Commercial Management II

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Commercial Management II
Direcció Comercial II (Universidad Pompeu Fabra)
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Commercial Management II Topic 1
TOPIC 1: MARKET SEGMENTATION AND PRODUCT POSITIONING
Markets are heterogeneous  Consumers differ in many aspects:
 The benefits wanted: The consumers refer to attributes or characteristics of the

product. ItÕs important to know why people like your product.
E.g.: Oranges can like you because you want to refresh yourselfor you may love
oranges because you care about nutritional facts.
The preferences of costumers are the valuation of attributes in marketing.
 The amount they are able or willing to pay. Price in marketing is one more
attribute or characteristic of the product.
E.g.: When you buy salt you never look for the brand, you buy the cheapest.
 Demographics. Demographics or personal characteristics can be highly
correlated to preferences. In market segmentation research we need to
understand consumers by having the maximum information itÕs possible to have.
o Gender
o Age
o Family structure
o Etc.
 Psychographics.
o Lifestyle. E.g.: Sport oriented people, rural tourism…
o Values
 Behavioral. We refer to behavior related to consumption (habits) and
purchasing of the products.
o Quantities
o Usage
o Consumption frequency
o Consumption and purchase habits
o Occasion
o Etc.
E.g.: Yogurt market, cookies, coffee, beer, etc.
 Media they are exposed to:
o TV
o Internet
o Games
o Social networks
All of this is important in conducting a market research to do market segmentation.
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SEGMENTATION:
Segmentation is trying to analyze the market and making separate similar groups
based on evaluation of preferences of a product. When doing a segmentation process
analyzing preferences are not enough and we need to know other specific
characteristics (E.g.: Habits, Demographics, Psychographics…).
Segmentation is the process of determining customer groups within the

market that have special characteristics, which are significant for the
marketing strategy.
TARGET MARKETS:
Targeting markets is segment evaluation and itÕs specific for every firm. Target
markets are the selected segments presenting the greatest opportunity to the
firm.
E.g.: If I am a cost leader maybe the price sensitive segment is the most interesting for
me because I can have comparative advantages.
There are selection and evaluation process based on some criteria:
¥ Biggest segment.
¥ Growing segment (E.g.: Organic products)…
POSITIONING:
The concepts above are related to the market; however, positioning is related to the
brand. Once the segment is chosen, the firm has to build a differential advantage
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(differentiation), which will make its offer preferred to those ones that have its
competitors. Basically is how we make the market perceive product attributes.
FUNDAMENTALS OF MARKET SEGMENTATION
When we segment itÕs fundamental to group consumers by valuation product

characteristics/attributes. For marketers, products are combinations of
characteristics or attributes. We could ask every consumer to evaluate a set of
attributes in terms of:
1. Its ideal level

2. Its importance
E.g.: Ideal levels of attributes
Lets assume that the two basic attributes considered by consumers when buying plain
yogurts are:
- Sweetness
- Fat/creaminess
We could ask every consumer to rate the ideal levels of sweetness and fat for a yogurt.
First we have to do statistical research to make quantitative research (doing an

analysis of a representative sample of the market).
The perceptual map is a representation of the market where costumers will be placed
depending on their preferences. At the end we can find different groups of consumers
with similar preferences: we can segment.
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DO THE CONSUMER PROFILES VARY FOR THE DIFFERENT SEGMENTS?
The key issue in market investigation is to find groups of consumers but we need to
complete the information about the target, in order to properly achieve it.
Market research studies include consumer characteristics that may be relevant to

determine the consumerÕs representative profile for each segment:
SEGMENTATION CRITERIA:
 Geographic
E.g. Campbell soup, fishing nets, urban vs. rural… hotel services. Can products
have his maximum demand in 80Õs and 90Õs as a packaging system nowadays
starts declining its demand.
 Demographic
o Age,
o Gender,
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E.g.: Clothes, Toys…

o Family life cycle, it is related to products and services bought by groups
(E.g.: Holidays)
o Education,
o Income
 Psychographics (E.g.: Social class, lifestyle...)
E.g.: Cars (4 x 4, sportive), fast food, alcoholic drinks...
 Behavioral
o Consumption frequency,
o Consumption habits,
o Purchasing habits,
o Consumption occasion. Even the same consumer can have different
preferences for different for occasions.
E.g.: In chocolate market there are 3 occasions (cooking chocolate, as a gift
and as a snack).
E.g.: In the traveling industry there are 2 segments (business travels,
holidays).
SEGMENTATION ALLOWS BRANDS TO POSITIONATE THEMSELVES:
E.g.: Diet Pepsi/ Pepsi max (One is for women other is for men. In difference with
Coca-Cola who has been doing a light product for everyone in advance and they have
the leading products, Pepsi diversified its products).
E.g.: Segmentation by age in Playskool (Online shop of toys in which you choose
childrenÕs age in order to buy products).
CRM (customer relationship management): Considering consumers as customers in

order to have with them long term relations along the customerÕs lifetime.
CLV (Consumer Lifetime Value): is a prediction of the net profit attributed to the entire
future relationship with a customer. The prediction model can have varying levels of
sophistication and accuracy, ranging from a crude heuristic to the use of complex
predictive analytics techniques.!
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User Category: For every market we can classify the market in some categories based
on if they are users or not.
¥ NON USERS
o Potential. E.g.: Is the mobile phone market a mature one in developed
countries? It is a dynamic market because it is a technological one. And
services launch many innovations. For example washing machines market
is mature in Spain because almost in every house there is one. Mobile
phones is not the same, it is non a mature market because there are people
who doesnÕt have one (there are non users and the most interesting for
producers: potential non users  specific mobiles for senior people).
o Non-potential: Non-users that are not interested in the product.
¥ USERS
o Ex users: People that are targeting are old people that consumed the
product in childhood. E.g.: Cola-Cao for adults. Producers are targeting up
with people there are used to the product when they are children. There is an
important segment of adult people who can drink Cola-Cao.
o New users
o Regular
 Frequency.
CONSUMPTION FREQUENCY DOESNÕT CHANGE: Detergent,
deodorant, toothpaste…
SPORADIC CONSUMPTION HABITS: Cereals, ice cream, cinema…
* Luxury products are those products in which the rent elasticity
(income elasticity) is more than 1 (when income increases the
consumption of the product increases more than proportional).
 Loyalty. We can also segment the market depending on loyalty of
consumers. A strategy could be position your brand in front of the
leading brand. E.g.: Nordic
GRAPHICAL TECHNIQUES
1. Perceptual Maps (For segments and brand positioning).

We plot the consumers according to the ideal level. It is a graphical presentation
of a market. We need to complement the segments with the established brand in
the segment.
IDEAL PRODUCTS: Consumers evaluate the ideal levels or relative importance of
attributes (preference maps) the different segments are located according to the
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preferred combination of attributes (Packaging, flavor, brand, price…). We can ask

consumers for the ideal level of the attribute or we can ask how important is each
attribute.
EXISTING ÒPRODUCT POSITIONINGÓ: Consumers evaluate the perceived levels
of attributes for the established brands. Each product is positioned in the map,
according to the average perceived levels.
NEW PRODUCT EVALUATION
Evaluate the importance of attributes like: Taste, Price or all the other attributes
important for the product.
The scales have a limitation  You canÕt trade off of attributes to consumers; they
canÕt choose one despite others. The best way to ask consumers without a trade
off is constant sum scale. The constant sum scale is used to compare attributes
because consumers have to give punctuation to each one.
The perceptual map with 2 characteristics presents no problem; the problem

appears when there are +2.
There are 2 techniques: Clustering techniques and factorial analysis (it transforms
a 3d representation to a 2d plane).
We can use clustering techniques to group similar consumers (with computer
algorisms) when there are more than 2 dimensions and there canÕt be done any
graphical representation.
E.g.: The Amusement parks with 4 attributes (Price, Fantasy, Fun rides,
Educational Activities)
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Perceptual maps to be a useful tool must be compared to existing brands and

products.
ConsumerÕs research evaluates the perceived levels of attributes for the
established brands. Each product is positioned en the map, according to the
average perceived levels.
The last step is evaluating new products according to all the information collected
by research.
2. Segment profiles (For segments) are easy graphical techniques, which allow you
to compare the segments. Once you group consumers you find segments and you
can calculate the average punctuation of each attribute for all segments.
We can plot each segment profile depending on the relative weigh of each
attribute.
3. Product profiles (For brand positioning). We can ask consumers to evaluate the
perceived levels of attributes for the established brands. Each product is
positioned in the mac according to the average perceived levels.
For evaluating brands it is possible to use different scales techniques.
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BIPOLAR SCALES:
- Semantic differential scales: Scales with two antonyms in the extremes.
1 2 3 4 5 6
Not reliable Very reliable
Reliability  Probability of a product being perceived to fail for consumers.
- Likert Scales: It allows us to ask about whatever characteristic of the brand
in terms of agreement of the consumers. It is the most versatile technique.
E.g.: To evaluate PRITT:
o Conveys confidence.
o Quality.
o Uses.
There are some characteristics in which PRITT is better valued:
⇒ Is for special uses only.
⇒ Is only for sticking paper.
⇒ Is more for children
⇒ Is more from the office
People perceive PRITT as a brand that can only be used in some specific
cases (low sticking capability so it can only be used for sticking paper and
children). On the other hand, UHU has a larger number of products that can
be used with other materials and this is perceived as an increase in
confidence for the consumers.
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TO SUM UP:
 Segmentation: Identify customer needs and segment the market. To do this it is

important to conduct a research using surveys, focus groups… with the results of
these representative samples we can identify customer needs, habits or lifestyle.
The objective of market segmentation is to develop market profiles with a lot of
knowledge of the segment.
 Targeting process: This is about evaluating the attractiveness of each segment.

