBLEM RECOGNITION
INFORMATION SEARCH Criteria, Alternatives EVALUATION OF ALTERNATIVES PURCHASE DECISION
POSTPURCHASE BEHAVIOUR
PERSONAL SOURCES
COMMERCIAL SOURCES
PUBLIC SOURCES
EXPERIENTIAL SOURCES
TOTAL SET
AWARENESS SET
CONSIDERATION SET
CHOICE SET
PURCHASE DECISION
POST-PURCHASE BEHAVIOUR
1) 2)
3)
4)
Introspective method Marketers think how they would act if they were consumers Retrospective method Ask consumers who have bought to recall the event Prospective method Ask prospective consumers who plan to buy to think aloud. Prescriptive method Ask consumers ideal way.
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NON-COMPENSATORY MODEL
CONJUNCTIVE MODEL
DISJUNCTIVE MODEL LEXI COGRAPHIC MODEL
ATTRIBUTES
EXTERIORS PRICE MILEAGE PERCEIVED VALUES
0.2
0.3
0.1
10 8 6 4
8 9 10 6
6 6 8 5
8 6 9 5
PERCEIVED RISK
FINANCIAL
PHYSICAL
SOCIAL
PERSONAL
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formal organizations establish the need for purchased products and services and identify , evaluate, and choose among alternative brands and suppliers. Organizations could be corporate, manufacturing firms,Service firms, Institutional & Government markets.
Buying Situations
1. Straight rebuy - recorder on routine basis automatic recording system from approved list of suppliers. Insuppliers & outsuppliers strategy. 2. Modified rebuy - modifying in product specifications. Prices, delivery requirements or other terms. 3. New
* Greater cost or risk, more the decision participants & greater the information gathering. * Missionary sales force used by marketer * Mass media in awareness stage, stage sales people in interest stage & technical sources in evaluation stage.
INTERPERSONAL
INDIVIDUAL
Interest Authority Status Empathy Persuasiveness Age Income Education Job position Personality Risk attitudes Culture
BUSINESS BUYER
Organizational Structures
Systems
2.
3. 4. 5. 6.
Problem recognition - as a result of internal or external stimuli General need description - items general characteristics, attributes &
quantity.
Product specification- Technical specifications. Supplier search - buyer can examine trade directories, computer search, trade
shows, advertisements, recommendations of others.
7.
8.
Performance review
BUYPHASES
Vendor analysis
An example of vendor Analysis Rating scale
ATTRIBUTES IMPORTANCE WEIGHTS (1) POOR (2) FAIR (3) GOOD (4) EXCELLENT
X
X X X X
COMPETITION
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PORTERS MODEL
Threat of new entrants Intensity of Competitive rivalry Bargaining power of buyers Bargaining power of suppliers Threat of substitutes
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100
Identifying Competition
A. Industry Concept of Competition Group of firms that offer a class of products that are close substitutes classified on basis of I. Number of sellers & degree of differentiation a) Pure monopoly b) Oligopoly Pure oligopoly (oil, steel) & differentiated oligopoly (auto, computers) c) Monopolistic competition restaurants d) Pure competition stock market II. Entry, mobility & exit barriers.
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III. Cost structure shapes strategic conduct e.g. steelmaking involves heavy manufacturing & raw material costs IV. Degree of vertical integration V. Degree of globalization some industries are highly local (babycare) others are global (e.g. oil, cameras) B. Market Concept of competition Brand/Form/Category/Desire
102
103
IDENTIFYING COMPETITION
CORRECT DEFINITION IMPORTANT TO MARKET PLANNING & STRATEGY KEY QUESTION IS DEGREE EXTENT BALANCE BETWEEN TOO MANY & TOO FEW NOT EASY AS EMERGING COMPETITION WRONG DEFINITION LEADS TO a) MARKETING MYOPIA b) AMBIGUITY IN MARKET RELATED STATISTICS
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IDENTIFYING COMPETITORS
I. INDUSTRY CONCEPT OF COMPETITION II. MARKET CONCEPT OF COMPETITION
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Generic / Category
(Outward)
Desire / Budget
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III. CUSTOMER BASED MEASURES a) PURCHASE DATA FOR BRAND SWITCHING MATRIX b) CROSS ELASTICITY OF DD c) CONSUMER JUDGEMENTS c.1. JUDGED OVERALL SIMILARITY c.2. SIMILARITY OF CONSIDERATION SET c.3. PRODUCT DELETION SET c.4. SUBSTITUTION IN USE
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A
A TIME t B .6 .2
B .2 .3 .3 .1 0
C
.2 .4
D
0 .1
E
0 0
C
D E
.2
0 .1
.5
.1 0
0
.5 .4
0
.3 .5
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Form
Existing definitions Technology substitution Managerial judgment Customer behavior based: Brand switching X X X X X X X X X X X X X X
Interpurchase times
Cross-elasticities
X
X
X
X X
X
X
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Form
Customer evaluation based: Overall similarity X X X X X X X X
Substitution in use
Note: An X indicates that either the method is useful for determining competition at that level or it employs data of a certain type.
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1. TARGET MARKET 2. CORE MARKETING STRATEGY a) POSITIONING b) DIFFERENTIAL ADVANTAGE 3. MARKETING MIX
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Short term v/s long term profits, satisfycing v/s maximizing profits, cash flow,,market sharegrowth,,technological/,service /cost leadership objectives shaped by size, history, management perspective, financial situation, place in larger organisation
objectives can be assessed
a) from strategy
b) geographical home of parent c) ownership of firm - private / public/ government
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DEPENDS ON
c) AGGRESSIVENESS OF MANAGERS
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TYPES OF COMPETITORS
LAID BACK
SELECTIVE TIGER STOCHASTIC
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DESIGNING COMPETITOR
INTELLIGENCE SYSTEM
1. COSTLY SIGNALS
PRODUCT MANAGER MUST COLLECT BOTH TYPES OF INFORMATION BUT BE WARY OF (2)
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I.
SECONDARY
IV. UNETHICAL
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SELECTING COMPETITION
1. LEVEL 2. SELECTING COMPETITOR FOCUS CHOOSING WHO TO COMPETE HAS IMPLICATIONS ON PERFORMING STDS (MARKET SHARE) & COMPETITIVE STRATEGY DEPENDS ON a) TIME HORIZON
b) STAGE OF PLC
c) RATE OF CHANGE OF TECHNOLOGY
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1. STRONG V/S WEAK COMPETITORS 2. CLOSE V/S DISTANT 3. GOOD V/S BAD
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COMPETITIVE POSITIONS
DOMINANT-Controls behavior of other competitors ,wide choice of strategic options
STRONG-can take independent actions and maintain its long term position
FAVOURABLE-exploitable strength and above average opportunity to improve position TENABLE-exists at sufferance of dominant company and has lesser than average opportunity to improve position WEAK-poor performance.must change or exit NON-VIABLE-poor performance and no opportunity for improvement
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I.
II.
125
128
Firms that occupy 2nd,3rd or lower ranks are called runner ups. These firms can either attack leader and make aggressive bid for further market share( market challenger ) or play ball and not rock boat ( market follower)
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FRONTAL ATTACK-attacking opponents strength rather than weakness.Matching opponent on product,advertising,price with 3:1 advantage otherwise cant succeed MODIFIED FRONTAL ATTACK-Match leaders offer on all and beat on price FLANK ATTACK-Blind spots. Flank attack can be geog or segmental eg Nirma. Much more likely to succeed than frontal attack
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ENCIRCLEMENT ATTACK-Comprehensive Blitz attack on front,sides rear.Offer everything opponent offers and more BYPASS ATTACK-is an indirect assault strategy.like diversifying into unrelated products,new geographical markets and leapfrogging into new technology GUERRILLA ATTACK-waging small intermittent attacks. Harass , Demoralise eg price cuts, promotional blitz,legal action
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2. CLONER-The cloner emulates the leaders products,distribution, advertising etc Sudar dust
3. IMITATOR-copies some things of leader but maintains differentiation on packaging, advertising, pricing etc 4. ADAPTER adapts or improves leaders product. Can become future challenger E.g. Japanese firms
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SPECIALIZATION- Customer, geographic product line, MULTIPLE NICHING BETTER THAN SINGLE NICHING
135
Vertical-level specialist:
Customer-size specialist: Specific-customer specialist: Geographic specialist: Product or product line specialist: Product - feature specialist: Job shop specialist: Quality price specialist: Service specialist: Channel specialist: 136
1) 2) 3) 4)
Segment Marketing Niche Marketing Local Marketing Customerization or segments of one or customized marketing or one to one marketing.
