Strategic Marketing Notes PDF

STRATEGIC MARKETING “Santiago González Hernando” 2º - Comercio y Marketing Les González Berlanas 2024 | 2025 1 TOPIC 1 The marketing scope 1.1 Marketing: needs, wants and demands 1.2 Goods, services and experiences 1.3 Value, satisfaction and loyalty 1.4 Transactions and relations 1.5 The marketing plan 1. Marketing: needs, wants and demands Simply advertising? Advertising is a part of marketing; it makes people discover products, so it has a social function. Just selling? Sells are also part of marketing. Marketing is a social and managerial (managerial approach to sell something) process by which individuals and groups obtain what they need and want through creating and exchanging (marketing is all about exchange) products and value with others. The marketing process The marketing process starts with a ﬁrm that looks into the needs of customers, e.g. Amazon notices a trend that many people are looking for a videogame chair; with this information, they may add one to the “Amazon basics”. Another example: Zara looking in real time at what is being sold worldwide. Firms decide which segment they are targeting. They try to sell their product/service, and, sometimes, it becomes a relationship. Brands have a target. Everyone needs status sometimes (customers with status needs). Companies exist to create value for shareholders. The value of a company in the stock exchange depends on their future proﬁts. The value of a brand depends on the number of sells that are going to be successful. VALUE OF A BRAND à BRAND EQUITY Without value creation there is no brand, no business. A business only makes sense if you are able to sell and make a proﬁt. 2 A simpliﬁcation of the market system Sometimes the consumer is another company (B2B) Needs, wants and demands Needs States of deprivation - Physical ‒ hunger, (clothing), warmth, safety - Social ‒ belonging and aﬀection - Individual ‒ knowledge and self-expression Wants Form that needs take as they are shaped by culture and individual personality (coﬀee vs. tea) Demands Wants backed by buying power Discussion: - Is every want related to the same need? Sometimes you buy a sweater because it is cold, and sometimes because of self-expression. For this reason, a sweater can be sold because of need, status or personal realization. The same want can solve diﬀerent needs, and vice versa. - does every want mean there will be a demand? No, it depends on the purchasing power of consumers, and their willingness to spend money. E.g., for self-realization I want a Ferrari, but I dońt have the money, but there are other products that Íve always wanted to have, like a camera of 900€ à I have the money, but I donʼt want to spend that money on the camera. YOU NEED CUSTOMERS WHO HAVE THE MONEY BUT ALSO THE WANT TO SPEND THE MONEY. 2. Goods, services and experiences 3 Market oﬀering is kind of the same as value proposition but it is better to use “value proposition”; it has 4 components (product, service, experience and information). Salt is basically a commodity, but Maldon sea-salt is much more expensive (80 times the price of regular salt). Customers feel some added value (because if not, nobody would buy it). (+) Modern marketing was invented when a soap manufacturer stamped their brand name on a soap bar. Before that time, brands didnʼt exist. Without a brand is very diﬃcult to understand the idea of marketing. Tangibilizationof services à e.g., welcome packs Products also bring services nowadays à you buy a car, and you have a warranty service, etc. Services are not pure services, and products are not pure products. Selling an experience is diﬀerent from saying that a product has an experiential side à haptics in Apple. E.g., smell of new in cars à car sellers keep some smell in the car so that when you sit, you smell the taste of new; they are not selling an experience, but a product with an experiential side. Discussion: what is the diﬀerence between buying a handbag at: - Carolina Herreraʼs corner at El Corte Inglés - Carolina Herreraʼs own boutique - Carolina Herrraʼs campaign on Vente-Privé The experiences are diﬀerent: in the boutique you can have a personal treatment, feeling special, status. Maybe buying online you have more information, and it is also an advantage for the new generations that prefer not to have to treat with people. All of these is because customers are diﬀerent. The experience is diﬀerent à in the boutique, experience is maybe more upscale, but not better (we can only see if it is better by looking at the sales of them); we cannot say that one experience is “better” than another one, because it depends on the customersʼ preferences. 3. Value, satisfaction and loyalty Companies make value propositions as a reply to consumersʼ demands. Purpose: Consumers choose amongst market oﬀerings based on: Capturing o Expectations on customer value part of this o Expectations on satisfaction value Low cost is not the best strategy; what we actually need is companies oﬀering a lot of value that someone would capture (oﬀer something that customers really value). And turn it into a proﬁt Discussion: - Whatʼs the conceptual diﬀerence between market oﬀering and customersʼ expectations? o Market oﬀering ‒ objective and rational o Customersʼ expectations ‒ subjective and perceptual (consumers buy based on perceptions) Our satisfaction level is inﬂuenced by expectations. Expectations can be inﬂuenced by companies. Each of us interpret the oﬀering in a diﬀerent way. 4 - Shall a company ser expectations high or low for their market oﬀering? o Too high expectations mean higher sales in the short-term. They are very diﬃcult to maintain. o If market oﬀering does not live up to expectations, this can lead to dissatisfaction, and lower sales in the long-term. It can be interesting if product is sold every 10 years, e.g. mattress. o Too low expectations mean lower sales in the shor-term. You donʼt deceive anyone, but you may not make it to the long-run. o Lower sales in the short-term may prevent the success in the long-run. Firms have to ﬁnd a balance so that pros donʼt outnumber the cons. They shouldnʼt promise what they cannot really deliver. Expectations base don experience à eﬀects on the next purchase If you liked a product from a brand, then you will have a higher expectation the next time you buy a product; you will Exchange - also have loyalty for the brand. purchase From expectations you perceive Satisfaction: if customer value. You compare your expectations the value you get with the are lower than money you have to spend. what you get. How is value created? Production concept: when a brand oﬀers value by making the product aﬀordable and available. E.g., when modern cars were launched (car Ford T): before that, cars were made to customersʼ speciﬁcations, but then cars were standardized, so price went down, and cars became available. E.g.; Zara: in traditional shops, if you got the trend right, you would have a lot of proﬁt, if not, your problem. Zara is looking at trends in real time; if they detect many green trousers sold in Italy, they produce more in 10 days (quick production process, they are able to adapt). E.g., Ikea; the ﬂat package, no empty space (many products are transported in smaller space) à eﬃciency of the product. Product concept: about making the product as good as possible (evolve). Quality and performance. Every time you update, it gets more costly, so the problem is that it loses the focus on customers; because we donʼt always want the best product, just the product that satisﬁes their needs at the right price (maybe we donʼt want a 200€ handbag, but a 20€). E.g., Apple. 5 Selling concept: a brand has to be known. If you donʼt sell enough, you are not pushing enough à invest in advertising and sales forces. A brand has to sell in order to be proﬁtable. Salesforce and promotion. Marketing concept: it is about putting the customer in the center: to try to understand their needs and oﬀer something that satisﬁes them. Solving consumersʼ needs and wants; idea that achieving organizational goals depends on knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do. E.g., fast fashion companies give you the opportunity to buy something every week. Societal and sustainable concept: the societal concept adds dimension of society (aims that sells wonʼt be bad for the society).The sustainable concept takes into account that an exchange today shouldnʼt have bad eﬀects on the future (natural resources, pollution, …) They are related to “corporate social responsibility”. Increasing present and future societyʼs well-being. 