o Price sensitive segment. E.g.: If my company is very efficient and is a cost
leader probably I can focus to this price sensitive segment.
o Technological segment. E.g.: If I am Apple or Samsung maybe IÕm going to
target the segment that loves innovation.
 Positioning strategy: When we know the target and what they value, the strategy
moves about how we want to be perceived in consumerÕs mind.
 Tactical Marketing:
o Design the product.
o Branding
o Packaging
 Marketing Plan:
o Pricing.
o Distribution.
o Communication actions to efficiently communicate the market about my
product.
 Implementation and control.
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Commercial Management Topic 2
TOPIC 2 Ñ MANAGING THE PRODUCT OVER THE TIME
2.1. Technology Life Cycles
Technological markets are those markets where things happen fast, so firms have to
improve their products with new technology and continuously launch new versions of their
products.
The main difference between the mobile phone market and the detergent market is the
frequency of the product is developed. In the mobile phone market changes are constant,
and the phone could become obsolete in 2 years while in the detergent market things
happen slower. But the truth is that in every market is dynamic, and the innovation is more
frequently.
The diffusion of products and technologies take place within a continuously growing demand
for a basic need.
When analyzing the diffusion of products and technologies, three main levels can be
distinguished:
¥ Demand Life cycle (basic need): This is the need that people have. For example,
communication, transportation, health, calculationÉ
¥ Technology Life cycle: To satisfy these needs users can choose between different
technologies. For example it is possible to satisfy the communication need with the fix
phone technology, the mobile phone technology or the smartphones technology.
¥ Product Life cycle: Inside each technology we find different products. Inside the
smartphones technology we can find a lot of different products. For example iPhone 6,
SamsungÉ
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In the graph we can see in blue the evolution of the demand fora determined need along the
time and in yellow we can see the evolution along the time of the demand for different
technologies that satisfy the need.
In this graph we can see the demand for music recording media and the evolution of the
demand of the different technologies that satisfy that need (Records, Cassetes and CDs). If
we aggregate the demand for each technology we can know the global demand for music
recording media.
New technologies increase the perceived quality for consumers.
THE FOOD MARKET EXAMPLE
The food market exists because humans have the need for eating 4 times a day. In this
market a lot of different technologies have appeared and evolved along time.
Technology life cycles:
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✦ Fresh food: Humans started to develop technologies for growing animals and vegetables.
The problem is that distribution was very limited to the day (no preservation).
✦ Salted and dried food: This was the first technology on the market that allowed to
preserve the product and start extending distribution.
✦ Canned food: This allowed to preserved cook and uncooked food for a lot of time so
people could store products. Extensive distribution is related to geographic area and
intensive distribution is about the number of distribution places in each
geographic area.
✦ Frozen food: This technology requires more sophisticated packaging technology and
distribution channels.
✦ Refrigerated food: An example of this technology is fresh pasta, fresh soups or gazpacho
(The demand is growing world wide, the demand for dry pasta is so mature and investing
decisions are around fresh pasta because this market is growing).
✦ Organic products: The demand for organic products is growing constantly.
We can group different technologies into 2 different groups: eat-at home products and eat
out products.
2.2. Product Life Cycle
The introduction of a new product offering innovative attributes (e.g. new technologies)
usually presents a life-cycle curve along the diffusion process, characterized by four stages:
I. Introduction
II. Growth
III. Maturity
IV. Decline
The more technological the product is, faster the cycle of the product will be.
However, there are some steps to follow before launching a new product:
A. Vision/ concept.
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B. Design/ Development.
The product concept is a virtual product but is precise enough to evaluate the product
idea. The company has not invested on the product yet but the idea is precise enough to
start to investigate market demand. Once the company decides to move from ideas to
products the company must invest money on it (packaging, stocks, design development,
marketingÉ).
Examples on product concepts:
¥ The new Dannette: Danone made people vote about the new flavors:
France: New flavors such as hazelnut, chocolate and toffee.
Spain: Leche merengada, Crema tostada, Brownie.
¥ Kit - Kat: Salva tu sabor.
¥ BayleyÕs: They tried to start growing extending the line and they proposed consumers to
decide which of the 2 flavors purposed wanted to have.
If consumers contribute to the launch of a product theyÕll feel connected to the brand. This is
a direct marketing action (Direct marketing action is an action take by the manufacturer
that make consumers make some other action that can be measured). These actions
reduce pre launch costs.
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INTERPRETATION OF THE GRAPH
¥ In red: Operating costs curve: We can see why in the first stage the company does not
make profits.
¥ The operating break-even: Sales are big enough to compensate the operating costs. From
this point the company can start to make profits.
¥ Blue line: Accumulated flow of revenues and costs: Until the breakeven moment the flows
keep going down and then start to grow until the company reaches the breakeven of the
project and from this moment the project is giving profits.
2.2.1 Introduction
The first of the four product life cycle stages is the Introduction Stage. Any business that is
launching a new product needs to appreciate that this initial stage could require significant
investment. This stage has the following characteristics:
¥ Small or no market: When a new product is launched, there is typically no market for it,
or if a market does exist it is likely to be very small. Naturally this means that sales are
going to be low to start off with. There will be occasions where a great new product or
fantastic marketing campaign will create such a buzz that sales take off straight away,
but these are generally special cases, and it often takes time and effort before most
products achieve this kind of momentum
¥ High costs: Very few products are created without some research and development, and
once they are created, many manufacturers will need to invest in marketing and
promotion in order to achieve the kind of demand that will make their new product a
success. Both of these can cost a lot of money. It must be said that in this stage unit
costs will be very high because there are not economies of scale.
¥ No profits (losses): Because all the costs of developing a new product to market, most
companies will see negative profits for part of the Initial Stage of the product life cycle,
although the amount and duration of these negative profits does differ from one market to
another.
¥ Limited competition: If the product is truly original and a business is the first to
manufacture and market it, the lack of direct competition would be a distinct advantage.
Being first could help an organization to capture a large market share before other
companies start launching competing products, and in some instances can enable a
businessÕs brand name to become synonymous with the whole range of products.
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There are important limitations that avoid fast grow:
➡ Supply side:
Technical problems: There are new technologies, new processes, new suppliers and
productivity is low but becomes efficient along the time.
Delays in expansion of production capacity.
Delays in obtaining distribution: This is the most important issue because there is a
golden rule that says never launch an advertising campaign until the product is
available and completely distributed. Distribution channels are everyday more
professional and have more negotiation power. The way to achieve the proper
distribution is offering discounts and promotion to push the product and once the
companyÕs got distribution start to advertise the product.
➡ Demand side:
Consumer unawareness: It takes time that consumers get to know with new products.
Consumers reluctance: Company can use trial actions in order to promote the
acceptance of the product (free samples, little sizes, discounts).
Long replacement period: In durable products demand is limited to replace. For

example, if a company launch in Spain a new washing machine maybe a lot of people
is not thinking about changing the washing machine so demand will grow slowly.
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In this stage, when companies analyze their strategy they must make two decisions:
1. Price:
1. High: When prices are high companies follow a Skimming strategy. Sometimes
companies launch an innovation at a high price an every year the price is reduced. If
there is a relevant segment of non price sensitive consumers it is a good idea to use
a skimming strategy.
2. Low: When prices are low companies follow a penetration strategy. The advantage of
this strategy is that most segments can afford the product so companies can create
demand.
2. Promotional efforts: The key is that if the company needs to accelerate the process
depending on the risk of competitors (accelerating the process has a cost). The less
entry barriers the more companies should invest in promotional actions.
1. Fast.
2. Slow.
NESPRESSO EXAMPLE
Basic product: The coffee machine.
Captive product: Products that have to be replaced (capsules).
During the first years did no advertise at all and tried to have an exclusive distribution line
because did not expect to have any competitors (capsules where exclusive). However, now
because of the competitors Nespresso is trying to invest in communication to defend the
positioning of the brand. So during first stages, Nespresso used a slow skimming strategy
and now is investing in communication and advertising.
PENETRATION STRATEGY
This strategy consists to fix a low price and get benefits not from a big margin but
from the high level of sales (huge markets).
This strategy is interesting when there are:
- Big markets.
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- Economies of scale: The higher economies of scales the higher competitors barriers are. If
the fix cost is high then the effect of economies of scale into the unit cost is very important.
Depending on the size of the market fix costs may create a natural monopoly.
Penetration strategies can be used in elastic demands that can exist on

homogeneous market/segment or in price sensitive consumers. The main 2 reasons
that justify a penetration strategy for the pioneer company are:
- Big markets, Economies of scales (entry barrier 1 for the following competitors).
- Experience curve (entry barrier 2): The experience curve is what makes the pioneering
firms be the first leading brand.
When can use 2 strategies depending on the risk of competitors:
- Fast penetration strategy: In 2000Õs there was a big opportunity to offer low cost plane
trips so EasyJet and Ryanair were the first companies to offer low cost trips. In this case,
there were no entry barriers and in 2 years every company had low cost tickets.
- Slow penetration strategy.
2.2.2. Growth
The Growth stage is the second of stages in the product life cycle, and for many
manufacturers this is the key stage for establishing a productÕs position in a market,
increasing sales, and improving profit margins. This is achieved by the continued
development of consumer demand through the use of marketing and promotional activity,
combined with the reduction of manufacturing costs. How soon a product moves from the
Introduction stage to the Growth stage, and how rapidly sales increase, can vary quite a lot
from one market to another. The characteristics of this stage are:
¥ Increasing competition: When a company is the first one to introduce a product into the
market, they have the benefit of little or no competition. However, when the demand for
their product starts to increase, and the company moves into the Growth phase of the
product life cycle, they are likely to face increased competition as new manufacturers
look to benefit from a new developing market.
¥ Lower prices: During the Introduction stage, companies can very often charge early
adopters a premium price for a new product. However, in response to the growing
number of competitors that are likely to enter the market during the Growth phase,
manufacturers may have to lower their prices in order to achieve the desired increase in
sales.
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¥ Different marketing approaches: Marketing campaigns during the Introduction stage tend
to benefit from all the enthusiasm and hype (bombo publicitario) that surrounds the
launch of a new product. But once the product becomes established and is no longer
ÔnewÕ, a more sophisticated marketing approach is likely to be needed in order to make
the most of the growth potential of this phase.
¥ Costs reduction: As production increases to meet demand, manufacturers are able to

reduce their costs through economies of scale (lower unit manufacturing costs and lower
unit promotional costs), and established routes to market will also become a lot more
efficient. It is also important to take into account the experience curve.
¥ Greater consumer awareness: During the Growth phase more and more consumers will
become aware of the new product. This means that the size of the market will start to
increase and there will be a greater demand for the product; all of which leads to the
relatively sharp increase in sales that is characteristic of the Growth stage.
¥ Increase in profits: With lower costs and a significant increase in sales, most
manufacturers will see an increase in profits during the Growth stage, both in terms of
the overall amount of profit they make and the profit margin on each product they sell.
¥ Market fragmentation: As the market grow and consumers start using the product natural
segments appear and firms start to differentiate and target new segments.
STRATEGIES FOR GROW STAGE
✓ Differentiation: The key strategy in this stage is to position the brand (differentiate). For
example improving quality, looking for new attributesÉ Pastas Gallo accepted that they
canÕt grow on the market of dried pasta and start launching fresh pasta.
✓ New products: If the market is growing it is the moment to extend the product line. So,
the company could launch new sizes, flavorsÉ
✓ New distribution channels: If productÕs demand is growing, there is also an opportunity

for distributors to grow. For example, at first mobile phone were only sold in specialized
shops, but nowadays they are sold everywhere, also in vending machines.
✓ New segments: Companies can look for lagged segments. For example mobile phones
for old people, low-income segment in Whirlpool or Nintendo wii targeting families and
old people.
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2.2.3. Maturity
After the Introduction and Growth stages, a product passes into the Maturity stage. The third
of the product life cycle stages can be quite a challenging time for manufacturers. In the first
two stages companies try to establish a market and then grow sales of their product to
achieve as large a share of that market as possible. However, during the Maturity stage, the
primary focus for most companies will be maintaining their market share in the face of a
number of different challenges. A market is mature when virtually 100% of consumers have
tried the product.
The maturity stage has these characteristics:
Sales volume peak: After the steady increase in sales during the Growth stage, the
market starts to become saturated as there are fewer new customers. The majority of the
consumers who are ever going to purchase the product have already done so. Markets
become saturate so companies cannot achieve big growth rates because all consumers
have adopted the product (example: cookies). There are 3 ways to growth:
Demographic growth: In developed countries population growth rates vary between

1% or 2%
Economic growth: The GDP per capita is the best indicator to analyze purchasing
power. In developed countries the economy can grow at 1% or 2%. This can impact
the demand for luxury products because this demand is very sensitive.
Replacement demand (durable products): The demand is limited to the replacement.
Decreasing market share: Another characteristic of the maturity stage is the large volume
of manufacturers who are all competing for a share of the market. With this stage of the
product life cycle often seeing the highest levels of competition, it becomes increasingly
challenging for companies to maintain their market share. In this moment, there is a
strong competition among firms. Firms that have advantages fight for market share and
weak companies may disappear (get off the market). There are different types of
comparative advantages:
Leaders:
In terms of sales: The company with biggest sales and market share. There is an
advantage because of economies of scale. Experience can also make firms more
efficient.
Technological leader.
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Control of the value chain: Controlling the distribution channel, suppliersÉ
Small firms: A nicher is a company that target a very specific segment (niche). For
example, sugar free ice-cream for diabetics. This companies have low volume of
production but they have high unit margins.
Profits start to decrease: While this stage may be when the market as a whole makes the
most profit, it is often the part of the product life cycle where a lot of manufacturers can
start to see their profits decrease. Profits will have to be shared amongst all of the
competitors in the market, and with sales likely to peak during this stage, any
manufacturer that loses market share, and experiences a fall in sales, is likely to see a
subsequent fall in profits. This decrease in profits could be compounded by the falling
prices that are often seen when the sheer number of competitors forces some of them to
try attracting more customers by competing on price.
Continued reduction in costs: Just as economies of scale in the Growth stage helped to
reduce costs, developments in production can lead to more efficient ways to manufacture
high volumes of a particular product, helping to lower costs even further.
Increase in R&D budget for improvements and line extensions.
STRATEGIES FOR MATURE MARKETS
➡ Companies must try to gain market share through:
Line extensions: Sometimes this is not profitable. Examples: Absolute Vodka, Baileys,
Philadelphia.
Product repositioning (improvements). Condensed milk (La Lechera from NestlŽ:

