Marketing Strategies and Market Analysis

MARKETING 4.1 THE ROLE OF MARKETING **MARKET VS. PRODUCT** - **Market-led** -- consumer is put at the center - If you want to know what they want, you must do market research and analysis - Demand is what determines the supply - **Product-led** -- consumers have no idea what they w...

MARKETING 4.1 THE ROLE OF MARKETING **MARKET VS. PRODUCT** - **Market-led** -- consumer is put at the center - If you want to know what they want, you must do market research and analysis - Demand is what determines the supply - **Product-led** -- consumers have no idea what they want, so the companies should help them figure it out - Quality should win over quantity -- efficient production of high-quality goods reigns supreme page5image12658848 **MARKET ORIENTATION** **BENEFITS** - Due to market research, firms have increased confidence that their products will sell, which reduces failure - Access to market information means that firms can anticipate and respond quickly to changes in the market - As a result of regular feedback from consumers due to market research, firms are in a strong position to meet the challenges of new competitors entering the market **LIMITATIONS** - Conducting market research can be costly and therefore weigh heavily on a firm's budget - Due to frequently changing consumer tastes, firms may find it difficult to meet every consumer's needs with their available resources - Uncertainty about the future could have a negative influence on the market-planning strategy **PRODUCTION ORIENTATION** **BENEFITS** - It is associated with the production of goods that are of premium quality and often, highly luxurious - It can succeed in industries where the speed of change is slow and the firm has already built a good reputation - It has control over its activities, with a strong belief that consumers will purchase its products - Since the firm ignores the needs of the market, it takes risks that may lead to eventual business failure or closure - Spending money on research and development without considering consumer needs could be costly and not yield any promising results **MARKET SHARE** - **Market share** -- the percentage of sales in the total market sold by one business - **Measured by volume** -- measures the number of goods bought by consumers - Quantitative by nature, it focuses on the number of units sold by business - **Measured by value** -- measures the amount spent by consumers on the total number of goods sold by the business - Also quantitative, but focuses on the revenues in monetary terms **Market size** -- the total sales made by all companies in a given market **MARKET GROWTH** - **Market growth** -- the increase in the number of consumers who buy a good or a service - The percentage change in the market size over a given period of time **How to calculate market growth?** - Subtract the market size in the second year from the market size of the first year - Divide this difference by the market size in the first year FORMULA **IMPORTANCE OF MARKET SHARE AND MARKET LEADERSHIP** - Provide useful insights into the firm's revenues, growth, and profit margins - Economies at scale to thank for that (the bigger the firm, the better it can serve numerous customers) - Market share can be a driving force -- there is a compounding effect present - The larger the firm, the more efficiently it produces, the more competitive it becomes, the greater the market share it captures - When calculating market share, careful thought is needed! - Different results of market share may appear due to different measuring approaches - Changes in the time period and market will produce different results - The types of products included also the calculation of market share - Having the highest market share indicates that a firm is a market leader - It uses its dominance in the market to influence others to follow it **BENEFITS OF BEING A MARKET LEADER** - The market leader often has first-mover advantage - Enjoys increased sales revenue that translates to higher profits - The business may be able to reap economies of scale - Market leader may also be the brand leader - The leading brand is another promotional tool to push other brands - Able to attract the highest quality development partners - Some caveats are in order - Often a target for regulatory oversight - May not be the most profitable investment (no room to grow!!!) 4.2. - **Marketing plan -- a** detailed document about the marketing strategies that are developed in order to achieve an organization's marketing objectives - Based on market research, providing information on the issue such as: - the market size (which may be measured in terms of sales volume or sales value) - the likely market growth - the segments in the market and their size and growth - the positioning of competitors according to customers - customers' views of the brand - information on the level of sales, through different distribution channels and trends in distribution - Develop a marketing plan considering all of the above - Track progress and check if changes need to be made to the plan by doing market research - **Executive summary** -- key point of the plan - **Market analysis** -- details of the target market and the competition - **Marketing objectives** -- increasing market share, maintaining market growth - **Marketing strategy** -- How these objectives will be achieved? - **Resource required** - **Marketing budget** - **Marketing activities** -- What will be done, by when, who is responsible and how much money will be spent on each activity **THE ROLE OF MARKETING PLANNING** **Marketing planning -** A systematic process that involves undertaking a marketing audit (including a market analysis), setting marketing objectives, devising marketing strategies, and setting out how these would be implemented  - **The marketing plan should:** - Be detailed and specific - Set out various stages and elements of the plan - Have clear targets, achieved by designed people within a given timeframe - Each activity should have a clear timeline so progress can be monitored -...and WILL be used by other functions of the business Marketing planning **BENEFITS** **LIMITATIONS** ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------ Helps a firm in identifying potential problems and seeking solutions to them Marketing plans may become outdated if organizations are not quick to consider changes in market conditions Setting SMART objectives improves the chances of success of a firm's marketing strategy The process may consume considerable resources in terms of time, expertise, and money in designing the plans Sharing the marketing plan with other business departments improves coordination and provides the whole organization with a clearer picture or sense of where it is heading Failure to prioritize marketing objectives may make it difficult for firms to tell whether they are meeting them Devising a marketing budget ensures that resources are not wasted on unprofitable activities A clearly spelled-out plan could improve employees motivation and inspire confidence in them about the organization's future - **Marketing mix --** is the combination of elements that influence a customer's decision on whether or not to buy a product - **Product --** specification, and features - **Price --** charged to the customer for the product - **Promotion --** communications about the product such as advertising - **Place --** the distribution of the product and how ownership is transferred from the producer to the consumer - Is the product sold directly from the producer to the consumer or via an intermediary such as a retailer? **A MARKETING MIX** **High/Advanced marketing mix** - **People --** involved in the sales process such as shop assistants - **Process --** involved in consumers buying the product - **Physical environment --** the environment of the stores or offices where customers buy the products - Anything that customers see when they come into contact with the business - Not all of the four Ps have the same degree of significance in every marketing mix **Coordinated marketing mix** - Interrelated elements fit together into a coherent and integrated plan - Messages that are being sent are not conflicting and do not confuse the customer  **HOW DOES IT WORK IN REAL LIFE?