4. Exchanges; transactions and relations Exchange is the act of obtaining a desired object from someone by oﬀering something in return. An exchange can be lucrative or not, it doesnʼt have to be money involved. Conditions that make the exchange possible: - At least two parties must participate - Each must have something of value to oﬀer the other - Each party must also want to deal with the other party - Each party is free to accept or reject the otherʼs oﬀer Exchange only takes place when both parties reach an agreement. Marketing theory is concerned with two questions: every marketing decision can be sooved by understanding: - Why do people and organizations engage in exchange relationships? - How are exchanges created, resolved or avoided? Types of exchange Lucrative/non lucrative: value of the product more than money. At the beginning, all exchanges were lucrative, but in the 70s, they extended concept to non-lucrative. Restricted (two agents; seller and buyer), generalized (at least 3 parties involved; the scheme), complex (not two parties. E.g, the town-hall has no money, but they want to improve the city, and there is a construction company that wants to build a parking. The town-hall oﬀers the right to make a parking and exploit it as long as you make a beautiful spot to improve the city; the town-hall gets admiration, the constructor makes a proﬁt, and citizens get an improvement of the city). 6 Transactions and relations Transactional exchange: happens only once, separated from past and future. Def. one in which there are no social elements, no further communication (if youʼre talking about a bottle of water, you only talk about quantity, composition, etc., nothing apart. No expectations for the future: the brand is irrelevant, you havenʼt tasted the band before, you donʼt commit to anything in the future. Pure: only matters what you get and pay today. o One time exchange with no social elements § No further communication § Not expectations for the future. Only relevant thing is what I am getting for my contribution to the exchange. Relational exchange: (it normally works better in business to business exchange) the communication goes beyond the productʼs basic characteristics. E.g., you go into a store where you have been buying for years, and a salesperson knows you very well: he knows what he is going to show you based on your previous purchases, and they know that you will come back. Maybe the salesperson adds a little belt free of charge, because you are a good customer, and he wants to show appreciation. Maybe you have loyalty, with every purchase you get some points which may lead to a discount, or something free, etc. Maybe he knows your family and he asks you about them. § Includes communication beyond basic characteristics of the exchanged values § Considers future expected returns Discussion: - Can exchanges be other thing but pure transactions or relations? We deﬁne it for the limit, but most are in between. - Propose a pure transactional exchange. Vending machines, changes in currencies, buying unbranded petrol in a road you donʼt plan to go again. Pure relationship: you partner with a supplier… - is a relational exchange always better than a transactional exchange? No, it depends in what does the customer want. - When a customer buys repeatedly from a company, can we say that a relational exchange is happening? It is diﬃcult to have a relation before having a few transactions. Maybe it is not suﬃcient, but it is necessary. After transactions maybe you start to feel attached to the brand. The share of wallet gives info about loyalty of customer. If Apple wants to keep growing the brand with a customer whose share of wallet is 1 (all of his/her products are from the same brand, in this case Apple), they will have to invent something new. However, if it wants to sell to a customer with shared wallet (his/her products are from diﬀerent brands), it can still sell something they have. Knowing the share of wallet of customers you are facing; it is important to set your strategy. To sell more products to customers you already have is more diﬃcult than getting new ones. Transactions and relations are diﬀerent for: - B2C (Business to Consumer): many customers with low margins. - B2B (Business to Business): less customers with high margins Interested in having a good relationship with business. B2C: lot of customers but only sell once. o Customer delight o Loyalty o Share of wallet o engagement CUSTOMER EQUITY 7 Customer engagement marketing: - Fostering direct and continuous customer involvement in shaping brand conversations, brand experiences and bran community. - Customer-engagement marketing goes beyond just selling a brand to consumers. Its goal is to make the brand a meaningful part of consumersʼ conversations and lives. Ambiguous: do I have a lot of products of the same brand (e.g. Logitech)? Yes, but do I talk about the brand much? Do I think it is part of myself? Maybe not. Apple watch could be, but Logitech projector not so much. Are all customers worth our dedication? Not all customers are the same, therefore, not all customers are equally proﬁtable. Butterﬂies: good ﬁt with needs. They hunt a lot and always look for the best deal. We try to capture as much value from them on the short- term. It is not proﬁtable to invest in customer relationships. Strangers: little ﬁt with their needs. Shouldnʼt invest in a relationship, just make money at every transaction. Barnacles: very loyal but not proﬁtable. Fire them! They keep coming to the business, they give you a lot of work but buys very little. E.g., client who tries lots of clothes but then buys nothing. True friends: strong ﬁt with their needs. Invest in the relationship until they become endorsers for the brand. High engagement in B2C, partnership in B2B. They are good customers, they trust you, … You need to know what customers you are dealing with to know how to treat them. You should try to push away only barnacles. E.g., banks with bank fees à they set up fees to push away barnacles because they are no proﬁtable (they “ﬁre” them). 5. The marketing plan No one strategy is best for all companies. Each company must ﬁnd the way that makes more sense given: its situation, opportunities, objectives and resources. There are three stages of Marketing Planning: - The strategic plan - The marketing process - Ways of putting the plan into action The strategic plan (it is at corporate level) Corporate level (which is above marketing) à it is the consequence of decisions happening at the corporate level. ****** 8 The marketing process The marketing process starts with an analysis: what tools and resources do we have? What are the companyʼs objectives? Do we need to use all our resources in order to obtain our goals? First: know what resources you have (sales, proﬁt, …) Second: where can I go with these resources? You need to know what is feasible with resources and know where you want to go. Third: put the means into it. Analogy with the boat. e.g., Massimo Dutti analysis: a) planning: you want to increase the average ticket, but not by increasing prices because we donʼt want to alter them (not proﬁtable) b) develop: marketing plan: oﬀer accessories at checkout. Cross-selling: when you go to the supermarket and next to the chips there is soda; they put products which go well together, which are complements. c) implementation: which accessories? We put socks at 9€ at the counter, and the cashier will oﬀer them to clients. Place: displays. Promotion: “why donʼt you add a pair of socks to your order? They are great and at such a good price…”. d) control: - measuring results: we make an average ticket comparison some moths later - evaluation: was it proﬁtable? If so, how can we make it even more? Of not, what can we change? - corrective action: correcting or improving the plan. All this plan costs money, so you need an investment. You do marketing actions to get something: they are an investment. Ways of putting the plan into action Marketing policies are consequence of marketing strategies. 