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3.
4. 5.
6. 7.
STEPS IN SEGMENTATION
2. OCCASIONS
3. USAGE RATE (HEAVY, MEDIUM, LIGHT) 4. USER STATUS (EX, CURRENT, NON, POTENTIAL, REGULAR, 1ST TIME) 5. LOYALTY STATUS (HARDCORE, SOFT CORE, SHIFTING, SWITCHERS) 6. BUYER READINESS (UNAWARE, AWARE, INFORMED, INTERESTED) 7. ATTITUDE TO PRODUCT (ENTHUSIASTIC, POSITIVE, INDIFFERENT, NEGATIVE, HOSTILE).
MAJOR SEGMENTATION VARIABLES FOR BUSINESS MARKETS SITUATIONAL FACTORS 12. Urgency: Should we serve companies that need quick and sudden delivery or service? 13. Specific application: Should we focus on certain applications of our product rather than all applications? 14. Size of order: Should we focus on large or small orders?
PERSONAL CHARACTERISTICS 15. Buyer-seller similarity: Should we serve companies whose people and values are similar to ours? 16. Attitudes toward risk: Should we serve risk- taking or risk-avoiding customers? 17. Loyalty: Should we serve companies that show high loyalty to their suppliers?
1. SIZE 2. GROWTH 3. STRUCTURAL ATTRACTIVENESS (PORTERS MODEL) 4. OBJECTIVES & RESOURCES 5. ECONOMIES OF SCOPE
1. SINGLE SEGMENT CONCENTRATION 2. MARKET SPECIALISATION 3. PRODUCT SPECIALISATION 4. SELECTIVE SPECIALISATION 5. FULL MARKET COVERAGE
WHOLE MARKET
UNDIFFERENTIATED MARKETING
MARKETING MIX 1 M M 2
SEGMENT 1 SEGMENT 2
SEGMENT 3
DIFFERENTIATED MARKETING
Additional Considerations 1) 2) 3) 4) Segment by segment invasion plans mega marketing to counter blocked markets Updating segmentation schemes market partitioning Ethical choice of Target markets Counter segmentation.
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DIFFERENTIATION IS THE ACT OF DESIGNING A SET OF MEANING DIFFERENCES TO DISTINGUISH THE COMPANYS OFFERS FROM COMPETITORS OFFERS. POSITIONING IS THE ACT OF DESIGNING COMPANYS OFFER AND IMAGE SO THAT IT OCCUPIES A DISTINCT AND VALUED PLACE IN THE TARGET CUSTOMERS MIND.
Involves: 1) Defining the Target Market 2) Competitive frame of reference 3) Points of Parity & Points of Difference
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2)
3)
Distinctive
Believable & credible
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3)
Marketers must decide at which level (s) to anchor brands PODs At lowest level are brand attributes, then brand benefits & at top are brand values.
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STEPS IN POSITIONING
Positioning Strategy
1. 2. 3. 4. 5. 6. 7. 8. ATTRIBUTE for e.g. clinic with zpto BENEFIT USE/ APPLICATION USER COMPETITOR LEADERSHIP quality , technology, service PRODUCT CATEGORY DISASSOCIATION EXCLUSIVE CLUB
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PRODUCT REPOSITIONING
1. CHANGING TARGET CONSUMER PROFILE 2. COMPETITOR TOO CLOSE 3. INCREASE MARKET - E.g. CADBURY 4. COMMUNICATE TECHNOLOGICAL ADVANCEMENT / UPGRADATION IN THE PRODUCT - E.g. SURF. 5. CHANGING CUSTOMER NEED.
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DIFFERENTIATION VARIABLES
SERVICES Ordering ease Delivery Installation Customer training Customer consulting Maintenance and repair Miscellaneous
2 1 3
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7 Recommend ed Action
8 6 8 4
8 8 6 3
L H L H
L M L H
M M L L
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5 LEVELS OF PRODUCT
1. CORE BENEFIT 2. BASIC PRODUCT - FEATURES, BENEFITS, DESIGN & STYLE, PACKAGING, BRAND NAME. 3. EXPECTED PRODUCT - CREATES NO PREFERENCE
SHOPPING HABITS
4.
5. 6. 7.
Classification Of Products
Most goods
Easy to evaluate
Most services
Difficult to evaluate
1) Need family thirst 2) Product family All product classes that serve a core need with reasonable effectiveness Non-alcoholic beverages, alcoholic beverages 3) Product class A group of products within a product family having certain functional coherence e.g. Aerated soft drinks
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4) Product line A group of products within a product class that are closely related because they perform a similar function, are sold to same customer groups, are marketed through same outlets or channels or fall within price ranges. Soft drink 5) Product type share same form. Cola drink. 6) Item (SKU or variant) Coke 300 ml.
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Product systems & Mixes A product system is a group of diverse but related items that function in a compatible manner. A product mix (product assortment is set of all products & items a particular seller offers for sale. A product mix has width, length, depth & consistency.
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1. PRODUCT LINE ANALYSIS A. PRODUCT LINE SALES & PROFITS B. PRODUCT LINE MARKET PROFILE - PRODUCT MAPPING C. PRODUCT LINE LENGTH - UPWARD / DOWNWARD / TWO WAY STRETCH D. LINE MODERNIZATION E. LINE FEATURING F. LINE PRUNING
BRAND
A BRAND IS ESSENTIALLY A SELLERS PROMISE TO CONSISTENTLY DELIVER A SPECIFIC SET OF FEATURES, BENEFITS AND SERVICES TO BUYERS.A BRAND IS ABOUT INTANGIBLE AND TANGIBLE ASSOCIATIONS
Brand
A brand is a product or service that is differentiated on dimensions functional, rational, tangible (brand performance) and/or symbolic, emotional, intangible (what brand represents).
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BRANDING DECISIONS
1.
BRAND OR NOT Advantages of branding easy processing, legal protection, brand loyalty, segmentation ,corporate image. Also distributors and consumer s prefer brands.
2.
3.
4.
5.
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- Brand extension line extensions & category extensions - Parent brand & sub brand - Brand line consists of all products original as well as line and category extensions sold under a particular brand. - Brand mix (or brand assortment) is the set of all brand lines that a particular seller makes available to buyers. - Licensed brands, co-branding, ingredient branding.
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1. 2. 3. 4. 5.
Easy to pronounce, spell and remember. Suggest about benefits, quality, use or action. Unique, distinctive. Versatile can be added to new products / global reach. Registered and protected.
PACKAGING TESTS
BRAND - MEANING
Competitors
Relative price
Product class
Use/application
Lifestyle/personality
Celebrity/person
User/customer
FUNCTIONAL VALUE
CONDITIONAL VALUE
SOCIAL VALUE
BRAND CHOICE
EMOTIONAL VALUE
EPISTEMIC VALUE
1. BRAND AWARENESS 2. PERCEIVED BRAND QUALITY AND FUNCTIONALITY 3. POSITIVE BRAND MENTAL & EMOTIONAL ASSOCIATIONS 4. BRAND LOYALTY 5. OTHER ASSETS - PATENTS, TRADEMARKS ,CHANNEL RELATIONSHIPS
1. CUSTOMER WILL CHANGE BRAND FOR PRICE REASONS 2. CUSTOMER IS SATISFIED - NO REASON TO CHANGE 3. CUSTOMER IS SATISFIED & WOULD INCUR COSTS BY CHANGING BRAND 4. CUSTOMER VALUES THE BRAND AND SEES IT AS A FRIEND 5. CUSTOMER IS DEVOTED TO BRAND.
1. 2.
3.
4. 5. 6. 7.
CONVENIENCE TO CONSUMERS
BENEFIT TO RETAILERS AFTER-USE VALUE IDENTIFICATION INFORMATION
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1.
LANGUAGE
2.
3. 4. 5. 6. 7. 8.
COLOUR
SIZE CLIMATE NATURE OF THE PRODUCT LENGTH OF DISTRIBUTION CHANNEL ACCEPTED NORMS METHOD OF TRANSPORT USED
9.
TRENDS IN PACKAGING
183
PACKAGING
1. 2.
PRIMARY SECONDARY
3.
SHIPPING
DECISIONS 1. 2. 3. The first task is to establish packaging concept. What packaging should be or do. e.g. protection, novel dispensing method, visibility. Decision on packing elements Tests engineering tests, visual tests, dealer tests and consumer tests.
4.