They changed the packaging and extended the line).
➡ Entering non-traditional segments with the existing product:
New regions where the product is not introduced (within the country or outside).
Non traditional consumers.
Hotels (revenue management allows increasing revenues when costs are almost
fixed like in hotels. There is a fixed supply, we canÕt increase or reduce the
capacity of the hotel). For example NH that was focused on business services
started to promote their hotels for weekend uses.
Johnson & Johnson. Repositioned baby products for mums.
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Redbull in Turkey and Italy.
➡ Increase brand usage: Growing from current users by:
Stocking promotions (loyal consumers): The company provides incentives to

consumers like 3x2 to promote product consumption. The brand incentives
consumers to stock high quantities of the product to make them consume more, but
this promotions are only effective if consumption is impulsive (for example it works for
tuna).
Continuity promotions (occasional consumers): When consumers are not loyal the
kind of promotion that could increase their consumption is continuity promotion. An
example of continuity promotion is giving discounts for accumulating tickets. This pro
Product design.
New uses of the product: Use philadelphia not only for spreading also you can use it
for cooking. This strategy can make sales grow even in mature markets.
USAGE AND ATTITUDE SURVEYS
This are surveys conducted in a periodical basis by the manufacturers to find out
consumers tendencies. Which brands do you know, which you use, packaging, usage
occasions, characteristicsÉ It is important to ask consumers consumption frequency and
usage occasions.
Penetration is the percentage of households who mention that have bought the
product in the last period.
REDBULL CASE
The traditional use of RedBull was to drink it at night in clubs by young people. However,
RedBull found out that some university students started to use it for studying. So they started
to target this segment also.
2.2.4. Decline
The last of the product life cycle stages is the Decline stage is often the beginning of the end
for a product. When looking at the classic product life cycle curve, the Decline stage is very
clearly demonstrated by the fall in both sales and profits. Despite the obvious
challenges of this decline, there may still be opportunities for manufacturers to continue
making a profit from their product.
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Characteristics of the decline stage:
Market in decline: During this final phase of the product life cycle, the market for a
product will start to decline. Consumers will typically stop buying this product in favor of
something newer and better, and thereÕs generally not much a manufacturer will be able
to do to prevent this.
Falling sales and profits: As a result of the declining market, sales will start to fall, and the
overall profit that is available to the manufacturers in the market will start to decrease.
One way for companies to slow this fall in sales and profits is to try and increase their
market share which, while challenging enough during the Maturity stage of the cycle, can
be even harder when a market is in decline.
Product withdrawal: Ultimately, for a lot of manufacturers it could get to a point where
they are no longer making a profit from their product. As there may be no way to reverse
this decline, the only option many business will have is to withdraw their product before it
starts to lose them money.
During the decline phase the best strategy is to reduce the cost to have a profitable
business in a residual market. There is no point to invest a lot on advertise because
everybody knows the product and the brand. Sometimes the product ends up disappearing
(black and white TVs) but there are still some uses in which the product is better this can
keep in the market (fixed phone).
STRATEGIES IN DECLINE STAGE
Reduce the line (Example of Campbell Soups).
Harvest: This is to reduce costs and maximize profits.
Divest the business: Usually when companies do not expect to have more profits start to
invest in new companies, sell the lineÉ
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TOPIC 3 – STRATEGIC PLANNING IN MARKETING
1. Definition
The STRATEGIC PLANNING IN MARKETING is the managerial process of developing

and maintaining a viable fit between the organization’s objectives, skills and
resources and its changing market opportunities. The aim of strategic planning is to
shape the company businesses, products, services, and messages so that they
achieve targeted profits and growth.
Sometimes you must sacrifice the profits to obtain more growth. When we want to
growth in the market, we should sacrifice the profits because we must put a lot of
resources that have a big costs. It’s difficult to know what we are going to prioritize:
profits or growth.
2. The process
 Managing business as investment portfolios: It consists to managing

businesses as investing portfolio. We must reduce risk so it is better to invest in
more than one investment. Then, we must determine the most promising
businesses (business evaluation) to select the best one, attending our budgeting.
It’s important how to allocate the resources in the most efficient way.
 Planning at different levels:
A) Corporate level (Businesses = countries): Businesses have to develop the
products attending what it’s needed in the countries they are. Each country is
a business unit. Country is analysed like a business. We decide what country
we prioritize.
B) Country level (Businesses = Categories/Lines): When we are allocate
in one country, we must decide the categories or lines that can have
more opportunity to be successful. Each category is a unit.
C) Category level (Businesses = products): It is the low level, the
product level. Each product is a unit.
3. Establishing the Strategies Business Units (SBU)
Each Strategy business unit is a single business or collection of related business that
can be planned separately from the rest of the group.

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 Own market segment.

 Own positioning.
 Own competitors.
E.g. Pepsico. Strategy Business Unit?
A) Country: Spain, France, UK...
B) Divisions: Drinks, refrigerated drinks, snacks...
C) Product category: drinks.
 Water: Aquafina.
 Energy drink: Gatorade.
 Carbonated drinks: Pepsi, 7UP.
 Light carbonated drinks: Pepsi Diet.
All of these levels are summarize in a Marketing Plan.
By category level in each country
DRINKS SNAKS REFRIGERATED WATER

SPAIN 2
FRANCE
ITALY
...
1
Level 1: Countries. Level 2: Divisions. Level 3: Products.

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4. Evaluating the Strategy Business Unit’s
SBU are evaluated in terms of two main divisions:
 EXTERNAL: Market attractiveness.

 INTERNAL: Business strength.
The most common analysis is the Boston Consulting Group (BCG) approach: For
every SBU, the following strategic variables are determined and plotted in a matrix:
- Relative market share (Internal).

- Annual Growth Rate.
- Contribution to Corporate Sales ($, €).
THE BCG MATRIX
The growth–share matrix (aka the product portfolio, BCG-matrix, Boston

matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that was created
by Bruce D. Henderson for the Boston
Consulting Group in 1970 to help
corporations to analyse their business
units, that is, their product lines. This
helps the company allocate resources
and is used as an analytical tool
in brand marketing, product
management, strategic management,
and portfolio analysis.
To use the chart, analysts plot a scatter

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graph to rank the business units (or products) on the basis of their relative market
shares and growth rates.
 CASH COWS: Is where a company has high market share in a slow-growing

industry (mature markets). These units typically generate cash in excess of the
amount of cash needed to maintain the business. They are regarded as staid and
boring, in a "mature" market, yet corporations value owning them due to their cash
generating qualities. They are to be “attended” continuously with as little
investment as possible, since such investment would be wasted in an industry with
low growth. The cash cows are characterized by economies of scale, higher profit
margins and other competitive advantages (distribution channels, image...).
 DOGS: They are units with low market share in a mature, slow-growing
industry. These units typically "break even", generating barely enough cash to
maintain the business's market share. Though owning a break-even unit provides
the social benefit of providing jobs and possible synergies that assist other
business units, from an accounting point of view such a unit is worthless, not
generating cash for the company. They depress a profitable company's return on
assets ratio, used by many investors to judge how well a company is being
managed. Dogs, it is thought, should be sold off.
 QUESTION MARKS: They are business operating in a high market growth, but
having a low market share. Usually requires lots of cash (investment) to maintain-
increase the position. They are a starting point for most businesses. Question
marks have a potential to gain market share and become stars, and eventually
cash cows when market growth slows. If question marks do not succeed in
becoming a market leader, then after perhaps years of cash consumption, they will
degenerate into dogs when market growth declines. Question marks must be
analysed carefully in order to determine whether they are worth the investment
required to grow market share.
 STARS: They are units with a high market share in a fast-growing industry
(high growth markets). They are graduated question marks with a market or
niche leading trajectory. Stars require high funding (cash, investment) to fight
competitions and maintain a growth rate, the leading position, in a growing
attractive market. When industry growth slows, if they remain a niche leader or are

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amongst market leaders it’s have been able to maintain their category leadership
stars become cash cows, else they become dogs due to low relative market share.
As a particular industry matures and its

growth slows, all business units become
either cash cows or dogs. The natural cycle
for most business units is that they start
as question marks, then turn into stars.
Eventually the market stops growing thus the
business unit becomes a cash cow. At the
end of the cycle the cash cow turns into
a dog.
As BCG:
Only a diversified company with a balanced portfolio can use its strengths to truly
capitalize on its growth opportunities. The balanced portfolio has:
 stars whose high share and high growth assure the future;
 cash cows that supply funds for that future growth; and
 question marks to be converted into stars with the added funds.
To be successful, a company should have a portfolio of products with different growth

rates and different market shares. The portfolio composition is a function of the balance
between cash flows. High growth products require cash inputs to grow. Low growth
products should generate excess cash. Both kinds are needed simultaneously.
- RELATIVE MARKET SHARE: Relative market share indexes a firm’s or a brand’s

market share against that of its leading competitor. It is useful in comparing a firm’s
or a brand’s relative position across different markets and in evaluating the type
and degree of competition in those markets. The purpose of the “relative market
share metric” is to access a firm’s or a brand’s success and its position in the
market. A firm with a market share of 25% would be a powerful leader in many
markets but a distant “number two” in others. Relative market share offers a way to
benchmark a firm’s or a brand’s share against that of its largest competitor,
enabling managers to compare relative market positions across different product
markets.

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Brand s Market Share

Largest competitor s market share
Relative market share can also be calculated by dividing brand sales by largest
competitor sales because the common factor of total market sales (or revenue)
cancels out.
The absolut market share is less

important than the relative market
share, that allows us to see the actual
position that the company has in the
market. The relative market share is
my market share divided by the biggest
competitor in the market. For example:
if the fist brand has 40% in the market
and the second one has 25%, the
relative market share of Brand A is 1’6.
- ANNUAL GROWTH RATE: Rapidly growing in rapidly growing markets, are what
organizations strive for; but, as we have seen, the penalty is that they require
investment. The reason for this is often because the growth is being 'bought' by the
high investment, in the reasonable expectation that a high market share will
eventually turn into a sound investment in future profits. The theory behind the
matrix assumes, therefore, that a higher growth rate is indicative of accompanying
demands on investment. The cut-off point is usually chosen as 10 per cent per
annum.
- CONTRIBUTION TO CORPORATE SALES: For each product or service, the

'area' of the circle represents
the value of its sales. The
growth–share matrix thus offers
a "map" of the organization's
product (or service) strengths
and weaknesses, at least in
terms of current profitability, as
well as the likely cash flows.

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EXAMPLE: PEPSICO
PLANNING - RESOURCE ALLOCATION ACROSS THE SBU.
What objective, strategy and budget to assign to each SBU. There are different
possible strategies for each SBU:
1. Build: Increase market share.

2. Hold: Retain position.
3. Harvest: Increase short-term cash flows (short-
run).
4. Divest: Sell the business unit.

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PLANNING NEW SBU.
When projected sales are lower than future desires sales, corporate management will
develop or acquire new businesses.
Available options:
1. INTENSIVE GROWTH: Improving existing businesses by:
a) Market Penetration Strategy: Seeking increased market share for present

products in present markets.
b) Market development Strategy: Present products in new geographic areas.
c) Product Development- Strategy: Seeking increased sales by improving or
modifying present products.
2. INTEGRATIVE GROWTH: Improving existing businesses by:

- Backward integration: Seeking ownership or increased control of a firm’s
suppliers. When you move backwards and starting creating your own
technology for supplies you are going to have some competitive and
strategic advantages. E.g: Ford motors; they go backward and started
producing their wheels and glasses for they cars.
- Forward integration: Gaining ownership or increased control over
distributors or retailers. E.g.: Nestlé Waters; It establishes distribution
channels for bottled water. Or opening new specialized shops like Nescafé in
UK or Danone in Barcelona.
- Horizontal integration: Seeking ownership or increased control over
competitors. E.g: Banking Industry; You may acquire the competitor maybe
it’s smaller but have some specific attractive technology or in order to gain
distribution they are complementary. It provides banks with lower costs.

