Advanced Marketing Concepts - I

4 P’s
STP

04/22/10 Advanced Marketing Concepts 1

The Four Ps and Marketing
Mix Planning
• Why is the Four "Ps" idea helpful?
– Provides an organizing framework
– Helps to bring many, more detailed decisions
together in a logical fashion
– Focuses thinking on the idea that all marketing
decisions must work together as a whole
– Focuses on a managerial orientation—and what
a marketing manager/firm can do about needs
of target customers

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A Marketing Strategy—Showing the 4 Ps of a
Marketing Mix

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Relation of Strategy Policies to Operational
Decisions for Baby Shoe Company

Marking Mix Strategy Policies Likely Operational Decisions

Area

Product Carry as limited a line of colors, styles Add, change, or drop colors, styles,
and sizes as will satisfy the target and/or sizes as customer tastes
market dictate

Place Distribute through selected “baby In market areas where sales potential
products” retailers who will carry the is not achieved, add new retail outlets
full line and provide good in-store and/or drop retailers whose
sales support and promotion performance is poor.

Promotion Promote benefits and value of the
special design and how it meets
customer needs
When a retailer hires a new
salesperson, send current training
package with details on product line;
increase use of local newspaper print
ads during peak demand periods

Price Maintain a “premium” price, but Offer short-term introductory price

encourage retailers to make large- “deals” to retailers when a new style
volume orders by offering discounts is first introduced
on quantity purchases
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 Customer Analysis
• Who will be our customers?
– Segmentation, Market size, growth, etc.
• Why would they buy?
– Buying motives, criteria
• When would they buy?
– Age, replacement cycle
• Where would they buy?
– Distribution outlets
• How would they buy?
– Rs., time expenditures

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 A Framework for Marketing
Management: The 4 Ps (marketing
mix)
• Product
– quality, brand name, packaging, warranty, etc.
• Price
– list price, discounts, credit terms
• Place
– distribution channels, inventory, transportation
• Promotion
– advertising, personal selling, sales promotion
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 The functional marketing process
Opportunity
assessment

Segmentation,
Targeting,
Positioning

Product Pricing Promotion Place

Strategy Strategy Strategy Strategy

Implementation, Monitoring, and Control

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 The five major segmenting strategies

Fig 7.2, pg 210

(dude, but I only count 4 of them here)

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 Segmenting, Targeting, and
Positioning – Cornerstones of
Marketing Management

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 Step 1. Market Segmentation
Bases for Segmenting Business Markets

Personal
Demographics
Characteristics

Bases
Bases
for
for Segmenting
Segmenting
Situational Business
Business Operating
Factors Markets
Markets Characteristics

Purchasing
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Approaches
Advanced Marketing Concepts 10
 Effective Segmentation
• Size, purchasing power,
Measurable
Measurable profiles of segments can
be measured.

• Segments must be large or

Substantial
Substantial profitable enough to serve.

• Segments can be
Accessible
Accessible effectively reached and
served.

• Segments must respond

differently to
Differential
Differential different marketing mix
elements & actions.

• Must be able to attract and

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Actionable
Actionable Advanced Marketing Concepts serve
the segments.
11
 Five Patterns of Target Market
Selection
Single-segment Selective Product
concentration specialization specialization
M1 M2 M3 M1 M2 M3 M1 M2 M3
P1 P1 P1
P2 P2 P2
P3 P3 P3
Market Full market
specialization coverage
M1 M2 M3 M1 M2 M3
P1 P1
P = Product
M = Market P2 P2
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Advanced Marketing Concepts P3 12
Positioning is the act
of designing the
company’s offering
and image to occupy a
distinctive place in
the the target
market’s mind. P 298
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 Positioning Strategies
• Product Attributes

• Benefits, Problem Solutions & Basic Needs

• Price & Quality
• Specific Use
• Against Other Products
• Product User
• Against a Competitor
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Advanced Marketing Concepts - II

PLC
Brand Management

04/22/10 Advanced Marketing Concepts 15

 The Product Life Cycle
Concept
• Products, like people, have been viewed
as having a life cycle.
• The concept of the product life cycle
describes the stages a new product goes
through in the marketplace:
introduction, growth, maturity, and
decline.
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 Stages in the Product Life Cycle