9 What does a marketing plan look like? - Executive summary: quick overview for quiack reading: main goals and recommendations in the plan. WE WRITE IT THE LAST. - Marketing audit: background data on the market, product, competition and distribution. - SOWT analysis - Objectives and issues: which are the objectives to attain during the planʼs term? What issues from two previous steps may aﬀect them? - Marketing strategy: broad marketing approach. Customer analysis, segmenting, diﬀerentiating, positioning. - Marketing mix: product, place, price, promotion. - Budgets: resources needed to implement the plan. Expected outcomes. - Controls: how will the Marketing Plan be monitored? BONUS TRACK: LATEST MARKETING TRENDS Latest upon latest: - Emotional marketing: we can classify the brand by hoy much we respect (functional side) - Online marketing: from commercial TV (google ads). They need to balance because they are very transactional, and it doesnʼt make brand image. - Viral marketing: word of mouth. Inﬂuencers. - Geo-marketing: taking advantage of location of customers. - Neuro-marketing: set of tools which look for the part where the brain activity takes place. In order to study pleasure and losses. The part that activates when we feel pleasure is the nucleus account. The insula/amigdala is related with fear, losses, prices. You can track neural activity signaling pleasure and losses. E.g., experiment with wine and prices: same wine but people felt more pleasure when they were told the price was higher rather than cheaper. Tools: electroencephalograms: measure electric properties. It is diﬃcukt but very good temporal emissions (precise on time) Functional magnetic resonance: it shows very easily where the act is happening. It measures magnetic properties. Every time there are connections between neurons, hemoglobin sends oxygen 10 to that part. This emits iron which has magnetic properties. Measures actions are happening every 3 seconds by very precise on an area, but without time. Conductivity: on the skin as a consequence of brain activity. eye tracking: marketing research which measures where ayes go when shopping. When a person is attracted to a product, their pupils widen as a consequence of a neural act. These last two are not NM because they are not directly from the brain. 6. Conclusion share of customer = share of wallet customer equity = value that you are capturing from your potential customers for the future. Aggregation of customer lifetime value from potential customers. 11 12 13 TOPIC 2 Marketing environment 2.1 Environment 2.2 Microenvironment 2.3 Macroenvironment 2.1 Environment Def. The marketing environment is the set of actors and forces outside marketing that aﬀect marketing managementʼs ability to build and maintain successful relationships with customers. In plain words: everything that aﬀects and can be aﬀected by the marketing department. 2.2 Microenvironment Actors and forces that are close to the marketing department that aﬀect its ability to serve its customers. Internal environment (company) Companies are systems. - Top management sets the companyʼs mission, objectives, broad strategies and policies. - Finance ﬁnds and allocates funds to implement the marketing plan. Finance is important. - R&D designs safe and attractive products. Research and development. You need the product to be goods, and it does that. - Purchasing gets supplies and materials. Samsung doesnʼt manufacture everything, so the better they purchase e.g., batteries, the better product will be and, usually, more successful the brand would be. Important for companies that are just resellers. - Operations produces the desired quality and quantity of products. The better the op. department, the better the brand would be. - Accounting provides measures of costs and revenues. From a marketing point of view, accounting, specially cost accounting, is interesting for price setting. You need to know how much it costs to produce the product to know what price to charge, and that is what accounting does. Also, if you think of a marketing plan, there is the step of control; this is what accounting does. Suppliers The better they are, the more successful the brand is going to be. They are those who provide you what you need to produce your goods and services. Prices if the products can increase because the price of materials are rising. - Provide resources needed to produce goods and services. 14 - Important to watch out for supply availability, shortages or delays. - Monitoring price trends of key inputs. An airline sells trips in advance. Iberia doesnʼt really know the cost of the fuel in Easter, so they have to be careful, because the price of fuel can change from one day to another, so they need to keep track of it. Relational marketing: converting key suppliers into partners. Intermediaries Firms that help promoting, selling and distributing to ﬁnal buyers. Resellers. - Resellers: wholesalers and retailers. Buy and sell without transformation. - Physical distribution ﬁrms: warehousing and transportation. - Marketing services agencies: market research, advertising, promotion… - Financial intermediaries: banks, credit companies, insurance. Only forward. There is no place where you can go and touch a tesla car, like a car dealer, à no distribution network (yet), that is a problem. Resellers can contribute to your image; it is not the same that if youʼre available in El Corte Inglés Gourmet, that if youʼre available in Dia, even if youʼre selling just water. Premium apparel brands (e.g. Lacoste) only sell in oﬃcial resellers, for which you have to pass an exam (policies, street, summer, promotions, windows…) You are a company from Asturias and sell cheese. Idea of expanding your market and make products available in all Spain. You know how good your products are in your place, but not when they leave it. When the customer gets to the store, they are going to blame your company, not the intermediaries. So, controlling how your products are is important. (Physical distribution). Customers - Consumer markets: also known as B2C; the customer buys whatever and uses it. (I buy water just to consume it). - Business markets: also known as B2B. (I buy water to make beer and sell it). - Reseller markets: speciﬁc type of business market. The store buys the water and resells it as it arrives. - Institutional / government markets: the public administration buys to incorporate in the production of public services. - International markets; for the most part of B2B; importers that distribute in a speciﬁc country. EVERYTHING IS NOT CONSUMERS MARKET IS GOING TO BE B2B. Markets can be classiﬁed according to the type of consumer. Central Lechera Asturianaʼs webpage: “consume”, “profesionales”, “industriales”. E. g. for restaurants, bars, etc., they have a speciﬁc product (leche de hostelería), maybe more resistant to room temperature, etc. In consumer markets, the consumer uses the product for their own satisfaction, in business markets, it is incorporated to the production of the product you sell. 15 Competitors - Analysis of competitors is one of the keys to understand the success of a company. How you compete with them. - Positioning against competitorsʼ oﬀerings. It is important to analyze competition. Marketing myopia: consultar. Music: though the industry was selling vinyls, etc, and it took much time for the to realize that there were selling entertainment. Anything competitors do, is likely to aﬀect you. Laligaʼs competitor is not premier league, but Netﬂix. Publics - Financial publics: banks, investment houses, stockholders. Brands have ﬁnancial needs. When banks start thinking a company is not viable, itʼs out of market. - Media publics: newspapers, magazines, radio and tv stations. For the good when you get publicity (¹ advertising) (in publicity you donʼt have to pay for it). It can also work agains you. Companies aim to have good, ﬂuent relations with media publics; when you have good conections, if something bad happens to your company, at least they will ask you. - Government publics: lawyers and oﬃcials. - Citizen action publics: consumer organizations, environmental groups… - Local publics: neighborhood residents, community organizations. Mercadona has a policy for unloading trucks; so they could do this at 5 am., but it is noisy, so they have policies to not do it very early to not disturb. - General publics: public image. - Internal publics: workers, managers, volunteers, board of directors. Internal marketing: How you can have ﬂuent relationships with your employees. Happy employees produce more a better. 