184
Introduction to Services
185
Services
Intangible
Resulting implications
- Services cannot be inventoried. - Patented. - Readily displayed or communicated. - Pricing is difficult. - Service delivery and customer satisfaction depend on employee actions. - Service quality depends on uncontrollable factors - Customers & employees affect the service outcome.
Standardized
Heterogeneous
Perishable
- Difficult to synchronize supply and demand with services. - Services cannot be returned or resold.
186
Internal Marketing
Enabling promises
External Marketing
Making promises
Technology
Providers
Interactive Marketing
Keeping promises
Customers
187
- Promotion blend - Salespeople Number Selection Training Transportation Incentives Storage - Advertising Managing channels Targets Media types Types of ads Copy thrust - Sales promotion - Publicity
188
People
- Employees Recruiting Training Motivation Rewards Teamwork - Customers Education Training
Physical evidence
Facility design Equipment Signage Employees dress - Other tangibles Reports Business cards Statements Guarantees
Process
- Flow of activities Standardized Customized - Number of steps Simple Complex - Customer involvement
189
190
Most goods
Easy to evaluate
Most services
Difficult to evaluate
Information Search
Culture Language
Values and customs Material culture * Aesthetics
Postpurchase Evaluation Attribution of dissatisfaction to self & less complaints Innovation diffusion slow Brand loyalty high due to more search costs
192
193
Company Gap 1
The provider gaps are the underlying causes behind the customer gap:
Gap 1 -- Not knowing what customers expect. Gap 2 -- Not selecting the right service designs and standards. Gap 3 -- Not delivering to service standards. Gap 4 -- Not matching performance to promises.
195
196
Zone of Tolerance
1.
Desired service want. Adequate service accept; Predicted service likely to get.
2.
3.
198
- Zone of tolerance is range in which customers do not notice service performance. - A customers desired service expectation is same for all service providers within a category e.g. Service expectations from fast food restaurants V/s fine dine restaurants. - Adequate service expectation level varies for different firms within a category. - Zone of tolerance expands or contracts for a customer from time to time. E.g. Customer hard pressed for time will have narrow zone of tolerance. - Zone of tolerance varies for different customers. - Zone of tolerance varies for service dimensions. E.g. unreliability will be least tolerated. - Zone of tolerance varies for first time & recovery service.
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Personal Needs
Transitory Service Intensifiers * Emergencies * Service problems earlier Perceived Service Alternatives Self- Perceived Service Role e.g. articulate customer Situational Factors * Bad weather * Catastrophe * Random overdemand
Adequate Service
Predicted Service
200
201
Service Quality
Product Quality
Customer Satisfaction
Price
Personal Factors - emotions, attributions for service success or failure, 202 Perceptions of equity or fairness
* Service quality is a focused evaluation that reflects the customers perception of specific dimensions of service: reliability, responsiveness, assurance, empathy, tangibles. Satisfaction, on the other hand, is more inclusive: it is influenced by perceptions of service quality, product quality, and price as well as situational factors and personal factors.
* Satisfaction is the customers evaluation of a product or service in terms of whether that product or service has met their needs and expectations.
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Service Quality Dimensions Reliability : Ability to perform the promised service dependably and accurately. Responsiveness: Willingness to help customers , solves problems and provide prompt service, be flexible. Assurance : Employees knowledge and courtesy and their ability to inspire trust and confidence. Empathy: Caring individualized attention given to customers. Tangibles: Appearance of physical facilities, equipment, personnel and written materials. Sometimes customers will use all of the dimensions to determine service quality perceptions, at other times not. For example,in a remote encounter such as an encounter with an ATM, empathy is not likely to be a relevant dimension.
204
Improving performance & hence perceptions is virtually impossible in basics/ core/ technical elements. Hence process is where one can play around.
205
Process quality
- When technical quality cannot be evaluated accurately (e.g. Professors, doctors,) customers form impressions, of service including technical quality from own shorthand cues.
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Service Encounters or Moments of Truth service encounters are the building blocks of service quality & satisfaction - Every experience with product, service or person which allows customer to judge/ form impressions about the quality of service is a moment of truth. - It takes 10 good moments of truth to wipe one bad moment of truth. - Disney Corporation 74 service encounters in amusement park. Marriott Hotels - 4 of the top 5 factors come into play in first 10 minutes of guests stay. Types of service encounters- remote, phone, face to face. - In remote - tangible evidence & technical quality important. - In phone- process quality - In face to face - customer also play role.
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208
MARKETING INFORMATION
MARKETING INFORMATION
MARKETING ENVIRONMENT
SCOPE OF MARKETING RESEARCH 1. NEW PRODUCTS - Concept testing,Brand name generation,& testing,Product testing,packaging tests, Test-marketing, Market feasibility. 2. 3. PRODUCT RESEARCH - Competitive - product studies, SALES & MARKET - Market potential, Market characteristics, Market share analysis, Sales analysis, Distribution channel studies.
4. PROMOTION - Copy research, Media research, Ad effectiveness, sales promotion effectiveness.,public image studies, sales force effectiveness 5. BUSINESS & CORPORATE RESEARCH - Business trend studies,, International scope studies, Internal employees studies, Operations research, Location studies etc. 6. 7. 8. CORPORATE RESPONSIBILITY - Ecological studies, Values PRICING-Competitive pricing analysis,price elasticity BUYING BEHAVIOUR-Brand preference, attitude,product satisfaction,purchase behaviour,purchase intentions,brand awareness,segmentation studies
I.
DEFINE THE PROBLEM - not too broad or narrow, watch for symptoms.
II. RESEARCH OBJECTIVES - measurable and specific (except exploratory) III. RESEARCH DESIGN APPROACHES A) EXPLORATORY
B) DESCRIPTIVE
C) CAUSAL
CONCLUSIVE
PRIMARY
SAMPLE UNIT SAMPLING FRAME SAMPLE SIZE SAMPLING PROCEDURE A) PROBABILITY B) NON-PROBABILITY
SAMPLE
B) SAMPLING PLAN
E) CONTACT METHODS
-MAIL,TELEPHONE,PERSONAL(ARRANGED,INTERCEPT)
Sampling procedures
A) PROBABILITY SAMPLING : 1. Simple Random Sampling : random selection through lottery without replacement. Unrestricted random sampling is with replacement. 2. Systematic Sampling : involved a system of selecting every nth item in sampling frame after 1st name / unit is selected at random. 3. Random Route sampling: used for sampling households, shops etc. An address is selected at random & every nth address is selected therefrom. 4. Stratified Random Sampling: Population is divided into mutually exclusive groups & within each group, units are selected through random methods. 5. Cluster (Area) sampling: The area to be surveyed is broken into smaller areas. A few of these areas are then selected by random methods. Every unit or some units randomly selected may be interviewed in these selected areas.
SAMPLING PROCEDURES
B) NON - PROBABILITY SAMPLING used when a) Probability sampling not feasible because population not known or no suitable sampling frame. b) Random sampling too costly & time consuming. c) When information is exploratory in nature.
SAMPLING PROCEDURES
B) Non probability sample: 1. Convenience sample: The researcher selects the easiest population members from which to obtain information. 2 Judgement sample: The researcher uses his/ her judgement to select population members who are good prospects for accurate information. 3. Quota sample: The researcher decides on prescribed no. of people in each category (age, gender, income) & then finds & interviews.
Contact Methods
Contact Methods
TELEPHONE - Quick
- Interview should be short.
- Cannot be personal. - Not strictly representative. - Screening of calls. - Non-verbal cues missing.
MAIL
- Poor response
PERSONAL
- Most versatile - Non- verbal cues -Costly - Bias - Cold calls to prevent mall intercept interviews.
QUESTIONNAIRE
1. Dichotomous (2 choice) 2. Multiple choice (3 or more) 3. Likert scale 5 point scale of agreedisagree 4. Semantic Differential 5. Importance Scale 6. Monadic Rating
4. Story completion
5. Picture completion 6. Thematic apperception test (TAT)
7.
QUESTIONNAIRE
Most common instrument must be carefully developed, tested and debugged before they are administered on a large scale. Each question should contribute to research objectives. Logical sequence
A QUESTIONABLE QUESTIONNAIRE
1. What is your total income to the nearest dollar. 2. Are you an occasional or frequent flyer. 3. Do you like this restaurant? 4. How many ads did you see on TV last week?
Creativity
Multiple methods Value & cost of information Look at background - Classic failure of coke. Dont look at problem in isolation. Dont give in to temptations of giving management what they want to hear.
