Food System Marketing Notes PDF

Food system marketing Index The essence of marketing Immutable laws of marketing Environment analysis Analysis of the company's potential SWOT analysis Marketing research Segmentation Marketing mix Consumer value Literature Philip T. Kotler, Kev...

Food system marketing Index The essence of marketing Immutable laws of marketing Environment analysis Analysis of the company's potential SWOT analysis Marketing research Segmentation Marketing mix Consumer value Literature Philip T. Kotler, Kevin Lane Keller (2015), Marketing management, Pearson Gordon W. Fuller (2011), New Food Product Development –From Concept to Marketplace, CRC Press Alessio Cavicchi, Cristina Santini (2017), Case Studies in the Traditional Food Sector, Woodhead Publishing David J Schaffner, Food Marketing Management. An International Perspective Philip T. Kotler, Kevin Lane Keller (2015), Marketing Management Michael Solomon, Rebekah Russell-Bennett, Josephine Previte (2012), Consumer Behaviour Cong Nie, Lydia Zepeda (2002), A Lifestyle Segmentation Study of US Food Shoppers to Examine Organic and Local Food Consumption 1 The essence of marketing Manipulation or persuasion? It's not a Square, it's a Diamond! - The Case of Diamond Shreddies → Shreddies (biscottino) decided to change the shape of its cereal from a square to a diamond as a way to boost sales One of the most intriguing marketing campaigns in the past years has certainly been the Shreddies debate between the shape of the breakfast cereal. It all started when Shreddies decided to change the shape of its cereal from a square to a diamond as a way to boost sales. This led to a large debate as to which type of Shreddies cereal was better. With this slight change in their product, Shreddies has continued to maintain their high sales. how a slight (if any) change to a product could revive an entire cereal brand? “45 degree rotational technology” was hardly a technological advancement, definitely not enough of an improvement to justify a new product. Understand this campaign as an attempt at product differentiation. The company’s use of a voting system (diamonds vs. squares) was also a very creative way to sell the idea that the two products were very different.they did not sell a product, rather an idea. thinking of real-world examples of companies selling ideas and not products. I believe that this campaign was certainly an excellent example of just that. Persuasion: humour, interacting, understanding and respecting your customer can be effective methods of persuasion; marketing is persuasion, not manipulation. How to define marketing 1. a set of integrated instruments 2. integrated decision making process 3. integrated enterprise function 4. concept of achieving company goals 5. business organization and management concept 6. concept and way of thinking (philosophy) Outstanding marketing thinkers: Peter Drucker (1909 – 2005) (the man who has invented management) ○ The only business goal is to create a customer ○ The goal of marketing is to know the client's needs so well and understand them so that products and services sell themselves as the result of optimal adaptation to these needs ○ Marketing is a business management philosophy. It must cover the entire company, permeate all functions. 2  Theodore Levitt (1925 - 2006) (the author of the term „globalization” and „marketing myopia”) ○ Market is an area of satisfying consumers needs ○ The goal of marketing is to create and retain customers ○ The goal of marketing is to recognize what customers need and want, and to make an effort to meet these needs and desires, assuming that: 1) it is consistent with the company's strategy; 2) the expected rate of return is in line with the company's goals. Philip Kotler (1931 - ) (The marketing guru, the father of marketing)) ○ Marketing aims to meet customer needs and wishes through the exchange process ○ To be successful in business today, it is not enough to persuade the customer to buy a product, but to make him remain faithful to him. What about profit? “Profit is not an explanation, cause or rational premise for business behaviors and decisions, but rather a test of their legitimacy.” (Peter Drucker) VS “Marketing is a management process responsible for recognizing, anticipating and meeting customer needs in a way that ensures profit.” (British Institute of Marketing) American Marketing Association The AMA’s definitions of marketing are reviewed and reapproved/modified every three years by a panel of five scholars who are active researchers. 1935: Marketing is the performance of business activities that direct the flow of goods and services from producers to consumers; 1985: Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives; 2004: Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders; 2007: (2017) Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. Key aspects of the concept of marketing 1. The ideological aspect Conscious orientation of the entire organization. Consumer needs – as the foundation 3  → Marketing is the orientation of the company, covering all links of the system, consisting in recognizing the needs of buyers and satisfying them in a more effective way than the competition using a properly shaped marketing offer. “Marketing is an administrative and social process through which individuals and groups obtain what they need and desire by the generation, offering and exchange of valuable products with their equals”. (P.Kotler) 2. The cognitive aspect Interdisciplinarity Observation and analysis of phenomena Patterns and models of behavior Marketing is constituted by art and knowledge The theory of marketing is based on: economics, statistics, sociology, psychology,and anthropology. 3. The strategic aspect Long-term goals Adaptation to changes in the market environment Consistency with the company's strategy 4. The informative aspect Systematic market research Selection and storage of market information Analysis, diagnosis and forecast 5. The system aspect The systemic nature of marketing activities 4  Marketing as a subsystem in the organization 6. The instrumental and functional aspect The goals are achieved through an integrated set of instruments and marketing activities (marketing mix) Marketing system is an integrated set (system) of instruments and activities related to market research, based on market rules of conduct (L. Garbarski, I. Rutkowski, W. Wrzosek) Marketing rules define market research, marketing tools and marketing activities (instrumental and functional sphere) 7. The structural aspect Marketing is a structured category Integration of functions, activities, instruments and decisions based on market rules of conduct 8. The organizational aspect Properly shaped organizational structure Institutionalization of the system as well as decision-making and coordination processes 9. The segmentation aspect Recognition of potential market heterogeneity Searching for differences and dividing the market into segments 10. The social aspect Marketing decisions are determined by social factors Marketing activities influence social environment Evolution of company orientation toward the marketplace 1. The production concept 2. The product concept 3. The selling concept: It holds that consumers and business believe in this concept think that leaving alone the customers will not help. Instead there is a need to attract the customers towards them. They 5  think that goods are not bought but they have to be sold. The basis of this concept is that the buyers can be attracted. Keeping in view this concept these companies concentrate their marketing efforts towards educating and attracting the customers. In such a case their main thinking is ‘selling what you have’ 4. The marketing concept 5. The holistic marketing concept The marketing evolution 1. Consumer goods 2. Industrial market 3. Non profit 4. Service marketing 5. Sector marketing (food system) 1. Marketing 1.0: product-centric: selling what we make 2. Marketing 2.0: consumer-centric: knowing consumers and meeting their needs 3. Marketing 3.0: Values-driven: beyond products, sharing beliefs and making the world a better place! 4. Marketing 4.0: digital evolution: connecting in a fragmented world! Dominant logic Goods-Dominant Logic Service-Dominant Logic SDL (Vargo, Stephen L.,Robert F. Lusch): They describe a clear alternative to the dominant worldview of the heavily planned, production-oriented, profit- maximizing firm, presenting a coherent, organizing framework based on ten foundational premises. Customer-Dominant Logic (Heinonen, Kristina) Foundational premise of SDL with the Axiom status Currently, S-D logic has eleven foundational premises (FPs). Five of these have been identified the axioms of S-D logic (Vargo and Lusch, 2016), from which the other FPs could be derived. FP1 Service is the fundamental basis of exchange FP6 Value is co-created by multiple actors, always including the beneficiary: the actions by customers within a market always provide service value to the companies they interact with by expanding their knowledge and ability to make beneficial decisions in the future. This differs from models in which a manufacturer creates value and a purchaser consumes it in exchange for their financial resources. FP9 All social and economic actors are resource integrators: The companies and consumers operating within an economy are part of a larger system. How they combine the services provided from multiple sources determines the value provided by an individual service that a company offers. 