Chapter 1

Marketing Defined
The process of creating, distributing, promoting, and pricing goods, services and ideas to facilitate satisfying exchange relationships in a dynamic environment. Products
Can be goods, services and ideas Design product to satisfy a need/want

Distribution
Make available at right place and time

Promotion
Advertising, sales, PR, promotion, etc.

Price
Acceptable price to create value

Organizations Customer Focus

Target group -- target audience Differentiated products and messages Consumer research -- market from a differential advantage
Define business in terms of customer needs

IBM sells problem solving/uncertainty reduction Revlon sells hope

Customers buy solutions, not products

Must bring customer satisfaction in line with other company goals & capabilities -- realistic

Core Concepts of Marketing

Needs, wants, demands

Needs -- state of felt deprivation -- dont create needs Wants -- specific satisfiers -- shaped by culture and individual experience -- we can influence wants Demands -- wants backed by buying power --demands often for a group of benefits and may be addressed by a number of needs/wants Basic needs are relatively few -- usually have many wants -- and limited demand

Products
Anything that satisfies a need or want We buy the service/benefit -- sell the service Marketing myopia -- focus on the product versus customer need

Core Concepts of Marketing

Value, cost and satisfaction

Value is consumers estimate of products capacity to satisfy a need or want --versus the cost Cost is part of the need-satisfaction equation Often more emotionally driven than rational

Exchanges & transactions

Exchanges -- the act of obtaining desired objects by offering something in return Transactions -- actual trade of value between two or more parties Agreement reached -- the event

Core Concepts of Marketing

Relationship Marketing
Built over time Centers on mutual benefits Extremely valuable asset

Markets -- the set of actual and potential buyers of a product

Centralized of decentralized Exist wherever something of value is desired Driven by a set of customers versus a set of suppliers [industries] Potential customers share a particular need or want -and may be able and willing to purchase/exchange

Core Concepts of Marketing

Marketers -- people seeking a resource from someone else and willing to offer something of value in exchange Marketing -- working the exchange
The one with the greatest desire to make the exchange is the marketer Normally a company serving end-users in the face of competition

Company Orientations Toward Marketplace

Production concept -- emphasis placed on production and distribution efficiency. Contends the customer will buy products that are widely available at low cost Product concept -- holds that consumers will favor products that offer the most quality, performance, or innovative features -marketing myopia Selling concept -- responds to overcapacity -sell what they make rather than make what the market wants

Company Orientations Toward Marketplace

Marketing concept -- the key to achieving organizational goals consists in:

determining needs and wants of target markets delivering the desired satisfactions more effectively and efficiently than competitors

The Boundary Spanning Role of Marketing The Environment

Support firms (e.g.,
ad agency)

The firm
Production

Competitors

MARKETING
Customers

Finance/ accounting

R&D

Personnel Channel firms

Factors Influencing Marketing Strategy

Demographic/ economic environment
Marketing Intermediaries
g in et tion k ar a M orm tem inf sys

Technological/ physical environment

g ti n ke ing ar n M an em Pl yst s

Product
Target

Suppliers

Place Customers Price

g tin ke ol ar tr M con tem s sy

Publics

Promotion

Political/ legal environment

ing nd m et n a yste k ar io s M izat ion an tat r g en o m ple im

Competitors

Socio/ cultural environment

The Four Ps

Components of the Marketing Mix

Product
Quality Design Features Brand name Packaging Sizes Services Warranties Returns Product variety

Marketing Mix

Place

Channels Coverage Assortments

Price

List Price Discounts Allowances Payment period Credit terms

Promotion
Sales Promotion Advertising Sales force Public relations Direct Marketing

Locations Inventory Transport

Marketing-Mix Strategy
Promotion Mix
Sales Promotion Advertising Sales force Public relations Direct mail, telemarketing, and Internet Distribution channels Target Customers

Offering Mix Company

Products Services Prices

Chapter 2

Creating Customer Value

Alternative Value States
High "Rip-off" Bad Buy Expensive M.O.R. Premium Good Buy

Relative Price

Equal

Low

Ecomomy Inexpensive Low Equal

Bargain High

Drs. Michael & George Belch, 1994. All rights reserved

Relative Benefit

The Planning Process

Define mission Examine internal environment Examine external environment Set corporate and business unit goals & objectives Design programs Implement Examine feedback and provide control

Market-Oriented Strategic Planning

The managerial process of developing and maintaining a viable fit between the organizations objectives, skills, and resources and its changing market opportunities. Aim is to shape and reshape companys business and products to yield target profits and growth.

Corporate Mission Statement

A comprehensive statement which defines the purpose and nature of an organization of people. In business, the needs of the customer are its basis. It should be future-oriented and provide direction. It helps select the best strategies from among alternatives. It provides focus and concentration.

