Marketing Management I (Course Slides) PDF

DIRECCIÓ COMERCIAL I Marketing Management I 1  Marketing Management I RECOMMENDED BIBLIOGRAFY Marketing (13 ed.). Roger A. Kerin & Steven W. Hartley. McGraw-Hill, 2018 Marketing. Concepts & Strategies Europea...

DIRECCIÓ COMERCIAL I Marketing Management I 1  Marketing Management I RECOMMENDED BIBLIOGRAFY Marketing (13 ed.). Roger A. Kerin & Steven W. Hartley. McGraw-Hill, 2018 Marketing. Concepts & Strategies European Edition. Dibb, Sinkim, Pride, Ferrell. (8th European edition) 2019. Marketing Management. Kotler et al. (4th European Edition). Pearson- Prentice Hall, 2019. Marketing Turístico. Antoni Serra (2nd edition). Eds. Pírámide, 2012. Any book on Marketing Management or Fundamentals of Marketing available at the UIB Library. 2  Marketing Management I IMPORTANT DATES Final Exam’s date: 15/01/2025 16:00h Recovery Exam’s date: 04/02/2025 16:00h 1st assignment presentation:  11/11/2024  13/11/2024  18/11/2024 2nd assignment presentation:  02/12/2024  04/12/2024  09/12/2024  11/12/2024 3  Marketing Management I First assignment Students can choose one topic from the following list: 1. Entry barriers to e-commerce 2. Ethics / CSR as a Business Competitive Tool 3. Neuro-marketing 4. E-commerce 5. Managing the Online Reputation 6. Digital marketing. What changes when compared with traditional (non-digital) marketing 7. Digital Marketing. Concepts and Strategies 8. The impact of eWOM (with particular impact on hospitality firms) 9. Social Networks as a marketing tool. 10. Online reputation. How is it measured and how to manage it. 11. Value co-creation processes with customers 12. Travel Planning. Comparing the sources of information used by travelers in the XX and XXI centuries 13. Content Marketing 14. Big Data & Marketing Research 15. Artificial Intelligence & Marketing Research  Marketing Management I First assignment The deadline for submitting the written assignment is 18/01/2025. Length of the written assignment: between 10-20 pages-length. Presentations should be around 15-20 minutes.  Marketing Management I Second assignment Students can choose one topic from the following list: 1. What factors explain the success of Airbnb? 2. Entry barriers to e-commerce. What explains the emergence of the new mega- intermediaries and their reduced number? 3. Global warming: is there anything that can be done from the marketing field? 4. Metaverse: What do you think is behind? Can it have impacts on the marketing field? 5. Artificial Intelligence. What impacts can be expected in the marketing field? 6. New tools of market segmentation using digital technologies  The deadline for submitting the written assignment is 18/01/2025.  Length of the written assignment: between 10-20 pages-length.  Presentations should be around 12-15 minutes.  Marketing Management Direcció Comercial I (anglès) INTRODUCTION TO THE MODERN CONCEPT OF MARKETING 7  Marketing Management I What is Marketing? Marketing is not the art of selling what one produces… is the art or knowing what to produce. Marketing is as much a philosophy as a technique. As a philosophy, it is a mental stance, an attitude, a way of conceiving relationships in the exchange on the part of the enterprise or entity which offers its products to a market. As a technique, marketing is the specific way of executing or carrying out of the exchange relationship, which consists in identifying, creating, developing and attending demand demand. 8  Marketing Management I Company Orientation to the Marketplace Competition Orientation Emphasis None or minimal. Production Production and distribution. Demand is higher than supply Product availability is what is important. The starting point is that everything that is produced will be sold (because demand is higher than supply). Increase in competition. Product Product quality Greater balance between supply It is supposed that if the product has quality it will be and demand in demand, without the need of promotion. But quality alone is not enough Strong Sales Promotion: advertising and sales Supply higher than demand One must sell what is produced. It is supposed that consumers can be induced into buying a product, even though it may not satisfy a need. But an unsatisfied customer is equal to an unloyal customer. . Strong Marketing Long-lasting relationships with the consumer. . Supply higher than demand The consumer’s needs must be identified and one must try to satisfy them at a profit. One must produce what is in demand. The social responsibility of the organization offering the market a product must be taken into account. 9  Marketing Management I Company Orientation to the Marketplace. Societal Marketing Orientation Are companies that do an excellent job satisfying consumer wants and needs necessarily acting in the best long-run interests of consumers and society? … not necessarily. These companies could be creating social costs. Example. The fast-food hamburger industry offers tasty but unhealthy food. The hamburgers have a high fat content, and the restaurants promote fries and pies, two products high in starch and fat. The products are wrapped in convenient packaging, which leads to much waste. In satisfying consumer wants, these restaurants may be hurting consumer health and causing environmental problems The Societal Marketing Concept holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors (this is the original Marketing Concept). Additionally, it holds that this all must be done in a way that preserves or enhances the consumer’s and the society’s well-being. Thus, companies must take into consideration long-run social interests and communicate to potential customers they are doing it. The basic assumption is that consumers will reward companies showing concern in not creating long-run social costs. Research indicates consumers are willing to compensate this behaviour, particularly those with higher income and education levels. If not willing to pay more, consumers will show brand preference. 10  HOW MARKETING ACTS Socio-cultural Factors Economic Factors Personal characteristics Available Resources NEEDS WANTS DEMAND Guides Channels Identifies Estimulates MARKETING  Marketing Management I Does Marketing create artificial needs? A need is a sense of lack of something, a physiological or psychological state that is common to all human beings, regardless of ethnic or cultural factors. A desire (a wish) is the way it expresses the will to satisfy a need is expressed, according to the personal characteristics of individual, cultural, social and environmental and marketing stimuli. For example, how to meet the basic need to eat depends on whether your are a Spanish or an indigenous African, a Christian or a Muslim, a professional athlete or o member of a gastronomic club… Demand is the express statement of a desire, which is conditioned by available resources of the individual and marketing stimuli received. Marketing, therefore, acts primarily on the demand side. It helps to guide the wishes and channel them towards effective demands. But does not create needs, which is one of the criticisms that has been made repeatedly. What it does is to stimulate demand. 12  Marketing Management I Some important concepts But not always Marketing is trying to expand demand: De-Marketing (reduce); Counter-Marketing (eliminate) ‘Market-driven’ organizations (Marketing Oriented organizations) ‘Market-Driving’ organizations Strategic Marketing Operative or Tactical Marketing Relationship Marketing: focus on long term commercial relationship instead on the isolated commercial transaction.  Marketing activities that are aimed at developing and managing trusting and long-term relationships with larger customers.  A strategy designed to foster customer loyalty, interaction and long-term engagement. 