6  FP10 Value is always uniquely and phenomenologically determined by the beneficiary: A service's value links directly to the value the consumer feels they can extract from its use. This means the value provided by one party, for example, the producer to the consumer or the consumer to the producer, exists only to the degree determined by the recipient, and not the service provider. FP11 Value cocreation is coordinated through actor-generated institutions and institutional arrangements: institutions are humanly devised rules, norms, and beliefs that enable and constrain action and make social life predictable and meaningful. Institutions and institutional arrangements—higher-order sets of interrelated institutions—enable actors to accomplish an ever-increasing level of service exchange and value cocreation under time and cognitive constraints in service ecosystems. This benefit, however, comes at a potential expense, as institutionalization can also lead to lock-in. Value in marketing perceived value value proposition value-in-use value-in-context value-in-experience 7 Immutable laws of marketing The 22 immutable laws of marketing (Al Ries, Jack Trout) Law of leadership: better to be first than to be better - brand as names of the category (bic, pampers, scottex) What if you can’t be first? You still can be unique, different, the only one → set up a new category! Law of the mind: better to be the first in the mind than to be first in the marketplace. Law of perception: marketing is not a battle of products, is a battle of perceptions A perception that exists in the mind is often interpreted as a universal truth. (es. vino in bottiglia è più buono che in cartone) Law of exclusivity: Two companies cannot own the same word in the prospect’s mind. (es. fast only linked to McDonald’s, not burger king) The Law of Perspective: Marketing effects take place over an extended period of time. The long-term effects are often the exact opposite of the short- term effects. (es. 50% discount) The Law of the Opposite: If you are shooting for second place, your strategy is determined by the leader. Es. you counterpose to the leader. The Law of Resources: Without adequate funding an idea won’t get off the ground. Ideas without money are worthless. 8 The market environment What is a market? What is a transaction? What does macro- and micro-environment consist of? What is competition and under what market conditions does this process take place? How to identify a direct, substitute and potential competitors? How can we define the notion „market” ? Market is a place where sellers meet buyers. Market is about all conditions leading to a consensus between the supply and demand side: products, entities, place. Market as a sector of specific products - A product is a conventional discriminant of the market (es. mercato di penne) - A need as a criterion for market identification (es. bisogno di nutrirsi) es. mercato di libri risponde a bisogno di informazione, ma anche cose digitali, social, giornali ecc possono competere sullo stesso bisogno. Market as a group of specific entities 9 A settore/ramo corrisponde segmento di mercato. Market – a geographical dimension Why is this dimention so essential? What criteria should be used to determine: Worldwide market EU market Foreign market: quando esporti Internal market: nazionale Local market: regionale (es. famù) Transaction: Exchange of goods or services between a buyer and a seller. Every transaction has three components: (1) transfer of good/service and money, (2) transfer of title which may or may not be accompanied by a transfer of possession and (3) transfer of exchange rights. Two main types of Economic Systems: - Command Economy, Socialism - Market Economy, Capitalism The fundamentals of a market economy Private property Striving for profit and satisfaction Competitive conditions Freedom of choice Equilibrium - the state in which market supply and demand balance each other at given, stable prices. Permanent imbalance as a reason for marketing activities. Seller’s market vs buyer’s market A buyer's market refers to a situation in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations. A seller’s market refers to a situation in which demand exceeds supply, giving sellers an advantage over purchasers in price negotiations. 10 Macroenvironment STEP : es. in Europa, contesto Technology push & market pull New technologies Globalization Demanding consumers What are the consequences for marketing? The company's attitude towards changes in the environment passive attitude reactive attitude proactive attitude Phenomenon of competition Conditions: at least two sellers on one market conflict of interest Types of competitors Direct competitor Substitute Potential competitor Features Type of competitors Direct Substitute Potential Product the same different same/different Need the same the same at least one is the same and at Buyer the same the same least one is different Market the same the same Levels of competition internal: stesso brand diverse linee, es. gusti succo 11  the brand level: (same quality/price), different brand, stesso prodotto the industry level: ogni brand gareggia contro gli altri, segue i trend the product form: competizione con i substitutes (stesso bisogno, prodotto diverso) general competition: no relativo a nessun settore, ma es. devo comprare macchina e quindi risparmiare, aka compro meno prodotti o più cheap Market structures and marketing tasks Pure competition Oligopoly Imperfect/monopolistic competition: es. apple Monopoly 12 Environment analysis Industry: "A group of companies that produce similar or identical products or services that are sold to the same market within a specific geographic market." Sector: "A broad area of the economy where businesses share the same or a related product or service." ex. Dairy, Confectionery, Meat, Bakery, Soft Drinks The marketing management process takes place at three levels at least: enterprises as a whole strategic business units products Strategic Business Units (SBUs) Definition: "SBUs are distinct parts of an organization with its own vision and direction.", in one company (es. Unilever has sbus, each of them with its own competitor) Explanation: "Within a large company, different units may operate as independent businesses with their own strategies and market focuses." Strategic Groups Definition: "Firms in an industry with similar strategic characteristics, following similar strategies, or competing on similar bases.", group of companies in one sector (es. the competitor of Unilever detergent brand are other detergent brands) Example: "In the food industry, companies may be grouped by product type, market segment, or brand positioning." Porter's Five Forces Model Purpose: "A tool for analyzing competition within an industry." Five Forces: 1. Threat of New Entrants: "How easily can new competitors enter the market?" 2. Bargaining Power of Suppliers: "Can suppliers control prices or quality?" 3. Bargaining Power of Buyers: "Can buyers demand lower prices or higher quality?" 4. Threat of Substitute Products or Services: "Are there alternatives available?", main factor is technological advancement 5. Industry Rivalry: "How intense is competition among existing companies?" 13 Value Chain Primary activities transform the input into output, and create the value for customer. But it’s possible only thanks to support activities. Do the company operate on the highest possible level on each link? Can every link use all the input from the previous one? Because if outbound logistic can’t use all the input from operations, it goes wasted → we don’t need all of that. 14 "BCG Matrix" Purpose: "A framework for evaluating a company's SBUs or products based on market growth and market share." Market share in relation to our best competitors (=market competitiveness), and Market attractiveness. Categories: ○ Stars: High growth, high market share products → should invest here, they have potential. ○ Cash Cows: Low growth (market attractiveness), high market share products (company competitiveness) → should take the money from them to finance marks and star. ○ Question Marks: High growth (=very attractive market), low market share products → invest or discard. ○ Dogs: Low growth, low market share products → discard, liquidate or change if your market share is higher than the best competitor, you’re towards the cow. If not, you’re towards the dog. Same for market growth, but the market growth rate gets compared with the GDP. The SBU increase sales rate is the arrow, to show the potential market share. Exercise: GDP = 3% SBU sales Market growth SBU market SBU increase rate rate share competitor market share SBU A 9% 5% 23% 20% SBU B 3% 1% 34% 14% SBU C 7% 9% 7% 13% 15 SBU D 4% 2% 8% 17% what to do: ex. A → look at the market share (23%) and compare it with the competitor market share (20%). Since 23>20, we’re more towards the cow than the dog. Now we confront the market growth rate (5%) with the GDP (3%); since 5>3, we’re more toward the stars. For putting the arrow, we look at the SBU sales increase rate: since it’s higher than the market, we go toward higher market share. "Nestle Case Study using BCG Matrix" Stars: Nescafe, Nestle Water Cash Cows: Maggi noodles, nesquik Question Marks: milk products, chocolates, confectioneries Dogs:, Milo SWOT Analysis SWOT analysis is a strategic planning tool used to identify and analyze the Strengths, Weaknesses, Opportunities, and Threats related to a business or project. It helps companies align their strategic positioning with market realities. 1. Strengths Definition: Internal attributes and resources that support a successful outcome → Positive, internal Typical Factors: ○ Brand Reputation: A well-known, trusted brand can command loyalty. 16  ○ Product Quality: Superior quality can attract and retain customers. ○ Innovation: Unique products, technology, or processes. ○ Financial Stability: Strong cash flow and profitability allow investment in growth. ○ Human Resources: Skilled workforce or experienced leadership. ○ Operational Efficiency: Efficient processes that reduce costs and increase productivity. 2. Weaknesses Definition: Internal factors that hinder performance and growth → Negative, internal Typical Factors: ○ High Costs: Production or operational costs that may reduce profit margins. ○ Limited Product Range: Lack of variety can limit market appeal. ○ Poor Brand Recognition: Lesser-known brands may struggle to compete. ○ Outdated Technology: Use of inefficient or obsolete tools and systems. ○ Weak Financial Position: Limited cash reserves or high debt levels. ○ Dependence on Key Staff: Vulnerability if critical employees leave. 