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There are 3 basic distribution strategies:
 Intensive: The objective is to maximize the number of points of sales (E.g.:

Chewing gum, snacks…). Frequent products, not controlling anything in
distribution, there is no control of the distribution channel.
 Selective: For durable products (E.g.: Phones, Sony products, technology
products…). It’s an intermediate strategy. The product can be sale in the
distributors that provide a specific service.
 Exclusive: Controlling everything (Price, products…) the only way to have an
exclusive distribution strategy is:
o Going to a forward integration and selling the products by yourself. Own
the distribution system.
o By contracts. Look for partners (exclusive dealers).
3. DIVERSIFICATION GROWTH: Diversification is a corporate strategy to enter into a

new market or industry which the business is not currently in, whilst also creating a
new product for that new market. The business has no experience in the new market
and does not know if the product is going to be successful. Is the strategy that
requires more resources (it requires different market and a different product line).
Expansion of the existing product line with related products is one such method
adopted by many businesses. Adding tooth brushes to tooth paste or tooth powders or
mouthwash under the same brand or under different brands aimed at different
segments is one way of diversification. These are either brand extensions or product
extensions to increase the volume of sales and the number of customers. Benefiting
from corporate competitive advantages:
 Technological: E.g.: Dell producing HD TVs.

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 Distribution channels: E.g.: Danone – Minute Maid (Europe, refrigerated).

PEPSICO for snacks (Snacks are fully complemented with carbonated
drinks). Nestlé with chewing gum (Intensive channel, Joint venture with
Colgate).
Confectionery (Chewing gum and sweets market) is a very mature market;
Functional Confectionary includes a benefit (Whitening chewing gum for
example).
 Brand Image: E.g.: Colgate (Chewing gum). Cola Cao (Cereals).
There are different diversification strategies:
- Concentric Diversification: Adding new, but related products. A move into a

new industry where the firm applies what made it successful in the original
industry: its product knowledge.
- Conglomerate diversification: Adding new, unrelated products of services. A
move into a new industry with no links to the original one.
- Horizontal Diversification: Adding new unrelated products for present
customers.
CRITIQUES ABOUT BCG ANALYSIS
- How to measure the market attractiveness? BCG measure attractiveness with the
market growth rate but there are many other indicators. The level of differentiability
affects the market attractiveness.
- How to measure the Business position? BCG only measures market share. But
business position is not only the size.
- Forecast? The result of BCG is an instant picture but the market is dynamic. With
this or any other such analytical tool, ranking business units has a subjective
element involving guesswork about the future, particularly with respect to growth
rates.
Model 2: The General Electric Model:

The next most widely reported technique
is that developed by McKinsey and
General Electric, which is a three-cell by
three-cell matrix—using the dimensions
of `industry attractiveness' and `business
strengths'. Industry attractiveness and
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business unit strength are calculated by first identifying criteria for each, determining
the value of each parameter in the criteria, and multiplying that value by a weighting
factor. The result is a quantitative measure of industry attractiveness and the business
unit’s relative performance in that industry.
- Market attractiveness: It is determined by factors such as market growth rate,

market size, demand variability, industry profitability, global opportunities...
- Business strength: Some factors that can be used to determine business unit
strength include market share, growth in market share, brand equity, distribution
channel access, production capacity, profit margins relative to competitors...
- For every business, visualization of:
o Total market sales ($, €) – The size of the circle
o Market share – Current position.
o Forecasted position for the next 3-5 years.
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TOPIC 4: STRATEGIES FOR INTERNATIONAL MARKETS
ECONOMIC TRENDS IN FAVOR OF ENTERING FOREIGN MARKETS? (Last

decades):
¥ Governments are moving faster to ÒMarket basedÓ Economies: China, east

Europe, etc.
¥ Emerging Economies (economies that are growing and gaining importance in the
global market): Brazil, Asian southeast, India, China…
¥ World trends to reduce free-trade barriers (Economic theories): Countries should
focus on producing in sectors where they have comparative advantages and then
allow them to trade.
o Free-trade Areas: EU, Nafta (North America Free Trade Area), Mercosur,
Ansa-China, etc.
o Bilateral Agreements
¥ Development of service markets:
o International transport
o Communication
o Financial markets…
¥ INTERNET, E-Commerce
¥ GLOBAL CONSUMERS ÐGLOBAL
BRANDS
Export and Import are every day more

important. Every day is easy to firms to
access international markets.
WHY GOING TO THE FOREIGN MARKETS?
SITUATION OF THE LOCAL MARKET: The local market is limited. E.g.: Polish Bike
Maker (A small firm take strategically decisions to benefit to access in the global
market).
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SCALE ECONOMIES: In terms of the manufacturer, the more manufacturing quantity,

the lower unit cost. The more it produces the lower cost per unit will be achieved.
 Production. They manage to create global brands for the same products.
E.g.: Unilever (Ice creams & frozen lines). Unilever respect the branding name but
the products are the same all over the world.
 R&D. In terms of research and development you can also benefit of economies of
scale. E.g.: Whirlpool
 Advertising. In one side we can find global brands (E.g.: Magnum) where there is
no adaptation however sometimes we need adaptation (E.g.: Coca-cola, itÕs same
formula everywhere but the level of sugar is adapted depending in local taste). If
you are working with global brands you may need to adapt the characteristics of
the product, the same is for advertising.
E.g.: Coca-cola beards (Recall advertising Ð When there is no information of the
product at all, the main objective is just to maintain the brand notoriety or the brand
image on consumers brain).
There are two types of selling propositions (that can vary depending on the
country) value proposition (VP) and unique selling proposition (USP) the difference
is how you want to sell the product.
The USP states that such campaigns made unique propositions to customers that
convinced them to switch brands. A value proposition is a promise of value to be
delivered and acknowledged and a belief from the customer that value will be
delivered and experienced.
LIMITS OF THE LOCAL MARKETS:
¥ Excess of production capacity for the local market (it is small). When a
company has excess production capacity it is possible to start producing more and
trying to export excess production units.
¥ Risk reduction: As each country is different in terms of competitors, economy
trends… companies can reduce risks entering in new markets.
EVALUATING THE CANDIDATE COUNTRIES
 Free-Trade Barriers. Unilaterally every own country will be motivated to protect its
own products and establish barriers. However, they know the best for all is not
establishing any type of barriers. It has to be analyzed if there are:
o Tariffs
o Quotas & Licences
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o Local subsidies
 Size, growth, and distribution of the population.
E.g.: McDonalds in Japan Tthe traditional target of McDonalds is families with
children, they have the happy meal and playing areas focusing on families. The
problem in Japan is that people is not having children there are low birthrates.
They start focusing and targeting on working young people because the population
is bigger), Whirlpool in Brazil (the segment they were targeting is not rich families
with lot of children)
 Situation of the foreign market (size, growth, segments, competitors, established
brands, potential comparative advantages/barriers…). Usually in developed
countries the market is more mature and the competition is higher.
E.g.: Ice-Cream market (Unilever & NestlŽ vs. locals). Telecommunication and
Banks in Latin America
 Economic variables
o Per capita GDP and economic growth
o Income distribution
o Currency, exchange rate-policy (fixed vs. variable).
o Foreign exchange control.
 Cultural environment
o Foreign habits and values. The market for some services is very traditional.
 Consumers (E.g.: QB-Net, Whirlpool, SlimFast, Ice-Cream on China)
 Business (E.g.: P&G and the French retailers. P&G when they launch a
product they do lots of promotions to push their product with
aggressive discounts or offers. However, French people are against
these promotions, so they canÕt negotiate these aspects when they are
offering a new product in French retailersÕ market)
o More examples
 Jamon Serrano in USA competing with Italian Prosciutto.
 ÒBi-FiÓ is very popular in Germany (The leading products are BiFi Roll
and Carazza) and Unilever seeing the huge demand and the success
in Germany they tried to launch it in Spain. In Spain the acceptance
was lower. Unilever did a market research and they found that these
products were not well perceived in Spanish market.
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HOW TO ENTER THE FOREIGN MARKET (alternative strategies)
1.- INDIRECT EXPORT
Export processes in which the local firm doesnÕt handled the process, they didnÕt
deliver the product to the costumers and donÕt control the distribution. The firm doesnÕt
look for the market. The firm usually sells the product to domestic export agents.
Other alternative is cooperative organizations (Primary products); the growers or

farmers donÕt have resources or experience and they organize in cooperatives that
handle management. It will be the association who will charge the market opportunities
not the growers or the farmers individually.
Advantages:
 Less resources/investment: No export or international sale departments are

required.
 Low risk (for bad and for good). The firm relies on an agent because the firm
doesnÕt have expertise and doesnÕt invest in the foreign market. The agent is who
assume the risk.
2.- DIRECT EXPORT (The firm handles the export process):
The firm must have export department or division in the destiny country. The firm
has to do a branding strategy in order to decide the agents, the distributors and the
packaging based on foreign agents and distributors. If the firm not only looks for a
distributor and the market is huge, the firm must open foreign sales offices.There is a
big opportunity but there is more risk.
3.- LICENSES AND FRANCHISES:
The licensor ÒlicensesÓ a foreign firm to use a process, brand, patent… for a fee. The
firm controls the foreign partner by a contract.
 Low risk. Usually in the contract the local firm delegate the risk. E.g.: Coca-Cola,
Fast-food chains.
 Long-term risk. The franchise is the one the firm is delegating all, the one with the
know-how can in the long term brake the partnership and starting selling the same
by itself.
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4.- JOINT VENTURES:
It is basically looking for a foreign partner to go together in the foreign market.
Reasons:
 Financial or resource restrictions. You may not have all the capital to full invest
in the foreign country and you may look for a partner to share the investment.
 Legal requirements. In some countries the Governments impose some
restrictions to foreign capital and in order to potentiate local investments and a
percentage of the capital business has to be local.
 Complementarities (E.g.: Beijing Allied & Beijing Sayuan)
5.- DIRECT INVESTMENT:
Usually is the strategy that has most investment and resource requirements.
Investment will be high and also risk will be high, but in the long run the firm will be an
expert of the market. With this strategy there is no partner in the foreign country so the
local firm needs to take the maximum control in: Channels, distribution, advertising,
market knowledge…
Maximum risk: We are not strong yet in the foreign country, maybe we will be strong,
but there is a lot of risk.
6.- GRADUAL IMMERSION
If the firm thinks that there is an opportunity in the foreign market it starts exporting.
The firm starts by indirect export and after knowing the market like the product they
change strategy (only if they sells a lot). The bigger the market opportunities the most
probably of changing strategy 1 (indirect export) and opening a factory in the foreign
country in order to benefit from economies of scale with more production and lower unit
cost.
E.g.: Strategy 1  Strategy 2  Strategy 4;
There are some markets that are similar, some products that can succeed as a global
product (E.g.: Almond Magnum). Nevertheless itÕs difficult to find 2 identical markets
and a lot of times firms has to adapt all the marketing tools to the characteristics of the
market.
5!

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TOPIC 5 Ð THE MARKETING PLAN
5.1. WhatÕs a marketing plan?
All marketing oriented firms organize their marketing department with brands. The
brand manager is the main responsible of every issue related with the brand and it is
also responsible for the results. So it can be said that the brand manager is the person
who has marketing responsibilities to develop and execute marketing programs that
increase brand identity and awareness for a specific line of products.
A marketing plan could be defined as the written document that describes your
advertising and marketing efforts for the coming year; it includes a statement of
the marketing situation, a discussion of target markets and company positioning
and a description of the marketing mix you intend to use to reach your marketing
goals. So, A marketing plan is a business document written for the purpose of
describing the current market position of a business and its marketing strategy for the
period covered by the marketing plan. Marketing plans usually cover a period of 1-5
years.
The reasons that justify having a marketing plan are:
¥ Useful as a map: The marketing plan includes all the actions for the brand and a
timing for every action along the year. So the marketing plan can be used as a
description of what to do during the year.
¥ Useful as a management control tool: The marketing plan allows companies
control and evaluate differences between objectives and results.
¥ Informs new participants about:
o Objectives and how to achieve them.
o Situation of the market, the brand and competitors.
o Problems, opportunities and possible threats.
o ParticipantsÕ functions.
¥ Having a plan is the most efficient way to get resources for the implementation of
the plan.
¥ Defines responsibilities and tasks.
¥ Defines deadlines.