13  A DEFINITION OF MARKETING CONCEPT “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that FOCUS have value for customers, clients, partners, and society at large” (AMA, 2007) SCOPE © Miguel Santesmases Mestre, Marketing: Conceptos y Estrategias, Ediciones Pirámide, Madrid, 2004  Marketing Management Direcció Comercial I (anglès) MARKETING MANAGEMENT Marketing Management. A process of planning, organising, implementing and controlling marketing activities to facilitate and expedite exchanges effectively and efficiently. 15  Marketing Management I The Marketing System ECONOMIC ENVIRONMENT TECHNOLOGICAL Suppliers ENVIRONMENT POLITICAL & LEGAL Product Price ENVIRONMENT COMPANY 2 Product Price Promotion Product Price Distributión COMPANY1 COMPANY 3 Promotion Distribuction Promotion Distribution PHYSICAL ENVIRONMENT Distributors Intermediaries SOCIAL & CULTURAL ENVIRONMENT MARKET DEMOGRAFIC ENVIRONMENT 16  Marketing Management I The Marketing Mix To design marketing strategies, the marketing department has some instruments that have to be properly combined in order to achieve business goals. These instruments are the four controllable commercial variables: Product Price Place (Distribution) MARKETING MIX Promotion PRODUCT PRICE MARKETING MIX DISTRIBUTION PROMOTION Product and distribution are strategic instruments, in the long term: they may not be altered in immediate mode, we need time. Price and Promotion are tactic instruments, in the short term: they can be altered easily in the short term. Price is always a derived variable: it depends on the changes we introduce in the other three variables. 17  Special characteristics of travel and Tourism Marketing The four P’s of Services Marketing: People, People, People, People (Richard Dow) THE CLEAR INTERDEPENDENCE OF OPERATIONS, MARKETING AND HUMAN RESOURCES IN TOURISM COMPANIES Operations Department Marketing Department Customers Human Resources Department  Marketing Management I. Marketing Management PRODUCT DECISIONS Product Portfolio Product differentiation and Positioning  Differentiation involves establishing the features that will distinguish our product from those of competitors and which will make it, in a way, unique or different to the rest.  Differentiation can provide us with a competitive advantage.  There are multiple ways to differentiate our product/brand.  If we do not differentiate, competition will be, basically, based on price competition.  We must know how consumers perceive our product or brand. Product positioning is how consumers perceive our product/brand in comparison with other brands (or according to some attributes/features). Perceptual Map is the graphical representation of our product/brand’s positioning 19 20  Marketing Management I. Marketing Management PRODUCT DECISIONS 21  Marketing Management I. Marketing Management PRODUCT DECISIONS Branding  Brand. A name, term, symbol or a combination of them, which is intender to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.  Trademark. A brand or part of a brand that is given legal protection because it is capable of exclusive appropriation. A trademark protects the seller’s exclusive rights to use the brand name and/or brand mark. Brand Equity and Brand Value  Brand equity and brand value are similar, but not the same  Brand equity refers to the importance of a brand in the customer’s eyes. Brand equity is a set of assets or liabilities in the form of brand visibility, brand associations and customer loyalty that add or subtract from the value of a current or potential product or service driven by the brand. It is a key construct in marketing management.  Brand value, on the other hand, is the financial worth of the brand. To determine brand value, businesses need to estimate how much the brand is worth in the market – in other words, how much would someone purchasing the brand pay? 22  Marketing Management I. Marketing Management PRODUCT DECISIONS Branding decisions  First decision: whether to create or not a brand.  Branding strategies: Single brand. The same brand name is used for all company products (despite of its differences).  Advantages: (a) Economies of scale in promotion (b) if the brand image is positive, the prestige of the brand gives coverage to all company products (c) when a new product is launched, it appears with a certain degree of awareness and prestige.  Disadvantages: More difficulties in segmenting the market Individual or multiple brands. The opposite alternative to single branding: a different name for each of the company’s products.  Advantages: better segmentation  Disadvantages: increased communication costs Second brands. Second brands belong to companies with other more important/prestigious brands. This strategy attempts to segment and widen the market covered to other segments different to the usual ones. Private labels. The distributor’s name become a brand for a wide range of products, although they are not necessarily manufactured by the distributor. Private labels are an example of the distributor’s growing negotiating power. Umbrella branding. Trying to benefit from the advantages of single brand and multiple brands. 23 PRODUCT DECISIONS. Branding Multi-brand strategy Marketing of two or more similar and competing products by the same firm under different and unrelated brands. While these brands eat into each others‘ sales (cannibalism), multi-brand strategy does have some advantages as a means of: (1) obtaining greater shelf space and leaving little for competitors’ products, (2) saturating a market by filling all price and quality gaps, (3) catering to brand-switchers users who like to experiments with different brands, and (4) keeping the firm's managers on their toes by generating internal competiton 24  PRODUCT DECISIONS. Branding Examples of Umbrella branding. Forte Hotels Group Forte Posthouse. Mostly three-star hotels for business travellers located in city centres or near major trunk roads. Forte Heritage. Hotels ranged from smaller country house-style hotels to larger inns Forte Crest. More upmarket business hotels than Forte Posthouse, located in cities and mostly four-star. Forte Grand Hotels. A collection of high-end international hotels including the Waldorf Hotel, Westbury Hotel, and Hotel Russell in London, the Balmoral Hotel in Edinburgh, the Bath Spa Hotel in Bath, etc. 25  Marketing Management I. Marketing Management PRODUCT DECISIONS Product Life Cycle  Products have a limited life  Product sales pass through different stages, each posing different challenges, opportunities and problems to the seller.  Profits rise and fall at different stages of the life cycle  Products may require different marketing actions according to the life-cycle stage 26  Marketing Management I. Marketing Management PRODUCT DECISIONS Boston Consulting Group Matrix  Cash Cows are products with high market share and slow-growing demand. These units typically generate cash in excess of the amount of cash needed to maintain the business. Any corporation would be happy to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth.  Dogs are products with low market share in a mature, slow-growing demand. These units typically "break even", generating barely enough cash to maintain the business's market share. They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off.  Question marks (also known as problem children) are products with a high market growth demand, but having a low market share. They are a starting point for most businesses. Question marks have a potential to gain market share and become stars, and eventually cash cows when market growth slows. If question marks do not succeed in becoming a market leader, then after perhaps years of cash consumption, they will degenerate into dogs when market growth declines. 27  Marketing Management I. Marketing Management PRODUCT DECISIONS Boston Consulting Group Matrix  Stars are products with a high market share in a fast-growing industry. They are successful question marks. The hope is that stars become next cash cows. Stars require high funding to fight competitions and maintain a growth rate. When growth slows, if they have been able to maintain their category leadership stars become cash cows. Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth opportunities. The balanced portfolio has:  stars whose high share and high growth assure the future;  cash cows that supply funds for that future growth; and  question marks to be converted into stars with the added funds. 28  Marketing Management I. Marketing Management PRODUCT DECISIONS Modification and elimination of existing products New Product Planning and development STAGES IN NEW PRODUCT PLANING Idea generation Idea screening Concept development and testing Economic analysis and marketing strategy design Product development and product test Market Test Product launching / Full scale commercialization 29  Marketing Management I. Marketing Management PRICING DECISIONS What price exactly is? Pricing a single product. Pricing Methods:  Costs  Demand elasticity (consumers' price sensitivity)  Competition (competitors’ prices) All three methods can be considered simultaneously Market skimming and market penetration strategies Yield (Revenue) Management Pricing a product line 30  Marketing Management I. Marketing Management PRICING DECISIONS Pricing a product line Cross elasticity of demand may be considered Loss leader pricing: An aggressive cost setting strategy whereby a retail outlet deliberately sells particular desirable products below their cost to attract customers. The idea behind loss leader pricing is that the profits from additional purchases that customers will make while in the store will more than cover the store’s loss on the heavily discounted product. Selling at prices below costs is not forbidden by law. The correct concept of dumping. 31  Marketing Management I. Marketing Management DISTRIBUTION DECISIONS Design and selection of distribution channels  Distribution channel is the path through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them that flow in the opposite direction (from consumer to the vendor). (note differences in services)  Distribution channels can be as short as being direct from the vendor to the consumer or may include several interconnected intermediaries such as wholesalers, agents, retailers, etc.  Direct channels are typical in industrial business-to-business (B2B) markets. Long channels are widespread in consumer markets.  Distribution channels evolution. Two basic factors: advances in technology and costs  Aspects to take into consideration: economic factors (costs) but also market control.  Push and Pull strategies  Different levels of Market Coverage: Intensive Distribution: The use of all available outlets for distributing a product Selective Distribution: The use of only some available outlets in an area to distribute the product Exclusive Distribution: The use of only one outlet in a relative large geographic area to distribute a product. Direct Marketing. A decision by a company’s marketers to select a marketing channel that avoids dependence on marketing channel intermediaries. Marketing communications deal directly with targeted customers. 32  Marketing Management I. Marketing Management PROMOTION DECISIONS. PERSONAL SELLING AND DIRECT MARKETING Merchandising  The activity of promoting the sale of goods at the retail outlet Distribution Logistics  It's a combination of processes that efficiently move goods through the fulfillment process, from warehouse to end customer  Marketing Management I. Marketing Management CHANNEL STRATEGIES 34  Marketing Management I. Marketing Management PROMOTION DECISIONS PROMOTON MIX DIRECT MARKETING ADVERTISING PERSONAL SELLING PROMOTIONAL MIX SALES PROMOTION PUBLIC RELATIONS A specific combination of promotional methods used for one product or a family of products Generic objective: communicate the benefits of consuming a certain product/service and persuade the market to buy it…. But don’t be naïve! 35  Marketing Management I. Marketing Management PROMOTION DECISIONS. ADVERTISING Advertising. Any paid form of non-personal communication through mass media. Main features  Control over the message.  Most expensive form of promotion. Low cost per impact but if media is not very selective we impact a lot of non potential customers. Advertising is the less selective of all promotion tools. Effects  Effects of advertising on demand curve (sales): it is not as easy! Measuring advertising effectiveness in terms of sales is practically impossible due to the difficulty of isolating the influence of other factors, aside from advertising, which have an influence on the demand.  Advertising effectiveness is measured in terms of achieving communication objectives (pre- test, post-test)  Advertising reduces demand elasticity… but if competitors react can increase elasticity. Regulation of Advertising (General Advertising Law, November 11th 1998) o Subliminal Advertising. Promotional stimulus the recipient is not aware of, such as those played at very low volume or flashed on a screen for lot less than a second. It’s effectiveness is not fully supported by scientific evidence. Jus in case, its forbidden by Spanish law. o Comparative Advertising (also called comparison or competitive advertising). Promotional technique in which an advertiser claims the superiority of its product over competing product(s)) by direct or indirect comparison. If other products are mentioned by their name (and not as 'brand X,' 'brand Y,' etc.) the owners of those brands may challenge the fairness of the comparison in a Court. 36  Marketing Management I. Marketing Management PROMOTION DECISIONS. ADVERTISING Objectives of advertising  To inform, persuade, and remind… but also: Secure the distributor’s acceptance Increase customer’s brand loyalty Create market entry barriers Set of decisions to be taken  Setting objectives (why)  Selecting the target group (to whom)  Determining budget  Message design (what)  Media selection (Media planning)  Establishing the length and the dates of the advertising campaign Be careful with very creative ads but not effective! 37  Marketing Management I. Marketing Management PROMOTION DECISIONS. PUBLIC RELATIONS Public Relations. A set of activities carried out by organizations with the generic aim of obtaining, maintaining, or recovering acceptance, trust and support. Main goals:  Obtaining publicity (non-paid good communication).  Improving the company’s good image.  No control over the final message  But a lot more effective  Target groups: o Internal: employees, shareholders, suppliers, unions. o External: customers, media, opinion leaders, and society in general with the aim of creating a positive image.  The role of Influencers: a good complement to their other PR tools.  Influencer Marketing is the shift in recognizing there are new ways to reach the firm’s audience or public. Traditionally that used to be high net worth individuals or journalists and now it can be anyone with their own network. 38  Marketing Management I. Marketing Management PROMOTION DECISIONS. SALES PROMOTIONS Sales Promotions. Activities aimed to increase sales in the short term. Incentives to buy the product (consumers) or to increase the effort to sell the product (channel of distribution, sales teams).  Target groups: o Consumers (price offers, an additional amount of product, gifts, prizes, trips, etc.) o Sales force (extra commissions, bonuses, trips…) o Distribution channel (quantity discounts, free advertising, bonuses, trips…) o Prescribers/Influencers (factory visits, useful technical documentation, assistance to seminars and conferences, gifts, trips…) 39  Marketing Management I. Marketing Management PROMOTION DECISIONS. PERSONAL SELLING Personal Selling. The process of using personal communication in an exchange situation to inform customers and persuade them to purchase products or services. WHEN IT IS ADVISABLE TO USE PERSONAL SELLING It depends on the characteristics of the product and the market. In general:  In high-value transactions  When the product is of a technical nature  When the product requires demonstrations  When the product or service must be adapted to the specific needs of the buyer  When the purchase may be subject to negotiation (final price, form of payment, delivery terms...)  