3. Opportunities Definition: External factors that could support growth or improvement → External, positive Typical Factors: ○ Market Growth: Increasing demand in the industry or specific product category. ○ Technological Advancements: New technology that can streamline processes or create new offerings. ○ Expansion Potential: Opportunities to enter new markets or customer segments. ○ Shifts in Consumer Preferences: Changes in tastes that align with the company’s strengths. ○ Favorable Government Policies: Tax benefits, subsidies, or regulations that encourage business growth. ○ Strategic Partnerships: Potential collaborations with other companies or organizations. 4. Threats Definition: External factors that could negatively impact the organization → External, negative Typical Factors: ○ Intense Competition: Rival companies that could erode market share. 17  ○ Economic Downturns: Economic slowdowns that reduce consumer spending. ○ Regulatory Changes: New laws or regulations that increase compliance costs. ○ Supply Chain Disruptions: Unreliable suppliers or raw material shortages. ○ Technological Disruption: Innovation by competitors that may make current products obsolete. ○ Changing Consumer Preferences: Shifts away from the company’s current offerings. Strategic Planning: Companies leverage strengths and opportunities, while minimizing weaknesses and countering threats. Product Development: Identifying market gaps and aligning product offerings with strengths. Competitive Analysis: Understanding the company’s position relative to competitors. Risk Management: Preparing contingency plans for identified threats. 1. Weak competition: opportunity 2. Increase of environmental protection requirements: opportunity or threat, depends on our situation (if we already abide by that law) 3. Low interest rate: depends 4. High market price of products in the sector: external, positive 5. High price compared to competitors' prices: internal, negative 6. High unemployment rate: external, 7. Positive brand image: strength 8. Coronavirus epidemic: external, but it depends on the type of the organization "Strategies for Amy’s Organic Soups" growing consumer awareness about harmful ingredients of packaged foods in general: Threat high profits: Strength poor performance of units/branches in some regions: Weakness growing market for ready-to-use food items: Opportunity increasing popularity of instant soups in the market: Opportunity safe ingredients of Amy’s Soup: Strenght not easy-to-use packaging of Amy’s Soup: Weakness Amy’s Suop products popularity is high: Strenght high competition in the market: Threat availability of funds from staheholders to invest: Strenght Strategies: Opportunity: growing market for instant foods including soups Strenght: Funds from stakeholder Strenght: Product popularity 18 Strategy: Open more factories Strenght: safe ingredients of the product Threat: Awareness of food safety Strategy: Launch a campaign about safety of Amy’s food Weakness: inadequate packaging Strenght: fund availability Opportunity: growing market Strategy: Sell soups in micro-weavable containers Weakness: Poor performance by some units Threat: Huge competition Strategy: Close down loss-making units 19 Marketing research Marketing structure: → market → information → organization → marketing toolkit → Marketing research To create products and marketing offer that meet customers' expectations → identify customer expectations and perceptions → Marketing research Definition: Marketing research involves systematically designing, collecting, analyzing, and reporting data relevant to a company's specific marketing situation. Types of Marketing Research Firms: 1. Syndicated-Service Research Firms: Gather and sell consumer/trade information for a fee. 2. Custom Marketing Research Firms: Hired for specific projects. Budget-Friendly Research Tips: Engage students/professors. Use the internet for data collection. Marketing Research Process Outlines steps from converting management dilemmas into research questions to analyzing and presenting findings. 1. Convert management dilemma into research questions 2. Determine data sources and research methods 3. Select a research sample 4. Design research instruments 5. Carry out pilot studies 6. Collect the information 7. Analyze the information 8. Present the findings Management dilemma → research problem Examples: Questions to identify decision and research problems, such as: ○ "What kind of customers are interested in high-protein products?" ○ "Should we introduce new yogurt flavors?" 20 Types of Research: Comprehensive Research (Census): A census is an attempt to gather information about every member of some group, called the population. Non-exhaustive Studies (Sample): A sample allows the researcher to gather information from only a part of the population. Key Concepts in Sampling: Target Population:the entire population, or group, that a researcher is interested in researching and analyzing; Sample Unit: any single person, animal, plant, product or ‘thing’ being researched; in the context of market research, a sampling unit is an individual person - singular value within a sample database. (ex. research using a sample of university students, a single university student would be a sampling unit) Research sample: sampling units are taken from an entire population, such as a country, customer database or region, and put into a smaller group to form a research sample. Sample selection and Representativeness: A representative sample is a sample from a larger group that accurately represents the characteristics of a larger population. Sampling Procedures: ○ Probability Methods: Each population unit has equal chances of selection. Depending on the size of the larger population, it’s possible to inadvertently over-sample one portion of it. ○ Non-Probability Methods: selecting your sample, rather than leaving it to chance. However, as you’re selecting the sample, this can result in bias in some surveys as you’re aware of each participant’s characteristics. Data Sources: Secondary Data: Internal sources, government publications, periodicals, and commercial data. Primary Data: Original data collected for specific research, by the researcher himself. Main Participants in Research Process: Poolster: provide questionnaire, collect questioner Moderator, reviewer: engage in process of collecting data, or conduct the experiment, saving the answers Respondent: the one who answer Research methods: survey: no direct contact with respondent, they just get the questionnaire → close ended questions, anonymous but they are not encouraged interviews: opposite method, the interviewer in asking the question and there isn’t anything to fill, just answer, open-ended question but the respondent knows they’re being watched so they’re not 100% honest and it’s time consuming 21  experiment: simulation of real circumstances,with manipulation of the situation, we use scenario and other tools, like technology devices, or consumer senses; observation: simulation of real circumstances, and see what happens, without trying to affect them. Research Methods and Approaches: ○ Exploratory Research: Identifies potential solutions; assessing a situation where the problem isn’t clear,to gain a better understanding. ○ Descriptive Research: Quantifies demand, describing the characteristics of the population, phenomenon or scenario. ○ Causal Research: Tests cause-and-effect relationships between two or more variables. Quantitative research: expressed in numbers and graphs. It is used to test or confirm theories and assumptions. This type of research can be used to establish generalizable facts about a topic. Common quantitative methods include experiments, observations recorded as numbers, and surveys with closed-ended questions. Qualitative research: expressed in words. It is used to understand concepts, thoughts or experiences. This type of research enables you to gather in-depth insights on topics that are not well understood.interviews with open-ended questions, observations described in words, and literature reviews that explore concepts and theories. Quantitative Methods: PAPI: Paper and Pencil Interviewing. CAPI: Computer-Assisted Personal Interviewing. CATI: Computer-Aided Telephone Interviewing. CAWI: Computer-Assisted Web Interviewing. Qualitative Methods: FGI: Focus Group Interviews. IDI: Individual In-Depth Interviews. Mystery Shopping: Checks service quality, compliance, and product information. In-Hall Test: Qualitative testing within a controlled environment. Exploratory Descriptive Casual Emphasis Discovery of Frequence of Determine cause ideas and occurrency and effect insights Features Flexible, Hypotheses Variable control unstructured based, structured 22 Techniques used FGI, IDI, Surveys, Quantitative qualitative observation, research, research panel data, experiments quantitative Expert panels research Questionnaire construction rules Make the questions as simple as possible (do not use questions that include multiple ideas or two questions in one). Avoid jargon (=technical language). Steer clear of sophisticated or uncommon words. Avoid ambiguous words (last month, is it the month before or the 30 days before?). Use response bands instead of precise numbers. Ensure that fixed responses do not overlap. Allow for "other" in fixed-response questions. Ask for sensitive data at the end (age for someone, gender&income - put the prefer not to say). Open end questions: - Qualitative data - They don't suggest an answer - Respondents are reluctant to respond - More difficult to analyze - qualitative analysis Closed-end questions: - set of answers - easy and quick answers - quantitative data - statistical analysis Pilot studies: a small scale preliminary study conducted in order to evaluate feasibility, duration, cost, adverse events, and improve upon the study design prior to performance of a full-scale research project. 