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Customer Management : 1. Relationship management - Jet airways flying returns,Shoppers stop First Citizens Club. 2. Affinity group & online communities. Product & Branding : 1. Mass customization - e.g. Scorpio, Asian Paints, Dell. 2. Umbrella Branding Pricing : 1. Target pricing 2. Announcing price upfront Packaging : 1. Sachet marketing Distribution : 1. Non- traditional methods - Multilevel (Avon , Oriflame ),Party plan (Tupperware)
Advertising, Media, sales promotion: 1. In film advertising - Baghban, Castaway (Fedex) 2. Surrogate advertising. 3. Comparative advertising. 4. Use of new, unconventional media, below the line media. (e.g.. Surf Vans). 5. Increase in sales promotion. 6. Using colours & sensory methods - e.g. Blue (Cool), Red (Hot).
PRICING
PRICING
I. CONSISTENT WITH TARGET MARKET & POSITIONING A) PRICE - DETERMINED BY OBJECTIVES - SURVIVAL, PROFIT OR MARKET SHARE OR SIGNALLING LEADERSHIP. B) METHOD - COST BASED V/S CUSTOMER BASED V/S COMPETITOR BASED. C) UNDERSTAND CUSTOMER PRICE SENSITIVITY (PRICE ELASTICITY OF DEMAND) D) OTHER FACTORS
Determining demand
Estimating Costs
Analyzing competitors costs, prices and offers Selecting a pricing method Selecting the final price
Determining Demand
- Each price will have a different level of demand - Demand curve captures affect of alternative prices on resulting demand - Higher the price, lower the demand (except in prestige goods) - Price band width - Price Sensitivity factors - Estimating demand curves through a) Statistical analysis (longitudinal or cross sectional past data b) Price experiments c) Surveys of purchase intentions - Price elasticity of demand & price indifference band.
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The product is more distinctive. Buyers are less aware of substitutes. Buyers cannot easily compare the quality of substitutes. The expenditure is a smaller part of the buyers total income. The expenditure is small compared to the total cost of the end product. Part of the cost is borne by another party.
T
233
Estimating Costs - Types of costs (variable, fixed/overhead, total costs, average cost - Accumulated production leads to experience or learning curve - Activity Based Cost accounting - Target Costing.
234
Pricing
Consumer Psychology & Pricing
1) 2) 3)
Price threshold low & higher (Price bands) Reference price Price quality inferences
4)
237
II. Pricing discounts & allowance III. Promotional pricing IV. Discriminatory pricing V. Product mix pricing
II. Price Discounts & allowances - Cash discounts, Quantity discounts, functional discounts, seasonal discounts, allowances(trade in allowances,promotional allowances).
PRICING TERMINOLOGY
VALUE PRICING - GIVING MORE VALUE IN RELATIONSHIP TO PRICE PAID. PENETRATION PRICING - CHARGING LOWER PRICE TO GAIN MARKET SHARE. SKIMMING PRICING - CHARGING AS HIGH AS POSSIBLE TO GET FIRST LAYER OF CUSTOMERS AND THEN PROGRESSIVELY LOOK DOWNWARDS. TARGET COSTING - DETERMINE PRICE AT WHICH PRODUCT MUST SELL GIVEN ITS APPEAL AND COMPETITION AND THEN WORK BACKWARDS.
PENETRATION
SKIMMING
2. PRICE-SENSITIVE MARKET
3. 4. HIGH COMPETITION COST IS MORE FIXED THAN VARIABLE
2. PRICE INSENSITIVITY
3. COMPETITION IMMINENT 4. COST IS MORE VARIABLE THAN FIXED.
I.
PV
>
PRICE
>
V COST
FAILURE SCENARIO
1. DIRECT PRICE RATING METHOD WHAT PRICE WILL YOU PAY FOR C IF A IS RS. 90/2. DIRECT PERCEIVED VALUE RATING METHOD GIVE MARKS OUT OF 100 TO A B C. IF PRICE OF A IS 90. WHAT SHOULD BE PRICE OF C.
3. DIAGNOSTIC METHOD
PRODUCT ATTRIBUTES IMP A B C
FEATURES
PURCHASE PRICE STARTUP COSTS POST PURCHASE COSTS 300 200 500 1000 600* 100 300 1000 700* 200 400 1300
OTHER FACTORS
1. PRICE AS INDICATOR OF QUALITY 2. BUYERS HAVE REFERENCING PRICING IN MIND - FAIR PRICE, PRICE BANDWIDTH. 3. PSYCHOLOGICAL PRICING BARRIER 4. ODD END PRICING SHOULD BE AVOIDED IF HIGH PRICE IMAGE IMPORTANT. 5. HOW IMPORTANT IS PRICE TO INDIA IN PURCHASE DECISION_-JUST ASKING CUSTOMERS THROUGH SURVEYS IS NOT ENOUGH (CONJOINT ANALYSIS BETTER).
REASONS
1. Excess capacity - Might trigger a price war 2. Declining market share
REASONS
1. Expected improved profitability 2. Cost Inflation 3. Overdemand
3.
4.
Risks - Low Quality trap - Fragile Market Share trap. Buyer loyalty is not ensured - Shallow pocket trap. Reserves are less. Staying power is less.
1. Shrink amount of product 2. Substitute less expensive materials 3. Reduce or remove product features / services 4. Less expensive packaging or promoting larger pack sizes. 5. Reducing number of models / sizes 6. Creating new economic brands
Competitor will react when few firms, product homogeneous, buyers highly informed. It is important to estimate the competitors likely reactions before affecting a price change.
The factors to be considered are :
Homogeneous-product Market Little choice but to match price cut However, price increase need not be matched. Ultimately competitors will be forced to reduce.
Price
Quality
Realiability
Service
Reactions: 1. Maintain Price when Not likely to lose market share Might regain market later Would lose too much profit if price reduced 2. Raise perceived quality while maintaining price 3. Reduce Price when Costs fall with volume Market is price sensitive Difficult to rebuild market share later 4. Increase price aned improve quality 5. Launch lower price fighter line
YES
DISTRIBUTION
DISTRIBUTION
A COMPANY LAUNCHING A PRODUCT NEEDS 1. SALES CHANNEL (TALKING ABOUT PRODUCT) 2. DELIVERY CHANNEL (HOME DELIVERY, INSTALLATION) 3. SERVICE CHANNEL THE 3 NEED NOT BE SAME.
Marketing Channels
M
No of contracts = 9
M
No. of contracts = 3
Manufacturer
Retailer
Consumer
Medicines
Manufacturer
Wholesaler
Retailer
Consumer
Bombay Dyeing
Manufacturer
Industrial distributor
Industrial Consumer
Bombay Dyeing
Manufacturer
Industrial distributor
Industrial Consumer
Car spares
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Channel Development
- Hybrid channels - Value networks for superior value delivery - Channel functions (information, stimulate purchase, financing, risk-sharing, storage, breaking down, time, place, possession gaps) - The question is not whether various channel functions need to be performed (they must be) but rather, who is to perform them - 5 marketing flows in the marketing channel are physical flow, title flow, payment flow, information flow, promotion flow.
260
Generation
Internet National account management
sales
Presales
management
Direct sales
C
U
V E N D
Direct mail Telemarketing
S T O M E R
O Retail stores R
Distributors Dealers and valueadded resellers Advertising
Multichannel architecture optimizes coverage, customization, & control while minimizing cost & conflict.
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CHANNEL LEVELS
EACH INTERMEDIARY WHO BRINGS PRODUCT AND ITS TITLE CLOSER TO BUYER CONSITUTES CHANNEL LEVEL. ZERO CHANNEL(Direct marketing channel) - Door to door ,home
THREE LEVEL
II. CUSTOMERS DESIRED SERVICE OUTPUT LEVELS - Eg. CONVENIENCE, WAITING AND DELIVERY TIME,FASTER SERVICE, PRODUCT VARIETY, SMALL LOT SIZE ETC.