2.3 Macroenvironment Larger societal forces that aﬀect not only one speciﬁc brand, but everyone in the market. Demographic environment Markets are composed by people. - Involves people… and markets are made up of people. - Important to track: o Population growth trends § Global 1,2% annual rate (India, China, Pakistan, Bangladesh, Nigeria, and the US account for half that growth). § Europe is decreasing. o Changing age structure. Related to: § Number of births § Life expectancy § Life quality 16 o Changes on the familiy composition: from the ideal family (2P2C) to new situations. Economic environment Aﬀects the money you have and how willing you are to spend the money. - Factors aﬀecting purchasing power and spending patterns. - Europe is a single market for more than 20 years (Euro introduction) - Income: o Consumers spend money rationally during recessions. o Consumers spend more liberally during expansive periods. - Income distribution: (moderator) o Upper segments are less susceptive to economic downtowns. o Upper segments are target for luxury products o Middle segments can aﬀord good life some of the time. o Lower segments stick to basics: food, clothing, and shelter. - Changing consumer spending patterns: Engelʼs law: every time your rent goes up, you spend less and less on basic goods: if you earn 1000€, it is going to go for food, rent, not much more (basic needs); if your salary increases 20€, maybe you start buying a beer every Friday, which is not a basic good, (the % you spend on basic needs decreases). When a crisis is announced, consumers will buy less, and it helps cooling down the economy. Natural environment - Growing shortages of raw materials - Increased cost of energy - Increased pollution and climate change o Kyoto protocols ‒ diﬀerence between EU, USA, China - Government intervention in natural resource management o Emission restrictions for the EU Technological environment One of the most dramatic forces shaping our destiny. - Fast pace of technology change - Increased regulation Originally, music was played live, you needed to go to a concert; then vinyls could be made à you could sell copies. Then you had tapes (problem, record a vinyl in a tape, so market went down). Then CD (better sound). Then Internet (Napster), that is a problem for musicians. 10.15 years to realize that musicians need to play live again to make money. Technology changed the way of making the business. Cultural environment - Persistence if cultural values - Shifts in secondary cultural values Coﬀee and tea. They are diﬃcult to change. 17 Years ago, people paid more for something you used for many years; nowadays: fast fashion. Political environment - Laws, government agencies and pressure groups that inﬂuence and limit various organizations and individuals in a given society. - Types of inﬂuence: o Legislation that aﬀect business o Increased emphasis on ethics and socially responsible actions (Soda tax) 2.4 Conclusion The marketing environment is not uncontrollable. A proactive approach is of interest: - Trying to inﬂuence legislation - Trying to get press coverage - Keeping competitors in line - Partnering to better control distribution channels 18 19 TOPIC 3 Consumer markets 3.0 Two preliminary questions 3.1 Characteristics aﬀecting consumer behavior 3.2 The buyer decision process 3.3 Types of buying decision behavior 3.0 Two preliminary questions - What is a consumer market? o All of the personal consumption of ﬁnal consumers (personal consumption: when someone that buys whatever to use for its own value and without incorporating it to any production process). o Diﬀerence with an industrial/institutional/organizational marketing In those business marketing, whatever is bought, goes into a production process to make something you can buy. - What is consumer purchase behavior? o The buying behavior of ﬁnal consumers, individuals, and households, who buy goods and services for personal consumption Metrics online stores: how do you get users? Organic search: you search in google for it. Paid search: when you search in google and there are ads (anuncios que salen los primeros cuando buscas). At what time? If you send a newsletter, or a push notiﬁcation, or something similar, you might ﬁnd that information quite interesting. 3.1 Characteristics aﬀecting consumer behavior A model of consumer behavior. 20 Cultural factors Culture: the learned values, perceptions, wants, and behavior from family and other important institutions. E.g., when itʼs cold, in Spain we will have a coﬀee, and in UK you will have a cup of tea. Subcultures: groups within a culture with shared value systems based on common life experiences and situations. It can be in a very small level, such as urban tribes (gothic, sporty, etc.) Social class: societyʼs relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. DISCUSSION: which are the antecedents of (how can we determine) social class? Occupation, income, neighborhood, educational level, wealth. consequences: hobbies. People spend their money in diﬀerent ways; social classes behave diﬀerently, so we have to do diﬀerent value propositions for them. Red Bull oﬀer appeals to higher classes than Monster. Heinz ketchup: in every UK house there is one, and on top of that it is quite expensive for what it is, and still customers are willing to buy it. That is really a business. A plumber and a lawyer belong to diﬀerent social classes, although itʼs probably that the plumber makes more money. Customers from the same social class normally behave the same, but it is hard to tell who belongs to each social class. Social factors Reference groups: - They inﬂuence our behavior - Primary or secondary, depending on how often we are with our group of reference. Primary: very frequent. Formal (rules are very clearly identiﬁed, even written) vs. informal (rules arenʼt written, but everybody knows them). - New kid on the block? Social networks. You want to be like someone, and you change your behavior to try to be like them (also happens on the internet). 21 E.g. Adidas superstar o Opinion leaders: You really trust and admire; you aspire to be like them. E.g., Federer-Rolex- - Reference (skills, knowledge, personality) on a reference group. - They inﬂuence our behavior. - Brands try to get them as ambassadors Family It is the most important consumer-buying organization in society - Family of orientation (family we grow up in; we learn how to behave and how to consume) - Family of procreation (family that you form; the inﬂuences are diﬀerent: it introduces a new idea: household (not individual) purchases with joint decisions (car, vacations, apartment…) Consumer buying roles with the family: - Initiator - Inﬂuencer - Decider - Buyer - User Individual purchase: I buy a sweater; I am all the above. If I go with my wife, and she says that she likes it, etc., she is the inﬂuencer. When you buy a present, you are solving your own need, it is a social need, maybe you are obliged to. This aﬀects very much what you buy: you are trying to show (true or fake) appreciation, and how much you care, so perhaps you will buy a diﬀerent product for a gift than for yourself. The fact than you are giving something that is useful, doesnʼt mean that you solve their need, but yours. You start the process; you recognize the need; itʼs you. Personal factors Age and life cycle stage we donʼt behave the same at every age - Young: singled, married without children, married with children, divorced with children 22 - Middle aged: single, married without children, married with children, married without dependent children, divorced without children, divorced with children, divorced without dependent children. - Elder: older married, older unmarried. Financial life cycle Occupation Blue collar ̶ white collar Decades ago: working class typically wore blue, and white colors corresponded with oﬃce jobs. These words are not useful anymore. Economic situation Companies react in diﬀerent ways. Rolex, before crisis 400€, now, more like 800€ because they discovered than the more expensive it was, the more exclusive it was, consumer of Rolex were not aﬀected by the price. they launched a good watch for average class (Tudor) to make it aﬀordable 200€, the problem is that it was so successful that prices rose to around 400€. Burberry trench. Economic situation is really important. Lifestyle A personʼs pattern of living as expressed in his/her activities, interests, and opinions. Lifestyle classiﬁcations: - SRI VALS (values and lifestyles) (9 categories) - SINUS GmbH: o Basic orientation: traditional (to preserve) o Basic orientation materialist (to have)) o Changing values: hedonism (to indulge) o Changing values: postmaterialism (to be) o Changing values; postmodernism (to have, to be, and to indulge) Traditional values: hard work, thrift, religion, honesty, good manners and obedience. Material values: possession and need for security. 