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5.2. Types of marketing plans
Basically there are 2 types of marketing plans:
 For new products: This kind of marketing plan is slightly different because, usually,
considers a 3 to 5 years horizon. This must be in this way because the marketing
plan for new products takes into account market research, market tests, product
development… Market test consists on selecting a representative region of the
national market and launching the product only in this region in order to evaluate
the market acceptance. If it works, then the company can launch the product
nationally with fewer risks.
o New products in new markets.
o New brands in existing markets: This is called multi-branding strategy and
consists in launching new brands in a market where the company is already
operating.
o Relaunch of existing brands: Sometimes in a reposition strategy it is
necessary to redesign the product.
o Line extension.
 For existing products: This plan considers one year horizon.
5.3. Structure of the marketing plan
5.3.1. Executive summary
This is the last part to write because it must contain a summary of the whole marketing
plan in one page, usually including 3 paragraphs. The executive summary must
mention: product definition, strengths, required investment, previous results, objectives,
share…
5.3.2. Index
The index facilitates searching the relevant information for the participants involved in
the projects of the discussion of the plan. It is important because the marketing plan
can be seen as a negotiation document that has the brand manager so, since a
marketing plan normally has between 30 to 40 pages plus attachments (market
research conducted, previous marketing campaigns, previous media plans…), it is
important to have a guideline of where to find each part of the marketing plan.

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5.3.3. Introduction
The introduction is a detailed description of what happened during past years and must
include an explanation on how the company got to the actual situation and must talk
about the actual situation of the market, the product…
5.3.4. Analysis of the situation
The analysis of the situation is a very detailed description of the actual situation
because to conduct a SWOT analysis it is important to have detailed information on the
actual situation.
GENERAL CONDITIONS OF THE MARKET
The general conditions of the market analysis is a market detailed description of:
 Market size (volume and sales) and main segments.

 Growth rates and trends.
 Purchase and usage habits: Behavioral variables are related to purchasing and
usage habits.
 Socioeconomic, cultural and demographic characteristics of the market and its
segments.
 Products characteristics and technology life cycle.
ENVIRONMENTAL ANALYSIS
When analyzing the environment it is necessary to separate:
⇒ Microenvironment: The microenvironment can be defined as all the parties in an

economy that, directly or indirectly, exchange products and services with the firm.
o The value chain: It is necessary to evaluate supplier markets and distribution
channels.
o Industrial markets and e-commerce: Sometimes companies sell their
products in B2B markets (industrial markets) or sell their products directly to
consumers using e-commerce.
o Services: It should be taken into account transport services, financial
services, advertising agencies and market research agencies.
o Competitors and substitute products: Competitors are going to be considered
in a separate topic of the marketing plan.

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⇒ Macroenvironment: The macroenvironment includes all external issues that may

affect companyÕs activity. Normally those issues not only affect the company, but
also affect all the society. The macroenvironment includes:
o Demographic issues: Population age structure, migration movements, birth
and mortality rates…
o Sociocultural environment: Lifestyle, social groups, social values…
o Economic environment: Per capita GDP, inflation, monetary and fiscal policy,
unemployment, interest rates, purchase power…
o Technological environment.
o Political and legal environment: Politic system, lobbies, territorial distribution,
entry and exit barriers, regulatory affairs…
o Natural environment: Weather…

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COMPETITORS
It is important to fully describe main competitors and analyze for each of them:
 Products and strategies: Strategies in marketing, formally, are about segmentation,

targeting and positioning and differentiation to target the segment. Tactics are
pricing, placement, distribution and product.
 Marketing mix for each of their products.
 Strengths and weakness:
o Brand awareness and loyalty.
o Distribution channels.
o Technology.
o Financial resources.
OUR COMPANY
The brand manager should conduct the same analysis done for competitors for its own
brand.
5.3.5. The target
Now is the moment to fully describe the market segment that the company is targeting
attending to:
 Size.
 Trends.
 Demographic factors.
 Socioeconomic factors.
 Habits.
 Lifestyle.
It is also important to provide an explanation for why the company is targeting

this/these concrete segment(s).
5.3.6. Problems and opportunities
In this part of the marketing plan it is possible to summarize trends detected in previous
analysis that could be opportunities or threats. After, the brand manager should
compare its own position, loyalty and distribution channels in front of competitors. For

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doing it, the brand manager can use the SWOT analysis that is a schematic analysis
on the external and internal factors that allow to base objectives.
¥ The opportunities (Analyzing new trends in new markets)

¥ Problems to face and how to react (threats)
¥ Strengths and weaknesses (internal analysis)
5.3.7. Objectives
It must be said that objectives have to be measurable and fixed for a time horizon.
There are different types of objectives:
A. Sales and market share: ThatÕs what is called volume objectives.

B. Profits: There is a big tradeoff between sales and profits. Depending on the type of
product we should maximize profits or sales growth.
C. Marketing:
a. Reach and frequency of campaigns: The reach is the number of citizens that
will be exposed to the campaign and it can be measured in the media plan.
The frequency is an average number of how many times consumers have
seen the campaign.
b. Online marketing: SEO, SEM, Banners…
c. Brand and attribute awareness (recall).
d. Trial levels.
e. Distribution: By store type, by region…
5.3.8. Marketing strategies
⇒ Segmentation.
⇒ Differentiation and positioning
5.3.9. Marketing tactics
Steps and actions to take regarding the marketing-mix variables (the 4 Ps):
 Product
 Price
 Promotion
 ÒPlaceÓ (Distribution)

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5.3.10. Implementation and control
 Monthly chart of:

o Sales.
o Marketing activities.
 Budget:
o Production and other costs assigned to the product.
o Profit and Loss Statement (previous, current and forecasts).
o Budget for the brand: Marketing expenditures on:
 Market research designed for the brand.
 Promotions: sales promotion, public relations, etc.
 Advertising:
¥ Production
¥ Media.

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TOPIC 6 – PRODUCT, LINE AND BRAND STRATEGIES
1. Product
A PRODUCT is anything that can be offered to a market for attention, acquisition, use,
or consumption that might satisfy a want or need. Someone is going to pay for the
product because he/she consider that it has a value. The value is what the consumers
willing to pay. The difference between the price and the value is the margin.
Products can be classified according to:
A) Product characteristics:
Goods (tangible):
 Non-durable goods: The durability is not due to the duration about the
product is about is consumption with its use. The non-durable goods are
consumed by its use. They may be defined either as goods that are
immediately consumed in one use or ones that have a lifespan of less than 3
years. E.g.: Coca-cola, perfume. Examples of nondurable goods include fast
moving consumer goods such as cosmetics and cleaning products, food,
fuel, beer, cigarettes, medication, office supplies, packaging and containers,
paper and paper products, personal products, rubber, plastics, textiles,
clothing, and footwear.
 Durable goods: Is about the consumer is expecting a product that offers a
services for a certain period of time. The product is not consumed itself buy
the product is depreciating during the service it gives with its use. Is a good
that does not quickly wear out, or more specifically, one that yields utility over
time rather than being completely consumed in one use. Highly durable
goods such as refrigerators, cars, or mobile phones usually continue to be
useful for three or more years of use, so durable goods are typically
characterized by long periods between successive purchases. E.g: A car is
a durable good. The gasoline that powers it is a non-durable good,
or consumable good.
Services (intangibles): Services may or may not tie to a physical product,

differences are not so easy to identify in the market.

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Some authors propose that there is a continuous process between a good and a
service. Services may or may not be tied to a physical product:
Example: When you buy a Coke in the supermarket you are paying for a pure
product. When you consume a Coke in a restaurant you are paying for a special
occasion and time, so you are paying for an extra value that the coke has.
Example: When you pay for a hotel you may thing that is a pure service and
sometime it is that but in other occasion you pay for a special extra services or
you pay for an extra products the hotel offers you.
B) Consumer purchasing habits: This classification is based on consumer habits or

behaviour, not about the characteristics’ of the product.
 CONVENIENCE GOODS: Frequent, immediate purchase, with minimum
effort in comparison and buying. The purchase process is quite automatic.
- Straples: Are those convenient goods for which the consumer plans
the purchase. Purchased on a regular bases. Routinary but planned
purchase. Example: When you want to do a special receipt you
prepare the ingredients do you need.
- Impulse goods: Unplanned purchase. The purchase it is based on
impulse. The impulse is a channel generate brands’s strategies, like
vending machines or putting impulse goods in the cash machines.
- Emergency goods: Unexpected need. Example: Aspirin. Umbrella
when is raining. However, it could be a durable product with low
durability –the perception that a consumer has about how much time is
going to have the product-.
The same good can be classified in any of the previous categories
depending on consumer’s purchasing occasion. EVEN FOR THE SAME
CONSUMER!! E.g: newspaper, coke, aspirins...
Example: Condoms: if you have a frequent sexual life because you have a
partnership, you will plan the purchase and you’ll be more price sensitive. If
you are single, your sexual life is not so frequent, so the program process is
stopped and if you pass in front of the supermarket shelf and se the

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condoms if you buy them with the intention of having in home it is impulsive.
And if you go out with friends in a bar and you find someone and do you
want to have sex and you haven’t any condom you will buy it by emergency
in vending machines or an open pharmacy.
Example: Shops in the airports – The airports are deigned like a commercial
centre because it could be a planned purchase because of the low taxes in
them. But the main reason is because a unplanned purchase and
unexpected need like when you are walking and you see something and you
decide to buy it (unplanned purchase) or you realized that you have forget
something you need for your travel (unexpected need).
 SHOPPING GOODS: Opposite to convenience; there is a process of

collecting information, comparison and selection. Example: car, mobile
phone, laptop...
As they are durable, they are expensive. Do you have an unexpected
satisfied because they are durable and the uncertainty is major. The decision
process is longer because this uncertainty and the risk.
Are shopping goods always durable and convenience goods always non-durable?
So much times it is but there are examples that it’s not true. Example: Kit-Kat is non-
durable and it is convenience good and a PC is a durable good and it is a shopping
good. Example: Cloth is a durable but could it be an unexpected purchase
(convenience product). The shops usually are decorated and distributed in the way to
allow consumers buying by impulse. Example: Wine is a non-durable product but you
take a time to analyse the different option do you have to buy it.
 SPECIALTY GOODS: Unique characteristics. Do not involve making

comparisons. Consumers are willing to make a purchasing effort. E.g.: Do
you want to see a CD of Rihanna, if there aren’t CD by Rihanna you don’t
buy another one.
 UNSOUGHT GOODS: Consumer does not think of buying the product.
Usually require personal selling support. E.g.: Encyclopaedias, insurances,
contribution to NGO’s.

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2. Product mix and product line
The PRODUCT MIX is a set of all the products and items that a particular seller offers
for sale to buyers. It is the whole offers of the products and items that a particular seller
offers for sale to buyers. Firms organize all the product mix by lines.
The PRODUCT LINE a group of products that are closely related because they:
- Perform similar functions. E.g: detergents –the line of P&G of detergents-, oral
care, body care... (all the products perform a similar functions they are
complements or substitutes).
- Are sold to the same customer groups-segments. “Line positioning”. E.g.: a line of
low price detergents by P&G or a delicate-clothes detergent (in the detergents line,
that perform the same functions it is segmented by the ones that are for delicate
clothes). E.g.: Nestle has a lot of cereals product but it has a line positioning with a
Cereal Fitness for low fast, this line is position differently. E.g: Clinique is
positioned as antiallergenic products.
- Are marketed through the same channels. E.g.: E.g.: Frozen lines (Findus by
Nestlé (1962-2000) has different products and different supplies and demands for
each of them).
- Make up a particular prince range.
o Premium lines: E.g.: Saimaza (coffee brand has the standard line and the
selected line with a higher line). El Pozo (with “El Pozo selección” that is the
standard line and “Legado Ibérico” that is the premium line).
o Affordable lines: D&G has a line with less quality than its standard one that is
the higher priced.
- Present manufacturing interactions (in packaging, in raw materials, etc), share
inputs. E.g.: celluloid product line (toilet paper, kitchen paper…).
PRODUCT-LINE ANALYSIS: In sales and profits. Determine the contribution of the

each product of the line in the sales (volume) and profits to make decisions.