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 Figure 11.13: Overlapping Life Cycles for Two Products

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 Figure 2.1: Planning at Different
Levels

04/22/10 Advanced Marketing Concepts 19

 Steps in Strategic Planning
(Fig. 2.1)
Business unit,
Corporate Level product,
and market
level

Planning,
Planning,
Defining Setting marketing,
Defining the
the Setting Designing
Designing marketing,
Company Company
Company the
Company the Business
Business and
and other
other
Mission Objectives
Objectives Portfolio
Mission Portfolio functional
and
and Goals
Goals functional
Strategies
Strategies

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 Evaluate the Internal/External
Environment

Strengths Weaknesses

Opportunities Threats

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 Analyzing Current SBU’s:
Boston Consulting Group Approach
Relative Market Share
High Low
Market Growth Rate

Stars Question
Question Marks ?
High

Marks
• High growth & share ••High
Highgrowth,
growth,low
lowshare
share
• Profit potential ••Build
Buildinto
intoStars
Starsor
orphase
phaseout
out
• May need heavy ••Require cash to hold
Require cash to hold
investment to grow market
marketshare
share
Cash
Cash Cows
Cows Dogs
Dogs
••Low • Low
Lowgrowth
growth&&share
Lowgrowth,
growth,high
highshare
share ••Low share
Low

••Established, profit potential

Established,successful
successful • Low profit potential
SBU’s
SBU’s
••Produce
Producecash
cash
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 BCG Matrix
• Method focuses on the potential of a firm’s
existing successful products to generate cash that
the firm can then use to invest in new products
• New products are chosen for their potential to
become future cash generators
• Two dimensions:
– Market growth rate
– Relative market share

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 BCG Matrix: Stars
• SBUs with dominant market share in high-
growth markets
– requires funding to keep up with production
and promotion demands
– strategies seek to maximize market share in the
face of increasing competition

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 BCG Matrix: Cash Cows
• SBUs with dominant market share in a
low-growth potential market
– product is well established and market share
can be maintained with minimal funding
– firms milk cows of profits to fund growth of
other products in portfolio
– too many cows can become a liability due to
the lack of growth potential

04/22/10 Advanced Marketing Concepts 25

 BCG Matrix: Question Marks
• SBUs with low market shares in fast-growth
markets
– sometimes called problem children
– the firm has failed to compete effectively
• The dilemma? Investing more money into the
SBU may:
– improve market share in a high potential market OR
– result in negative cash flow and failure

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 BCG Matrix: Dogs
• SBUs with small market share in a slow-
growth market
– specialized products in limited markets unlikely
to grow
– firms may sell dogs to smaller firms or
eliminate product from market

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 Marketing Productivity ???
• Generating maximum sales with least
investment
• Customer Satisfaction
• Minimizing Sales Returns
• Generating Word of Mouth Publicity
• Brand Equity
• Geographical Area Covered

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MARKETING ROI:
WHAT ARE THE HURDLES?

1. Measurement is the most difficult part….just getting

started is a hurdle and commitment…larger companies do
better with measurements

2. Successful measurement creates challenges: how to

change existing practices to Best Practices

3. Market mix modeling is gaining adherents but not with

everyone. Small companies measure less than large…do
not have the data

4. Companies are outsourcing measurement to gain speed,

objectivity and access to best/better practices

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 Marketing’s Results
Are Embarrassing

• Sales promotions are mostly

wasted.

• Direct marketing mailings

have poor response.

• Too many sales calls done by

the numbers.

• High rate of new product

failure

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 Poor Marketing Controls
• Less than half the companies knew their individual products’ profitability.

• About one-third had no regular review procedures for spotting and deleting
weak products.

• Almost half of the companies failed to conduct formal evaluations of

advertising effectiveness.

• Companies took four to eight weeks to develop control reports, which were
occasionally inaccurate.

• *Study of 75 companies

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 Basic Performance Evaluation
Questions
• What is/isn’t working?
• Why are strategies working/not working?
• Have marketing strategies been implemented according to
plan? Have resources been used efficiently and effectively?
• What are direct and indirect competitors’ current and
evolving marketing strategies and tactics? What is their
impact?
• What are trends and critical events in the environment how
are they affecting industry competitors?