** - If an expensive, well-known brand of perfume was for sale on a *market stall*, would you be suspicious? - If the most exclusive shop in your town sold expensive gifts and wrapped them in *newspaper*, would you be surprised? - If a cheap range of children's clothing was advertised in a *glossy color magazine* aimed at professional women, would this advertisement lead to many sales? - Poorly integrated and inappropriate marketing-mix decisions result in failure! Look at slide 17! **MARKETING SEGMENTATION** - **Market segment -- a** sub-group of a market made up of consumers with similar characteristics, tastes, and preferences - Individuals in a particular segment respond to trends and market forces in similar ways and require similar products - **Market segmentation --** the process of dividing the market into smaller or distinct groups of consumers in an effort to specifically meet their desired needs and wants **Examples** - Market for newspapers - politics / financial news/celebrity gossip / obituaries - Marketing for clothing -- males/ female/ Youth/ Children - Market for chocolate -- snacking/ sharing/ gifts **Types of Market Segmentation** - Divides the market into different geographical sectors and may consider factors including: - Regions in a country where consumers reside -- urban vs. rural - Climatic conditions -- hot vs. cold - Population density -- dense vs. spread - Age, gender, ethnicity, marital status, family size, religion, language - Divides the market based on occupation, income, and class: - High class - Upper middle class - Lower middle class - Skilled working class - Divides the market based on people's lifestyle choices or personality characteristics including: - **Lifestyle --** active vs. passive - **Personality** - **Values --** left vs. right - **Attitude --** voters vs. passive **PRODUCT POSITIONING** - **Positioning --** how consumers define or perceive a product relative to competing brands - **Position map --** a visual representation of identified features of a product considered to be important to consumers - As established by market research - Helps a business to identify where its products fit in the market relative to its rivals **TARGETING** - Once the market segments have been identified then businesses must decide which of these segments are going to become target markets - **Targeting --** the process of marketing to a specific market segment - **Target market --** a group of consumers with common needs or wants that a business decides to serve or sell to **TARGET MARKET vs.** **SEGMENTS** - Target markets are the segments of the market that the business is going to aim its product at - No need to serve all the segments, focus on the ones that the company is particularly good at serving Targeting = effective segmentation - For a market segment to be attractive for a business to target, it must be: - measurable, so the business can identify it exists and measure its size to decide on the likely earnings - accessible, so the business has the resources to offer what would be required and be able to get its products to the customers - profitable, so the business can meet customer needs and its own needs at the same time - If properly done, business provide exactly - The right product - In the right place - At the right time - At the right price **MASS vs. NICHE MARKETS** - **Niche marketing --** occurs when a firm targets a relatively small market segment of the whole market -- that is, particular group with similar customer needs and wants - **Mass marketing --** targets the market as a whole  **Unique selling proposition/point USP** - **Unique selling proposition/ point --** something about your business or product which is perceived by your customer as different from competitors - **What is so distinctive about your particular product/ service?** - Companies can differentiate their offering and may be able to charge a higher price or off value for money in the eyes of its customer **PRODUCT DIFFERENTATION** - Occurs when your product is perceived as being clearly different from competitors\' products in some way - It may have different features or specifications than rival products - Lit may occur through different elements of the marketing mix - The product may be distributed differently than that of competitors -- for example, you may be able to buy directly from the producer online rather than through retailers. - The product may be differentiated by its brand and its brand values; it may be positioned as more modern or more environmentally friendly. Brands will have different values and associations - The pricing structure may be different than it is for rivals; for example, customers may be able to pay in instalments or to part- exchange an existing product - The delivery options may be different; for example, one business may offer 24-hour delivery which could differentiate it from others page36image12643712  4.3. - **Why is it important to accurately predict the future?** - Reduces uncertainty - Helps manage inventory and cash flow - Ensures better planning for growth - Complex process influenced by a number of external factors - **Sales forecasting-** the process of predicting future sales level (\$ and volume) and trends - **Sales forecast --** a key element of the marketing plan **TIME SERIES ANALYSIS** - **Time series analysis --** quantitative sales forecasting method that predicts future sales levels from past sales data - Relies on time series, e.g. sales data the businesses have gathered over a period of time - **Certain aspects in time series data need to be identified:** - **Trend --** a visible pattern noted after inputting the past sales data - **Seasonal fluctuations --** changes in demand because of the varying seasons in the year - **Cyclical fluctuations --** variations tied to the business cycle in an economy can extend for more than one year - **Random fluctuations** -- notable changes that are unpredictable and can occur at any time **EXTRAPOLATION** - **Extrapolation --** basing future predictions on past results - **Moving averages --** allows the identification of underlying factors that are expected to influence future sales (Trend/ Seasonal variations/ Cyclical variations / Random variations) - \'Smooth out\' the fluctuations in time-series data and allows managers to identify the trend more easily - More complex than simple graphical extrapolations **CORRELATIONS** - Spotting things between variables - Future market sales may be estimated using correlation rather than extrapolation - **Correlation --** occurs when there appears to be a link between two or more factors/variables e.g. investment in advertising and sales increase - Correlation analysis examines data to see if any relationship appears to exist between different variables identifies the link, not the cause - 2 types of correlation **Positive and negative** - **Market research can be used to identify likely future trends** depends on the types of sources, size and samples, etc. - **Test-marketing --** a process in which a new product offered for a tryout to a representative selection of consumers - **Pros:** small-scale and reliable - **Cons:** visible to competitors and may give misleading results **OTHER WAYS OF ESTIMATING FUTURE SALES** - Wisdom and