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E.g.: Campbell’s soups. There are 11 soups. The first we do is organizing the products
by its contribution in sales from the product that has higher sales to less contribution
one. Then we put the contribution to the profits of each product. The next step is
calculating the perceptual contribution of the products to the total sales and total profits.
After that we calculate the profitability index (Profits%/Sales%).
Product Sales Sales Profits ($) Profits Profitability

(%) (%) index
A 600 19’42 300 22’54 1’16
B 500 16’18 100 7’51 0’46
C 450 14’56 135 10’14 0’69
D 420 13’59 168 12’62 0’92
E 350 11’33 175 13’14 1’16
F 200 6’47 80 6’0 0’92
G 150 4’85 105 7’8 1’61
H 150 4’85 120 9’0 1’86
I 120 3’88 108 8’11 2’09
J 100 3’24 20 1’5 0’46
K 50 1’62 20 1’5 0’93
The decisions to optimize the line is basically based on the product profitability. We can
increase the profitability by reducing the length of the line, because then even if the
revenues could decrease, the cost reduce too. If we decide, in cash caws, to reduce
the products, we can focused in short line in products that have more profitability and
we reduce the costs by given up those products that have less profitability. And we can
positioned the line in the market and this will help us to take decisions. The objective of
the line will be different if this is a kind of question mark, a star, cash caw, etc. If it is
cash caw it is interesting to reduce de number of products and reduce the costs. If we
can focus on a short line we can focus on economies of scale, maybe the sales will
reduce a bit but costs will be reduced significantly and we will be cost effective.
LINE DECISIONS
The optimal product-line length is influenced by product-line objectives.

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- Volume objectives: High market share, sales growth… If we forget about

profitability in short terms and we focused on increase volume of sales or having a
high market share, we obtain a longer lines. They are the typical objectives for
question marks and stars.
- Profitability objectives: Increasing cost when extending the line. Which costs?
Design costs, inventory-carrying costs, manufacturing-changing costs, new-item
promotional costs… To reduce cost the best thing is short the line.
BASIC STRATEGIES
A) Line stretching strategy.

B) Line pruning strategy.
3. The quality-price map
It is a preference map and a perceptual map with 2 attributes: price and quality. Going
to the right is lowering the
price with the same
quality. Going to the up is
getting a higher quality
with the same price.
The IDEAL PRODUCT is

what everyone wants
(high quality with low
price), but that is not
profitable (high quality
means high costs). No
company is going to
invest in this product.
PROFIT MAXIMUM MONOPOLY: It is in the left side at the bottom: High-Price, Low
quality. It is the product that generates more benefits. It is only possible in a monopoly
situation. If there aren’t competitors, the incentives to increase quality to be competitive
don’t exist. If exists competition in price the product will move along the price and starts
reducing its price. If appears quality competitors the product will start moving to the top
and improving quality. At the end the firm will convert the product into a premium
product.

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The companies could compete in price on in quality. Companies are adding quality in
the product and obtain a PREMIUM PRODUCT, the top quality product. The
technological
leader implements
it in new products.
Companies that
compete in terms
of price obtain a
BASIC PRODUCT.
Companies and
products can
coexist positioning
their products. The
firms can position
the products along
the diagonal between premium products and basic ones (positionated in the left side
with low price and low quality) because the market is heterogeneous (there are some
consumers who are price sensitive and some aren’t).
Price-sensitive consumers for, whatever reason, they strongly prefer the basic products
because they prioritise price.
Non prince-sensitive consumers don’t take care about the price, they purchasing
decisions aren’t affected by the changes in the prices.

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4. Adding value to a product
PRODUCT A PRODUCT B
Price $10.000 $ ???
Cost $5.000 $6000
Consumer $12.000 $16.000
Value
With product A there is an exchange here. Consumer value is higher than the price.
The additional value added to the new product B is more for the customers’ value than
for the costs of the firm.
For the new product the superplus

for the company is 7000, and for
the second product the superplus
is 10000.
The consumer superplus is 2000

for product A. So if we want
consumers to buy product B,
buying it product has to give them
the same or more surplus if they
buy this product, so the superplus must

be 2000 for product B, so the price must
be 140000.
So, the firm’s profits for Product A is

5000 and for Product B is 8000. So, for
product B there is an upward stretching,
a higher unit margin.

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When we go to the upper end, the

sales volume is less but the unit
margin is bigger. And, on the other
side, if we go to the lower end, the
sales volume is so big but the unit
margin is so small.
An example in the Spanish market – Procter&Gamble Detergent line strategies
In USA P&G, was the leader in detergent sector, it had 10 different brand
(multibranding strategy – different brands positioning different in the same market).
Multibranding strategy is too expensive and now the distribution brand have increased
their power negotiation so these brands are promoting their top brands. The advantage
is that the risk is diversificated and if one brand has problems, they do not affect the
other brands.
P&G in Spain has only one product detergent: Ariel. But they are extending the line,
they have different products in this line. They have, for example, a lower quality product
with low price to compete with distributor brands and products with especial value,
extra attributes extra smoothness or smell.
5. Basic strategies
A) Line stretching decisions: Adding new features, new items into the line.
Increasing the number of products within an existing product range with similar
products that have additional or different features. When a business already has a
well established brand, it can use line stretching to expand its product line and help
increase its market share without having to develop substantially new products.
A product line extension is the use of an established product brand name for a new
item in the same product category.
Line Extensions occur when a company introduces additional items in the same
product category under the same brand name such as new flavours, forms,
colours, added ingredients, package sizes. This is as opposed to brand
extension which is a new product in a totally different product category.

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1. DOWNWARD STRETCH: Extending the line by including lower-price items

(basic versions, cheaper products, etc.). Market opportunities, attracting a
bigger growing segment (ex. Lagged segment).
E.g.: GM and other American car companies resisted building smaller cars. In
the 80s appeared a necessity of having smaller cars and the cars
manufacturing needed a lot of time to see this necessity. Japan
manufacturing saw the
necessity before.
IBM (originally large
computers) – Was the first firm
that design a simple, smaller
and cheaper computer for
personal uses.
BMW basic models (Serie 1):
BMW did a cheaper version to
move to the basic product,
cheaper product and less
costs.
Risks:
- Cannibalization (every time you launch a product, the consumers
could change the election so they could begin to buy the cheaper
version of the product). The risk of the cannibalizations depend on the
substitutability of the two products. E.g.: Whirlpool-ideale vs BMW-
serie 1: The first case the two markets are so different so when the
company began to sell products with people that have never had
washing machine the two products that offered were so different in
terms of quality and price. In this market there are no washing
machines yet, and the other countries don’t buy cheaper and low
quality washing machine because they already have one. The second
example (BMW-serie 1) the risk of cannibalization is higher because
people prince-sensitive could start to buy the cheaper version.
E.g.: Kodak Funtime film after the entering into the market Japanese
products that are substitutes and cheaper. Kodak launches a low
quality product with a lower price that cannibalizes the premium Kodak
existing before.
- Damaging an existing brand-quality image.
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2. UPWARD STRETCH: Including more expensive items, improved versions of

the products.
- Higher margins.
- Market opportunities: growing segments (e.g. innovations: TV’s, mobile
phones, etc.).
Risk: The main risk

is no the image, it’s
the credibility
among
consumers
(convincing
consumers about
the product, about
that the quality is
higher now).
Another risk is the
lack of experience: When quality is increased the procedures in
manufacturing or sales are more difficult than before. It will take some time
to acquire technological experience, sales experience, distribution
experience… In industrial market is easier to sell simple products, so begin
selling another kind of products represent a risk.
3. LINE-FILLING STRATEGY: Adding more items within the present range. It

is about extending the line by launching new product but in the current level
of price-quality. The strategy is appropriate when there are specific market
opportunities:
- Market opportunities because of:
 Variety seeking behaviour – buscadores de variedad-:
Consumers look for variety in some kind of products like yogurts
or ice-creams. In yogurts it is not common to buy like 12
strawberry yogurts; consumers look for combination of different
favours.
 New segment: E.g.: low calories, low alcohol, low salt…
- Dealers requirements: More sizes to reach different types of consumer:
If a company wants to target a low income segment it may reduce
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packaging costs and maybe it should offer smaller sizes adapting to

the consumption habits.
- There is excess capacity: If there is not used installed production
capacity it may be a good idea to use this excess of capacity for
producing other varieties of the product.
- Strategic positioning as a leading full-line company.
Risk: There is a risk of

cannibalization,
depending on the
substitutability of the
products the risk may be
higher or lower. If the
consumers that have
already bought your
product, start to buy
another one, the benefit
no grow. If the products
are completely
substitutes, it’s not a
good idea extending the line.
B) Line-pruning decisions: Reducing the length of the line. Line-strategies involve

the process of getting rid of products that no longer contribute to company profits.
A simple fact of marketing is that sooner or later a product will decline in demand
and require pruning.
When evaluating your product line, whether a product is profitable is not the only
reason to consider keeping or dropping it. How the product contributes to your
growth strategy, brand management and production efforts determine whether you
should discontinue it. Knowing what to look for in your product mix helps you
decide when it’s time to prune your line.
The reason of this strategy mainly due to:
o Non-profit items.
o Strategic reason (e.g. declining demand for the product).
o Short of production capacity (increasing production).
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6. Branding strategies
1) GENERIC PRODUCTS: Unbranded, plainly packaged, standard medium-low

quality. Basic products, low price positioning. Appropriate strategy to
minimize manufacturing and promotional cost and market a product with
standard quality, targeting price-sensitive consumers. The strategy of no
expend any euro in creating a brand or image happened at the 80s that
developed on distributor brands. Generic product evolved into distributor
product. In terms of cost (communicate cost, packaging cost…), it is de most
efficiency strategy. An example of generic products it’s the pharmaceutics
market.
The advantages is that you don’t have to create a brand so there aren’t
communication cost.
2) DISTRIBUTOR / STORE / PRIVATE BRAND: Distributors have agreements
with manufacturers and, in this way, manufacturers focus on producing
according to distributors requirements and marketing, sales and distribution
is made by distributors. If a company does not have enough money for
building a brand the best idea is to start producing for a distributor. However,
the main risk is that you company has no negotiation power. The only
situation where the manufacturer has negotiation power is when
manufacturers product is a differentiated product because has better quality,
so the product could be sold anywhere.
3) MANUFACTURER / NATIONAL BRAND: You can use different levels:
corporate brand, line brand, individuals brands or mixtures some of them.
- Individual brand strategy: Uses a brand for each product.
- Line brand name: Having stronger lines gives negotiation power and it
creates economies of scale in terms of communication and brandings.
It is also easier to create trial campaigns and if a consumer is familiar
with the brand this consumer may buy the new product because the
product has a well-known brand. E.g.: P&G, Colgate. E.g.: Unilever
with Dove. The first product by Dove was a soap with 25% of
moisturizing cream (EEUU’s product). The Brand became well-known
and all the beauty products (shampoo…) with moisturizing cream.
When you have a big line brand you have negotiation power and you
could take benefit of economy scales. And you reduce communication
and distribution cost.
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- Corporate brand strategy for all products: There are no many

companies using this strategy. They only produce for their own brand,
so the company uses the corporate brand in all products. E.g.: Heinz.
- Combinations of individual line and corporate names: It is possible
to combine strong line brands with corporate brands. E.g: Kellogg’s:
rice Krispies, all brand, nestlé: Chambourcy, Sveltness.
Advantages and disadvantages of individual brands vs corporate brands: advertising

cost, image, multi-brand strategies. Corporate brand are useful when they are
consistent (e.g. Nestlé).
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TOPIC 7: COMMUNICATION STRATEGIES
MARKETING COMMUNICATION MIX
Sales Personal Public Direct

Advertising
promotions Selling Relations Marketing
1. MARKETING COMMUNICATION MIX:
1.1. ADVERTISING: Any paid form of non-personal presentation and promotion of

goods or services by an identified sponsor.
¥ Same message to the target, impersonal and not interactive
¥ Selective-mass media
¥ Require a major investment (production)
Traditional ÒofflineÓ media:
 Outdoor (printed adds)
 TV
 Newspapers
 Magazines
 Radio
 Cinema
Online media:
 Internet, E-mailing, Mobile.
 When a communication action in Internet is done with a paid form with the
same message to everyone and is non-personal is considered advertising
E.g.: Banners, SEM (position your website in the first places in a searching
engine)
1.2. SALES PROMOTIONS: Provide short-term incentives to encourage quicker or
greater purchase of a product or service.
In marketing we said invest on advertising and spend in a promotion. Advertising is
not an expense; itÕs an inversion (as a inversion will get back profits). Promotion is
an expense, and as an expense provides short-term incentives.
¥ Offers an incentive to buy
¥ Motivation when acquiring the product
¥ Short-term response. Promotions do not build brand image.
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E.g.: ÒUn sueldo para toda la vidaÓ NescafŽ

1.3. PERSONAL SELLING: Oral presentation in conversation with one or more
prospective purchasers for the purpose of making sales.
¥ Interactive communication
¥ The buyer is committed to attend and respond
¥ Appropriate for durables (shopping goods) and industrial markets when
consumers need more information (e.g.: Buying a car).
Mass consumption products  it is more difficult to do personal selling.
1.4. PUBLIC RELATIONS: Opposite to advertising they are a variety of programs and
activities that the organization undertakes to communicate to its public which are
not paid for directly. The main objective is to improve, maintain, or protect a
company or product image.
¥ The message gets to the buyers as news rather than a sales-directed
communication.
¥ Higher credibility than ad. Information
¥ Sponsorship is also considered a PPRR activity (indirect impact on
media/news).
1.5. DIRECT MARKETING:

Kotler: Use of consumer direct channels to reach and deliver goods and services
without using marketing middlemen. (This is a definition for E-Commerce, and e-
commerce is part of direct marketing)
Others: Direct marketing is a type of advertising campaign that seeks to elicit
a measurable action (such as an order, a visit to a store or Web site, or a
request for further information) from a selected group of consumers in
response to a communication from the marketer. The key issue is it is a
measurable action.
E.g. Direct mailing, catalog marketing, telemarketing, other direct-response media
and e-marketing. Personal selling.
E.g.: AVON- The only way to buy the product is calling to the call centre o visiting
the web site.
E.g.: Special K Ð obtain a special and personal plan to get fit.
¥ The response of any action can be measured!!!!
¥ Purchases are usually made directly from the manufacturer rather than
through an intermediary.
¥ May be interactive
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Growing trend: Greater number of parameters to choose: Mass customization.