When the market is concentrated (by number of customers or geographically) In general, when we act in the business-to-business market (when customers are firms)  Marketing Management I. Marketing Management PROMOTION DECISIONS. PERSONAL SELLING Advantages of Personal Selling Disadvantages of Personal Selling Direct and personal communication High cost per impact with the buyer: it is a two-way form of Contact with a reduced number of clients communication. at a time Flexibility: communication can be Need for training adjusted to the customer’s requirements (feedback) Allows for client selection Possibly the biggest disadvantage of selling is Obtaining more and better information the degree to which this promotional method is on clients misunderstood. Most people have had some bad experiences with salespeople who they Continual relationships that can foster perceived were overly aggressive or even future sales. It is the most effective downright annoying. promotional method for building While there are certainly many salespeople who relationships with customers, fall into this category, the truth is salespeople are particularly in the business-to- most successful when they focus their efforts on business market. satisfying customers over the long term and not focusing on their own selfish interests.  Marketing Management I. Marketing Management PROMOTION DECISIONS. SALES MANAGEMENT The Sales Manager is responsible for designing and implementing the sales strategy and managing the sales team DESIGNING AND IMPLEMENTING THE MANAGING THE SALES TEAM SALES STRATGY 1. Recruitment and Selection of salespeople 1. Specifying sales objectives 2. Training of salespeople 2. Choosing the sales system and team 3. Motivation of salespeople 3. Organizing the sales network 4. Compensation of salespeople 4. Determining the size of the sales team 5. Control of the sales force 5. Assigning sales territories It’s extremely important to work as a group! 6. Planning visits, calls, etc.  SALES MANAGEMENT 1. SETTING SALES OBJECTIVES They should be consistent with the broader objectives set out in the Marketing Plan They must meet the following requirements: 1. Be precise 2. Quantifiable 3. Refer to a specific period of time 4. Be reasonable Can be expressed in several ways:  Volume of sales in units  Sales revenue  Increase in the volume of sales  Market share  Number of new customers  Number of buying orders  etc. 43 SALES MANAGEMENT 2. SELECTING THE SALES SYSTEM When the sales activity takes place within the retailer’s establishment, sellers often belong to the company’s staff and be bound by an employment contract. When the activity of sales takes place abroad, there are two possibilities: a) Own sales teams b) Foreign sales teams 44 SALES MANAGEMENT 2. SELECTING THE SALES SYSTEM OWN SALES TEAMS VERSUS FOREIGN SALES TEAMS Positive and negative aspects Own sales teams: Full-time commitment to the company and greater integration Greater control over the sales people activity Improved communication company-customer Greater control over the market Fixed costs which implies higher total costs for low sales volume but lower total costs for high volumes Foreign sales teams : Partial dedication of the seller, what involves a lower seller’s integration in the company Lower control over the seller’s activity Lower control over the market Only variable costs, what implies lower total costs for low sales volumes, but higher total costs for high sales volumes. 45 SALES MANAGEMENT 3. ESTRUCTURING THE SALES TEAM 1. GEOGRAPHICALLY  Dividing the market where the company operates in different territories or sales zones.  Especially suitable when the range of products offered is reduced and customers have similar characteristics  Advantage: we benefit from reduced travel costs and reduced travel times  Disadvantage: lack of specialization of sales teams  Basic objective when designing sales territories: to get similar territories in terms of amount of work, extension, distances to travel, Communications, number of customers, and purchase potential. Comparative grievances with other sellers must be avoided: similar effort = similar compensation. 46 SALES MANAGEMENT 3. ESTRUCTURING THE SALES TEAM 2. BY PRODUCTS  Sellers are assigned to different lines or categories of products.  Especially suitable when the range of products offered is high and/or heterogeneous  Advantage: the seller may have a greater specialization.  Disadvantage: travel costs may increase  To avoid this disadvantage, a combination can be made structuring sales teams by products and by geographic territories 47 SALES MANAGEMENT 3. ESTRUCTURING THE SALES TEAM 3. BY CLIENTS  Sellers are assigned according to the characteristics of customers  Especially suitable when customers are very different (in terms of volumes of purchase, needs and requirements, etc.)  Advantage: greater specialization and customization.  Disadvantage: travel expenses may increase  To avoid this disadvantage, a combination can be made structuring sales teams by clients and by geographic territories 4. MIXED FORMS  The previous criteria (territories, products, clients) can be used in combined form  Another alternative criteria is to specialize by tasks: prospecting customers, obtaining orders, management of customers’ payments, technical advice... 48 SALES MANAGEMENT 4. DETERMINING THE SIZE OF THE SALES TEAM At first, the higher the number of sales representatives the better (if enough resources are available) The ‘Law of Diminishing Marginal Returns' will limit the number of sales representatives that can be assigned to a territory... 5. ASSIGNING SALES REPRESENTATIVES TO SALES TERRITORIES Assignment of sales representatives must be done in such a way that achieves the highest total performance in sales. This does not imply that each seller will act in the territory where he obtains best results 6. PLANNING VISITS Basic objective: sales representatives’ time must be used in the most effective and efficient way. Planning of visits implies specifying the following: 1. Number of visits to be carried out 2. Routes design 49  Tabla 15.3. Asignación ce vendedores a territorios de ventas Ventas de los vendedores Asignación óptima en cada territorio ------------------- ------------------------ Vendedor- Vendedor 1 2 3 Territorio Ventas -------- ------- ------- ------- ---------- ------ A 200 130 160 A-3 160 B 150 120 100 B-1 150 C 130 135 90 C-2 135 ----- Total ventas 445 SALES MANAGEMENT SALES REPRESENTATIVES’ MOTIVATIÓN 1. Continuous training 2. Regular meetings to create a spirit of group and support and exchange of information between vendors 3. Task recognition 4. Personal promotion of the seller 5. Delegation of authority, greater autonomy 6. Sales promotions: incentives, prizes, competitions... to stimulate specific tasks 51 SALES MANAGEMENT MOTIVATIÓN. LEADERSHIP STYLE AS A KEY ELEMENT The best leader is the one whose existence goes unnoticed to people. It is not so good when people obey and claim him. He is still worse when people are afraid of him. If you don't honor your people, people will not honor you. The good leader speaks little and, when the work is done, people will say: we did it ourselves. De Lao-tse 52 SALES MANAGEMENT REMUNERATION OF SALES REPRESENTATIVES. The system must:  Be simple to apply  Be equitable in order to avoid comparative grievances between vendors  Provide security to the seller  Motivate market information gathering (about the market, competitors…) 53  Marketing Management I. Marketing Management PROMOTION DECISIONS. SALES MANAGEMENT Method Advantages Disadvantages Particularly useful when… Fixed Salary  Feeling of Security  Lack of stimulus  New salesperson  Easy administration  Costs not related to  Have to develop new markets  Predictable costs sales  Many tasks are unrelated to sales Pure High stimulus Feeling of insecurity by Aggressive selling Commission Costs related to the sales force All tasks are related to sales sales Sales force has no incentive to provide market information Mixed systems Provides both More difficult We want to provide feeling of incentive and security administration security to our sales force and, at to the sales force the same time, maintain control over Costs related to them sales Bonuses: a specific amount (in addition to regular pay) given for reaching a specific goal (differently to a commission it is a fixed amount, not a percentage). Additionally or alternatively to bonuses, the sales force can receive other rewards, like incentive trips, etc.  