23 Personality Unique psychological characteristics that lead to relatively consistent and lasting responses to oneʼs own environment. Group of traits (rasgos). - Self-conﬁdence - Dominance - Sociability - Autonomy - Defensiveness - Adaptability - Aggressiveness. - Etc. Self concept - How do we see ourselves (actual self-concept); - how would we like to be seen by others (ideal self-concept). Psychological factors Motivation a need becomes a motive when it is aroused (we become aware of them) to a suﬃcient level of intensity. The need of energy is always there, but when we perceive hunger, we become aware of it. The battle between Freud and Maslow. Pyramid: there are more important needs than others. 1,2 primary. Convertible: could be safety, self-actualization, cognitive... Perception Process by which people select, organize, and interpret (everything that comes to our senses) information to form a meaningful picture of the world from three perceptual processes. The ﬁnal decisions would depend on how the customer perceives the product. key concepts: - Selective attention: it is diﬃcult to perceive something that you are not paying attention to. It is very diﬃcult to sell to customers that donʼt know you. We select to what pay attention: we donʼt have the time to pay attention to everything (I donʼt pay attention to your laptops, but the stimuli are there). SIMONS 1999 ATTENTION TEST SEARCH. 24 - Selective distortion: “tendency to interpret information according to the beliefs or perceptions that you have rooted” how do we know we all see the same blue? When our brain identiﬁes strawberries, it sees it red, despite it is actually green. When you engage with a brand, the perception will be distortion. Attitudes towards brands act as a ﬁlter. That is why many brands do public relations. - Selective retention: “tendency to remember information that best connects with our needs, beliefs, interests and values”. If you see a trailer about a ﬁlm about dogs, you will remember it better if you like dogs than if you prefer cats. Learning Change in an individualʼs behavior arising from experience and occurs through interplay of: - drives, - stimuli, - cues, - responses, - reinforcement. The process of learning: 1. A friend invited us for dinner at his/her place o Damn! I should provide something for dinner. (thatʼs a drive) 2. While reading the newspaper: o Look! Thereʼs an article about a wine called Luis Cañas Crianza 2009 that has been named “Wine with the best QPR in the world” by The Wine Advocate (Thatʼs a stimuli) 3. In the shop: o You donʼt ﬁnd the aforement wine, but you start looking at other bottles of wine, and pay attention to words as “Rioja”, “Crianza”, “Reserva”, etc. (Those are cues (pistas)). 4. You purchase: o One bottle of Herencia Remondo La Montesa 2009 (thatʼs your response). Maybe you donʼt buy, and that is your response too, but with that response, your learning process is ﬁnished. 5. You provide o The wine for the dinner and everybody loves it. (Your behavior has been reinforced). o There can also be negative reinforcement, e.g., if nobody liked it. Beliefs A descriptive thought that a person has about something based on - knowledge, - opinion, - or faith (nothing). Some knowledge that you associate with an object (a brand, a product, a class). Beliefs connect very well with attitudes. Many consumers think that Apple is cool, (what is cool? How can a device be cool?) but many people think that, so thatʼs enough. Attitudes simplify. I like Logitech, and, although I can ﬁnd cheaper options, the next time I need something, I will search directly in Logitech, so I will not go through the process of searching for the perfect product. 25 Attitudes They describe a personʼs relatively consistent evaluations, feelings, and tendencies toward an object or idea. 3 components: 1. Knowledge (beliefs are knowledge) 3.2 The buyer decision process A process with ﬁve stages: Need recognition The buyer senses a diﬀerence between an actual state and some desired state, triggered by internal (you decide by yourself) (you become angry because you are hungry); not so many, because nowadays there are many external stimuli, and external stimuli (you perceive the smell of food and you become hungry, can also be an ad) Marketers want to understand the factors and situations that usually trigger consumer need recognition. Information search When the consumer has a need, there are 3 possible outcomes: Strong drive, satisfying product at hand... just purchase it. Sometimes you donʼt need info: if your iPhone gets stolen, youʼre going to buy another one. Just store the need in memory (heightened attention). You start thinking about buying something. Your clothes are a sign of attention, so you immediately recognize other person with them; if you are considering buying a Toyota Yaris, it becomes your center of attention, and you start seeing them everywhere; then you start looking at who is driving, and it might change your thinking (what is the typical driver? Old people? I donʼt want it then) Letʼs search for information on how to solve my need (active search). You want to change car: you start going to car dealers, buying magazines, getting info online... Sources for information: Personal sources: family, friends, neighbors... Iʼve seen you drive a Yaris, what can you tell me about it? Are you happy? Commercial: advertising, salespeople, Internet, packaging, displays. Conﬁguring, interaction with the product: I want this this and this, this equipment, this color, etc. and the price would be this. Public sources: mass media, consumer-rating organizations Experiential sources: handling, examining, and using the product. Going to the car dealer, and try the car. Marketers want to understand where consumers get their information and how they trust it depending on the source. 26 Evaluation of alternatives If I want a new car because Iʼm having a baby, I will pay attention to the attribute “large”, but if Iʼm buying because mine broke, I wonʼt mind if it is large or not. How do consumers process information to arrive at brand choices? Certain needs take consumers to value certain product beneﬁts. Consumers attach diﬀerent degrees of importance to each attribute someone would care about how cute the car is, and someone would care about how sportive it is. It is not important to be the best car, but to understand how consumers think. The diﬀerence between “importance” and “saliency”. Consumers develop brand beliefs. German cars (collective brand) are safe and reliable Consumers have a utility function for each attribute. Not every attribute of car will have the same value for every customer, because we all have diﬀerent utility values (all customers are diﬀerent). Models: - Expectancy value model of consumer choice (composite index of attributes x importance). Consumers make some kind of calculations on their minds. - Conjunctive models: my choice must have this attribute. It is like a ﬁlter; you only consider the cars that meet at least 1 criterion, e.g., I want a hybrid car, so I wonʼt consider non- hybrid cars. This doesnʼt happen in real life. Way to sum up information to make our decisions easier. - Disjunctive model: my choice should rank high in this attribute. I want a car that is large, so I want the trunk to be more than 500 liters. Maybe I donʼt need the best (largest) but (the Octavia has more space, but you prefer the Honda because it is good enough). Sometimes they mix, specially in complex products. Marketers want to understand how consumers evaluate alternatives. Purchase decision After evaluation, the preferred brand is most likely to be purchased but, it can also be postponed. The decision can be inﬂuenced by other people and/or situational determinants (inﬂuencers, parents, friends...). Perceived risk poses several threats in this stage, if you started a complex buying behavior, and you couldnʼt make your mind clear, maybe you just abandon because it is too risky. (e.g., how are the batteries of the electric car going to age, are they working the same in 5 years?) Maybe you donʼt reach a decision: not that product on the market, or not aﬀordable. Marketers want to understand why consumers engage in exchange, and how those exchanges are created, resolved, or avoided. Post purchase behavoir Comparison between expectations and perceived performance. The size of the gap determines levels of satisfaction and dissatisfaction. 