ESTABLISH CHANNEL CONSTRAINTS A. PRODUCT CHARACTERISTICS - PERISHABLE, NONSTANDARDISED, BULKY. B. S/W OF DIFFERENT INTERMEDIARIES C. COMPETITORS CHANNEL
A. TYPES OF INTERMEDIARIES - Eg. CELL PHONES. SEARCH FOR INNOVATIVE CHANNEL BECAUSE LESS DOMINANCE.
(Franchisees)
I. ECONOMIC - AGENT FOR SMALLER FIRMS, LOW VOLUME TERRITORIES.Each channel alternative will produce a different level of sales and costs.eg internet vsSalesforce.Company will try to switch their customers to low cost channels asumimg no loss of sales or deterioration of service quality. II. CONTROL - LESS ON AGENT. III. ADAPTIVE
I. SELECTING CHANNEL MEMBERS - NO. OF YEARS, OTHER LINES CARRIED, REPUTATION, CO-OPERATIVENESS, GROWTH AND PROFIT RECORD. II. MOTIVATING - THROUGH TRAINING, SUPERVISION & SHARING INFORMATION. - Using
Channel dynamics
A conventional marketing channel comprises an independent producer, wholesaler(s), and retailer(s). Each is a separate business entity seeking to maximize its own profits,even if this goal reduces profit for the system as a whole. A vertical marketing system (VMS), by contrast, comprises the producer, wholesaler(s), and retailer(s) acting as a unified system. One channel member owns the others or franchises them or has so much power that they all cooperate. The vertical marketing system can be dominated by the producer, the wholesaler, or the retailer.
I.
1. Corporate VMS - combines successive stages of product & distribution under single ownership. I.e. vertical integration. 2. Administered VMS - Co-ordinates successive stages of production & distribution through size & power of one of the members . E.g. HLL commands high level of cooperation from reseller in terms of shelf-space, displays etc. 3. Contractual VMS - consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies and /or sales impact than they could achieve alone. E.g. retailer co-operative, franchise organizations.
I. Horizontal Marketing Systems - In which two or more unrelated companies put together resources or programs to exploit on emerging marketing opportunity ( called symbiotic marketing). E.g. SBI & Management.
III. Multichannel Marketing Systems - Occurs when a single firm uses two or more marketing channels to reach one or more customer segments.
269
Channel Conflict
Types of conflict
Lack of financial resources for direct marketing. Not feasible / practical. Channel members add time, place, possession, form utility. Thus it is not whether various channel functions need to be performed but rather who is to perform them. Key Functions Information Promotion Ordering Financing Risk taking Physical possession Payment Title
Why are marketing intermediaries used & why not direct marketing
WHY IMC?
Market: Cluttered More competition: Less Buyers Media Exposure is very high Media Fragmentation: Many TV Channels and even more newspapers and weekly newsmagazines Lifestyle change: Malls and Cafes Technology Email, net, mobile, SMS easy access to information for customer
AND..
Shrinking budgets and demand for accountability And acceptance by marketing managers that Advertising specialization is important
Sales Promotion Public Relations
IMC
Internet Marketing
ALSO CALLED PROMOTION MIX CONSISTS OF 1. 2. 3. 4. 5. 6. 7. ADVERTISING SALES PROMOTION PUBLIC RELATIONS AND PUBLICITY PERSONAL SELLING DIRECT MARKETING MERCHANDISING EVENT SPONSORSHIP
8.
9.
PRODUCT DESIGN
ONLINE ADVERTISING
SALES PROMOTION
Contests, games, sweepstakes, lotteries Premiums and gifts Sampling Fairs & trade shows Exhibits Demonstrations Coupons Rebates Low-interest financing Entertainment Trade-in allowances Continuity programs Tie-ins
PUBLIC RELATIONS
Press kits Speeches Seminars Annual reports Charitable donations Sponsorships Publications Community relations Lobbying Identity media Company magazine Events
PERSONAL SELLING
Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows
DIRECT MARKETING
Catalogs Mailings Telemarketing Electronic shopping TV shopping Fax mail E-mail Voice mail
Noise
Feedback
Response
1. 2.
DEVELOPING EFFECTIVE COMMUNICATIONS IDENTIFY TARGET AUDIENCE affects what to say, how to say, when, where and to whom to say. SITUATION ANALYSIS & DETERMINE COMMUNICATION OBJECTIVES DESIGNING THE MESSAGE SELECT THE COMMUNICATION CHANNELS ESTABLISH TOTAL PROMOTION BUDGET
1) Category need (for new to the world products) 2) Brand awareness recognition & recall 3) Brand attitude 4) Brand purchase intention.
283
MICRO MODEL OF CONSUMER RESPONSES 1) 2) 3) Learn-feel-do (Cognitive affective responsive). When high involvement & high differentiation Do-feel-learn high involvement & low perceived difference Learn-do-feel When low involvement& low perceived difference
284
Behavior Stage
Message Issues
What to say ? ( Message Content ) Message appealsInformational(rational),Transfomational appeals(sensory,social,ego satisfaction); message strategy will look at one of 3appeals in context of product-in-use ,results of use or incidental to use experience. negative positive appeals.Borrowed interest technique like babies,puppies,celebrity,popular music,provocative sex appeals. How to say it logically? ( Message Structure )-order of presentation(strongest first or last);,one sidedor two sided, Conclusion Drawing How to say it symbolically? ( Message Format ) Who should say it? ( Message Source ) Celebrity, expert, Common man. Expertise,trustworthiness,likeability.
Success Factors
Nature of Message: striking, eye catching, Audiences interpretation of it Environment in which it is received: eg. 20% off in recession would be more effective. Words, pictures, sounds, colours may have different meanings to different people Eg: Black; in urban areas- sophisticated, in rural areas- death
1. 2.
PERSONAL CHANNELS Advocate channel (salespersons) expert channel (independent) social channel (neighbors, friends etc.) NON-PERSONAL CHANNELS Media, atmospheres and events,.
4.
5. 6.
7.
8. 9.
EMPIRICAL METHOD
QUANTITATIVE MATHEMATICAL MODEL INVESTMENT SPENDING
10. PECKHAMS METHOD - For new products spend twice, For established products same share or less
PROMOTIONAL TOOLS
UNDERSTANDING UNIQUE CHARACTERISTICS AND COSTS OF EACH 1. ADVERTISING Strategic and long term, most economical form of consumer contact, transforms products into brands. Persuasive, expressive public presentation hence perceived as legitimate but impersonal . SALES PROMOTION Short term, tactical Creates quick response but not effective in building long-run brand preference. PUBLIC RELATIONS & PUBLICITY High credibility, dramatization, catch buyers off guard. PERSONAL SELLING Useful in later stages but long-term cost commitment. DIRECT MARKETING Customized, interactive, secrecy. MERCHANDISING or Point of Purchase activity for traffic building in outlets especially self-service outlets
2.
3. 4. 5. 6.
PROMOTIONAL TOOLS
7. 8.
EVENT SPONSORSHIP should be relevant target audience,involving. PRODUCT DESIGN and packaging and brand name acts as silent salesmen.
9.
10. WORD OF MOUTH recommendations need to be stimulated through proper identification of opinion leaders
FACTORS a) TYPE OF PRODUCT MARKET business v/s consumer markets Buyer readiness stage
Listener, reader, viewer recognition Recall. Checklists Brand attitudes, purchase intent Recall over time
Inventory, pop consumer panel
Attention
Comprehension
Feeling
1. Informative 2. Affective (thinker) (feeler) Car, house, Jewelry, furnishings, cosmetics, new products motorcycles Low 3. Habit 4. Self satisfaction Involvement Formation (doer) (reactor) Food, household items Cigarettes, liquor, candy
4) 5) 6)
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MEASUREMENT
Ideal ad campaign
The ideal ad campaign would ensure that: 1) The right consumer is exposed to the right message at the right place and at the right time. 2) The ad causes the consumer to pay attention to the ad but does not distract from the intended message. 3) The ad properly reflects the consumers level of understanding about the product and the brand. 4) The ad correctly positions the brand in terms of desirable and deliverable points-of-difference and points-of-parity. 5) The ad motivates consumers to consider purchase of the brand. 6) The ad creates strong brand associations with all of these stored communication effects so that they can have an impact when consumers are considering making a 298 purchase.
Creative Strategy
1. 2. 3. 4.
INFORMATIVE ADVERTISING used in pioneering stage to build primary demand. PERSUASIVE ADVERTISING important in competitive stage, to build selective demand. Comparative advertising. REMINDER ADVERTISING for mature products REINFORCEMENT ADVERTISING for assurance.
TO PERSUADE Building brand preference Persuading buyers to purchase now Encouraging switching to the brand Persuading buyers to receive a sales Changing buyers perception of product call attributes TO REMIND Reminding buyers that the product may Keeping it in buyers minds during be needed in the near future off-seasons Reminding buyers where to buy it Maintaining its top-of-mind awareness
3.
4. 5.