Marketing Management I. Marketing Management PROMOTION DECISIONS. PERSONAL SELLING AND DIRECT MARKETING  Marketing Management Direcció Comercial I (anglès) ENVIRONMENTAL ANALYSIS 56  Environmental Analysis “It is useless to tell a river to stop running. The best thing is to learn how to swim in the direction it is flowing” Anonymous When winds of change blow, some rise walls, while others build windmills. Gabriel García Márquez “All business operate within an environment, which directly or indirectly affects the way in which they function, just as we as a consumers live within a cultural and social environment which to a greater or lesser degree determines the way in which we behave as individuals” Elaine O‘Brien. University of Strathclide 57  Environmental Analysis MACRO-ENVIRONMENT Economic Natural/ MICRO-ENVIRONMENT Political-Legal Physical Competitors Suppliers Company Market Intermediaries Institutions and other groups of interest Technological Demographic Social-cultural 58  Marketing Management I. Marketing Management COMPETITORS ANALYSIS A good competitors Analysis has to give an answer to six questions: 1. Degree of intensity of competition in the markets 2. Who are our competitors? 3. What are their strategies? 4. What are their objectives? 5. What are their strengths and weaknesses? 6. How they will react to our actions?  Marketing Management I. Marketing Management COMPETITORS ANALYSIS Degree of intensity of competition in the markets It depends on the market structure which, basically, depends on two factors: 1. The number of vendors 2. The degree of homogeneity of the products MARKET STRUCTURES One Seller Few Sellers Many Sellers Homogeneous Monopoly Oligopoly Perfect Competition Products Differentiated Differentiated Monopolistic Products Oligopoly Competition structure Entre Cost high Low Fixed costs Es U - moe intense , higher I Low high Stable variable costs Low Stable return Exit Bav.. Low high high e risk  Marketing Management I. Marketing Management COMPETITORS ANALYSIS Who are our competitors? CURRENT COMPETITORS  Three levels of competitors according to the degree of product substitutability POTENTIAL or LATENT COMPETITORS ‘A company is more likely to be driven out of the market by a potential or latent competitor than by an actual competitor’  Sources leading to the emergence of latent competitors: o Disruptive technological developments o Market expansion or Legal changes  Marketing Management I. Marketing Management COMPETITORS ANALYSIS Techniques to retrieve information for the Competitor Analysis remaining questions Mystery Shopping: it consists of pretending to be clients and collecting information on all aspects that are considered interesting COMPETITORS ANALYSIS Environmental Management  From a reactive response to a proactive response regarding environmental changes  Reactive means adapting to changes  Proactive means trying to anticipate changes and measuring their potential impacts on the company’s objectives  Techniques: Prognosis of the environment & Mapping of potential future scenarios  Marketing Management Direcció Comercial I (anglès) MARKET SEGMENTATION 63  " Never follow the crowd ". Bernard M. Baruch Definition  A market segment consist of a group of customers who share a similar set of wants.  The marketer does not create the segments; the marketer’s task is to identify the segments and decide which one(s) to target.  Segmentation is a process of dividing the market into homogeneous subgroups, in order to carry out a differentiated marketing strategy for each, enabling more effectively meet their needs and the business objectives of the company Utility  Better understanding of customer’s needs and wants.  It helps in identifying market gaps  It helps in establishing priorities  It facilitates competitor’s analysis 64 Effective segmentation There are multiple forms of segmenting a market. But not all segmentations are useful to design marketing strategies. To be useful, market segments must be:  Identifiable. The components must clearly be defined.  Measurable. The size, purchasing power and characteristics of the segment can be measured  Substantial. The segments are large and profitable enough to serve. It’s worth going after with a tailored marketing program.  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.  Actionable. Effective programs can be formulated for attracting and serving the segments. Do we have sufficient capacities and resources? 65 Criteria for segmenting consumer markets Generic Specific Behavioral Segmentation Objectives  Demographic segmentation: gender, age,  User status generation, family size, family life cycle …  Usage rate  Socioeconomic segmentation: occupation,  Loyalty status education, income, accumulated wealth, social class…  Place of shopping  Geographic segmentation: nations, states,  etc. regions, counties, cities, neighborhoods, population density, climate… Subjectives  Lifestyle  Benefits sought Psychographic Segmentation  Personality  Attitudes, perceptions, preferences… 66 Applying Market Segmentation to marketing strategy Segmentation Targeting Positioning Identify market Measure Understanding segmentation attractiveness of consumer perceptions variables every segment and identifying the right positioning Look at profile of Decide on concept for each emerging segments targeting segment strategy Validate segments Positioning products in emerging Decide which the mind of the and how many consumer segments should be targeted 67 Measuring the attractiveness of segments We always have to consider three factors: 1. Size and growth potential of the segment.  The ‘right size’ is a relative matter.  Future growth potential is a fundamental aspect 2. Structural attractiveness 3. Company’s goals and resources 68 Measuring the attractiveness of segments Size and growth potential of the segment The first question that a company should ask is whether a potential segment has the right size and growth potential. The ‘right size’ is a relative matter.  Large companies prefer to operate in large segments and often overlook or avoid small segments.  Small firms can concentrate on small segments as they can represent a good business opportunity for them. Segment growth is normally a more attractive characteristic, since companies generally grow with the segment’s growth. 69 Five forces determining Segment Structural Attractiveness Michael Porter’s model Potential Entrants (Threat of new entrants) Suppliers Industry Competitors Buyers (Threat of growing (Threat of intense segment (Threat of growing bargaining power of rivalry) bargaining power of suppliers) buyers) Substitutes Substitutes (Threat of substitute (Threat of products) substitute products) 70 Measuring the attractiveness of segments Five forces determining Segment Structural Attractiveness Michael Porter’s model Threat of intense segment rivalry. A segment is unattractive if it already contains numerous, strong or aggressive competitors. The picture is even worse if:  The segment is stable or declining  If capacity additions are done in large increments  If fixed cost are high  If exit barriers are high or if competitors have high stakes in staying in the segment This conditions will lead to frequent price wars, advertising battles and new-product introductions and will make it expensive for the companies to compete. 