23 24 Segmentation Why do consumers buy products? Do marketers create needs? Discover existing needs, make needs more apparent Change importance and intensity of needs Create desires and shape product/brand attitudes Needs: Essential for thriving Wants: Desire satisfying a need Motive: Activated need driving action Expectations: Desire for need satisfaction Maslow’s Hierarchy and Decision-Making Decision-Making process 1. Problem recognition 2. information search 3. evaluation of alternatives 4. decision 5. post-purchase Consumer Roles: Influencer: who is important for the consumer (family, friends, celebrities, etc.) Decision-maker: understand who between payer and purchaser is the decision maker (the mother decides which food to buy for the kids) Bottom line: they’re different between each other; we may have all 3 roles in once, e.g. if I buy the product for myself payer: gives the money (you’d say “it’s cheap”) 25  purchaser: goes to the shop, physically does it (“easy to get, time convenient”) user/consumer: the one that uses it (“good quality, functionality”) Risks in Food Purchases: Financial: you payed more than you could (ex. another store, another brand that are providing the same value but are cheaper) Functional: the product does what it’s supposed to do, but you expected more (ex. compared to the commercial) Physical: product may hurt you or make you sick (food safety, allergens…), taste is different that what you expected Social: associated with things that people surrounding you will not accept (ex. some brands, smoking) Psychological STP Framework Goal: Maximize usability by offering limited solution options With so many brands, each with so many options, each with so many characteristics, it’s difficult for consumers to choose. But if we give them too few choices, they will complain that there are not enough offers. When given the possibility to choose between two products with the same price but one has more product in it, consumers buy the second one but this usually leads to food waste. Principles of Decision-Making: preference for more options, self-decision, business importance, variety in individual needs STP Elements: Segmenting: Dividing markets Targeting: Choosing market focus Positioning: Creating distinct market space Market Segmentation Definition: Dividing a market based on distinct buyer needs/behaviors, in order to address customers: it’s not the latter anymore that has to search for a product/offer Segment Characteristics: Similar needs/wants within groups Niche Marketing: Narrowly defined groups, often sub-segments Target Market: Focus of marketing efforts Examples of Targeted Offers: Athletes: Comfortable, lightweight products Stressed individuals: Magnesium-infused products 26  Pregnant women: Sodium-free products Businesspeople: Elegant packaging Segmentation Variables (descriptors): Geographic: nations, states, regions, cities, neighborhoods —> mainly if we are local and want to know where to put our message, sometimes also important in regards to climate Demographic: age, sex,family size cycle, income, occupation, education, religion Psychographic: health conscious, values sustainability, prefers premium brands behavioral: consumer knowledge, attitude, use or response to a product —> where will you purchase? Online or in a market? Effective segmentation involves using specific criteria and descriptors to ensure each segment is actionable, measurable, and profitable. - segment criteria: to determine if the segment is viable, like - measurability (it can be quantified) - substantiality (is large and profitable enough) - accessibility (reachable and serviceable through marketing channels) - differentiability (respond uniquely to different marketing strategy) - actionability (company has resources and capability to target it) - segment descriptors: specific variables used to define each segment, to differentiate them Demographic vs. Psychographic Variables Consumers can be divided by gender but to understand their lifestyle is more difficult —> they can have the same demographic profile but very different psychographic characteristics (ex. sister have the same demographic but can make very different decisions). Psychographic are more important, less easy to categorize consumers based on that (of course age it’s easter). VALS Framework Psychographic tool used to segment consumers based on psychological traits, motivations, and resources. Two key dimensions: Primary Motivation: what drives a consumer’s choices Ideals: knowledge, beliefs, and principles to guide their decisions. They value functionality and reliability over status or prestige achievement: success-oriented and strive for products that reflect success and social status. They are often influenced by peer approval. self-expression: variety, excitement, and self-discovery. They value experiences and products that allow them to express their individuality and creativity. Resources: Access and means available 8 categories (from high resources to low resources): innovators, thinkers, achievers, experiencers, believers, strivers, makers, survivors 27 More or less 200 questions with “completely agree”, “agree”,… options. A Priori segmentation Market segmentation approach where segments are defined in advance based on existing knowledge, theory, or predefined criteria, rather than through direct data analysis. In contrast to other methods, such as post hoc segmentation, which uses data-driven methods (like cluster analysis) to find natural groupings within a dataset, a priori segmentation begins with predefined segments based on specific characteristics or demographics. Quite simple segmentation: market —> segmentation criteria —> classification of consumers —> market research —> segments profiles Ex. Female, Male. Young, Medium, Adult. —> 6 segments After market research, it’s possible to find out that more segments behave in the same way. Post-Hoc/a Posteriori Segmentation Segment profiles AFTER market research. Process: Analyzing consumer behavior, clustering by similarity; uses statistical analysis to identify natural clusters or patterns within the data. Examples (Food Segments): House Proud, Trendsetters, Entertainers, Old-fashioned Cooks, Zappits, Take-it-aways, Just Feed Me Case Study - "Food Enthusiasts": Mostly female, educated, fitness-oriented, favor organic and fresh food Characteristics: Frequent shoppers at specialty stores, prioritize health/safety, often follow special diets Cooking Habits: High frequency of cooking, organic food preference Targeting Types Undifferentiated Marketing: Broad approach across market Differentiated Marketing: Tailored offers for each segment Single-Segment Focus: Concentrated effort on one segment Positioning Definition: Crafting company’s image and offering to occupy a specific market space Product Positioning: Aligning with product features. You compare your offer with other products in regards to price, availability, some functions,… Brand Positioning: Mindshare with consumers, what do they think when they see your image/brand (it’s innovative, green, associated with something else…) 28  Positioning Goal: Strengthen brand memory for potential benefits Quick test: which sentence is true A consumer and a buyer are always the same person A consumer and a buyer are always two different people Always the buyer is a consumer, but not always the consumer is a buyer None of the above answers is correct 29 Marketing mix Marketing Mix: A combination of factors controlled by a company to influence consumer purchases. (different from promotion mix, which is for communicating) Neil H. Borden introduced marketing mix concepts in 1964, listing the following elements: (something linked to product, something to communication) 1. Product Planning 2. Pricing 3. Branding 4. Channels of Distribution 5. Personal Selling 6. Advertising 7. Promotion 8. Packaging 9. Display 10.Servicing 11.Physical Handling 12.Fact Finding and Analysis Elements of the Marketing Mix for Manufacturers: 1. Product Planning: Policies on product lines, markets, and new products. 2. Pricing: Price levels, specific pricing tactics, and margin policies. 3. Branding: Trademark selection, brand policies, private labeling. 4. Channels of Distribution: Distribution paths from plant to consumer. 5. Personal Selling: Approach to selling across manufacturing, wholesale, and retail. 6. Advertising: Budgeting, image creation, advertising mix. 7. Promotion: Consumer and trade promotion strategies. 8. Packaging: Package and label formulation. 9. Display: Display methods to support sales. 10. Servicing: Customer service policies. 11. Physical Handling: Warehousing, transportation, inventory. 12. Fact Finding and Analysis: Marketing operations data management. 4P’s and 7P’s of Marketing 1969 (Eugene Jerome McCarthy): grouped the tools and proposed the 4P’s: 1. Product 2. Price 3. Place 4. Promotion 7P's (expanded for service marketing, which is intangible, like hairdresser): Product, Price, Place, Promotion, People, Physical Evidence, Process (is different from service to service - ex. hairdresser 30  and restaurant; it has to be the same each time in the same place) Service characteristics: Immaterial, heterogeneous, intangible, inseparable, perishable 5P's (Alternative): Product, Price, Place, Promotion, People (or Packaging for FMCG/SMCG = fast moving consumer good/slow moving). people are important because with products with many features (ex. tv, smartphone), the seller can explain to the consumer each specific —> not so important with fast moving products (like food) Evolution of the Marketing Mix 1990 (Robert Lauterborn): Transformed the 4P’s to 4C’s: - look from consumer perspective, not new tools 1. Product (from producers perspective) -> is the answer to customer needs, Customer Wants. Is the first step to service dominant logic 2. Price -> Cost to the Customer, more than only money (also time), all that is sacrificed to get the product 3. Place -> Convenience, sometimes it means that it should be available in specific places (ex. a specific polish cheese made in the mountains tastes differently when bought near the mountains than in any supermarket, some customers just buy it when they are in the mountains) 4. Promotion -> Communication 2005 (Chekitan Dev and Don Schultz): Proposed SIVA model (we can compare it to 4C’s): 1. Solution: Solve customer problems. Customers are looking for solutions. 2. Information: Access to information. Where can the customer learn more about it? 3. Value: Consideration of total cost. What value does the customer need to sacrifice to get the solution? 