E.g.: Nike makes a web application to customize shoes with different parameters
to choose.
Any action using mobile marketing is a Direct Marketing action.
2. FACTORS IN SETTING THE OPTIMAL PROMOTION MIX:
The effectiveness of each tool depends largely on the following factors:
A. Complexity of the decision process (Convenience and search goods):

¥ Expensiveness (The more expensive the more complex the process is in
order to try to avoid the risk).
¥ Uncertainty
¥ Adaptability (The more personalized the more complex the process is).
E.g.: Industrial markets and durables (search goods) require professional selling,
customized information… (advise, etc.).
Personal selling. Firms can do personal selling in two ways:
 Sales representatives (E.g.: Avon)
 Through concessionaries (E.g.: Cars)
B. Market Concentration level: The number of potential customers (A concentrated
market is a market with a limited number of potential customers).
 Industrial markets are usually concentrated markets.
 Personal selling
 Consumers markets: Mass markets vs. few costumers. In mass markets the
market is fragmented.
 Advertising and Sales promotions. (Because personal selling is too
expensive).
C. Length of the channels (number of intermediaries)
PUSH STRATEGIES: Strategies that promote the Distribution channel. Marketing
activities directed at channelÕs intermediaries.
¥ Sales force support. Salesmen of the company push the distribution.

¥ Trade promotion
E.g.: Include information or promotions inside the main products. This is a way to
inform retailers.
PULL STRATEGIES: Strategies that consist in creating demand for the products in
consumers. Marketing Activities directed at consumers.
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¥ Advertising
¥ Consumer promotions
¥ Direct marketing campaigns
However, when the channel is very large it is difficult to communicate with the last
retailer. In these cases it is possible to put information in the boxes that the retailer
manipulates in order to inform them about new launching products or promotions.
Push and pull strategies must be compensated for a proper distribution of the
product. Length of the channel is the number of intermediaries between producers
or manufacturers and consumers. Usually a channel with length 0 could be e-
commerce and in this case pushing strategies are not necessary. However, there
could be a channel of 3 or 4 elements.
Longer channel  more ÒpushÓ strategies
D. Category awareness (product-life-cycle stage, Pull strategies):

 INTRODUCTION STAGE. Informative advertising and trial promotions. Trial
is a promotional strategy that facilitates consumers who havenÕt try the
product to try it.
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 GROWING-MATURE STAGE. Persuasive advertising and promotions

directed to users. The most persuasive advertising is the comparing
advertising.
 DECLINING STAGE. Sales promotions. No advertising. Recall advertising. If
the market is declining it doesnÕt make sense to invest in advertising
because it has effects in long term, and in present terms it is a cost and we
want to maximize profits and reduce costs.
* Advertising can be classified as:
¥ Informative: A great example is the mistakes of cottonelle. In this case the

advertising campaign did not inform at all consumers about characteristics of the
product. It is important to explain clearly the characteristics of the product. This
kind of advertising is important in new products.
¥ Persuasive: Is an advertising campaign where the firms wants to position the
brand in front of other brands of competitors. The objective of this advertising is to
convince consumers that the product has benefits that competence donÕt have.
¥ Recall: Is a kind of advertising which objective is to keep the brand in top of
consumerÕs mind. All consumers know the brand.
¥ Promotional: Communicate a sales promotion.
E. Brand awareness (Sales Promotions, Target segment):

 Non-users. Consumers not familiar with the brand.
 Occasional users. Consumers who know the brand, they are familiar with the
brand, they have bought the brand but they are not loyal to the brand.
 Loyal users. Consumers those are familiar with the brand and are loyal in
buying it.
3. SALES PROMOTIONS:
The consumer promotions must be designed according to the short-run business

strategy, information on brand usage, habits and trends.
In order to design sales promotions it is necessary to rely on information that can be

obtained from information sources:
THE USAGE-AND ATTITUDE SURVEYS: Periodic surveys directed to a

representative sample of the market where questions about the frequency of
consumption habits, intention to buy...
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CONSUMER PANELS (HOUSEHOLD PANELS): Some people have a panel in their

houses to monitoring purchases of these people for every product category.
¥ Taylor Nelson
¥ AC Nielsen
E.g.: Target segment (Imagine you are brand A)
1. Non users of brand A: Have not purchased the product in the last 6 occasions
Purchases: B, C, B, B, C, C
2. Occasional Users: No loyalty. It is necessary to do continuity strategies.
Purchases: A, C, A, B, B, C
3. Loyal users. It is important to conduct stocking strategies.
Purchases: A, C, A, A, A, A
STORE AUDITS: It is a source to obtain information for:
¥ Share.
¥ Sales by region.
¥ Sales by type of store.
¥ Total sales of the brand.
¥ Sales for competing brands.
¥ Stock information: It is important to know if there are (roturas de stock) for my
brand, for an specific size…
In surveys every time you do one you take different random people, and this doesnÕt
allow to monitories. In household panels always is the same people.
Promotional strategies:
1. Trial: Are those promotions that generate knowledge of the brand and allow those
non-users to know and trial the brand. Typical for new launches of the product:
a. Free samples distributed: Door-to-door, in stores, Mail, attached in a product,
printed media, etc.
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b. Trial sizes, big discount in small sizes to encourage people to buy it to try the
new product.
c. Coupons, and other incentives in small packages, etc.
2. Continuity: Actions, which are effective with consumers that know your brand but
are not loyalty. The promotion has to give incentives to continue buying your
brand. They promote consumers not to switch the brand.
a. Storable coupons, codes or any other purchase evidence
b. Discounts for the next purchase
c. Long-period promotions (cumulative proof-of-purchase)
d. Etc.
* Loyalty program  Not generate loyalty, but are programs that create cards for
grocery shopping. They are particularly useful in markets where consumers are price
sensitive.
3. Stocking: Promotional action in which users are loyal in order to allow them to
stock or accumulate big quantities of the product in the expectation that stocking
will be transformed in higher future consumption. Only useful when there is a direct
conversion between the accumulation of product and future consumption.Bonus
packs
a. Contests in big/multiple packs
b. Additional quantity in big sizes/additional units in multiple packs
4. EVALUATION OF ADVERTISING CAMPAIGNS:
Setting the Advertising Objectives:
1. First, we have to identify the target audience. It doesnÕt necessary has to be the
same as the target segment.
2. Time horizon
3. Fixe communication objectives and desired change (measurable).
OVERALL OBJECTIVES: So objectives can be set in terms of brand awareness or in

terms of intention to buy.
¥ Brand awareness (e.g. brand recall, Top of mind). This can be obtained from
usage and attitude surveys.
¥ Aided brand awareness (associated to an attribute). Level of recall aided by a
certain characteristic.
¥ Attitudinal objectives to the brand. (E.g.: Like, intention to buy,...)
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E.g.: Ò25% of young Spanish smokers, between 18 and 35 year old identify toothpaste
XXX as an effective one for tooth whitening.Ó Value or Unique selling proposition (VP
or USP)
* A value proposition is a promise of value to be delivered and acknowledged and a

belief from the customer that value will be delivered and experienced. A value
proposition can apply to an entire organization, or parts thereof, or customer accounts,
or products or services.
The unique selling proposition (USP) or unique selling point is a marketing

concept that states that such campaigns made unique propositions to customers that
convinced them to switch brands.
HYPOTETICAL EXAMPLE:
The objective was 20% market share but in the end market share was only 10%. To
identify the problem we need information on:
‐ Brand awareness
‐ Distribution problems.
‐ Price problems.
‐ Satisfaction problems.
‐ Trial.
‐ …
With more information it is possible to deduce why the market share objective is not
met.
¥ First scenario: When awareness is lower than the objective people donÕt know the
brand, as they should. In mass consumption to create brand awareness it is
necessary to launch advertising campaigns. Maybe the media plan should be
more aggressive; maybe the story is not appropriate.
¥ Second scenario: There is brand awareness but there is not intention to buy:
o Maybe there is a problem with products characteristics: Wrong positioning of
the product, so the target donÕt value the attributes position in this product.
o Maybe there is a pricing problem.
¥ Third scenario: Awareness and intention to buy is high but there is low trial
(effective buy). Advertising was great but the gap is in effective trial so the main
problem may be distribution, facilitating trial, smaller samples, discount prices…
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¥ Fourth scenario: High brand awareness, intention to buy and trial but low market
share. The main problem is that consumers try but not repurchase. So the product
is not really satisfying expectations. If there is a big gap between trial and market
share it means that the product does not satisfy consumers needs however if there
is a low gap between trial and market share we can conclude that consumers are
satisfied with the product.
Intention to buy scale: we can ask level of intention to buy a product to consumers in a
5 level scale in order to determine the attitude towards the brand.
5. NEW WAYS TO COMMUNICATE WITH CONSUMERS:
Internet advertising is continuously growing compared to offline advertising. Internet

is growing around 20% per year. TV is the media more price sensitive or recession
sensitive. There is happening a huge substitution between online advertising and
printed newspapers advertising.
¥ Banners
¥ Search engine marketing
o Search-engine positioning: (SEO Ð Search Engine Optimization). Despite it
may be costly because it is difficult to optimize information in our webpage it
is not considered advertising because we are not paying any media.
o Adwords campaigns (SEM Ð Search Engine Marketing)
Membership (CRM)  Firms are growingly using Costumer Relationship Management

to interact with their customers (communities).
Web 2.0  When Internet appeared, 99% of information uploaded to Internet came
from firms. However, last years the tendency changed and consumers were willing to
upload information to Internet (Social Networks, Wiki, Chats…). So firms have to
acknowledge and accept that the importance of consumers uploaded by consumers is
growing.
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Real time promotions  Firms are also everyday more able to personalize
promotions and monitor history search (emerging pop-ups…)
Mobile devices  (Smartphones and tablets).
¥ Applications
¥ Geomarketing
¥ QR Codes, bar codes, ...
PRICING MODELS (TARIFFS) FOR INTERNET ADVERTISING:
 CPM (Cost per thousand views)

 CPA (Cost per action) ???
o CPC (cost per click)
o CPL (cost per lead): It is possible to pay per lead. A lead consists to
capture relevant information from a potential customer
o CPP (cost per purchase) o CPO (Cost per order)
 Hybrids: Combinations of 2 indexes.: CPM-CPA or CPA- CPA)
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TOPIC 8 Ð NEW PRICING STRATEGIES
8.1. Customized pricing
The customized pricing is basically to adapt the price of the product depending on the
characteristic s or attributes of the product requested by the consumer. So in this cases
there is a Customer request received by the company and then the company must
determine the price of the product bearing in mind the characteristics of the order.
THE NIKE CASE
For example Nike offers a fixed price for a determined model of shoes, however,
through NikeId allows costumers to fully personalize their product changing colors,
sizes and also the type cloth used.
THE BMW CASE
In the BMW webpage it is possible to choose a BMW car model and change a lot of
characteristics of the car in order to adapt the generic o standard model to customer
needs (for example it is possible to choose the power of the car, the color and the type
of painting used, if you want the seats with leather…) and depending on the decisions
of the costumer in each phase of the designing process the price of the car changes.
8.2. Dynamic pricing
Dynamic pricing is a pricing strategy in which businesses set highly flexible prices for
products or services based on current market demands. Business are able to stay
competitive by changing prices based on algorithms that take into account competitor
pricing, supply and demand, and other external factors. Dynamic pricing is a common
practice in several industries such as hospitality, travel, entertainment, and retail. Each
industry takes a slightly different approach to re-pricing based on its needs and the
demand for the product.
So summing up dynamic pricing consists on changing prices along time based on:
 The demand: This is typical in markets in which in the short run the supply is fixed
so most of the costs are fixed. For example, a hotel cannot change the number of
rooms that they have so virtually 100% of costs are fixed. So if costs are fixed,
then the company must maximize revenues; just focusing on the demand or
revenues in order to design a price structure to maximize revenues.