71 Measuring the attractiveness of segments Five forces determining Segment Structural Attractiveness Michael Porter’s model Threat of new entrants. A segment is unattractive if it is likely to attract new competitors who will bring in new capacity. The question boils down to whether new entrants can easily get in. The lower the barriers to entry, the less attractive the segment. A segment’s attractiveness varies with the height of the entry and exit barriers. Exit Barriers Low High Low, stable Low risky Entry Low returns returns Barriers High, stable High risky High returns returns  Threat of substitute products. A segment is unattractive if there exist actual or potential substitutes for the product. Substitutes place a limit on the potential prices and profits that can be earned in a segment. The company has to watch closely the price trends in the substitutes. If technology advances or competition increases in these substitute industries, prices and profits in the segment are likely to fall. 72 Measuring the attractiveness of segments Five forces determining Segment Structural Attractiveness Michael Porter’s model Threat of growing bargaining power of buyers. A segment is unattractive if the buyers possess strong or increasing bargaining power. Buyers will try to force prices down, demand more quality or services (at the same price) and set competitors against each other… all at the expense of seller profitability. Buyers’ bargaining power grows:  When they become more concentrated or organized.  When the product represents a significant portion of the buyers’ costs.  When the product is undifferentiated.  When the buyers’ switching costs are low.  When the buyers are price-sensitive because of low profits.  When the buyers can concentrate backward. The best seller defense consist in developing superior offers that buyers cannot refuse. 73 Measuring the attractiveness of segments Five forces determining Segment Structural Attractiveness Michael Porter’s model Threat of growing bargaining power of suppliers. A segment is unattractive if the company’s suppliers (raw material and equipment suppliers, public utilities, banks, trade unions…) are able to raise prices or reduce the quality of ordered goods and services. Suppliers tend to be powerful when:  They are concentrated or organized  There are few substitutes  The supplied product is an important input  The switching costs are high  They can integrate forward. The best defense is to build good relations with suppliers and have multiple supply sources. 74 Measuring the attractiveness of segments Five forces determining Segment Structural Attractiveness Michael Porter’s model Threat of growing bargaining power of suppliers. A segment is unattractive if the company’s suppliers (raw material and equipment suppliers, public utilities, banks, trade unions…) are able to raise prices or reduce the quality of ordered goods and services. Suppliers tend to be powerful when:  They are concentrated or organized  There are few substitutes  The supplied product is an important input  The switching costs are high  They can integrate forward. The best defense is to build good relations with suppliers and have multiple supply sources. 75 Measuring the attractiveness of segments Company objectives and resources Even if a segment has a positive size and growth potential…and is structurally attractive, the company needs to consider its own objectives and resources in relation to that segment. Even if the segment fits the company’s objectives, the company must consider whether it possesses the requisite skills and resources to succeed in that segment. Even if the company posses the requisite competences, this could be not enough. They need to develop some superior advantages in order to protect from new powerful competitors’ entry. 76 Selecting the market segments Targeting Strategies UNDIFFERENCIATED STRATEGY Company’s marketing-mix Market DIFFERENCIATED STRATEGY Marketing Mix 1 Segment 1 Marketing Mix 2 Segment 2 Marketing Mix 3 Segment 3 CONCENTRATED STRATEGY Segment 1 Company’s marketing-mix Segment 2 Segment 3 77 Selecting the market segments Targeting Strategies Undifferenciated Strategy The firm might ignore market segments differences and go after the whole market with a single market offer. It focuses in what is common in the needs of buyers rather than in what is different. It designs a marketing program that will appeal to the broadest number of buyers. Advantages: cost economies (single marketing-mix) Disadvantages: Difficult to satisfy all consumer needs The firm practicing undifferentiated marketing typically develops an offer aimed at the largest segments in the market. When several firms do this, the result is intense competition for the largest segments and under-satisfaction of the smaller ones. The typical conflict between operations and marketing 78 Selecting the market segments Targeting Strategies Differenciated Strategy The firm operates in most segments of the market (full market coverage) designing tailored programs for each significantly different segment. Advantages: differenciated marketing typically creates more total sales than undifferenciated marketing, Disadvantages: costs are higher (reduced economies of scale). Only large companies with strong resources can develop this strategy. When implementing a ‘differentiated strategy’, the firm can adapt all components of the marketing- mix to suit the requirements of the different market segments selected or just one or some of them (promotion, distribution, price) ConcentratedStrategy The firm identifies several segments but concentrates on serving the needs of a particular segment. Reasons: scarcity of available resources, competitive advantage in this segment.... Advantage: the firm can gain a strong reputation for specializing in serving this customer group. Disadvantage: risk concentrated in a particular segment, if demand weakens... This is the strategy for small and medium size companies. But, implementing this strategy a firm can grow and become a large company (Ex. Air Berlin) 79  Marketing Management Direcció Comercial I (English Track) CONSUMER BEHAVIOUR Students must read chapter 3 of Fundamentals of Marketing except the epigraph ‘Models of Consumer Behaviour’) (or the same chapter in similar marketing books) 80 Consumer Behaviour Dimensions to include in a Consumer Behaviour study In terms of buying, consuming, or using a product or service 1. What? 2. Who? 3. Why? 4. How? 5. When? 6. Where? 7. How much? 81 Consumer buying decision process MARKETING VARIABLES Product Price Distribution Promotion INTERNAL INFLUENCES PROBLEM RECOGNITION EXTERNAL INFLUENCES Motivation Economic, political, social Perception INFORMATION SEARCH environment Experience and Culture Learning EVALUATION OF ALTERNATIVES Reference Attitudes groups Personal Family characteristics PURCHASE Social class Situations POST-PURCHASE EVALUATION (Satisfaction / dissatisfaction) 82 Consumer buying decision process Perception Perception refers to the personal way of interpreting and giving meaning to the external stimuli to which we are exposed. Four stages in the perception process: 1. Exposure to information 2. Attention paid 3. Understanding and interpreting the message 4. Retention of information in memory  Perception is selective: what is of interest is perceived. Selectivity is manifested in each of the four stages. Important when we are trying to change attitudes  Perception thresholds. People may not distinguish differences between stimuli when they are not sufficiently important.  Weber’s Law: A minimum level of stimulus variation is required for it to be perceived. Example. Shrinkflation: process in which goods are reduced in size or quantity, while their prices remain the same. 83 Post-purchase attitudes Dissonance A mental state regarding the doubt of having made the right decision or not Sources of dissonance Price. The higher the price, the greater the dissonance. Psychological importance of the product. Very desired products by consumers tend to generate less dissonance. Product performance: if it is in accordance with consumer’s expectations, dissonance will be lower (and vice versa). Number of alternatives available: the more numerous are the possibilities of choice, less dissonance (doubt). Similarity of the alternatives: the more similar are the alternatives of choice, greater probability of occurrence of dissonance. Credibility of the source of information: If the person expressing doubts about the rightness of the choice deserve us a lot of credibility, this will generate strong dissonance (and vice versa). Communication actions made by competitors (advertising, etc.) is also a source of dissonance. 