Benefits of Mission Statement

Orients toward future Provides overall grand strategy Infers which businesses we will not be in Provides direction Helps in selection among alternate strategies Differentiates us Positions us Allows concentration of resources on a market niche

Elements of a Mission Statement

Reflect the history of the company Reflect current preferences of the owners/managers Recognize influences of the market environment Consider corporate resources Base on distinctive competencies Define the competitive scope
Industry scope Products and applications Competencies Market-segment scope Vertical scope Geographical scope ...and express the corporate vision in an exciting, positive way

The Marketing Planning Process

1. Analyze Present 1. Analyze Present Marketing Situation Marketing Situation 8. Implement Control 8. Implement Control & Evaluation & Evaluation Procedures Procedures 2. Identify Target 2. Identify Target Markets Markets

7. Establish Control & 7. Establish Control & Evaluation Criteria Evaluation Criteria

3. Determine 3. Determine

6. Implement the 6. Implement the Programs Programs 5. Develop Programs to 5. Develop Programs to Implement the Implement the Marketing Mix Marketing Mix

4. Select the 4. Select the Appropriate Appropriate Marketing Mix Marketing Mix

The Marketing Planning Process

1. Analyze present Marketing Situation

EXTERNAL ANALYSIS Market Size and growth Competitors Buying practices Political/ legal environment Technological environment Industry past performance Present& potential

INTERNAL ANALYSIS Financial resources Production capabilities & capacity Engineering and R&D capabilities Marketing capabilities Corporate mission & objectives Distribution capabilities Costs Top management style

The Marketing Planning Process

2. Identify Target Markets

Specifically define-segment Geographically locate Determine size and growth Estimate resistance to be encountered Assess your ability to overcome resistance expected

The Marketing Planning Process

3. Determine Marketing Objectives
TYPICAL MARKETING OBJECTIVES Sales volume figure Sales growth rate Market share Market penetration Return on investment Company image Social responsibility CRITERIA FOR EFFECTIVE OBJECTIVES Consistent with corporate objectives Realistic Attainable Measurable Specific Not mutually exclusive

The Marketing Planning Process

4. Select the Appropriate Marketing Mix
Product/Service Strategy--Specifications, Branding Product Line, Product Support Activities, Packaging

Distribution Strategy--Channels, Types of Middlemen, Warehousing, Inventory, Transportation

Promotion Strategy--Personal Selling, Sales Promotions Advertising, Public Relations, Direct Marketing

Pricing Strategy--List & Net Prices, Discounts, Rebates, Freight, Bidding, Leasing

The Marketing Planning Process

5. & 6. Develop and Implement Marketing Programs to Carry Out Marketing Mix

Determine required mix activities Estimate time required for each activity Arrange activities in a logical sequence Combine activities into program Establish dates for start & completion of each activity Assign responsibility for the performance of each activity Determine costs and budgets

The Marketing Planning Process

7. & 8. Establish Control and Evaluation Criteria & Implement Procedures
s s s s s s s

Identify key performance areas Set performance standards Measure performance results Compare results with standards Identify discrepancies Diagnose causes of discrepancies Determine corrective action

Contents of a Marketing Plan

Executive Summary
Summary of goals Recommendations of action Consider writing last

Current Marketing Situation

Market situation Product situation Competitive situation Distribution situation Macroenvironment situation

Contents of a Marketing Plan

Threats & Opportunities

Strengths & weaknesses -- internal Opportunities & threats -- external Issues analysis -- competition, environment, economics, etc.

Contents of a Marketing Plan

Objectives
Financial objectives -- profits, sales, etc. Marketing objectives -- growth, share, awareness, image, distribution, etc.

Marketing Strategy
Integration of all tools Strategies for target markets Marketing mix Expenditures, how support goals, etc.

Contents of a Marketing Plan

Action Programs
Tactics of the plan Who, what, when, how much

Budgets -- projected profit/loss Controls

Financial goal performance Awareness, attitudes, trial, repeat, adoption

Chapter 3

The Marketing Information System

Assessing information needs

What are we trying to solve? Get only what we need

Developing information
Internal records Marketing intelligence Marketing research

The Marketing Information System

Internal Records
Financial records, sales data, orders, shipments, warranty cards. etc. Reveal market saturation, decay in absence of advertising, origin of sales, profile of customer, etc.

Marketing Intelligence System

Environmental surveillance -- everyday flow of information to management Internal and external sources Sales force Distributors, retailers Purchased information -- Nielson, IRI Published data -- trends, trade associations, economic forecasts Can be gathered formally and informally Key is to make it available for decisions

Analyzing the Macroenvironment

Marketing Environment
Forces and factors that are external to the company: Largely uncontrollable Potentially relevant

Environmental Threats
Unfavorable trend or disturbance Lead to major impact on company, product or brand Must forecast character & degree of impact

Marketing Opportunity
Potentially favorable trend or actions Constant monitoring to identify potential opportunity -tracking

Tracking Major Environmental Forces

Monitor Six Major Forces

Demographic Environment Economic Environment Natural Environment Technological Environment Political Environment Cultural Environment

Deciphering and responding to these forces is critical Each provides threats & opportunities

10 Megatrends Shaping the Consumer Landscape

Aging boomers Delayed retirement Changing nature of work Greater educational attainment Labor shortages

Increased immigration Rising Hispanic influence Shifting birth trends Widening geographic differences Changing age structure

Demographic Environment

Study of populations: size, density, location, age, sex, occupation, etc.