experience may give you the edge - Qualitative sales forecasting -- basing estimates on the views and opinions of industry experts aka. \'educated guess\' - May be completely non-scientific -- based on a \'hunch\' - It may cling to scientific methods just in case **Delphi technique** - Gathering a group of experts and asking them (individually) for their views - After analyzing the views and extracting 'key areas', there's a new round of circulation - Keep incorporating the feedback until a consensus is reached **RELIABILITY OF SALES FORECASTS** - Likely to be correct when: - a trend has been extrapolated and the market conditions have continued as before - a test market is used and is truly representative of the target population - the forecast is made by experts (such as your own sales forces) and they have good insight into the market and future trends - the firm is forecasting for the near future (one month vs. five years) **POTENTIAL BENEFITS OF SALES FORECASTING** - **The operations department** would know how many units to produce what quantity of materials to order and the appropriate level of stock to hold - **The marketing department** would be aware of how many products to distribute and whether changes to the existing marketing mix were needed to increase sales - Human resources workforce plan would be more accurate, leading to the appropriate number of workers and the most appropriate employment contracts -- permanent or temporary - **Finance** could plan cash flows with much greater accuracy and make accurate profit forecasts - **Strategic decision-making** -- such as developing new products or entering new markets -- would become much better informed **4.4.** - **Market research --** the process of collecting, analyzing, interpreting and reporting data related to a particular market - **This includes:** consumers, competitors, and the industry as a whole - Useful for business decision-making **PURPOSE OF MARKET RESEARCH** - To identify consumer needs and wants - Aims to understand consumers\' satisfaction levels and patterns in purchase behavior - E.g. who buys the company\'s products? Is there a trend to be seen (and acted upon)? **PURPOSE OF MARKET RESEARCH** - To identify consumer needs and wants - Aims to understand consumers' satisfaction levels and patterns in purchase behavior - e.g., who buys the company's product? Is there a trend to be seen (and acted upon)? - To assist a business in predicting what is likely to happen in the future\ e.g.,good times vs.bad times,prepareforchangesinspendingpatterns - To reduce the risk of product failure (especially new products) - To measure the effectiveness of a marketing strategy E.g., is the company implementing its activities properly? - To provide current or the latest information regarding activity in the market e.g. R&D budgets maintain the company's edge ž **MARKET RESEARCH METHODS** - Primary market research - Field research,done by the company or a specialized agency - Slower, customized, andreliable - Expensive - Done after secondary research has been conducted first (bit confusing,no) - A gap-filling measure if secondary research doesn't generate sufficient data - Secondary market research - Desk research, done by the company - Quicker, generic, often done for other purposes, not always reliable - Done first! - Market research is not the same as research and development! - Market research--focuses on customers and identifying their needs and wants - Research and development(R&D) uses scientific techniques to develop new products or processes - Customer and consumer needs - What people must have to survive - E.g. water and food - Customer and consumer wants - What people desire but is not essential - E.g. Mlinar coffee over anything else **Surveys** - questionnaires sent out to a particular target audience to enable the researcher to gather useful information - Containvarioustypesofquestions: yes/no,multiple choice, open-ended, gradation(Likert) - Administered by mail, phone, online, in person page12image12817488 **Interviews** - A conversation during which the interviewer asks the interviewee questions in order to gain information  **Focus groups** - A small group of people brought together to discuss a specific product or idea - The market' in a nutshell' - page14image13059504 **Observations** - carefully watching and trying to understand certain things or people's behavior  **SECONDARY MARKET** - **Academic journals** -- Publication of scholarly articles written by experts (professors, authors, academicians) - Written for the sole purpose of providing and distributing knowledge (not a money-making opportunity) - **Media articles** - Printed publications containing news, feature articles, advertisements,and correspondence - Newspapers and magazines - **Government publications** - Articles produced by the government on a wide variety of topics - **Market analyses** - Commercial publications or market intelligence reports that gather data about particular markets - **Online** **ETHICAL CONSIDERATIONS OF MARKET RESEARCH** - Researchers should have the permission of the people who they will be studying to conduct research. Is this possible with all observational methods? - Data collection methods should not cause physical or emotional harm to the respondents. This requires being careful how the researcher words sensitive or difficult questions during interviews. Some topics are always sensitive -- for example, research into how patients were treated by staff in hospital. - Objectivity versus subjectivity in research is another important consideration. Researchers should be sure their own personal biases and opinions do not get in the way of interpreting research results. This is why the source of all data should be carefully checked and verified, if possible. - Many types of research, such as surveys or observations, should be conducted on the assumption that findings are kept anonymous. Respondents should be told whether research results will be anonymous or not -- but how can they check on this with online surveys, for example? - Researchers should not take advantage of easy-to-access groups of people (such as children at school gates) simply because they are easy to access. Should parents always be present when people under the age of 18 are subjects of market research? **QUALITATIVE VS. QUANTITATIVE DATA** - **Qualitative research --** observing what people do and say (consumer opinions, attitudes, and beliefs) - **Quantitative research --** measuring and counting objects, occurrences, people, and their behavior (measurable numerical data) page29image12726048 **SAMPLE SIZE** - **Primary data collection --** expensive and time-consuming - **Semantic distinctions** - In normal vernacular: the population - Region/country / world - \'all people between 21-25 y.o. still in full-time education - In statistics/marketing/research: populations - The total number of people under study, as defined by the objectives of research - All people between 21-25 y.o. still in full-time education - **Sample --** a group of people taking part in a survey selected to be representatives of the target market overall **SAMPLING METHODS** - Generally speaking, the larger the sample, the more confident the prediction and vice versa - **Sampling** -- the process of selecting an appropriate sample - What prevents someone from always having a larger sample? Time and money - **Sampling error --** errors in research caused by using a sample for data collection rather than the entire populations **QUOTA SAMPLING** - Gathering data from a mutually exclusing group chosen out of a specific sub-group - Share similar characteristics - Often non-scientific and subject to bias  **RANDOM SAMPLING** - Each member of the target population ha san equal chance of being included