84 Post-purchase attitudes Brand loyalty Getting a new customer is always more expensive than retaining an existing customer. Brand loyalty: the tendency to continously buy the same brand or visit the same retail outlet Sources of brand loyalty: The major one: customer satisfaction. Other causes:  Brand Equity is a set of assets in the form of brand awareness, brand reputation and customer’s behavioral intentions (customen loyalty, customer engagement, customer advocacy) that add value to an existing or potential product or service marketed by the brand. ‘Brand Equity’ and ‘Brand Value’ are similar but not identical concepts. Brand Value is the financial value of the brand. To determine brand value, companies have to estimate how much the brand is worth in the market, i.e. how much someone would pay to buy it.  Effects of advertising, constant availability of the product, very good customer service, inertia... Advantages It facilitates the sales and the costs of promoting new products under the same brand. It stabilizes sales volume and market share, thus, sales forecasting tasks are simplified. If brand loyalty is strong, it diminishes price sensitivity. Loyal consumers act as advocates among their reference groups (customer advocacy) Loyal consumers favor the distribution of the product due to the pressure they exercise on dealers to provide it. 85  Consumer buying decision process MARKETING VARIABLES Product Price Distribution Promotion INTERNAL INFLUENCES PROBLEM RECOGNITION EXTERNAL INFLUENCES Motivation Economic, political, social Perception INFORMATION SEARCH environment Experience and Culture Learning EVALUATION OF ALTERNATIVES Reference Attitudes groups Personal Family characteristics PURCHASE Social class Situations POST-PURCHASE EVALUATION (Satisfaction / dissatisfaction) Post-purchase engagement Post-purchase engagement has become sufficiently critical to be considered an additional step. Post-purchase engagement as any public user behavior that creates user brand interaction or that is directed to the brand (e.g. writing a review) and also affects other consumers’ decisions. 86  Marketing Management Direcció Comercial I (English Track) ORGANIZATIONS’ BUYER BEHAVIOUR 87 Organizations buyer behaviour Differences with the consumer buyer behaviour Fewer buyers. Demand is more concentrated. Number of organizations in the industrial market is very inferior if compared with the consumers market. The specialist in industrial marketing deals with fewer buyers than consumer marketing specialist. Consequences of this:  Direct marketing  Sales are made through sales teams.  Communication is direct and the use of advertising campaigns through mass media is limited or null.  A closer relationship between supplier and customer. Larger buys, in terms of units and value. Demand is often more inelastic. total demand for many goods and services in the industrial market is not greatly affected by changes in prices, especially if it is not easy to find substitutes or they represent a small percentage of the cost of the final product.Demand is inelastic in the short term because producers cannot make rapid changes in its production methods. The demand of organizations is a derived-demand. Demand for the industrial market is derived ultimately from the demand for consumer goods. Is the consumer demand that affects the industrial demand elasticity. 88  Organizations buyer behaviour Differences with the consumer buyer behaviour Fluctuating demand. Demand for industrial goods is subject to greater fluctuations than demand for goods and services in the consumers market. This is nothing more than a consequence of its nature of derived demand and is what is known as the “Acceleration Principle" in economic theory. The acceleration principle is an economic concept that draws a connection between changing consumption patterns and capital investment. It states that if appetite for consumer goods increases, demand for equipment and other investments necessary to make these goods will grow even more... and vice-versa. That is, small variations in consumer demand, or final demand, can cause significant increases or decreases in demand for industrial goods. For example, a small reduction in final demand for a product causes an accumulation of inventories at retailers and wholesalers, who stop their purchases until stocks decline. This will cause a reduction in the rate of manufacturing and will drastically slow down the purchase of components supplies. The purchasing process is far more complex, long-lasting, and purchase decisions usually are not taken by single person. This is due to the high monetary value associated to purchases, the technical nature of some of them and the number of individuals or departments affected by the buying process. Evaluation of purchase criteria are different. It's a more professional purchase, made by trained people who use their time in learning how to buy better. Industrial buyers consider many more criteria in their purchasing decisions. For example, industrial buying is generally more emphasis in technical assistance and training provided by the supplier, or costs, quality of product, delivery time and financial conditions of the offer. This means that industrial marketing specialists have to possess a high level of expertise both its products and those of the competition. 89 Organizations buyer behaviour Types of Buyclass Situation (the decision-making process) Buy-class situation Novelty of the Information required Consideration of new decision alternative suppliers First Buy High Maximum Important Straight Rebuy Low Minimum None Modified Rebuy Medium Moderate Limited First Buy Complete negotiation Straight Rebuy Pure routine 90  Marketing Management Direcció Comercial I (English Track) RESEARCH AND INFORMATION SYSTEMS IN MARKETING We can not manage what we can not measure Students must read chapter 4 of Fundamentals of Marketing (or the chapter dealing with this issue in similar marketing books) 91 Marketing Research The five steps of the marketing research process Problem definition Designing the research plan Collecting data Data analysis and interpreting research finding Reporting research findings and final conclusions 92 Marketing Research Problem definition Problem definition implies identifying research objectives  Once the research problem and research objectives are clearly identified, 50% of the job is already done.  Primary data: Information gathered by observing phenomena or surveying respondents The cost of the research must be estimated. Cost-benefits analysis will reveal if it is worth to carry out the research. Three kind of studies:  Exploratory studies  Descriptive studies  Causal studies 93 Marketing Research Designing the research plan Selecting information sources  Secondary data: Information compiled inside or outside the organization for some purpose other than the current investigation  Primary data: Information gathered by observing phenomena or surveying respondents.  Any research should first check if there is secondary data available useful for the research objectives. If not available or incomplete or not reliable, we will have to generate primary data (more expensive) Primary data collection methods  Observation  Focus Groups  In-depth interviews  Experiments  Gathering data from digital platforms/devices (Big Data) Sampling  Who is going to be interviewed?  How many?  