A. MESSAGE CONSTRUCTION - (CONTENT)-CREATIVE BRIEF Benefit Promise Or Unique Selling Proposition Should Be Believable, Desirable And Exclusive And Supported By A Reason Why Benefit Promise Is Strategic In Nature And Should Not Change Unless Change In Product Formulation, Marketing Strategy, Or Changing Consumer Needs / Wants. Should Appear In Headline
B. MESSAGE EXECUTION a. b. c. d. e. APPEALS rational( comparative vs Competitive) emotional(positive,negative) moral TONE positive, humour ? WORDS FORMAT placement of elements, typography (press) background, colour, arresting key frame (TV). STRUCTURE conclusion drawing, one sided v/s two sided argument, order of presentation
Promotional Executions
The way the promotional appeal is presented
Can be executed in multiple ways through multiple media & promotional elements Straight sell Technical expertise Scientific Evidence Demonstration Comparison
Direct or indirect
Testimonial
Authority, celebrity, peer
Slice of life Life style Animation Personality symbol Fantasy Dramatization Mood or Image Musical
Source Factors
Credibility: Extent to which the recipient sees the source as having relevant knowledge, skill or experience Trustworthy- the source to give unbiased, objective information. Likeability Disadvantages Overshadowing the product Overexposure of the celebrity
2. FACTS TO SUPPORT
3. CUSTOMER ADDRESSED 4. TONE & ATMOSPHERE
SUPPORT
5. PROVOCATIVE
6. CONTENT MORE IMPORTANT THAN STYLE 7. BOING FACTOR 8. BELIEVABLE LOGIC 9. VISUAL / VERBAL COHERENCE 10. CONSUMER EMPATHY
MEDIA BRIEF
TARGET AUDIENCE
ADVERTISING
REACH V/S FREQUENCY MEDIA HABITS OF TARGET AUDIENCE
TIMING OF CAMPAIGN
REGIONAL WEIGHTS SHARE OF VOICE DESIRED IN EACH MARKET CREATIVE REQUIREMENTS - MINIMUM SIZE OR LENGTH OF TIME
QUESTIONS TO ASK
1. CAPTIVE SALES OR CONQUEST SALES 2. DEMOGRAPHIC CHARACTERISTICS
3. REGIONAL CHARACTERISTICS
4. PSYCHOLOGICAL CHARACTERISTICS
Media Planning
X 100
X 100
1. Deciding On Reach, Frequency & Impact 2. Choosing Among Major Media Types 3. Selecting Specific Media Vehicles 4. Deciding On Media Timing 5. Deciding On Geographical Media Allocation
REACH ( R ): The number of different persons or households exposed to a particular media schedule at least once during a specified time period.
FREQUENCY (F): The number of times within the specified time period that an average person or household is exposed to the message. IMPACT (I): The qualitative value of an exposure through a given medium (thus a food ad in Good Housekeeping would have a higher impact than in the Police Gazette).
Percentage Reach
Exposures
REACH
FREQUENCY
Launching new products Launching new extensions Infrequently purchase brands Undefined target market
Strong competitors Complex story High consumer resistance Frequent purchase cycle High forgetting rate
2. PRODUCT
3. MESSAGE
4. COST
3. MAGAZINES can segment audiences, long life span, pass on readership but periodic hence advertising impactless.
4. RADIO good reminder medium 5. CINEMA South and smaller towns 6. OUTDOOR geographically selective medium
Advantages
Flexibility; timeliness; good local market coverage; broad acceptance; high believability Combines sight, sound, and motion; appealing to the senses; high attention; high reach Audience selectivity; flexibility; no ad competition within the same medium; personalization
Limitations
Short life; poor reproduction quality; small pass-along audience. High absolute cost; high clutter; fleeting exposure; less audience selectivity Relatively high cost; junk mail image
Direct Mail
Radio
Audio presentation only; lower attention than television; nonstandardized rate structures; fleeting exposure
Magazines
Limited audience selectivity; creative limitations High competition; long and purchase lead time; create limitations Costs could run away
Overproduction could lead to runaway costs Relative high cost unless volunteers are used
2) 3)
330
DEPENDS ON In PRINT circulation, effective audience, effective ad-exposed audience which affects cost per thousand criterion.
1) 2) 3) 4)
Selecting Specific Vehicles Circulation Audience, because of pass-on readership Effective audience Effective ad exposed audience Cost per thousand should be adjusted for audience quality & audience attention probability & editorial quality & ad placement policies
332
CPRP (cost per rating point) Cost of commercial time = Program rating
CONTINUITY
FREQUENT PURCHASE PATTERN HIGH LEVEL OF IMPULSE BUYING EXPANDING MARKET NO BUDGET CONSTRAINTS
BURSTS
INFREQUENT PURCHASE PATTERN
TIMING DEPENDS ON
Concentrated
( 4 )
Continuous
Number of Intermittent Messages per Month Month Factors to be considered are buyer turnover, purchase frequency & forgetting rate. 337
338
consumers to view or listen to a portfolio of advertisements. Consumers are then asked to recall all the ads and their content, aided or unaided by the interviewer. Recall level indicates an ads ability to stand out and to have its message understood and remembered.
c) Laboratory tests use equipment to measure physiological reactions heartbeat, blood pressure, pupil dilation, galvanic skin response, perspiration to an ad; or consumers may be asked to turn a knob to indicate their moment-to-moment liking or interest while viewing sequenced material. These tests measure attention-getting power but reveal nothing about impact on beliefs, attitudes or intentions.
339
2) Sales effect Research share of expenditure v/s share of voice v/s share of mind v/s share of heart v/s share of market Measurement through historical approach or experimental data.
340
For Print Ads. Starch and Gallup & Robinson, Inc., are two widely used print pretesting services. Test ads are placed in magazines, which are then circulated to consumers. These consumers are contacted later and interviewed. Recall and recognition tests are used to determine advertising effectiveness. For Broadcast Ads. In-home tests: A video tape is taken or downloaded into the homes of target consumers, who then view the commercials. Trailer tests: In a trailer in a shopping center, shoppers are shown the products and given an opportunity to select a series of brands. They then view commercials and are given coupons to be used in the shopping center. Redemption rates indicate commercials influence on purchase behavior. Theater tests: Consumers are invited to a theater to view a potential new television series along with some commercials. Before the show begins, consumers indicate preferred categories; after the viewing, consumers again choose preferred brands. Preference changes measure the commercials persuasive power. On-air tests: Respondents are recruited to watch a program on a regular TV channel during the test commercial or are selected based on their having viewed the program. They are asked questions about commercial recall.
341
SALES PROMOTION
SALES PROMOTION
SALES PROMOTION CONSISTS OF A DIVERSE COLLECTION OF INCENTIVE TOOLS, MOSTLY SHORT-TERM, DESIGNED TO STIMULATE QUICKER AND / OR GREATER PURCHASE OF A PARTICULAR PRODUCT BY CONSUMERS OR TRADE.
WHILE ADVERTISING OFFERS A REASON TO BUY, SALES PROMOTION OFFERS AN INCENTIVE TO BUY.
5.
UNDERSTAND WHAT EACH TYPE OF SALES PROMOTION TOOL CAN OR CANNOT DO.
CONSUMER FRANCHISE BUILDING TOOLS WHICH REINFORCE THE CONSUMERS BRAND UNDERSTANDING THROUGH IMPARTING SELLING MESSAGE ALONG WITH DEALS ARE BETTER E.g. PREMIUMS RELATED TO PRODUCT, FREE SAMPLES ETC. TRADE PROMOTIONS - LOOK FOR PROOF OF PERFORMANCE & PREVENT FORWARD BUYING OR DIVERTING. LOOK FOR CREATIVE EDGE.
4. PRETEST PROGRAM
5. IMPLEMENT 6. EVALUATE SALES PROMOTION RESULTS THROUGH SALES DATA, CONSUMER SURVEYS & EXPERIMENTS.
350
CONSUMERS
CONSUMER PROMOTION - SAMPLES, COUPONS, PRICE OFFS, PREMIUMS PATRONAGE REWARDS, FREE TRIALS, PRIZES, TIE-IN PROMOTIONS, CROSS PROMOTIONS, POINT OF PURCHASE DISPLAYS, DEMONSTRATIONS.
TRADE PROMOTION - PRICE OFFS, ADVERTISING & DISPLAY ALLOWANCES, FREE GOODS
BUSINESS PROMOTION - TRADE SHOWS, FAIRS, CONVENTIONS, SPECIALITY ADVERTISING
Samples
Offer free amount of product or service Might be delivered
Door to door Mail Pick up in a store Attached to product
Coupons
Help in stimulating sales of mature brand Should provide at least 15-20 % saving to the customer
356
357
Price Packs
Savings off the regular price of a product Maybe through
Reduced price pack Banded pack
358
Premiums - Gifts
Merchandise is offered free or at low cost as incentive to purchase a product Self liquidating premium is an item sold below its normal price to consumers who request it Maybe a
Near Pack On-Pack In-Pack With-pack
359
Tie-in Promotions
Involve two or more brands or companies that team up on coupons, refunds and contests to increase their pulling power Sales force of two companies push promotions to retailers thus giving strong thrust
361
Allowance
An amount offered to display prominently the wares
Free goods
Extra cases of merchandise to intermediaries who buy a certain size
362
Business Promotions
Trade Shows and Conventions
Sales Contests Specialty Advertising
363
4.