in the sample - To select a random sample the following are needed: - A list of all of the people in the target population - Sequential numbers given to each member of this population - A list of random numbers generated by computer **CONVENIENCE SAMPLING** - A sampling technique based on easy access and proximity page34image12983616 **STRATIFIED SAMPLING** - The target population is made up of many different groups who are subdivided into segments or strata that share similar characteristics - Divide the population into strata (layers) and then sample randomly - Surveying a secondary school  **CLUSTER SAMPLING** - An appropriate method to use when the population is geographically dispersed - Select a group from each region (cluster) and then take a random sample from the clusters page36image12644128 **SNOWBALLING** - Sampling that involves surveying the first group or individual who then suggests other groups or individuals who could participate, and so on - Members of the initial group use their contacts to refer to other people that they know, hence the snowball effect - Useful when conducting sensitive research **IMPORTANCE OF PROPERLY COLLECTED DATA** - Benefits of properly collected data include: - the ability of research to answer accurately the research questions posed - the ability to repeat and validate a particular study where needed - increased accuracy of findings resulting in efficient use of resources - good opportunities for other researchers to pursue areas needing further investigation. **RESULTS FROM DANA COLLECTION**  **RESULTS FROM DANA COLLECTION** page41image13050816 **THE MARKETING MIX** - **Marketing mix -** Describes all the marketing activities involved in influencing a customer's decision to purchase a product - The **price** charged to the customer for the product - The **product** itself, e.g. its specifications and features - The **promotion** of the product, e.g. advertising - The **place** -- how is ownership transferred - The **people** involved in the sales process - The **process** involved in customers buying the product - The **physical** evidence, e.g. office decor or website design **PRODUCT** - You can sell any product to consumers once, but to establish loyalty and good customer relationships, the product must be right - If it doesn't meet customer expectations regarding quality, durability, performance, appearance\... - No matter how low the price or how expensive the advertisement, it will not sell successfully in the long run - **Product** - the end result of the production process sold on the market to satisfy a customer need - Types of products - Single-use, e.g. food - Consumer durable - manufactured products that can be reused and are expected to have a reasonably long life, e.g. cars **PRODUCT LIFE CYCLE** - **Product life cycle** - Shows the course that a product takes from its development and launch to its decline and withdrawal in the market - The stages - Research and development - Introduction (launch) - Growth - Maturity and saturation - Decline **THE RESEARCH AND DEVELOPMENT STAGE** - **Generating ideas** - Brainstorming - **Screening ideas** - What ideas should be left out\_ - **Creating a prototype** - A first or trial form of a product - **Carrying out test marketing** - Trying out product samples with small but representative markets - **Commercialization** - Full product launch -  **The basic idea** of the product is developed and tested - **Expensive stage** -- no income is being generated - Mock-ups of designs, new recipes, model improvements - **The length varies depending on the product** - 12-15 yrs for pharmaceuticals - 2-3 months for a greeting card - 24hrs for newspapers/webpages content **THE INTRODUCTION (LAUNCH) STAGE** - The stage when the product enters the market and is put for sale - Many product ideas never reach this stage - Promotional costs are high - Done to increase product awareness - Most likely it's still selling at a loss - Challenging to - Convince stores to carry to product - Entice distributors to stock the product - Make customers give the product a try **THE GROWTH STAGE** - Most crucial stage for marketers - Less resistance to the product by those involved in the supply chaing - The customers have gotten used to it - Revenues begin to outweigh costs - NB: The phenomenon where there is a product being removed from market before it has recovered its cost is called a *bust* page14image69997248 **THE MATURITY AND SATURATION STAGE** - The growth of sales slows down - The product has been around for a while can last for years - Competition may have launched an improved offering - No opportunities for rapid expansion are available - What's next? - Should promotional costs be increased? - A new model developed? - Perhaps a new market could be targeted? **THE DECLINE STAGE** - Eventually, sales are likely to fall - Forced to cut price to maintain sales - Resistance to product increases - Distributors would like to drop it - Customers have found better alternatives - Stores would prefer liberating shelf space for other products **USING THE PRODUCT LIFE CYCLE** - Once you know where your product is in its life cycle, adjust the product mix - What are the main factors that determine the length of the life cycle? - What might push them into decline? page17image12808176 EXTENSION STRATEGIES - **Extension strategy** -- Occurs when marketing activities are changed to prevent sales from failing - Using an extension strategy to increase sales of an existing product in an existing market is an example of market penetration in the Ansoff matrix! EVALUATION OF EXTENSION STRATEGIES  **BOSTON CONSULTING GROUP (BCG) MATRIX** - A method of analyzing the product portfolio of a business in terms of market share and market growth - Evaluates the products making up a business - Imagine being a manager: how do you decide which products to keep and which to get rid of? - How do you know that your company's portfolio is adequate? - How do you know when it's time do something new? **THE GROWTH-SHARE MATRIX** - Zakon & Henderson cca 1970 came up and popularized the concept in *The Product Portfolio* - A portfolio management framework that helps companies decide *how* to prioritize their different businesses **CASH COW** - Products (or parts of the business) that enjoy a large market share with low growth prospects - A product or business that continues making more money than you put into it for a long time - Well-established product in a mature market - Not much room left to grow - Sales are high relative to the market - Promotional costs are low due to strong consumer awareness - Maintain this business for as long as possible - Use the cash generated from these products to prop up other products **STAR** - Products (or parts of the business) that enjoy a large market share that is growing rapidly - Highly successful products for the business - Expensive to maintain in terms of marketing - Require more promotion and further investments in distribution - Expected to become the cash cow of the future **QUESTION MARK** - Products that have a small market share in a growing market - Consume resources but generate little return, at least in the short term - If it's a newly launched product, it will need heave promotion - The product is vulnerable and its future is generally uncertain - If sales do not improve, decisions must be made - The potential is there, but the strategy may need to change **DOG** Products with low market share selling in a slow-growing market - Have little to offer in terms of existing sales, cash flow or future prospects - May need to be withdrawn, replaced or entirely liquidated - Small chances that they may be revived through extension strategies **PRODUCT EVOLUTION THROUGH THE BCG LENS** **BCG AND STRATEGIC