27 Cognitive dissonance: discomfort caused by post-purchase conﬂict. When I buy a car, maybe I start regretting it when I buy it. Money risk, social risk (what would others think if I buy this car, would the change the way they see me?, should I have bought the Toyota instead of the Honda?. This is independent of the consumer using the product: it can happen before you try the product. Eventually, you will use the car; if youʼre satisfy, you could buy again, if not, not, youʼre happy, youʼll tell friends, family (mouth to mouth) and also if youʼre dissatisﬁed (bad word of mouth). We donʼt want to live with the feeling that you make a mistake, so we try to convince ourselves by telling others how good our purchase was. A lot of things happen after you buy (not only satisfaction) The double speed magnitude: WOM If consumers are not buying a product because they do not perceive a need for it, Marketing might launch advertising messages that trigger the need and show how the product solves customerʼs problems. Companies are not selling as much as they expected. If customers know about the product but are not buying because they hold unfavorable attitudes towards the brand, the marketer must ﬁnd ways either to change the product or to change consumer perceptions. 3.3 Types of buying behavior A toothpaste is not a tennis racket, an expensive camera, or a new car. Complex decisions involve more buying participants and more buyer deliberation. Classiﬁcation: Purchase involvement means that consumers will devote some time and eﬀort to look for info, process it and get it right. You involve when you perceive risk (if you donʼt perceive risk at all, why would you bother). There are markets in which we donʼt know the diﬀerence between brands Complex buying behavior High involvement in a purchase, and signiﬁcant diﬀerences among brands. The product is expensive, risky, purchased infrequently, and high self-expressive. Typical example: buying of real-state, cars, computer. Dissonance-reducing buying behavior High involvement and few diﬀerences between brands. The product is expensive, infrequent to purchase, and with not big diﬀerence among brands (you may not now brands, e.g., ceramics). 28 Important dives: - good price (if you think they are all the same, youʼll choose the cheapest), - convenience (I need water, I buy whatever is available), - brand recognition→reduces dissonance. Porcelanosa is more expensive because it is the one that people know; the fact that the only one you know is the most expensive reinforcers the thought of the tiles been good. e.g., TILES. Habitual buying behavior Low involvement and little brand diﬀerence. The brand choice can be a habit more than a preference. It is more about familiarity than brand conviction. Price and sale promotions are very strong drives (they give me a reason to change). The one I usually buy is good enough, so I will keep buying it. I buy what I know. Example: kitchen paper towels. Variety-seeking buying behavior Low involvement and signiﬁcant perceived diﬀerences between brands. Consumers do a lot of brand- switching because of boredom, and/or for the fun of trying something diﬀerent. I will use one or the other. Change just for the fun of it. Books, movies. Is it better to have many variety or non? Mercadona: strategy is selling their own brand. Typical strategies: Brand leaders try to promote habitual behavior by dominating shelf-space, advertising and avoiding out-of-stock conditions. If you want my Doritos and my lays, you have to take all these products, and I want 10 miters of shelf. Using power in distribution channels. Advertising: Reconﬁrming customers that they are buying right. Out of stock opens the possibility to discover something new, which can even be better than the one that you habitually buy. Brand challengers will encourage variety seeking by oﬀering lower prices, deals, coupons, free samples and advertising centering on the fun of trying something new. 29 30 31 TOPIC 4 Industrial markets 4.1 Characteristics of business markets 4.2 The business buying process 4.3 Types of buying situation and participants in the business buying program 4.1 Characteristics of business markets A business market comprises all the organizations that buy goods and services to use them in the production of other products and services, or for the purpose of reselling or renting them to others at a proﬁt. you are using what you buy to sell to others. Europe cars rent to businessmen to sell, which is a business exchange. The diﬀerence between business or consumer exchange: who is buying and for what. Tires sell to companies and tire shops (business) and then they sell to customers (consumer) SIMILARITIES TO CONSUMER MARKETS: Both involve people assuming buying roles Needs are needed There is always some psychology and thereʼs always a need. Typical need in business exchanges: economic (you buy something that helps you provide a value proposition to others with proﬁt). DIFFERENCES TO CONSUMER MARKETS Market structure and demand Nature of the buying unit Types of decisions Decision process. MARKET STRUCTURE AND DEMAND: Far fewer but larger buyers: Tires: millions of consumers (Renault will buy much more than customers) that is why businesses are better for relationship marketing; it is diﬃcult to invest in relational marketing with individual consumers because the money you make from customers is so small that you cannot invest in a relation. Geographically concentrated: Luxury ﬁrms concentrate in Paris, NY, Milano. Petrochemicals and synthetic ﬁbers around Rotterdam or Amsterdam. Derived demand: car manufacturers demand tires when they have a demand for cars. tire manufacturers buy rubber depending on how many tires they are selling which depends on how many cars Renault, seat, etc., are expecting to sell. Inelastic demand (esp. in the short term). a drop in rubberʼs price will not shift Michelinʼs demand for it. You donʼt buy just because the price went down; very diﬀerent than in consumer market (if there is a promotion of yogurts, you may buy more). Fluctuating demand: an increase of 10% on the ﬁnal demand for a product may increase a 50% the demand for several of its components in the business markets. In many cases, the stocks accumulate and every time thereʼs a little disturbance in sells it goes back and back and the accumulation gets bigger and bigger. 32 NATURE OF BUYING UNIT: Business purchase involves: o More decision participants o More professional purchasing eﬀort The more complex the purchase, the more likely is that several people will participate in the decision-making process. Buying committees to decide what is right with: o Technical experts o Top management TYPES OF DECISIONS: More complex. if I donʼt like a bottle of water, the risk is 1€, but if I buy a machine, it is very risky. o Large sums of money o Complex technical and economic considerations o Interactions among many people More formalized o Detailed product speciﬁcations o Written purchase orders o Supplier approval o PO (purchase order): hoja de pedido. Order number, Price, date of payment, quantity, items, shipping address… incoterms. BUYING PROCESS: Water bottles: I, as an individual customer, am not dependent on the brand and the brand is not dependent on me, but, if itʼs an important customer, they are dependent. Buyer and seller are much more dependent on each other B2C keeps a distance B2B distance is armʼs length close between buyer and seller, but not so much, but still may require close working together: o Customizing. Adapt to the needs of consumers when the business is relevant, e.g., use screwcaps instead of cork for a certain customer. The size of the business makes the possibility to collaboration (that is why relational business happens mostly in B2B) o Helping customer to solve their needs o Providing ad-hoc after-sales support. B2B is the perfect ambient to let relationship marketing building. If youʼre selling to someone that is reselling, you have to charge a price so that the buyer is able to make a proﬁt, so sells have to be for everyone in order to stay in the long run. 4.2 The business buying process Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for its use in the production of other products and services that are sold, rented, or supplied to others. 