5.
366
Must decide the lead time and sales time Lead time
Prepare design, approval of package modifications material to be mailed or distributed, advtg, POP material and the like Notoifcation of field sales personnel, establishing allocations for distributors, purchase and printing of premiums, inventory mgmt, and eventual distribution to retailer
Sell-in Time
Begins with promotional launch Ends when 95% of deal merchandise is in hands of consumers
367
Measuring Effectiveness
Sales Data Consumer Surveys Experiments
368
Direct Mail, Catalogs, telemarketing, interactive TV, Kiosks, Web sites & mobile devices.
370
Has passed through a number of stages: 1) Carpet Bombing 2) Database marketing 3) Interactive marketing 4) Real-time personalized marketing 5) Lifetime Value marketing.
371
372
Telemarketing a) b) c) d) Inbound and outbound 4 types of telemarketing Telesales Telecoverage nurture key account relationships Teleprospecting Customer service & technical support
373
Sales force
6 types: 1) Deliverer 2) Order taker 3) Missionary e.g. medical representative 4) Technician 5) Demand creator e.g. Water purifier 6) Solution vendor.
374
4)
5)
Managing the sales force 1) Recruiting & selecting representatives selection criteria, sources, procedure 2) Training & supervising sales representatives technical & non-technical 3) Sales Representative productivitya) Norms for prospect calls vs. current customers b) Using sales time efficiently time & duty analysis. Inside sales people back up (technical support, sales assistants, telemarketers)
376
4)
5) -
Motivating Sales force Research found that reward with highest value was pay followed by promotion, personal growth & sense of accomplishment. Least valued rewards were liking & respect, security & recognition. Motivating through quotos Evaluating sales representatives Sales reports, customer letter & complaints, call reports Key indicators of sales performance e.g. average. no. of sales calls per day.
377
378
379
PLC PHASES
1. INTRODUCTION 2. GROWTH
3. MATURITY
4. DECLINE
380
Low
382
EXPANDING DISTRIBUTION;
EXPANDING SHELF FACINGS; INCREASING PURCHASE FREQUENCY;
383
MATURITY PHASE
384
THE MATURITY PHASE RETAINING CURRENT USERS; ATTRACTING NEW USERS; RETAINING DISTRIBUTION;
385
MATURITY PHASE
1. MARKET MODIFICATION VOLUME = NO. OF BRAND USERS X USAGE PER USER a) INCREASING USERS CONVERT NON-USERS ENTER NEW MARKET SEGMENTS SNATCH COMPETITORS CUSTOMERS b) INCREASING USAGE MORE FREQUENT USE MORE USAGE PER OCCASION NEW AND MORE VARIED USES 2. PRODUCT MODIFICATION 3. MARKETING MIX MODIFICATION
386
REJUVENATION DEVELOP AND QUALIFY MAJOR PRODUCT IMPROVEMENT; REPOSITION PRODUCT VIA ADVERTISING; ACHIEVE NEW DISTRIBUTION OUTLETS; ACHIEVE CONSUMER TRIAL AND CONVICTION; AND ATTRACT NEW USERS AND NEW USES.
387
DECLINE PHASE
388
389
S a l e s
Time
391
Costs
Average cost per customer Rising profits Early adopters Growing number
Profits
Customers Competitors
Marketing Objectives Create product awareness and trial Maximize market share Maximize profit while defending market share Reduce expenditure and 392 milk the brand
Strategies
Product Offer product Offer a basic product extensions, service, warranty Price to penetrate market Diversify brands and models Phase out weak items Cut price
Price
Charge cost-plus
Distribution
Advertising
Sales Promotion
Reduce to take Use heavy sales advantage of heavy promotion to entice consumer demand trial
394
5. INEFFECTIVE ADVERTISING
6. OVERPRICED 7. DEVELOPMENT COSTS HIGHER THAN EXPECTED
11. SOCIAL & GOVERNMENTAL CONSTRAINTS 12. COSTLINESS OF NEW PRODUCT DEVELOPMENT PROCESS 13. CAPITAL SHORTAGES 14. FASTER DEVELOPMENT TIME 15. SHORTER PLC
396
2. IDEA SCREENING
3. CONCEPT DEVELOPMENT & TESTING 4. MARKETING STRATEGY DEVELOPMENT 5. BUSINESS ANALYSIS 6. PRODUCT DEVELOPMENT
7. MARKET TESTING
8. COMMERCIALISATION
397
1. ATTRIBUTE LISTING
2. FORCED RELATIONSHIPS
3. MORPHOLOGICAL ANALYSIS 4. NEED / PROBLEM IDENTIFICATION
5. BRAINSTORMING
6. SYNECTICS
398
1)
399
Creative techniques for new ideas Contd of slide . New contexts Take familiar processes such as people helping services & put them into new context e.g. Instead of hotel guests going to the front desk to check in, greet them at curb-side & use wireless device to register them 6) Mind mapping Start with a thought & all thoughts such as car, Mercedes, Germany. Perhaps a whole new idea will materialize. 7) Lateral marketing Combines two product- concepts or ideas to create a new offering e.g. Cyber cafs = caf + internet Sony Walleman = audio + portable. 5)
400
Idea screening Company must avoid two types of errors: 1) A drop error 2) A go error absolute product failure, partial product failure (fixed costs not fully covered); relative product failure (yields profit less than companys target rate of return)
401
Idea screening
As the idea moves through development, the company will constantly need to revise its estimate of the products overall probability of success, using the following formula:
Overall
probability of = success
Probability
of technical completion X
Probability of
commercialization given technical completion X
Probability of
economic success given commercialization
For example, if the three probabilities are estimated as .50, .65, and .74, respectively, the overall probability of success is .24. The company then has to judge whether this probability is high enough to warrant continued development.
402
IDEA SCREENING
EVALUATING A MARKET OPPORTUNITY IN TERMS OF COMPANYS OBJECTIVES & RESOURCES I. COMPATIBILITY WITH COMPANY OBJECTIVES PROFIT OBJECTIVE SALES VOLUME OBJECTIVE SALES GROWTH OBJECTIVE
Unique or superior product High performance-to-cost ratio High marketing dollar support Lack of strong competition Total
.8 .6 .7 .5
*Rating scale : .00 - .30 poor; .31 - .60 fair; .61 - .80 good. Minimum acceptance rate: .61.
404
A product idea is a possible product that a company might offer to the market
A product concept is an elaborated version of the idea expressed in meaningful consumer terms-target market,,key benefit,occasion,etc
405
CONCEPT DEVELOPMENT
Any product idea can be turned into several products concepts . A company can form several concepts: Concept 1: An instant breakfast drink for adults for nutrition Concept 2: tasty snack drink for children for midday refreshment Concept 3: Health supplement for elderly for late evening Each of these concepts represents a category concept - that is , each positions the idea within a category.It is the category concept, that defines the products competition. Product- positioning map - can be utilized in communicating and promoting the concept to the market. Brand-positioning map - the product concept has to be turned into a brand concept.
406
1. CLARITY
2. BELIEVABILITY
3. NEED LEVEL NEED GAP SCORE
4. GAP LEVEL - BETWEEN NEW PRODUCT AND EXISTING PRODUCTS 5. PERCEIVED VALUE 6. PURCHASE INTENTION 7. PERCEIVED USAGE-WHO,WHEN AND HOW OFTEN
407
408
BUSINESS ANALYSIS
A. B. Estimating Total Sales - First time sales, replacement sales, repeat sales. Estimating Costs and Profits Year 0
1. Sales revenue 2. Cost of goods sold 3. Gross margin
4. Development costs 5. Marketing costs 6. Allocated overhead 7. Gross contribution 8. Supplementary contribution 9. Net contribution 10. Discounted contribution (15%) 11. Cumulative discounted cash flow
409
Break Even Analysis: How many units need to be sold or how many years to break even Risk Analysis: Here three estimates (optimistic, pessimistic, and most likely) are obtained for each uncertain variable affecting profitability under an assumed marketing environment and marketing strategy for the planning period.