How are we going to select them (Sampling methodology) Survey methods  Telephone  Mail / email / Online surveys  Personal 94  Delphi Method Observation, surveys, experiments… can help us to understand and describe a present situation or phenomena. Delphi method can help us to forecast a future scenario. The word "Delphi" refers to the Oracle of Delphi , a site in Greek mythology where prophecies were passed on. The Delphi technique was developed by Olaf Helmer and Norman Dalkey of the Rand Corporation in 1953 for the purpose of addressing a specific military problem. Since then the Delphi Method has been widely adopted in economic analysis and nowdays it is, particularly, used for environmental, marketing and sales forecasting. Definition of 'Delphi Method‘ A forecasting method based on the results of questionnaires sent to a panel of experts. Several rounds of questionnaires are sent out, and the anonymous responses are aggregated and shared with the group after each round. The experts are allowed to adjust their answers in subsequent rounds. Because multiple rounds of questions are asked and because each member of the panel is told what the group thinks as a whole, the Delphi Method seeks to reach the "correct" response through consensus. 95 Delphi Method Main Features Anonimity. Panel experts do not know individual answers given by a specific panel member. Objective: to avoid personal influences (from recognized people) on one’s responses. Numeric response Medians, Interquartile Range But we can ask reasons (arguments) for giving a concrete numeric response Feedback. Several rounds of questionnaires are sent out, and the anonymous responses are aggregated and shared with the group after each round. Information is given to the others experts about the reasons 96 Marketing Research Delphi Method Problem definition Experts panel selection Questionnaire design and distribution Results analysis Consensus? No Yes Feedback Final conclusions 97  Marketing Management I Direcció Comercial I (anglès) MARKETING PLANNING & STRATEGY Students must read chapters 5 and 11 in Fundamentals of Marketing (Santesmases) No wind is favorable to those who do not know what harbour are they sailing to. ‘There are three types of companies: those who make things happen; those who watch things happen; those who wonder what happened’ 98  Marketing Management I The Marketing Plan Definition A document that summarizes the firms’ marketing objectives for the near future (usually one to three years) and explains how they will be achieved. It serves as a blueprint to guide the firm's marketing policies and strategiess and is continually modified as conditions change and new opportunities and/or threats emerge. 99  Marketing Management I The Marketing Plan KEY QUESTIONS IN THE STRATEGIC MARKETING PLANNING PROCESS Key Questions Steps in the process Where are we now? Situation analysis Where do we want to Defining goals and objectives be in the future? How are we going to Strategies and programs’ get there? development  Marketing Management I THE STRATEGIC MARKETING PLANNING PROCESS SITUATION ANALYSIS External Analysis Internal Analysis – Market – Customers – Competitors – Company’s Portfolio – Sector – Finances – Macro environment – Marketing – Human Resources DIAGNOSIS – Opportunities – Strengths – Threats – Weaknesses SWOT Analysis DEFINING GOALS AND OBJECTIVES SELECTING MARKETING STRATEGIES DEVELOPING ACTION PROGRAMS IMPLEMENTATION – Timing – Budgeting CONTROL – Monitoring results – Analysing gaps – Corrective actions  Marketing Management I DEFINING GOALS AND OBJECTIVES Goals indicate what a company or a business unit want to achieve. Goals and objectives can be very diverse: growth of sales, growth of income, attainment of a certain market share, entering new markets, improvement of the image, etc. Whatever the objectives are: Should be quantified whenever possible (control becomes easier) They have to refer to a certain period of time, Must be realistic (should arise from analysis, not from wishful thinking) Must be consistent (it is not always possible to maximize sales and profits simultaneously) SELECTING MARKETING STRATEGIES Strategy is the way that will lead us to the objective  Marketing Management I PORTER’S GENERIC STRATEGIES Competitive Advantage Market Power Productivity (costs) Total Market Differentiation Cost Leadership Segment Focus Differentiation. Businesses can stand out from their competitors by developing a differentiation strategy (strong brand awareness and reputation). (ex. Rolex) Cost leadership. This strategy involves the organization aiming to be the lowest cost producer and/or distributor within their industry (ex. Ryanair) Focus. Under a focus strategy a business focuses its effort on one particular market segment (ex. Air Berlin) Don’t be "stuck in the middle".  Marketing Management I ANSOFF’s MATRIX Current Products New Products Product Development Current Market penetration strategy Markets strategy New Market development Diversification Markets strategy strategy Ansoff matrix Strategic marketing planning tool that links a firm's marketing strategy with its general strategic direction and presents four alternative growth strategies as a table (matrix). These strategies are seeking growth: (1) Market Penetration: by pushing existing products in their current market segments. (2) Market Development: by developing new markets for the existing products. (3) Product Development: by developing new products for the existing markets. (4) Diversification: by developing new products for new markets. Named after its inventor the father of strategic management, Igor Ansoff and first published in 1957 in Harvard Business Review  Marketing Management I Kotler’s competitive strategies Market Leader strategy The Leader is the firm with the highest market share. Leader faces three challenges: 1. Expand total market demand (more usage, new product uses or new users) 2. Defend market share (innovation, intensive distribution, price wars…) 3. Expand market share (keeping in mind to avoid legal excessive market dominance) Market Challenger strategy The Challenger is the firm aiming to become the market leader. To achieve this goal has to increase its market share through aggressive strategies. Increase in sales can be achieved through: a) Direct attack to the leader (high risk) b) Gaining market share to similar or smaller size firms (lower risk) If direct attack, the challenger can implement: - Frontal attack: using the same competitive strategies used by the leader (extremely risky) - Encirclement attack or guerrilla attack: focusing on the leader weaknesses (financial problems, out of date products, geographical areas or market segments where the leader enjoys less dominant position…). Less risky.  Marketing Management I Kotler’s competitive strategies Market Follower strategy Many companies prefer to follow rather than challenge the market leader. The Follower is a firm with a limited market share that do not challenge the market leader: it co-exists with the leader and adapt its strategies according to competitors strategies. Market follower is a firm that chooses ‘not to rock the boat’, fearing that it stands to lose more than it might gain. It is a strategy of product imitation. The innovator (leader) bears the expense of developing new products, bringing in the technology, breaking entry barriers and educating the market. The follower can achieve high profits because it did not bear any innovation expenses, can learn from the leader’s experience and copy or improve on the leader’s products and programs usually with much less investment. The follower should keep its manufacturing costs low, including product quality and services high. Market Niche strategy Concentrating all marketingg efforts on a small but specific and well defined market segment. By identifying needs, wants, and requirements that are being addressed poorly or not at all by other firms, and developing and delivering goods or services to satisfy them. As a strategy, niche marketing is aimed at being ‘a big fish in a small pond instead of being a small fish in a big pond’.