4. Access: Availability. Where can the customer find it? 4P’s 4C’s SIVA Product Customer Wants Solution Promotion Communication Information Price Cost Value Place Convenience Access In practice: the model tells us something, we don’t have to apply everything to our business. What is the criteria for choosing the tool we 31 want to spend in? → Does the element satisfy customer needs? ex. if they are not sensitive for price, no need to focus on it Synthetic Criteria for Marketing Mix: Expenditure level for the proposed component Recorded level of customer response flexibility Criteria for equal element recognition Case Study: PepsiCo’s Marketing Mix (4P’s) Overview: American multinational company in food, snack, and beverages; formed in 1965 (Pepsi-Cola and Frito-Lay merger). Product Categories: Beverages: Diet Pepsi, Gatorade, Mountain Dew, Tropicana, Aquafina, etc. Savory Snacks: Fritos, Cheetos, Ruffles, Lays, Tostitos, Doritos. Other Foods: Cereals, cakes, and mixes. Initiatives: Baked Snacks Unit: Focus on nutritious snack and food options. Sustainability: Increased use of recyclable plastic bottles. Price Strategy: Average pricing to maintain customer loyalty without low-quality perception (if you lower price, looks like lower quality). External costs (transportation, ingredients) may drive price increases. Relationship with hypermarkets pressures price maintenance through overhead reduction. Place Strategy: Extensive market presence that depends on their strong distribution network, primarily US-focused but internationally present. Promotion Strategies: Significant marketing budget, over $2.5 billion in 2016. Digital Advertising: Large portion directed to online engagement. Goals: Increase sales, enhance customer relationship management (CRM), and boost engagement. Channels: Television, internet, and social media. Quiz: In the marketing mix toolkit, the product primarily satisfies: a. Cost to the customer b. Convenience c. Communications d. Customer wants 32 1st P: Product Product: Anything that can be offered to satisfy a want or need, including physical goods, services, events, places, organizations, persons, information and ideas ex. waste can be a product if there is someone in the market who is interested in buying it and using it for something ex. services like hairdressers, education (university sells the service of teaching but when it comes to online modules it offers information) ex. events like wedding planning, events can also be used as a marketing communication tool ex. places (are mega products with 3 spheres: for tourists, for citizens, for investors) like a piece of land in agriculture, a city or a country ex. organizations like in the stock market (where you can earn on the organizations) ex. persons (we don’t possess/own these people but get some value from them) as someone we can refer to like celebrities, politicians ex. informations and ideas (nowadays it’s very important) like an idea that can be sold in the market (ex. I have the idea of how to use some ingredients to create more sustainable feed but I have no money to commercialize it, I will sell it) Classifications: ○ By Durability and Tangibility: Durable goods (SMCG - Slow Moving Consumer Goods): quite expensive, we accept a certain level of risk when we buy it, because they last more than food Nondurable goods (FMCG - Fast Moving Consumer Goods): goods that are tangible and we buy/replace very often, here there is an habitual behavior that saves consumers time Services ○ By Relation: Substitutionary products: products that can replace each other. If a substitutionary product rises in price then consumers will go for another substitutionary product that is less expensive. Complementary products: ex. bread and jam. If the complementary product is too expensive, your connected complimentary product will be bought less. ○ Product Classification that depends on Shopping Habits: Convenience goods: Purchased frequently with minimal effort. Depend on habitual decisions, consumers do not think when buying them —> position the product on the shelves directly in from of them Shopping goods: Compared for quality and price before purchasing. Loyalty fenomena is not easy to set but after setting it (after people learn this) it will stick with the customers, like wine or expensive things Specialty goods: Unique characteristics, often sought after. Bought very rarely like cars, apartments Unsought goods: Not actively sought by consumers. Consumers know those goods exist but don’t buy them ex. cigarettes to a non smoker, dairy-products for people lactose intolerant —> if 33  your product is unsought goods, you charge the segment or innovate your product ○ Tangibility-Based Classification: Classic material goods (pure product) Goods with associated services that support the basic purchase (assembly for furniture) Hybrid (mix of goods and services): ex. restaurant, not only food but also the ambience Basic service with accompanying goods Classic service (pure service) Service: - intangible: you need to provide fiscal evidence - inseparable: why people are important - perishable: why we need to adjust place - heterogeneous: why we need to adjust procedures Products from buyers’ perspective: It is a "set of features" providing the buyer with core functional value specific to a given product category, and a set of additional values that may be necessary or preferable. ex. a cup, one function but has different designs, shapes ecc based on values: convenience, reminding of something (es. tourism, gift) Five Product Levels Product Levels: ○ Core Benefit: The fundamental need or benefit, purpose of the product, basic function - food → satisfy hunger ○ Basic Product: The tangible product itself, the recipe/technology. ○ Expected Product: Attributes buyers typically expect; if not met, price should be lower. ○ Augmented Product: Additional features or benefits. The uniqueness of the product like heathy, organic. Brands have specific identity, specific value (shape, color, packaging if it is different from the others) ○ Potential Product: Future possibilities of the product. How will the product be developed in the future? Just ideas for now ex. vegan chili bean soup core benefit: hunger, nourishing basic product: specific recipe + the fact that’s liquid + ready to sue expected: good, ready to go, looks like picture, satisfies hunger augmented: vegan, brand potential: change the recipe, seasoning How can producers differentiate the offer/food products: form style design features degree of customization: provide different ingredients separately so the customer decides on what to use 34  performance quality durability: the easiest way to expand the durability in the food industry is to use preservatives (the nowadays challenge of food innovation is finding natural preservatives) ecc McDonanld said its products are healthy in the sense that they will not harm consumers even in the long run (they have preservatives). BurgerKing answered with a commercial showing how their products will look like after a while with mold because they don’t use preservatives. Product Life Cycle (PLC) - Theodore Levitt Stages: ○ Introduction: Product launch, low sales (low increase rate), high cost. ○ Growth: Rising sales, increased market acceptance. ○ Maturity: Peak sales, slowing growth, stable. ○ Decline: Decreasing sales as interest wanes. Product Life Cycle – Sales and Profit Dynamics Detailed PLC Analysis (sales and profit behavior in each stage) ○ Introduction Stage: Initial costs with no profit, we are not able to cover cost with profit. The price here is usually quite high. The goal here is to prepare for the next stage, prepare infrastructure and marketing network. ○ Growth Stage: Rising sales and profit. If the growth starts, you need to cover the market as soon as possible, prepare lower prices to be competitive, expand product and develop. The goal here is to gain market share. ○ Maturity Stage: Sales peak, profit may stabilize or drop, not a big increase of market share, keep more or less the same level. The goal here is to keep this stage going as long as possible. 35  ○ Decline Stage: Decreased sales and profit. If market saturation happens: recall the product or rejuvenate it with innovation to give it a new life. Food products do not easily go to the decline stage, they have a never ending plateau ex. Nutella is in the maturity stage, not in the decline stage because they are continuously improving their product and recipe In the market you see different shapes, food products have more like never ending plateau (IX), sometimes we have cycle and recycle (I and II) (to analyze in the scale of one year, or several years), huge boost like Matcha nowadays in Poland (VII and VIII) New Product Perspectives & Diffusion of Innovations Consumer vs. Enterprise Perspectives on a new product: ○ From consumers: they have no experience with the product, they haven’t tried it. Focus on innovation, usability. Also an existing product that enters a new market (nail polish for men) ○ From enterprises: it’s a new line, no experience in selling this product, new market share, profitability. Maybe consumers have the experience but you don’t. Everett Rogers' Adoption Curve: describes stages of adoption from Innovators (rather younger, educated, more money, they take risks), early adopters (opinion leaders, they don’t want to spoil their imagine with something that has not yet been tested), early majority (they want to be safe, sure, they don’t want to risk), late majority, to Laggards. ○ Factors to consider for the diffusion of innovation: 36  competitive advantage: very important for innovators because they would like to be first and test everything that is different compatibility: the innovative product introduced to the market should be in line with the culture, the habits (ex. canned soup was not in line with polish culture because they cooked at home; hair product with an ad in the shower was not in line with polish culture because they had baths and not showers); technical compatibility as well (kellogs introduced ready to eat toast with jam inside but the infrastructure at home was not in line with this) simplicity: the solution should be understandable on how to use it possibility of trying: if the product is complex, you have to teach consumer how to use it, beta testing, free account for students, in the bank visibility of results: we need to see other people using this (very