ANALYSIS** - **Holding** - continuing support for star products so that they can maintain their good market position - work may be needed to 'freshen' the product in the eyes of the consumers so that high sales growth can be sustained - **Building** -- supporting problem child products with additional advertising orf urther distribution outlets - **Harvesting** - taking the positive cash flow from established products and investing in other products in the portfolio - **Divesting** - identifying the worst-performing dogs and stopping the production and supply of these - this decision shouldn't be taken lightly -- involves issues such as layoffs, spare capacities, etc. **THE IMPACT OF PPA ON DECISION-MAKING** - When a business has too many dogs, it may have insufficient new products to keep it going in the future - Invest in new products - If there are lots of cash cows, it may forget to think about the future - Cash is king - Cashcowproductsmaydominatetheportfolioandpushoutthepotentialnewstars - If too many question marks appear, the business may be quite vulnerable - Morefundsareneededforprotectivemarketing - Thiswillinevitablydrainthefirm'sresources STRATEGIC DECISION-MAKING **EVALUATIONS OF THE MATRIX AS A DECISION-MAKING TOOL** The BCG matrix is relevant when: - analyzing the performance and current position of existing products - planning action to be taken with existing products - planning the introduction of new products - It can also have a limited impact in a number of situations - Of little use in predicting future success or failure - Cannot on its own tell a manager what will happen next with any product -- only research can do that - It is a planning tool and sometimes it simplifies a complex set of factors into a bare-bones model - Assumes that higher rates of profit are directly related to higher market sharess **THE VALUE OF THE PRODUCT LIFE CYCLE MODEL** - Highlights the fact that marketing activities have to be adjusted at different stages in the development of a product - The shape may vary considerably between products - It's still just a model with its limitations - Often, only clear in retrospect what stage a product was in: - A slight dip might have foretold a precipitous fall - A decline might indeed have been a small dip - Only traces the sales of one product at a time - Most companies operate with portfolios PRODUCT LIFE CYCLE VS PRODUCT PORFTOLIO VS MARKETING MIX  PRODUCT LIFE CYCLE VS INVESTMENT, PROFITS & CASH FLOW page45image13591072 **BRANDING** - **Brand** -- A name, symbol, sign or design that differentiates a firm's product from that of its competitors - **Branding** -- The process of distinguishing one firm's product from another - A good brand will: - have clear values that position it relative to competitors - connect your target prospects emotionally because they will identify with and want to be associated with the brand values - motivate people to buy and become loyal **ASPECTS OF BRANDING** - Brand awareness - Brand development - Brand loyalty - Brand value **BRAND AWARENESS** - Brand awareness -- The ability of consumers to recognize the existence and a vailability of a firm's good or service - Crucial when promoting related products - Theproductwiththehighestbrandawarenesswillsellmore - A major step in trying to capture a higher market share - Strong positive correlation between brand awareness and sales - A strong indicator of market leadership **BRAND DEVELOPMENT** - The plan to improve or strengthen the image of a product in the market - Involves building the brand identity and values as well as communicating these to customers - Invest inpromotional campaigns - Advertize to persuade the consumers - Offer free samples/tryouts **BRAND LOYALTY** - Measured by the extent to which customers return to buy a particular brand and the extent to which they prefer this over rivals' - If people know of the brand awareness is high - If people repeatedly buy the brand loyalty is high - **Brand ambassadors** - Consumers who will market a particular brand by talking positively about it or consuming it visibly - Benefits of brand loyalty: - makes customers less price sensitive - higher prices can be charged - encouragesrepeatcustomersandpreventscustomersfromswitchingtorivalbrands - creates a customer base that is likely to recommend products that they like - increases the chances of success when launching new products under the same brand name - increases the value of the brand **BRAND VALUE** - How much is a brand worth in terms of its reputation, potential income, and market value - The extra money a business can make from its products because of its brand name - Higher value brands are regarded as higher assets to business - **Brand name** -- Expression of a brand's personality\ - What makes you buy that particular product? **Goodwill** -- Monetary value that arises from brand awareness **THE IMPORTANCE OF BRANDING** - One of the most important tasks of marketers - For start-ups - Gives a clear image with which they can associate the business - Brand should complement the market and meet expectations - For established businesses - Use premium prices because of the image of the brand - Customers associate it with premium quality - Customers judge products based on the way they are presented to them - Develop personal identification and emotional connection - The key is to leave a positive impression and ensure repeat customes **PRICE** - The only "P" that generates revenue -- all the others generate costs - The money-maker! - Refers to the money customers pay or give up for having or using a good or service **COST-PLUS PRICING** - **Cost-plus pricing** - adding mark-up to the average cost of producing a product - **Mark-up** - percentage of the profit a firm wishes to gain for every product that it sells - **Average cost** - the cost per unit of the total cost divided by the number of products produced +-----------------------------------+-----------------------------------+ | **Advantages** | **Disadvantages** | +===================================+===================================+ | - It is a simple and quick | - It fails to consider market | | method of calculating the | needs or customer value when | | selling price of a product. | setting prices. | | | | | - It is a good way to ensure | - Since competitors' prices are | | that a business covers its | not considered, a firm could | | costs and makes a product. | lose sales if it sets a | | | selling price that is higher | | | than its competitors'. | +-----------------------------------+-----------------------------------+ **PENETRATION PRICING** **Penetration pricing** - Setting a low initial price for a product to attract a large number of customers quickly and gain a high market share\ Often used in mass marketing\ Once the firm starts gaining market share, it will slowly start increasing its price +-----------------------------------+-----------------------------------+ | **Advantages** | **Disadvantages** | +===================================+===================================+ | - As the prices are low, | - Gaining high sales volume | | consumers are encouraged to | does not necessarily mean | | buy the products and this | achieving high profits, | | leads to high sales volume | especially where the prices | | and market share for the | are too low. | | business | | | | - Customers may perceive the | | - The high sales volume can | product to be of low quality | | lead to decreases in the cost | if the price is kept too low. | | of production and increase in | | | stock turnover | - Penetration pricing is only | | | suitable for use in markets | | | that are very price | | | sensitive. Therefore, as | | | businesses increase their | | | prices over time they risk | | | losing potential customers, | | | who may seek