33 PROBLEM RECOGNITION: Someone in the company recognizes a problem or need that can be met by acquiring a speciﬁc product or service. - Internal stimuli: we are about to launch a new product, and this means a new machine or a new raw material. I notice that I donʼt oﬀer any Australian wine. - External stimuli. We have been to a trade show, and we could improve our oﬀer by adding a new feature by means of this new component. I went to a fair and I tasted an Australian wine that I like. GENERAL NEED DESCRIPTION: Buyer prepares a document in which the characteristics and quantity of the needed item are listed. - Checking with production department. Sellers in a retailer company (is it going to sale?) - Checking with accountancy department. Can we aﬀord selling it? PRODUCT SPECIFICATIONS: The buying organization develops the itemʼs product speciﬁcations: value analysis. I want a projector that is good for the space I have, reliable, consumption, colors... you prepare a document (we need 40 projectors with this xt, 20 with those xt...) then search suppliers. SUPPLIER SEARCH: who can sell projectors? Maybe you have from the past or look for new ones. Websites, magazines... Finding the best vendors for the required item - The newer the buying task - The more complex and costly the item -... the greater the amount of eﬀort that would be put in ﬁnding the right supplier. PROPOSAL SOLICITATION: Buyer invites qualiﬁed suppliers to submit proposals, ranging from: - Price lists, catalogues (simple) - Ad-hoc propositions 34 SUPPLIER SELECTION: You go for one supplier. Buying department will rank suppliers using: - Quality products and services - On-time deliveries - Ethical corporate behavior - Honest communication and prices - Repair and servicing capabilities - Technical aid and advice - Performance history and reputation. (in big companies, suppliers are ranked: ﬁrst G, if everything goes well, the second you are F... if you are A, they know you are a safe bet.) ORDER-ROUTINE SPECIFICATION: Preparing the ﬁnal order (PO): - Listing items, tech speciﬁcations, quantities - Expected time of delivery - Returns and warranties PERFORMANCE REVIEW: Buying department will contact users (within the company): - Asses their satisfaction - Decide whether to go on with the purchase or not - Monitor the usefulness of the purchased items. 4.3 Types of buying situations. Main participants in business purchasing Types of business situations If something works you buy again, if not, you modify. Straight rebuy: reordering something without any modiﬁcations. Modiﬁed rebuy: buyer wants to modify: (I didnʼt like it so much, do you have another type?. The purchase is not good enough for the customer) Product speciﬁcations Prices Terms Suppliers New task situation: the greater the costs or risks: The larger the number of decision participants The greater the eﬀort to collect information 35 Participants in the business buying process Major inﬂuences on business buyers 36 37 TOPIC 5 Segmentation and positioning 5.0 Introduction 5.1 Market segmentation 5.2 Market targeting 5.3 Diﬀerentiation and positioning 5.0 Introduction Why do brands segment the market? It is diﬃcult to serve a whole market. Buyers may be: - Too numerous - Too widely scattered. Geographically scattered; you cannot cover all the world because it is not eﬃcient. In the countryside you donʼt have good internet connection, because it is not proﬁtable for the company. - Too varied in their needs and buying practice. Customers are very diﬀerent→not all the consumers are the same, want the same things, behave the same way, etc. identify which are the customers you can provide better. Statistics: go in the middle (sell nothing), serve only one part of the market (hot, cold). Which segment is bigger? What is our strength? What is more proﬁtable? Etc. A company must identify the parts of the market that it can serve best and most proﬁtably. STP segmenting: dividing the market in groups. Segmenting in the coﬀee example: you identify the segments (hot, cold). Only make sense if the next step is proﬁtable. targeting: deciding what segment you want to serve. When you decide to go for one segment. Only targeting when you have already segmented. diﬀerentiation: making your value proposition diﬀerent than the competition. I want my coﬀee to be organic. So many diﬀerent options. positioning: placing your value proposition/ brand in a speciﬁc part on the mind of your consumers. Position your brand so that the customers associate your brand with a speciﬁc characteristic(s) when they think about it. 5.1 Market segmentation Market segmentation: dividing a market into smaller segments with distinct needs, characteristics or behavior that might require separate marketing strategies or mixes. 38 Consumers diﬀer in: (these are segmentation basis: diﬀerent ways you have to segment a market) - Wants Divide large and heterogeneous - Resources Market markets into smaller segments - Locations segmentation that can be reached more - Buying attitudes eﬃciently and eﬀectively. Buying practices: Recognizing their diﬀerences and make something speciﬁc for them. Eﬃciency: cost at what you can deliver a value proposition Eﬀectiveness: how good you can deliver a value proposition (?) Consumer markets Segmenting consumer markets: - there is no single way to segment a market; - there are several variables to segment: Geographic Demographic Psychographic Behavioral GEOGRAPHIC SEGMENTATION: Diving the market into diﬀerent geographical units (nations, regions, cities or neighborhoods). Tesco Metro: located in city centers and high streets of small towns. Tesco Express: neighborhood convenience stores → food with an emphasis on higher-margin products and everyday essentials (and a petrol station). One Stop: very small stores that do not even carry the Tesco name. DEMOGRAPHIC SEGMENTATION: Dividing the market into groups based on age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Age and life-cycle stage: Oral B Frozen. Image for kids, message for parents (“90% of the kids brush longer”) Gender: LʼOréal moisturizing cream. “Man colors”. Pink tax. Income: American Express. Diﬀerent types of credit cards PSYCHOGRAPHIC SEGMENTATION: Dividing buyers into diﬀerent groups based on: Social class Lifestyle Personality characteristics. You choose a diﬀerent motorbike depending on what kind of person you are: sporty person, etc. Product expressive for value: product that says things about you: cars, smartphones, where do you live, apparel... 39 BEHAVIORAL SEGMENTATION: Dividing buyers into groups based on their knowledge, attitudes, uses or responses to a product: Occasions: Samsonite good suitcases, long-live, expensive. User status: non-users, ex-users, ﬁrst-time users, regular users. Sometimes brands oﬀer better products to non-users than to users, e.g., telecommunications. Pepe phone (who gives promotions to existent customers), has less market share than Jazztel (donʼt give new promotions to existent customers), so relational marketing isnʼt always the best. Jazztel knows that changing the company is expensive. Not every exchange has to be arranged in a relation. Usage rate: light users, medium users, heavy users. Printers. Loyalty status: high loyalty users, medium loyalty users, no loyal. Wine shop: only gives you access to certain bottles when you have already bought a quantity of bottles (loyalty program), point cards... ﬁts well with relationship marketing. Business markets Primary segmentation variables for business markets: Demographics: o Industry o General purchase policies (leasing̶ o Company size (same size if one is purchase̶rent) bigger → expectations) o Purchasing criteria: quality, price, o Location service. Operating variables: Personal characteristics: o Technology o Loyalty to their suppliers o User/non-userstatus o Buyer-seller similarities o Customer capabilities o Attitudes toward risk Purchasing approaches: Situational factors: o Nature of existing relationships (with o Urgency of demand other suppliers) o Size of order 40 3.2 Market targeting Target market: consists of a set of buyers who share common needs or characteristics that the company decides to serve. Targeting is when the company selects which segments they are going to target. Evaluating market segments: - Segment size and growth. Not only today, but how is it going to be in the future. o Big companies can target larger and fastest growing segments ̶they have the size and the resources. o Smaller companies may be