important for early majority, late majority and laggards) Triple chasm model enters Quick Test The situation when sales grows but the growth rate is increasingly slower, is typical for the stage of: a. Introduction b. Growth c. Maturity d. Decline 37 5th P: Packaging Packaging: Encompasses all activities related to designing, evaluating, and producing the container for a product. It's a marketing tool that builds brand equity and boosts sales. You can still consider it as a product when taking into account the B2B market. Key Functions of Packaging: Protection and preservation of the product. Aids in logistics, provides information, identifies the product and brand, creates public image, promotes, and boosts sales. Packaging as the 5th P alongside Product, Price, Place, and Promotion. Importance of Packaging as a Marketing Tool Reasons Packaging is Vital: Self-Service: Products often chosen based on packaging appeal. Consumer Affluence: Increased spending leads to higher packaging expectations. Company and brand image: Packaging helps shape company and brand perception. Innovation Opportunity: Allows for creativity and differentiation. If you don’t do product innovation then packaging innovation can at least be done to improve something. "Packaging protects what it sells and sells what it protects." Two basic functions here: marketing (sells) and sustainability (protects). Functions of packaging: Protection/preservation Logistics Information Brand identification Image creation Promotion Sales boosting Utility Ecological considerations PROTECTION/PRESERVATION Product protected from the environment + environment protected from being polluted by the product. LOGISTICS Transportation and storage. There are different type of packaging (primary, secondary and tertiary). INFORMATION In the European Union a list of mandatory information that must be printed on food packaging: name of the food ingredient list (including any additives) allergen information quantity of certain ingredients date marking (best before / use by) 38  country of origin, if required for consumer clarity (example: products that display on their packaging country flags or famous landmarks) name and address of the food business operator established in the EU or importer net quantity any special storage conditions and/or conditions of use instructions for use if needed alcohol level for beverages (if higher than 1.2%) nutrition declaration Consumer preferences towards information provided by Smart Tags: - interested in: detailed information about ingredients, how to store food, how to prepare food, shelf life, health information, real time information on freshness, recycling, personalized deals - not interested in: traceability, product origin, recipes, map/geodata, competition Benefits of Bar Codes (EAN-13): Acceleration of trade and reduction of expenses related to the movement of goods Save time spent on inventorying goods Improvement of interactions between trade and production Improvement of customer service (checkdesk, everything is in the system) Smart Packaging: Intelligent packaging with features like detection, sensing, recording, tracing, and communication to facilitate decision making to extend shelf life, enhance safety, improve quality, provide information, and warn about possible problems. 39  Comparison Table: Various smart devices with applications and disadvantages. ○ Barcodes/QR Codes: Inventory control, product identification. ○ RFID Tags: Supply chain management, asset tracking. ○ Time-Temperature Indicators (TTI): For chilled/frozen food. ○ Freshness Indicators: For perishable items like meat. ○ Gas Indicators: For foods with required gas composition. ○ Biosensors: Detects pathogens in perishable goods. BRAND IDENTIFICATION You can guess the brand even without seeing the brand name. e.g. Pepsi and Coca-cola bottles, if you cover the name you can still recognise which is which. IMAGE CREATION Milka changed its packaging during the years but there is consistency, you can always recognise it’s the same product. PROMOTION All information not required to increase the product's attractiveness: why it is healthy, what effects it gives, who recommends it, what a customer gains, if it’s green, endorsements (es. celebrities). Packaging Design Elements: Font, Color, Themes, Information, and Size: Tailored to create a brand image and appeal to specific demographics; also in the case of colors, green and brown are about ecology. 40  Gendered Packaging: Packaging targeting specific genders through font, color, themes (women: nature, family, friends; man: technology), information (women like to have a lot of information), size (for men products are bigger). Colors: they attract attention, affect if the packaging will be remembered, help to identify the brand, create the image (the color will be associated with the brand, e.g. Milka and purple), impression of apparent volume, highlight meaningful information. ○ Green implies sustainability (greenwashing often happens because of this). ○ In the consumer’s mind: milk in white box has better quality than milk in a gray box. Shape: effects ease of storage, transport costs, and sales efficiency. ECOLOGICAL CONSIDERATIONS "Reduce, Reuse, Recycle" in packaging. Trends in Food Packaging Emerging Trends: Technology-Enabled Solutions: very popular trend - how to provide information to consumers. Smart packaging like qr codes (especially used when it comes to wine) but consumers are not used to scanning them, they need to be educated. Emotional Engagement: connecting with consumers on a personal level, make brand more friendly. Vintage-Inspired Designs: nostalgia-driven packaging, old-fashion. Transparency and clear labeling: better than pictures, they show what’s inside, but the exposure to sun can damage the product, the non-visible parts can mislead the consumer (not nice looking, not that much inside). Increased portability: portable designs, very popular for one-piece packaging, can be for bikes or to walk. Personalization: tailoring packaging to individual preferences, apparent personalization, e.g. coke bottles with names, or nutella with names. Minimal Design: clean and simple aesthetic, a sort of art, consumers associate with high quality (modern and specific designs). Abstract Design: a sort of art, consumers associate with high quality (because the company must have invested in the packaging). Sustainability: eco-friendly packaging solutions (e.g. packages made out of potato peels); on another note, if you offer plastic, you should offer 100% recycled plastic. Wine in paper bottles is perceived as low quality. Shrinkflation: there is information that the packaging is less/smaller (e.g. from 15g to 12g). Downsizing: same as shrinkflation but without the information. Lowering package dimensions (e.g. smaller can diameter, not equal packaging in a cookie box, yogurts that have the same packaging but one is 350g and the other 500g) and lowering the prices but not proportionally. 41 Quick Test One of the negative and undesirable trends in food packaging, that includes manipulation, is: a. Using lots of graphics and colors b. Downsizing c. Technology enabled solution d. Standardization 42 Product - brand A brand is defined as a "name, term, sign, symbol or design, or a combination of these" intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers. Usually considered under “product” or instead of it. Instrumental Attributes Brand Name: What is a brand? First, it’s a name, but then it’s an identity system. Fairly short, easy to remember It should be associated with health, healthy diet, ecology, good taste The name should sound good in English The name should allow for expanding the range It may refer to certain characteristic functions, benefits, features It may provide information on the market segment for which the service is intended Country-of-Origin Effect and Consumer Ethnocentrism: like in water, it’s named after the location of the source; the product is associated with the place. Quality is associated with specific countries. Ethnocentrism is linked with preferring products of your own country. Logo/Logotype: Logo is only the picture and logotype is picture+text or just text. Usually we see the logotype, but sometimes the logo is so famous that it is associate with the text. Roles of Brands: Identifying: identify product directly with producer Distinguishing: by the name, font, logo Informing Guaranteeing: consistent quality of all the products of the brand Transforming: transform the feeling when using the brand (if you eat a food of a specific famous brand, you feel like it has superior quality) Symbolic: huge power, brand accepted in specific social circles and express belonging in the group (Es. expensive car), commonly associated with something Segmentation: your brand cannot cover both rich and poor segments, you name the product differently based on who it is for A set of value: image, something that stays in the brand, for consumers it’s really important (especially if the brand is green) Functions of Brands from Company Perspective: Communication: what we would like to communicate to our consumers Competitive advantage: by creating the image and value system we differentiate our brand from competitors 43  Customer relations: relationship with customers is created when a brand has an image Customer loyalty foundation Constant sales and stable market share Supporting or umbrella effect Selective rejection or ignorance Consumer attitudes towards the brand Rejecting: rejecting the name brand because of something - worst thing that can happen (some consumers rejected Russian brands after the war started) Ignoring: in some segments people don’t care about the name, they just look for the price - need to put a name with okay quality and low price Brand name recall: very dangerous level, the costumer remembers the name of the brand from somewhere and therefore buys it instead of brands they have never heard of (commercials where the brand name is repeated several times) Brand preference: consumer prefer some brand over another, if they see the first they will choose it Desire: in the shop there is no brand you like and desire, you will go to another shop to find it, you will put effort to find the product. True loyalty Product Mix vs. Brand Mix Assortment: all product/services offered by the company Line: a group of products that have common purpose (sweets, dairy, proteins, gluten-free,…), a line is homogeneous in regards to the purpose Assortment dimensions: ○ width: number of lines ○ length ○ depth: forms in which one product is offered (e.g. big, small) ○ consistency: your assortment needs to be consistent (e.g. dairy and cars, consumers feel that you are not expert in either) 44 Assortment Structure Example: How wide? 4 lines. How long is line 1? 