lower-priced | | | products from rival firms. | +-----------------------------------+-----------------------------------+ **THE LOSS LEADER** - **Loss leader** - charging a low price for a product, usually below its average cost, to attract consumers to buy other higher-priced products - Sometimes charging a low price for one product can be more than compensated when charging a higher price of other products +-----------------------------------+-----------------------------------+ | **Advantages** | **Disadvantages** | +===================================+===================================+ | - Businesses selling a large | Firms using this strategy may | | number of frequently | be accused by competitors of | | purchased products may | undercutting them by using unfair | | attract many customers and | business practices. | | benefit from higher overall | | | profits. | | | | | | - Businesses may use loss | | | leaders as a promotional | | | strategy to encourage | | | consumers to switch to their | | | brand instead of buying the | | | competitors' brands. | | +-----------------------------------+-----------------------------------+ **PREDATORY PRICING** - **Predatory pricing** - when a firm deliberately sets a very low price on its good or service to drive its competitors out of the market - Your prices are so low that nobody wants to compete anymore -- businesses leave the market +-----------------------------------+-----------------------------------+ | **Advantages** | **Disadvantages** | +===================================+===================================+ | - The firm can gain a dominant | - Predatory pricing is a form | | position in the market using | of anti- competitive behavior | | this strategy. | and is illegal in many | | | countries because it is used | | - Competition is minimized, as | to restrict competition. | | financially weaker | | | competitors that are unable | - This strategy may work in the | | to bear the loss will be | short term but it will be | | driven out of the market | difficult to sustain in the | | | long term as new competitors | | - New entrantes are deterred | may enter the market. | | from entering the market, | | | cutting out any potential | | | competition | | +-----------------------------------+-----------------------------------+ **PRICE SKIMMING** - **Price skimming** -- strategy where firms set high prices when introducing new products to the market for a limited period in order to gain short-term profits, while later reducing the price +-----------------------------------+-----------------------------------+ | **Advantages** | **Disadvantages** | +===================================+===================================+ | - Consumers associate the high | The high prices may discourage | | price with a high-value or | some consumers from buying the | | high-quality product and an | product. | | enhanced brand image. | | | | | | - Firms are able to obtain | | | initial high revenues that | | | help in recovering their | | | research and development | | | costs. | | +-----------------------------------+-----------------------------------+ **PREMIUM PRICING** **Premium pricing** - a strategy where a firm sets a high price for a high-quality product +-----------------------------------+-----------------------------------+ | **Advantages** | **Disadvantages** | +===================================+===================================+ | - As customers are convinced of | - The firm misses out on price | | the high quality of the | conscious consumers who find | | product they do not try to | the price too high. | | buy it for less. | | | | - High marketing costs are | | - When a firm can set a high | incurred as a firm will need | | price for its product but | to create brand awareness of | | still manage to sell it, | its product to convince | | there is the potential to | customers that its high price | | maximize its profit margin. | equates to a high-quality | | | product. | | - A high price of a product can | | | increase the brand value of a | - Premium pricing cannot be | | firm. | applied to all products, | | | especially those that face | | - Premium-priced products cam | stiff competition. | | gain a high status in a | | | society and become status | | | symbols. | | +-----------------------------------+-----------------------------------+ **DYNAMIC PRICING** ** Dynamic pricing** - where firms charge different prices for their products depending on which customers are buying them or when the products sell\ Prices are changed to reflect changing demand conditions +-----------------------------------+-----------------------------------+ | **Advantages** | **Disadvantages** | +===================================+===================================+ | - Potential for high sales and | - Can lead to customer | | profits | dissatisfaction as some | | | customers pay more for same | | - A firm can beat its | product. | | competition easily by | | | | - It could lead to loss of | | | sales if customers know where | | | to look for. | | - Gives the flexibility to | | | focus on other | - Some customers have figured | | | out how to beat the system, | | | ie changing prices. | | | | | - Helps with better stock | - Not applicable to all | | management, eg. providing | industries -- some firms do | | discounts for overstocked | prioritize customer | | items. | satisfaction. | | | | | | - Can lead to significant price | | | fluctuations in the market, | | | disadvantaging the firm | | | itself. | +-----------------------------------+-----------------------------------+ **COMPETITIVE PRICING** **Competitive pricing** - where a firm sets the price of its product relative to the competitors' prices - Common when consumers can make a direct comparison between different products +-----------------------------------+-----------------------------------+ | **Advantages** | **Disadvantages** | +===================================+===================================+ | - Can prevent a firm from | - The firm misses out on price | | losing customers and market | conscious consumers who find | | share to its competitors. | the price too high. | | With adequate intelligence on | | | the competition, it can | - High marketing costs are | | respond to its every move. | incurred as a firm will need | | | to create brand awareness of | | - Helps to keep a stable | its product to convince | | customer base. | customers that its high price | | | equates to a high-quality | | - It is a low-risk strategy as | product. | | the competitiors are usually | | | well-known players in the | | | market. | | | | | | - Can be used in combination | | | with other pricing | | | strategies. | | +-----------------------------------+-----------------------------------+ **CONTRIBUTION PRICING** - The idea behind this way of pricing is to offer flexibility when deciding how much to charge - Two conditions need to be fulfilled: - The price needs to be higher than variable costs - Sufficient quantity of products needs to be sold **Contribution per unit = selling price -- variable costs per unit** - Used to decide whether to accept an additional order\ - If P\>VC, then the additional customer would contribute to Fc and is worth taking on - Caveats - Businesses can not charge by contribution to everyone as it may not cover the fixed costs - Customers are encouraged to wait until the last minute **PRICE ELASTICITY OF DEMAND** ** Price elasticity of demand** - Measures the sensitivity of demand to a change in price, with all other factors unchanged - This way businesses can find out how much a change in price will affect the number of sales  **PRICE ELASTICITY OF DEMAND** - The availability of similar product - Time - The type of product - The proportion of income spent on the product - Demand for the