more interested in smaller segments which are easier to serve. - Segment structural attractiveness o Number of competitors (is the market very crowded?) o Power of customers in the segment (can they dictate the terms of the exchange?) o Power of suppliers needed to serve the segment - Company objectives and resources o Segments of the right size and structural attractive can be beyond a companyʼs long-term strategy. Find the right segment for you (not the same for every company); each brand has to ﬁnd the right one for them. Selecting market segments: why donʼt we view every buyer as a separate target? The trade-oﬀ (punto de equilibrio): - Economies of scales: covering every customer you lose economies of scale, and you become less competitive. - Value creation segmenting and targetingʼs aim is creating value. Undiﬀerentiated marketing (aka. Mass marketing) ‒ million shirts in Zara Centering on what is common amongst consumers Targeting the while market with one oﬀer Problem: it is diﬃcult to compete with more focused ﬁrms. Schweps: 30 years ago, tonic water was dominated by it; 2 needs: gin-tonic, digestive. using the needs to make the segments (behavioral segmentation). Same product. Diﬀerentiated marketing (aka. Segmented Marketing) Centering on diﬀerent needs and wants of several segment Mean several Marketing Plans, Marketing Research, Advertising programs and brand building. Schweeps: launched premium tonic waters. Covering both segments with diﬀerent value propositions. 2 segments with 2 diﬀerent marketing mixes (diﬀerent product, price, promotion, packaging, communication, for diﬀerent products.) also Coca-Cola. Diet vs. zero (basically same product, but diﬀerent segments)→product level. also brand level, e.g., loreal group. Diﬀerent brands depending on the type of customer. 1 Concentrated marketing ‒ (aka. Niche marketing) Centering on needs and wants of one segment Useful when companiesʼ resources are limited Internet has opened a door for Niche Marketing companies targeting long tailers. New tonic water brand, perfect for mixing (low carbonation, 100% natural). it was more than double the price. it was speciﬁc for one segment (gin-tonic). It was a success because there was a segment that wanted something good for their drink. Just go for 1 segment (speciﬁc) Q tonic→only make tonic water. Even if the segment is really small, it can be proﬁtable with online shopping (e.g., books) Micromarketing Tailoring oﬀers to meet the needs of speciﬁc individuals and locations concentrating in a very small segment. Local marketing: Eroski hypermarkets and local food products. Individual marketing: aka One-To-One Marketing. Customer involves on the design of the product → cocreation. In ralph lauren you can personalize some items: color, logo, etc. pay more. Technology. How to choose a targeting strategy? Company resources: if resources are low, start concentrated make sense. Product variability: uniform products call for undiﬀerentiation. Productʼs life-cycle: o Undiﬀerentiation on introduction. Just make 1 o Diﬀerentiation and micromarketing on maturity Market variability: o If consumers are alike: undiﬀerentiation Competitorʼs strategy: o if competition is diﬀerentiated, undiﬀerentiation can be suicidal. 2 5.3 Diﬀerentiation and positioning Worst situation for a brand: perfect competition because there are inﬁnite number of buyers and sellers, no entry bounders, homogeneous products (no diﬀerences). When the products are not perceived diﬀerent, you go for the cheapest. Product position: brands try to be perceived diﬀerent (prices, communication, channels...) - The way the product is deﬁned by consumers on important attributes. - The place the product occupies in consumersʼ minds relative to competing products. In pharmacies, safer products. - “Products are created in the factory; brands are created in the mind” a brand is only what it means to consumers, compared to competition. The three steps: 1. Identify sources of diﬀerentiation (inﬁnite) PRODUCT: Trina: no carbonation. SERVICES: Ikea. No services: best price, but nobody helps you. CHANNELS: Lacoste. Selects carefully who is their retailer. La Roche posse, bought at pharmacies. PEOPLE (that delivers the service): El Corte ingles. Having people helping the customers. IMAGE: Pepsi. We perceive it diﬀerent than Coca-Cola. Itʼs an image thing because nothing in the product is diﬀerent. 2. Choose the right competitive advantages - How many: o The Unique Selling Proposition (USP) (Rosser Reves). Identify what makes your brand special, only one thing. o Successful examples of several competitive advantages several attributes: El Corte InglÈs. Great service, people, sophisticated, etc. - Which ones: those that are: o Important o Distinctive o Superior o Communicable o Not easy to copy o Affordable o Profitable Choose the best one. If thereʼs already a brand there: attack the brand, or go for second, third... Position in an attribute than no one positions into, and then upload it. 3 3. Select an overall positioning strategy Less for much less: low cost. Basic product, very affordable price. difficult to be profitable. Only if you are very cost effective. Aliada (line of affordable products in Supercor?) The same for less: AMD manufacturer of microprocessors. If you are able to do the same performance, why charge cheaper? Contrary to nature of marketing More for less: so difficult. Hacendado. Not about the status. That is the success of mercadona. More for the same: lexus (luxury division of Toyota). Lexus will have all the equipment, not as BMW of instance. Depends on how you define the competition. Lexus is premium compared to the rest of the brands, and more for the same compared to the premium category. More for more: premium. ≠ luxury. Luxury doesnʼt invent, you need a tradition, a heritage, a craftmanship... you become a luxury brand over time. Think in competition to choose. 4. (Developing a positioning statement) To (target segment and need) our (brand) is (concept) that (point of diﬀerence). Could also be the ﬁrst slide. e.g., to busy, mobile professionals who need to always be in the loop, BlackBerry is a wireless connectivity solution that allows you to stay connected to data, people, and resources while on the go, easily and reliably, more so than competing technologies. Bit long, but follows orthodox formula Identify target, who you are idea and point of diﬀerence. 4 5 TOPIC 6 Market and demand forecasting 6.1 Demand dimensions 6.2 Measuring demand 6.3 Demand forecasting 6.1 Demand dimensions Companies must measure and forecast the size, growth and proﬁt potential of each market opportunity. Market forecast is done by the Marketing Department. Measures of the market demand How to break down the market Potential market: set of consumers with enough level of interest in a value proposition. Available market: set of consumers with interest income and access to a particular value proposition. Target market: set of consumers withing the available market that a company decides to pursue. Penetrated market: set of consumers buying the companyʼs product. 6 6.2 Measuring demand Two major concepts: Market demand Company demand Three ideas: Demand function Sales forecast Sales potential / market potential 6.3 Demand forecasting Total market potential: Maximum amount of sales that might be available to all the ﬁrms in an industry during a given period, under a given level of Industry Marketing Eﬀort and environmental conditions. The chain-ratio method Methods to estimate future demand - Survey of buyersʼ intentions - Composite of sales force opinions - Expert opinions - Past sales analysis - Market-Test analysis Survey of buyersʼ intentions Do you intend to buy an automobile within the next six months? 7 Inquires into consumerʼs present and future: Personal ﬁnances Expectations on the economy Composite of sales force opinions Ask your sales representatives to estimate their future sales Sales representatives are in touch with the market They can be optimistic, or pessimistic They may be biased to suggest lower forecasts so that their sales targets are set lower. Expert opinions Dealers, distributors, suppliers, marketing consultants They also have strengths and weaknesses Specialized companies Past sales analysis Time series ARIMA models Econometrics Market-test analysis A direct market test can help forecasting in new environments or new products, where other methods fail. 8

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