3 main products. How long is the assortment? 10 products. How deep is your assortment? Take one criteria into account, es. size of packaging, if we have 3 different, we can say that is 3 level deep. This is the product architecture. Brand Architecture: 1. Branded house: you give one name for all products in the assortment, there is just the basic general brand name. You can optimize the market; by promoting the brand name, you promote the assortment. The guaranteeing function works very well. But if something happens within the brand then all the products will be affected. 2. Endorsed brands: provide partly both advantages and disadvantages 3. House of brands: opposite from branded house, in one assortment you have a lot of product names. Most common in the food sector because of food safety issues. If something happens within the brand then 45  usually no more than one product will be affected. Types of brands and their role: - endorser brand: helps you promote other brands - sub brand: in their name they have part of the main brand - product brand: brand that for consumers plays the main role - descriptors: like with google drive, google calendar - umbrella brand: small branded house within house of brands, covers specific products - branded differentiator: for ingredient or technical solution that are in the brand, same differentiation used in different products - co-branding: two or three brands organize common strategies (like encouraging sustainable consumption) Brand Identity vs. Brand Image Brand identity is how a company defines itself. Everything that distinguishes one brand from the other, everything that describes the brand, its features. Brand image reflects consumer perception, what is in the consumers’ mind. It’s an internal factor: the brand can manage its image. Branding Process To create the brand image using some identity system. Branding is endowing products and services with the power of a brand. Branding creates mental structures that help consumers organize their knowledge about products and services in a way that clarifies their decision making and, in the process, provides value to the firm. Rebranding Rebranding of Pepsi logo to affect/change the brand image. There usually is some consistency when a brand rebrands. 46 Brand Personality and Brand Archetype Brand personality is imagined as if the brand were a person/animal. The answer to the question “who would be the brand if it were a person?”. e.g. innocent: with a positive and kind speech this archetype sees the good in everything Kapferer’s Brand Identity Prism outlines elements of brand identity. All these features (personality, culture, self image, reflection, relationship, physique) describe identity and are communicated to consumers to create the brand image. If the identity and the image are in line, consumers 47 appreciate this more. Brand Equity The added value that a company generates from a product with a recognizable name when compared to a generic equivalent. Companies can create brand equity by making it: memorable, easily recognizable, superior in quality, reliable. Important elements to achieve brand equity are: 1. Familiarity 2. Relevance: refers to values, these values should be unique but also always important for consumers 3. Esteem: brand that supports somethings, all actions done by the brand should be appreciated in the market 4. Differentiation Brand Strategy Should we use a brand as a marketing tool? - Unbranded products - Branded products - Who is the brand owner? - private label - branded products - mixed strategy Brand Counterfeiting Counterfeiting of products and trademarks. Unauthorised use of the reputation of known brands. 48 Use of well-known brands and names to mark products from other product groups (e.g. Viagra energy drink or Visa condoms). Similar products that mimic packaging, visual identification system and trademarks of known products and brands. Counterfeit Consequences: decrease in sales of original products financial implication damage of brand image loss of buyers’ confidence Preventive and combating: registration of the trademark in the Patent Office placing warnings against counterfeit products in press advertisements and at press conferences negotiations legal proceedings Brand Positioning Objective reality is irrelevant: its perception by the consumer counts. Consumer perception is prioritized over objective reality. Positioning: a process of designing the offer and brand image, which aims to take a distinctive place in the awareness of the target market. Positioning focuses on creating a distinctive market image. e.g. beer commercials. Target market: football followers, men after 40. Lech wanted to broaden their market, started marketing campaigns and ads showing young people —> they rebranded their target market e.g. Kinder Bueno’s "Not Only For Kids" Campaign A new advertising campaign addressed the adult audience with sexy images of young men and women whose lips bore visible traces of chocolate. This campaign started in Poland in 2003 and continued until 2005, it included outdoor (billboards, citylight bus shelters and city buses) and ads in lifestyle magazines. The “Not Only For Kids” campaign attracted a lot of attention and achieved the goal of repositioning Kinder Bueno as a delicate chocolate bar for both kids and adults. Quick Test A brand image can be defined as: 1. All brand attributes 2. The entire brand identity 3. The consumers’ perception of a brand 49 4. The added value that is generated from a product with a recognizable name when compared to a generic equivalent 50 2nd P- Price The Paradox of Value "Why is it so, that although water is more useful, in terms of survival, than diamonds, diamonds command a higher price in the market?" → because of scarcity Price as a Product Value The value of rare commodities and common goods, there are two types of value: Value in use: how much we need the product to satisfy our need (Maslow pyramid, physical needs are more important but they’re not the most expensive) Market value: linked to scarcity Price: the amount of money expected, required, or given in payment for something. Everything devoted or done to achieve something else. Price and Other Ps: Complementary relationships: they invest, so price complement the investment and they get their money back (company perspective) Substitution relationships: (consumers perspective), I can have either good quality, communication and distribution or good price. I cannot have good price and quality simultaneously. When Price Becomes a Significant Marketing Mix Tool: High level of price elasticity of demand High degree of product homogeneity: offer price discounts to manipulate price Low total costs Low capacity utilization The Role of Prices in Business Strategy Functions of Price: ○ Instrument of information ○ Tool of persuasion Strategic Orientations of Price: Profit Orientation: ○ Return on investment ○ Increasing profit level Sales Volume Orientation: we can manipulate with price in order to increase the demand ○ Maximizing sales volume ○ Acquiring new buyers: temporary lower price to have more people try the product ○ Maintaining/increasing market share Competition Orientation: 51  ○ Strengthening the competitive position: sometimes it means lowering price, sometimes it means having higher price to communicate luxurious brand image ○ Corner the market: lower the price so small shops cannot be competitive and drive them out, then rise the prices again The use of price as an instrument of information and persuasion: ○ Price-quality inferences (price as an indicator of quality, lesser price lesser quality) ○ Reference price (contrast, comparison) ○ Price endings: (…9,…0,…5 —> 4.99$ makes you think you buy it for 4 instead of 5) Price Setting Methods Difficult issue, consumers always wants the lower price. Three Methods: (one of them dominates but all 3 should be taken into account) 1. Demand-based 2. Cost-based 3. Competitors’ prices-based Demand-based price settings You always check the demand, classic supply-demand curve. Lower the price, higher the demand; higher the price, higher the supply, lower the demand. Factors Affecting Price Sensitivity: Surplus vs. Shortage: ○ Demand for a product increases despite price rise due to: Inferior quality with a strong negative income effect. Small substitution effect. Giffen’s Paradox: 52  ○ The demand for a given product increases despite the price increase, it’s basics products like bread, potatoes... ○ The product is of inferior quality with a strong negative income effect. ○ The substitution effect is small. ○ There are products in specific segments that are basics for surviving, people are not willing to renunciate so they will pay for them → they will have less money to spent on something else. The price is higher, the demand is higher (PARADOX) Veblen’s Paradox (Snob Effect): ○ The demand increases as the price increases. ○ There are some products for which if the price is lowering, the demand is lowering as well; the snob effects fa sì che less people want it. Poor people are happy, but rich people are not buying it ○ Luxury goods (e.g. wines) demand rises with price due to: reflecting greater status, conspicuous consumption. The Paradox of Speculation: ○ A rise in price leads to an expectation of further price increases. ○ Temporal effect. ○ No increase in consumption. People do not respond to the price change due to expectations. PRICE ELASTICITY OF DEMAND Definition: "The responsiveness of demand to a change in price." If the price is lowering, the demand is rising. But the demand can change a lot or little —> price elasticity of demand. What are the determinants of food price elasticity of demand? ○ Number of substitutes: if there are a lot, when the prices increases consumers will buy another product ○ Availability 53  ○ Necessity: if the product is not very much necessary for our life (e.g. chocolate), if the price increases consumers will not buy it ○ Habitual consumption: for some products consumers do not look at the price ○ Income level of target segment: if I don’t have much money I will calculate everything I am spending (general rule but not always like this, some rich people are rich because they are careful about what they spend). 