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 The Problem
• Capital investments in plant and
equipment have a well-analyzed
payoff.

• Capital investments in
marketing go with a prayer
rather than a measured payoff.

• We can do better!!

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THE BIG ISSUE: ACCOUNTABILITY

DEFINITIONS: ROI - Agreement on Definitions

RESPONSIBILITY: Marketing?
Finance?, Supply Chain?

MEASUREMENT: How Many?

How Often?
How Accurate?
Quantitative\Qualitative
Who Assesses?
How to Manage Results?
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 Common denominators
• ROI accountability
• Customer-centric
• Data-driven

04/22/10 Advanced Marketing Concepts 35

 Marketing Productivity ???
Marketing KPA’s
(Key
• Market Performance Areas)
Demand
• Market Share
• Revenue per customer
• Variable cost per customer
• Marketing Expense
Marketing = Net Marketing Contribution/
Productivity Marketing Budget

04/22/10 Advanced Marketing Concepts 36

 Chain of Marketing Productivity.
Tactical Actions Strategies : Vision - 4P’s
Advertising, Channels

Impact on Customers Marketing Assets

Attitude, Satisfaction Brand Equity, Customer Equity

Market Impact Market Position

Share, Sales Market Share, Sales

Financial Impact Financial Position

ROI, EVA, etc. Profit, Cashflow

Value of Firm
Impact on Firm Value
Market Capitalization
MVA
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 Marketing KPA’s and their
Performance Objectives
Key PerformancePerformance Objectives Proposed Measure
Areas
1 Strategies 1.1 Product Product Innovations.
& Tactical Product Acceptability
Actions 1.2 Price Competitive Pricing
1.3 Place Vendor’s contribution in sales
Effectiveness of Channel members
1.4 Promotion Ability to reach to target market
Effectiveness of Communication

2 Customer 2.1 Customer Awareness Company and Product Recognition

Impact 2.2 Customer Association Favorability of Customers Perception
Customer Attitude Quality and Satisfaction
2.3 Customer Attachment Loyalty – Company & Products
2.4 Customer Experience
Enquire, Use and Word of Mouth
2.5

3 Marketing Assets 3.1 Brand Equity Impact on Buyer behavior / DMP

Distribution Channel
3.2 Customer Equity Number of Customers
Time span of Customer /Lifetime
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 Marketing KPA’s and their
Performance Objectives
4 Market 4.1 Market Share Turnover / Industry sale Convenience in
4.2 Impact on sales selling
4.3 Competitive market Willingness to pay price premium
position Competitive Market Rating

5 Financials 5.1 ROI % Discounted Expenditure

5.2 EVA Net Operating Profit – Cost of Cap
5.3 IRR Discounted Return – NPV
5.4 Profit Sales – Cost (Marketing Exp)
5.5 Cash Flow

6 Valuation 6.1 Market Capitalization Market value of outstanding shares

MVA
6.2 Environment Net Marketing Contribution
6.3 Political, Social, Technological

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 KPA’s and Performance Objectives -
Marketing Sub System
Key performance area Performance objectives Proposed measures
Sales Sales Sales (absolution monetary)
Sales expense control Sales / selling expense profit / sales

Profitability Profit / sales

Market penetration Value of orders booked / Total
market available
Collection index Sales / account receivables
Stock turnover Sales / average stock
Market research Market demand determination Intangible ( scale 0 -1 )

Pricing trend establishment Intangible ( scale 0 -1 )

Customer preference establishment Intangible ( scale 0 -1 )

Sales policy formulation Intangible ( scale 0 -1 )

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Key performance area Performance objectives Proposed measures

Product strategy product introduction Intangible ( scale 0 -1 )

Test marketing Intangible ( scale 0 -1 )

Product deletion Intangible ( scale 0 -1 )

Sales promotion and publicity Sales promotion Total sales / promotional expense

Target area identification Intangible ( scale 0 -1 )

Sales promotion effectiveness Intangible ( scale 0 -1 )

Effective product image Intangible ( scale 0 -1 )

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 Questions

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