410
PRODUCT DEVELOPMENT
Large jump in investment. The R & D department will develop one or more physical versions of the product concept. Design required functional characteristics & to communicate its psychological aspects through physical cues. The functional tests are conducted under laboratory and field conditions to make sure that the product performs for safety & effectiveness.(ALPHA TESTING) Consumer Testing(BETA TESTING) includes bringing consumers into a laboratory to giving them samples Inhome product placement tests.
411
Techniques for measuring consumer preferences: The most three most common are simple ranking, paired comparisons, and ranking scales. The simple- rank- order method ask the consumer to rank the three items in order of preference. It is difficult to use this method when there are are many objects to be evaluated. The paired-comparison method calls for presenting pairs of items to the consumer, then asking which one is preferred in each pair. The monadic -rating method asks the consumer to rate his or her liking of each product on a scale. This rating yields more information than the order methods.even know the qualitative levels of her preference for each.
412
MARKET TESTING
. CONSUMER GOODS MARKET TESTINGa. SALES WAVE RESEARCH Pre-selected consumers are offered companys & competitors products three to five times. Secrecy maintained but distribution issues can not be checked. b. SIMULATED TEST MARKETING Pre-selected consumers are given money, exposed to ads. Invited to stores,& purchase behavior observed. Ads effectiveness checked. c. CONTROLLED TEST MARKETING Panel of stores carry new products. Checks advertising, promotion. But, does not provide information how to sell to trade and also secrecy loss.
TEST MARKETS
1. HOW MANY TEST CITIES 2 to 6 cities.larger number if regional differences, different marketing strategies, possible loss, possible interference by competitors. 2. WHICH CITIES Not over tested, good media coverage, representative sample, average competitor activity. 3. LENGTH OF TEST Depends on repeat purchase rate. Period should be cut down if competitors are rushing to the market. 4. WHAT INFORMATION Store audit, consumer panels ( switching rates), buyer survey (Consumer attitude, usage , satisfaction). 5. WHAT ACTION TO TAKE Depends on trial & repurchase 414 rates.
COMMERCIALISATION
1. TIMING First entry : ( first mover advantages but must be debugged) , parallel entry, late entry. 2. GEOGRAPHICAL STRATEGY Planned market roll out necessary. 3. TARGET MARKET PROSPECTS Prime prospects. (early adopters, heavy users, opinion leaders, reached at a low cost) 4. INTRODUCTORY MARKET STRATEGY
416
DIFFUSION OF INNOVATION
Exposure to Innovation
Innovation Characteristics
Consumer- Dependent Relative Advantage Compatibility Perceived Risk Complexity Effect on Adoption of Other Innovations Consumer -Independent Trialability Divisibility Reversibility Realization Communicability Form of Innovation
Exposure to Innovation
Consumer Characteristics
psychological Variables Perception Motivation Personality Value Orientation Beliefs Attitudes Previous Innovative Experience Demographics Age Education Income
Propagation Mechanisms
Types Marketer- Controlled vs. Nonmarketer controlled Personal Vs. Impersonal Characteristics Credibility Clarity Source Similarity Informativeness
No
Modification
417
Adoption
Rejection
Innovators
2.5%
Laggards 16%
Adopter Categories
ADOPTER CATEGORY DESCRIPTION RELATIVE PERCENTAGE POPULATION WITHIN THE THAT EVENTUALLY ADOPTS
2.5%
Innovators
Venturesome - very eager to try new Ideas acceptable if risk is daring; more cosmopolite social relationships; communicates with other innovators. Respect - more integrated into the local social system; the persons to check with before adopting a new idea; category contains greatest number of opinion leaders; are role models. deliberate - adopt new ideas just prior to the average time; seldom hold leadership positions; deliberate for some time before adopting.
Early Adopters
13.5%
Early Majority
34.0
Late Majority
Skeptical- adopt new ideas just after the average time; adopting may be both an economic necessity and a reaction to peer pressures;innovations approached cautiously.
Traditional - the last people to adopt an innovation; most localite in outlook; oriented to the past; suspicious of the new.
34.0
Laggards
16.0
419
100.0%
CDI
100
2,00,000
2,00,000
14
28,000
56,000
200
BANGALORE
14,000
42,000
300
DELHI
10,000
10,000
100
CALCUTTA
2,000
1,000
50
421
BPI
NATIONAL MUMBAI 100
BDI
-
14
4,200
200
BANGALORE
2,100
4,200
200
DELHI
1,500
2,250
150
CALCUTTA
300
300
100
422
Demand can be measured at 6 product levels (item, form, line, company sales, industry sales, all sales), 5 space levels (customer, territory, region, country, global) & 3 time levels (short-term, medium & long-term).
423
Market can be defined as. a) Potential market = interest in a market offer. b) Available market = interest + income + access. c) Qualified available market = interest + income + access + qualifications (beer 21 yrs.) d) Target market = part of qualified available market that company decides to pursue. e) Penetrated market These definitions are a useful tool for market planning.
424
Market Demand
Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment. (e.g. recession V/s prosperity) under a defined marketing program. Hence, market demand is a function.
Market minimum (base sales) & market potential (upper limit).
425
Organizations selling in non-expansible market must accept the market size (level of primary demand for product class) & direct effort to winning larger market share (selective demand).
Market penetration index (current level of market demand vis--vis potential demand level) & companys share penetration index (current market share vis--vis potential market share). Market forecast is market demand corresponding to one level of industry marketing expenditure.
426
Company Demand
Company demand is companys estimated share of market demand at alternative levels of company marketing effort in a given time period. This depends on size & effectiveness of marketing expenditure relative to competitors.
Company sales forecast is expected level of company sales based on chosen marketing plan and an assumed marketing environment.
427
Sales quota is sales goal set for a product line, company division or sales representative. Sales quota higher than sales forecast.
Sales budget is conservative estimate used for current purchasing, production & cash flow decisions.
Company sales potential is maximum company demand as company marketing effort increases relative to competition. This will always be less than market potential.
428
1)
a)
b)
2)
Market Buildup Method Identify all potential buyers in each market & estimating their potential purchases (based on some norm e.g. lathes per hundred employees or per Rs. 1 million sales). Multiple-factor Index Method can use existing market indices or develop own market indices based on assumptions. RK Swamy BBDO Guide for urban markets uses 18 variables. MICA Rural Market Ratings for rural markets uses 6 variables. Developing own market indices.
3) a)
b)
430
CDI
100
2,00,000
2,00,000
14
28,000
56,000
200
BANGALORE
14,000
42,000
300
DELHI
10,000
10,000
100
CALCUTTA
2,000
1,000
50
432
BPI
NATIONAL MUMBAI 100
BDI
-
14
4,200
200
BANGALORE
2,100
4,200
200
DELHI
1,500
2,250
150
CALCUTTA
300
300
100
433
1) 2)
Time series Econometric Models of forecasting involving 3 stages macroeconomic forecast, industry forecast, company sales forecast. For business buyers-- buyer-intention surveys.
3)
434
All forecasts are based on a) b) c) What people say survey of buyers opinions or those close to them. What people do test market. What people have done analysing records of past buying behaviour or using time-series analysis or statistical demand analysis.
435
Methods
1) Surveys of buyers intentions eg. Consumer durables, industrial products. Buyers should have clear intentions, will be implementing them, willing to disclose.
2)
Composite of sales force opinion need to take with pinch of salt as pessimistic or optimistic. Also tend to be unaware of larger economic developments. May deliberately underestimate, or have no time. To encourage better estimating ,share records of past forecasts with actual sales & also description of company assumptions on business outlook, competitor behaviour & market plans. Benefits are that sales force best single group, greater confidence & incentive to achieve (as self driven) & the grass roots forecast provides detailed estimates broken down by product, territory, customer & sales rep.
Expert Opinion Dealers, Distributors, suppliers, marketing consultants, Trade associations. Group discussion method or pooling of individual estimates or Delphi 436 method.
3)
4) a)
Past-sales analysis Time Series break down past sales into trend, cycle, seasonal & erratic & project into future. Exponential smoothing consists of projecting the next periods sales by combining an average of past sales and the most recent sales, giving more weight to the latter. Statistical demand analysis consists of measuring the impact level of each of a set of causal factors (e.g., income, marketing expenditures, price) on the sales level. Econometric analysis consists of building sets of equations that describe a system, and proceeding to fit the parameters statistically. Market test method- especially desirable in forecasting new product sales or established product sales in new distribution channel or territory.
437
b)
c)
d)
5)