brand versus demand for the product: page65image13121344 **PRICE DISCRIMINATION** - Happens when you charge different prices to different groups of consumers based on their preferences - For price discrimination to work, certain conditions must be satisfied: SLAJD 67 **Advantages** **Disadvantages** --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Time-based price discrimination can be of benefit to either consumers or producers. For example, phone companies charge high prices and so generate higher revenus, while during off-peak times consumers benefit from the lower prices charged Businesses need to be certain about the type of elasticity of demand of their consumers. For example, charging higher prices in a market with elastic demand could lead to lower sales revenues. If firms were to charge a lower price in the elastic market, they should definitely ensure that the extra cost of producing and selling more products does not exceed extra revenue. **PROMOTION** - The P' from the marketing mix concerned with communicating information about the firm's products/services to the consumers - The main aim of promotion is to obtain new customers or retain existing ones. - Some promotional objectives include: - creating awareness or informing consumers of a new or improved product in the market - convincing or persuading consumers to purchase a firm's products instead of its competitors' products - reminding consumers of the existence of a product in order to retain existing customers or gain new customers for a product - enhancing the brand image of the product as well as the corporate image of the business. **THREE FORMS OF PROMOTION** - Above-the-line, Below-the-line, Through-the-line **ABOVE-THE-LINE PROMOTION** - A paid form of communication that uses independent mass media to promote a firm's products - Reaches out to a wide target audience via tv, radio, newspapers, posters, billboards, cinema, and the internet - The control or responsibility for advertising is passed on to another organization - Form of ATL (advertising) include: - Informative - Persuasive - Reassuring **ADVERTISING** - **Informative** - provide information about features, price, or other specs - Increases consumers' awareness of a firm's product - Useful when introducing a new product to the market - **Persuasive** - aims to convince the customers to prefer one firm's product over another's - Persuades customers to think that they really need the product -- great for impulsive shoppers - **Reassuring** - focus is on existing customers, reminding them they've made the right decisions **BELOW-THE-LINE PROMOTION** - A form of communication where the business has direct control over promotional activities - Focuses promotional activities on consumers the business knows or who are interested in the products - Does not depend on the use of independent media - Forms of BTL include: - Direct marketing - Personal selling - Public relations - Sales promotions **DIRECT MARKETNG** - Ensures product is aimed directly at the consumers - It eliminates the use of intermediaries saves money along the way - Main disadvantage most consumers regard this information as junk\ Nobody pays attention to it **PERSONAL SELLING** - Involves the sale of a firm's product through personal contact - Makes use of sales representatives can be done face-to-face or over the phone - Commonly used when selling expensive or technically complex products customers receive reassurance and personal attention - Main disadvantage expensive to retain a team of sales representatives **PUBLIC RELATIONS** - Promotional activities aimed at enhancing the image of the business and its products - Includes the use of publicity and sponsorships - Press conferences - Presentations - Product showcases - Social responsibility projects **SALES PROMOTIONS** - Short-term incentives provided by a business with the aim of increasing or boosting sales - **Money-off coupons** - discounts provided when the product is purchased - **Point-of-sale displays** - draw attention and encourage impulse buying Used in supermarkets around checkout counters - **Free offers or free gifts** - bundling products to make them more attractive - **Competitions** - enter a draw or a shuffle - **Buy one, get one free (BOGOF)** - attract new customers and help eliminate excess stock **THROUGH-THE-LINE PROMOTION** - An integrated approach which uses a combination of both ATL and BTL - A holistic view of the market and reach out to the customers in as many ways as possible - This leads to improved brand awareness and visibility - Forms of TTL include:\ 360-degree marketing Digital marketing **360 DEGREE MARKETING** - Marketing carried out by integrating ATL and BTL to gain maximum advantage **DIGITAL MARKETING** - Involves offering ATL and BTL benefits while at the same time acting as a BTL communication to the consumer - Uses cookie-based targeting - **Cookie** -- a piece of data used to target small audiences based on their web browser behavior - Allows display of advertisements throughout a user's browsing experience - High return on investment (ROI)  **CHOOSING A PROMOTIONAL METHOD** - It's a matter of preferences and styles - Certain factors require consideration - Cost - Legal framework - Target market - Stage in the product life cycle - Type of product  SOCIAL MEDIA MARKETING AS A PROMOTIONAL STRATEGY **Social media marketing** - Marketing approach that uses social networking websites to market a firm's products - A marketing tool that incorporates the use of technological concepts and techniques to grow a business through different media - Process of gaining website traffic or attention through social media sites - Used for - Building relationships - Driving repeat business - Attracting new customers **SOCIAL MEDIA MARKETING** - Usually centers on creating content that attracts attention and encourages readers to share it with their social networks - The concept is traditional word-of-mouth, but powered through technology - It resonates with viewers because the corporate message comes from a trusted, third-party source as opposed to the company itself **BENEFITS OF SMM** - **Wide reach** -- more personal and interactive, more time spent than on e-mail - **Engagement** -- customers are participants, not just passive viewers - Social customer relationship management - **Market information** -- useful and valuable measurable data - Trends, consumer interaction, feedback, public opinion, brand activity, buying habits - **Cost savings** -- less expensive than using traditional methods - **Brand recognition** -- repeat exposure increases customer brand awareness - **Speed** -- very short time span (almost instant) for achieving high reach **LIMITATIONS OF SMM** - **Accessibility problems** - places with no computer or connectivity still exist, making customers miss out on promotions - **Lurkers** - these individuals don't promote or share, just absorb information - They don't do the job they are expected to - **Used as a supplement** - they are not a replacement for other marketing methods - Difficult to stand out -- democratization of access has made this a challenge - The benefits outweigh the costs **GUERILLA MARKETING** - Marketing form which involves the use of unconventional activities that help companies weaken their rivals and stay successful on the market, even with limited resources  **PLACE** - Concerned with how the product is distributed to make it available to consumers - The distribution system includes getting the right product to the right place at the right time - Distribution is a crucial element in the marketing mix for businesses of any size - Refers not only to the location of the business but also to the location of the customers - Businesses should develop strategies to get goods from their