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 According to competitorsÕ strategies: An example could be guarantee that daily

prices will be the lowest (Colryd case).
HOTELS AND AIRLANES CASES
Hotels and other players in the hospitality industry use dynamic pricing to adjust the
cost of rooms and packages based on the supply and demand needs at a particular
moment. The goal of dynamic pricing in this industry is to find the highest price that
consumers are willing to pay. Another name for dynamic pricing in the industry is
demand pricing. This form of price discrimination is used to try to maximize revenue
based on the willingness to pay of different market segments. They feature price
increases when demand is high and decreases to stimulate demand when it is low.
Having a variety of prices based on the demand at each point in the day makes it
possible for hotels to generate more revenue by bringing in customers at the different
price points they are willing to pay.
Airlines change prices often depending on the day of the week, time of day, and
number of days before the flight.[3] For airlines, dynamic pricing factors in different
components such as: how many seats a flight has, departure time, and average
cancellations on similar flights.
8.3. Personalized pricing
Personalized pricing has often been defined as the ability to charge different prices to
different consumers. The price offered to a consumer whose valuation for a product or
service is known may be higher or lower than the posted uniform price charged by
firms that lack the sophistication to target individual consumers. So, in this case prices
change depending on the customer and not depending on product characteristics.
Usually to personalize prices and promotion is necessary to have a CRM.
 Amazon: The online retailer only asks for your name when your register on the
website, but it carefully tracks what you have purchased and collects personal
information about your buying habits. Personalization helps them identify your
interests and your willingness to pay. Once you make a purchase, you are
presented with recommendations based on previous purchases.
 Collaborative filtering:
o User level: It consists on comparing uses or attitudes of some similar
consumers in order to make recommendations.

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o Item level: It consists on comparing if there is a tendency that some

consumers that buy product x also buy product y and use this information to
make recommendations.
8.4. Other internet-based strategies
⇒ Auctions: The pricing strategy for Ebay is auction.

⇒ Inverse Auction: It consists on demanding a product and waiting for offers from
suppliers that accomplish some conditions.
⇒ Buyers webs: Are internet organizations that try to negotiate with suppliers
because they have a community of consumers. An example could be Groupalia.

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TOPIC 9 – DISTRIBUTION STRATEGIES
1. The distribution strategy
The decision on the distribution strategy depends on the product:
 The intensity of the geographical coverage.

Fragmented markets (longer channels) vs concentrated markets.
- Fragmented market: A marketplace where there is no one company that can
exert enough influence to move the industry in a particular direction.
The market consists of several small to medium-sized companies that compete
with each other and large enterprises. In this type of market, frequently is used
a long distribution channel that include wholesalers, retailers, dealers,
distributors, brokers, franchises, agents, etc. between itself and the final
consumer. With longer channel the company has less control.
- Concentrated market: If there are just few potential consumers the market is very
concentrated. Concentrated Marketing is a strategy whereby a product is
developed and marketed for a very well defined and specific segment of the
consumer population. Concentrated marketing is particularly effective for small
companies with limited resources because it enables the company to achieve a
strong market position in the specific market segment it serves without mass
production, mass distribution, or mass advertising.
 The desired control level over:
- Prices: Depending on the product prices can differ or in the other extreme
prices, promotions and product line may be homogeneous in every point of
sale. E.g.: Swatch vs Trident.
- Product offer: Product line or if there are competitors besides you product.
E.g.: Competitors.
- The required sales and promotions support: Sometimes sellers need to know
information about the product in order to give advice to customers. E.g.:
Durables, Fastfood.
- The required service level: Sometimes it is necessary to have additional
services like installation, credit, maintenance… E.g.: Installation, credit…
 Product limitations. For example in frozen products it is necessary to control
temperature…
 Legal restrictions. For example tobacco.
 Product image. The brand must be consistent of the branding strategy.

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2. Types of distribution strategies
 INTENSIVE DISTRIBUTION: A marketing strategy under which

a company sells through as many outlets as possible, so that
the consumers encounter the product virtually everywhere they
go: supermarkets, drug stores, gas stations, and the like. Soft drinks are generally
made available through intensive distribution.
In intensive distribution, a producer’s products are stocked in the majority of outlets.
The manufacturer attempts to get as many intermediaries of a particular type as
possible to carry the product. This strategy is common for basic supplies,
magazines, soft drink beverages and snack foods. It provides for increased sales
volume, wider consumer recognition and considerable impulse purchasing. Low
price, low margin and small order sizes often result from this strategy. As a
drawback, it can be extremely difficult to stimulate and control the large number of
intermediaries.
 SELECTIVE DISTRIBUTION: Type of product distribution that lies

between intensive distribution and exclusive distribution, and in which only a
few retail outlets cover a specific geographical area. Considered more suitable for
high-end items such as 'designer' or prestige goods.
In selective distribution, the product relies on a few intermediaries to carry their
product. The exact number of outlets in any given market is dependent upon market
potential, density of population, dispersion of sales, and the distribution polices of
competitors. This strategy is commonly observed for more specialized goods that
are carried through specialist dealers, such as brands of craft tools or large
appliances. It contains some of the strengths and weaknesses or the other two
strategies; however, it is difficult to determine the optimal number of intermediaries
in each market.
 EXCLUSIVE DISTRIBUTION: Situation where suppliers and distributors enter into

an exclusive agreement that only allows the named distributor to sell a
specific product. For example, Apple had an exclusive distribution deal with AT&T
to provide the iPhone to consumers.

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In exclusive distribution, the producer selects only very few intermediaries. Exclusive
distribution is often characterized by a deal where the reseller carries only that
producer’s products to the exclusion of all others. This creates high dealer loyalty
and considerable sales support. Success of the product is dependent upon the
ability of a single intermediary. Therefore, it provides greater control but limits
potential sales volume. This strategy is typical of luxury goods retailers such as
Gucci.
If the level of control level is 0 there is an intensive strategy, while when you want a 100%
control you must integrate vertically or distribute through franchises and it is called
exclusive distribution. Any control level between 0 a 100% is called selected distribution.
LAKME used their salesforce to sale their products so this is a exclusive distribution
strategy and they can control everything (information about product, prices, product line
and also the image of salesforce).
3. Intermediaries in the Internet
By the level  Wholesalers: Intermediaries that sale to other intermediaries. A

in the wholesalers is a person or firm that buys large quantity of goods from
channel various producers or vendors, warehouses them, and resells to retailers.
Wholesalers who carry only non-competing goods
or lines are called distributors.
 Retailers: The one that sales to final consumers. A retailer is a business
or persona that sells good to the consumer, as opposed to a wholesaler
or supplier, who normally sell their goods to another business.
By the  Merchants: The intermediary has the property of the product. A

property merchant is a businessperson who trades in commodities produced by
transmission others, in order to earn a profit.
 Infomediaries: The intermediary has not the property of the product they
only provide information. Informediaries are intermediaries of
information so the first infomediaries are searching engines. An
inforrmediary is a person or firm that buys large quantity of goods from
various producers or vendors, warehouses them, and resells to retailers.
Wholesalers who carry only non-competing goods

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or lines are called distributors. The term is a composite

of information and intermediary.
- Directories and search engines (Yahoo, Google, Lycos…).
- Portals: Provide information and several user services in an ordered
structure.
- Evaluation platforms:
 Generalists: Compares products and e-retailers for a lot of
products categories and provides tools to compare.
 Specialized: Platforms that compare a determined type of
product (rastreator, tripadvisor…) and gives evaluation from
different users and about different products (bookstores, flights
and hotels, restaurants…).
 Mobile applications
By the  B2B intermediaries: Business-to-business (B2B) is commerce

market transactions between businesses, such as between a manufacturer and
a wholesaler, or between a wholesaler and a retailer. Contrasting terms
are business-to-consumer (B2C) and business-to-government (B2G).
 B2C intermediaries: Business or transactions conducted directly
between a company and consumers who are the end-users of its
products or services. Business to consumer as a business model differs
significantly from the business to business model, which refers to
commerce between two or more businesses.

Commercial Management II

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Direcció Comercial II (Universidad Pompeu Fabra)

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Commercial Management II Topic 1

TOPIC 1: MARKET SEGMENTATION AND PRODUCT POSITIONING

Markets are heterogeneous  Consumers differ in many aspects:

 The benefits wanted: The consumers refer to attributes or characteristics of the

All of this is important in conducting a market research to do market segmentation.

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Commercial Management II Topic 1

Segmentation is the process of determining customer groups within the

There are selection and evaluation process based on some criteria:

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Commercial Management II Topic 1

FUNDAMENTALS OF MARKET SEGMENTATION

When we segment itÕs fundamental to group consumers by valuation product

1. Its ideal level

E.g.: Ideal levels of attributes

First we have to do statistical research to make quantitative research (doing an

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Commercial Management II Topic 1

DO THE CONSUMER PROFILES VARY FOR THE DIFFERENT SEGMENTS?

Market research studies include consumer characteristics that may be relevant to

Descargado por Matthew Peters (manuel.gonzalez02@estudiant.upf.edu)

Commercial Management II Topic 1

E.g.: Clothes, Toys…

SEGMENTATION ALLOWS BRANDS TO POSITIONATE THEMSELVES:

CRM (customer relationship management): Considering consumers as customers in

Descargado por Matthew Peters (manuel.gonzalez02@estudiant.upf.edu)

Commercial Management II Topic 1

1. Perceptual Maps (For segments and brand positioning).

Descargado por Matthew Peters (manuel.gonzalez02@estudiant.upf.edu)

Commercial Management II Topic 1

preferred combination of attributes (Packaging, flavor, brand, price…). We can ask

The perceptual map with 2 characteristics presents no problem; the problem

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Commercial Management II Topic 1

Perceptual maps to be a useful tool must be compared to existing brands and

Descargado por Matthew Peters (manuel.gonzalez02@estudiant.upf.edu)

Commercial Management II Topic 1

Descargado por Matthew Peters (manuel.gonzalez02@estudiant.upf.edu)

Commercial Management II Topic 1

 Segmentation: Identify customer needs and segment the market. To do this it is

 Targeting process: This is about evaluating the attractiveness of each segment.

 Implementation and control.

Descargado por Matthew Peters (manuel.gonzalez02@estudiant.upf.edu)

Commercial Management Topic 2

TOPIC 2 Ñ MANAGING THE PRODUCT OVER THE TIME

2.1. Technology Life Cycles

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Commercial Management Topic 2

New technologies increase the perceived quality for consumers.

THE FOOD MARKET EXAMPLE

Technology life cycles:

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Commercial Management Topic 2

✦ Organic products: The demand for organic products is growing constantly.

2.2. Product Life Cycle

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Commercial Management Topic 2

Examples on product concepts:

France: New flavors such as hazelnut, chocolate and toffee.

Spain: Leche merengada, Crema tostada, Brownie.

¥ Kit - Kat: Salva tu sabor.