𝑄𝑤− 𝑄1 𝑄1 Formula for Price Elasticity (PED): 𝑃2− 𝑃1 𝑃1 Relative change in demand (nomintore ΔQ/Q) / relative change in price (denominatore ΔP/P) Expressed in %: e.g. the price decreased of 10% Se non è il caso di un paradosso, il PED dovrebbe essere negativo → si tiene in account il valore assoluto aka sempre positivo. Perchè PED sempre negativo? perchè o a numeratore o a denominatore uno dei due valori è negativo. - Se numeratore è maggiore di denominatore, il PED sarà maggiore di 1, vuol dire che la domanda è cambiata molto ma il prezzo poco → la domanda è flexible - Se den è minore di numeratore =price cambia molto, ma la domanda poco, PED sarà minore di 1 e si dice che la domanda è non flexible. - se PED = 0, vuol dire che sono cambiati poco entrambi Elasticity Categories: ○ PED = 0: No change in demand with price changes. ○ PED < 1: Inelastic demand; revenue increases with price increase. 54  ○ PED = 1: Unit elasticity; revenue remains constant. ○ PED > 1: Elastic demand; revenue decreases with price increase. Price Sensitivity Meter (PSM): ○ Too expensive: Unacceptable price. ○ Too cheap: Perception of low quality. ○ Expensive: Still worth buying. ○ Cheap: Perceived as a bargain. Cost-Based Pricing Break-Even Point: each unit more we sell, provide us profit - each unit less, provide us loss. 𝐹𝐶 + 𝐼 Formula: Q = 𝑝 − 𝑣𝑐𝑢 ○ Q: number of products needed to get to the Break Even point, for a fixed price ○ FC: Fixed Costs: need to pay workers, employees, infrastructure ○ I: Investment ○ vcu: Variable Cost per Unit: depend on number of unit (energy, water, ingred). R = C (+ I) → break even point, we want revenue = cost. Q x p = FC + vc (+ I) → revenue is quantity x price, and vc = Q x vcu Qp - Qvcu = FC (+ I) Q(p - vcu) = FC (+ I) 𝐹𝐶 (+ 𝐼) Q = 𝑝 − 𝑣𝑐𝑢 55  Pricing Strategies: D: Intense Skimming Strategy: when you offer high price in moderate or high, extra margin for each unit, no need to sell lots of product, but demand need to be stable C: Moderate Skimming Strategy: when you offer high price in moderate or high, extra margin for each unit, no need to sell lots of product, but demand need to be stable B: Moderate Penetration Pricing Strategy: only if we cover BEP and if demand is flexible (PED is high) A: Intense Penetration Pricing Strategy: only if we cover BEP and if demand is flexible (PED is high) Competitor-Based Strategies: doing what they’re doing, or something different to differentiate Adaptation strategy: analyse the market and adjust our price to the market price. Innovation strategy: doing something different, if market price is rising, we don’t have to do the same, we can keep price on lower level but we need to justify it in some way. Quick Test Which of the following may be an example of a Veblen’s Good? a. Potatoes b. Salt c. Champagne d. Bread 56 3rd P – Place Marketing Channel Marketing channel (trade channel/distribution channel): Sets of interdependent organizations involved in the process of making a product or service available for use or consumption. The set of pathways a product or service follows after production, culminating in purchase and use by the final end user. Types of intermediaries/entities: Merchants: deal with final consumer, they provide products Agents: entities that don’t take part in the product flow, they’re only around the transaction - they negotiate, sign the agreement, but they don’t provide the product themselves (usually services) Facilitators: logistic, warehouses, marketing houses - companies that are involved in the transition of the product from producer to consumer The Role of Marketing Channels: Perform the work of moving goods from producers to consumers. Provides: ○ Place utility: the product is available in the geographical place where consumer would like to buy it (nearby, specific region, mountains…); not only when the producer produce it, but where consumer want it. Logistics helps to create this value. ○ Time utility: similar to place, warehouse creates it, because they store the product until WHEN it’s needed (Christmas things are produced before the Christmas period) ○ Assortment utility: company that produces sweets, but if you’re going for shopping you want sweets, meat, dairy… you need a shop with a differentiated assortment available even if it’s from different producers (same for brands) ○ Information utility: less important for food products because the packaging does this. For other products, the sales person does this job. ○ Support services utility: less important in food market, but is for transport (when you buy furniture, the shop sometimes offers the transport, could be groceries at home) Channel Levels: number of entities between producer and final consumer - marketing channel, it lasts as long as the product doesn’t change anymore. Zero levels: the organisation that produces the final product sell the product directly to the consumer (e.g. restaurants) Short channels (= one-level channels): one entity between the producers and the consumers [indirect] Long channels: more than one entity between the producers and the consumers [indirect] 57 Distribution Channels Direct distribution Indirect distribution channel challenge Manufacturer perspective Consumer perspective Direct Distribution Channels: no entities helping you providing the product to the consumers From the manufacturer’s perspective: Increased control over brand and customer relationship. From the consumer’s perspective: Faster access to products. Indirect Distribution Channels: there’s a distributor facilitating the contact with consumers. 58  From the manufacturer’s perspective: Expanded market reach and distribution expertise. From the consumer’s perspective: Increased availability and convenience. DIRECT AND INDIRECT CHANNELS Direct and Indirect Distribution Channels: Direct: 10 transactions between producers and 10 final customers. Indirect: ○ 10 transactions between producers and 10 wholesalers. ○ Wholesalers serve 100 retailers, resulting in 1,000 final customers. FACTORS FOR MARKETING CHANNEL DESIGN: Customer Desires: Waiting and delivery time: if you don’t want to wait, you want long channel - to go to the shop that is selling that product; you want it available near you, not directly from the producer (not have to order and wait for it) Spatial convenience: product available everywhere, long channels Product variety: in one place consumers can find a lot of products, they can choose from different brands and product categories, long channels 59  Service backup: if you sell furniture through short channel, you provide every costumer with everything + service for fixing and everything. if consumers require service backup, it’s something for long marketing channel Product Features: Perishability: long channels have transportation that takes time, if you have perishable products (e.g. flowers and fresh bread) it’s best to have short or even direct channels Complexity: if product is complex and need to explain, if you need to transfer information, is best to have short channel Innovativeness: same with complexity, best to have short channel Luxury goods: because you want the control over the product, and first price is already high, you want short channel Large weight and size: because of transportation cost, short marketing channels are recommended Low unit value: opposite than luxury goods, you can use long channel and you cover bigger market e.g. Bread: analyse all features and think which affects the product the most —> perishability so short channels Factors Affecting Food Sector Channels: Tailored solutions based on product and market needs. Product Features and Channel Integration Example Comparison Feature Chocolate Fresh Bar Bread Zero-level ✓ ✓ channel Short channel ✓ ✓ Long channel ✓ Marketing Channel Requirements: Perishability: Impacts channel length and storage needs. Complexity & Innovativeness: May require specialized distribution. Luxury Goods: Often use exclusive or selective channels. Weight, Size & Unit Value: Affect transport and cost decisions. Channel Integration and Systems: Conventional Marketing Channels: Independent participants. Vertical Marketing System (VMS): long term cooperation ○ Corporate VMS: Unified ownership, corporate system - one entity has ownership on all others. 60  ○ Administered VMS: Coordination by size/power, no domination of one entity ○ Contractual VMS: Franchises and agreements (e.g., McDonald's); franchisor gives licence and assistance and gets fee and royalty payments from franchisee. Producer and Retailer: Carrefour Express, Intermarche. Producer and Wholesaler: Coca-Cola. Service and Service: McDonald's. Distribution Strategies: Exclusive Distribution: only one entity may sell your product in a geographical area. Rare in food marketing Selective Distribution: few entities in a geographical area Intensive Distribution: present in each place this product category can be sold (e.g. Coca-cola, they need to visit each place the product is sold to make sure it’s correctly exposed on shelf) Quick Test If a product is highly perishable, you shouldn’t choose for its distribution: a. Direct channels b. Short indirect channels c. Long indirect channels d. This feature doesn’t influence the choice of channel’s level 61 4th P – Promotion Promotion vs. Marketing Communication "Marketing communications are the means by which firms attempt to inform, persuade, and remind consumers (directly or indirectly) about the products and brands they sell." — Philip Kotler Communication Process Sender and receiver of the information. The sender needs tools to transfer the communication (microphone, internet and media). The receiver will decode it and have a response (everyt