present location to the location of consumers - Enables businesses to come up with the best ways to distribute their products efficiently and effectively to consumers - The use of intermediaries such as wholesalers and retailers helps businesses to store and market their products and enhance their brand image - The growing global use of the Internet is making it easier for businesses to reach a wide range of consumers directly with their products **THE IMPORTANCE OF DIFFERENT TYPES OF DISTRIBUTION CHANNELS** - **Zero intermediary channel** - product is sold directly - **One intermediary channel** -- retailer or agent to sell from producer - **Two intermediaries channel** - involves wholesalers and retailers page90image13187504 COMPARATIVE ANALYSIS  **PEOPLE** - **A crucial aspect of the business** - Concerned with the firm's ability to select, recruit, hire, and retain the best people, with the right skills and abilities to do the job - People are the **most important element of any service business** - Services are produced and consumed at the same moment, and the specific customer experience can be changed to meet the needs of the person consuming it WHO DO YOU BUY FROM? - The company needs to ensure staff have the right attitude, skills, and appearance\... at all times - Offering customers an opportunity to feedback to staff can also help to assess how effective customer service is - People form a transactional link between the organization and its customers - Customer relationship management (CRM) - ensures that staff are trained to deliver good customer service - Culture also matters -- opinions, beliefs, and values can shape a firm culture gap **PROCESSES** - The procedures and policies that are put in place to provide the service or the product to the consumer - How is the product delivered to the consumer? - What are the waiting times? - How helpful is the information given to customers? - Processes must change for businesses to remain competitive - **Standard operating procedure(SOP)** page96image13505408 **PHYSICAL EVIDENCE** - 'the environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service' - Refers to the way the business's goods or service 'appears from the outside' - Physical evidence: how the business and its products are presented to customers - Enable customers to "see" what is on offer, before purchasing - Physical evidence includes where the service is being delivered from, such as the location, and the appearance and state of repair/decoration of the retail shop **PHYSICAL EVIDENCE** - Intangible products - a nonphysical product -- a service -- provided to a consumer such as an insurance policy or a car repair - Tangible products - a physical object that can be touched such as a building, car, tablet computer, or clothing **4.6.** **INTERNATIONAL MARKETING** - **Globalization -** the growing trend towards worldwide markets in products, capital and labor, unrestricted by national barriers - **International marketing --** selling products in markets across national boundaries by using a flexible approach - **Global marketing --** using a standardized approach to sell products in markets other than the original domestic market **HOW BUSINESSES ENTER INTERNATIONAL MARKETS** - The internet, exporting, direct investment, joint venture, international franchising **THE INTERNET** - Global reach through the Internet - Low costs in marketing the product - Used as an additional channel to enhance other marketing methods - E-commerce trading over the Internet, popular entry strategy for entering a new market **EXPORTING** - **Direct exporting --** the company markets the product abroad on its own behalf - **Indirect exporting --** the company hires an export intermediary or agent to market the product abroad - **Piggybacking --** the use of the existing distribution channels of one domestic business by another home country business trying to sell a new product abroad **DIRECT INVESTMENT** - Setting up business abroad - Gains local market knowledge, direct access to the market and easy customizations - **Greenfield** -- building own, brand new facilities from the ground up on a site that was never used before - **Brownfield** -- purchasing or leasing existing facilities and redeveloping the site to be used again in a new or similar manner **JOINT VENTURE** - A business arrangement where two or more parties agree to invest in a business project - Pool resources, with each taking responsibility for costs, profits, and losses The businesses remain independent - The purpose is to accomplish a specific task **INTERNATIONAL FRANCHISING** - A business arrangement where the franchisor (a business in one country) grants the franchisee (a business in another country) permission to use its - Brand - Trademark - Concepts - Expertise **OPPORTUNITIES AS A RESULT OF INTERNATIONAL MARKETING** - A larger market, diversification, enhanced brand image, gaining economies of scale, forming new business relationships **A LARGER MARKET** - Provides greater research, increases customer base, and improves sales and profitability - A very effective strategy -- when a product is in a saturation stage domestically and you move it to a new market to jump-start its lifecycle **DIVERSIFICATION** - Spreads the risks - Reduces dependence on the home market only - The more foreign markets, the better the balance in the portfolio  **ENHANCED BRAND IMAGE** - Global reach usually translates into a better perception of success - Creating brand prestige improves brand loyalty **GAINING ECONOMIES OF SCALE** - By selling more products, the average costs of production will fall - In turn, the company will become more competitive - Resulting in:\ Higher marku ps= higher profits\ Lower prices=higher market share **FORMING NEW BUSINESS RELATIONSHIPS** - Increasing contacts opens up new horizons - It's not just about new customers, but also: **THREATS AS A RESULT OF INTERNATIONAL MARKETING** - Economic challenges, Political challenges, Legal challenges, Social challenges, Technological challenges **POLITICAL CHALLENGES** - Inequitable distribution of income is a problem in many countries - Developing countries have low per-capita incomes and purchasing powers - Fluctuating exchange rates and different interest rates can impede marketing **LEGAL CHALLENGES** - Different countries have different laws - International companies must adhere to the laws of the host market **SOCIAL CHALLENGES** - International companies must be aware of each country's idiosyncrasies Demographics Population\ Justice - Segmentation approaches may vary **TECHNOLOGICAL CHALLENGES** - Technology has increased the speed of operations - Not all countries are at the same level of technological development - Some are simply not ready for the hi-tech approach by some companies  **COST LEADERSHIP STRATEGY** - A company can achieve this through: - **Lower input costs --** find cheaper suppliers or vertically intergrate to lower costs - **Economies of scale --** be bigger than the rival and save on fixed costs - **Experience --** have a better know-how and higher efficiency achieved through time - **Product / process design --** use better technology - As a cost leader, a company can: - Charge prices similar to competitors and earn higher returns (parity) - Reduce prices lower than competitors and have same profit margins as others (proximity) **DIFFERENTIATION STRATEGY** - Offer a product that is different than that of your competitors - Occurs when a business provides some degree of uniqueness relative to its competitors - Sufficiently valued by customers to allow a price premium to be charged - Attract more and more customers with that unique feature that is not available with the existing products in the market - More features - Higher level of customer services