The Baby Boom

Worldwide population explosion Highest growth -- poorest countries Baby boomers Generation X Salad bowl vs. melting pot Micro-marketing

Population age mix

Ethnicity

Demographic Environment

Study of populations: size, density, location, age, sex, occupation, etc.

Education

Americans becoming more educated Typical family rarely exists Mobility from technology

Family

Geographic shifts

Shift from mass to micromarkets

Economic Environment

Income Distribution
Track income & changes in spending Four structures:

Subsistence economy Raw material exporting economy Industrializing economies Industrial economies

Spending Patterns
Savings Debt Credit availability

Economic Environment
sU. S. moving to two-tiered economy
Income

rising slowly for some -Boomers Effecting retailing patterns -retailers in the middle being squeezed out Effecting product offerings, etc.

Natural Environment

Poses opportunities & threats

Shortage of raw materials Increased cost of energy Increased levels of pollution -opportunities Changing role of government in environmental protection

Technological Environment

Accelerating pace of change Must be fast, lean, entrepreneurial -- able to move quickly Allows new levels of mobility Unlimited innovation opportunities High cost of R & D for technological innovation High risk factors lead to minor improvements vs. new products

Political Environment

Legislation
Attempts to protect companies from each other Attempts to protect consumers from unfair and dangerous practices Sometimes to protect communities or society as a whole

Enforcement
Effect of laws depends on power put behind the enforcement agency -- FDA, FTC, etc. Varies with sitting political party/budgets

Public interest groups

Can be more powerful than legislation Employ sophisticated tools/marketing

Cultural Environment

Core cultural values -- high persistence

Relatively enduring Key consideration in positioning a product Examples: work ethic, marriage, honesty, roots

Subcultures

Homogeneous ethnic or lifestyle groups within the larger cultu Share common beliefs, behaviors -- cannot type-cast too narr Examples: seniors, teenagers, Catholics, Republicans

Secondary cultural values -- shift through time

How people see themselves & others How see organizations & society How see nature

Chapter 4

The Marketing Information System

Marketing Research
Systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company Formal gathering process Used in a variety of ways:

Planning -- understanding the market Product -- design alternatives, features, names, package Price -- appropriate range, skim/penetrate, price vs. quality Promotion -- pre-test ads, post-test, media mix, premiums, etc. Place -- type of dealers, retail movement, channel inducements, stocking goods Control -- sales/market share, sales vs. potential, new program effectiveness, image

The Marketing Information System

The Marketing Research Process

Collecting the Information

Secondary data -- data collected from other sources for other reasons must be in a useable form must be relevant, accurate, current, impartial available from trade associations, Government sources, etc. Role of Internet

The Marketing Information System

Collecting the Information(cont.)

Primary data -- research approaches

Exploratory Research Observational research -- actual behaviors Focus-group research -- discuss aspects of a problem : 6 - 10 people with moderator -qualitative vs. quantitative Causal Research -- experimental design to test cause & effect Descriptive Research -- survey research -measure peoples knowledge, beliefs, attitudes preferences, etc.

The Marketing Information System

Collecting the Information (cont.)

Research instruments:

Questionnaires -- requires professional expertise, testing/debugging Mechanical Instruments Target population Sample size Sampling procedures -- random, stratified, cluster Direct mail Telephone Personal

Sampling plan:

Contact methods:

Market Demand

Two types of demand

Expansible Non-expansible

Total market demand

Total volume bought by a defined consumer group Defined geographic area in a defined time period Defined marketing environment and defined level and mix of industry market effort

Market minimum Market potential

s s

Primary demand Selective demand

The Boston Consulting Groups Growth-Share Matrix

20%

Market Growth Rate

18% 16% 14% 12% 10% 8% 6% 4% 2% 10x

Stars

Question Marks
3

1 2 Dogs

5 Cash Cows

6
4x 2x 1x

7
0.2x 0.4x

8
0.1x

Relative Market Share

Chapter 5

Factors Affecting Consumer Satisfaction

Consumer Psychology Perspective Marketing Management Perspective

Prior Expectations

Product Performance

Confirmation/ Disconfirmation Consumer Satisfaction/ Dissatisfaction

Drs. Michael & George Belch, 1994. All rights reserved

Tracking Customer Satisfaction

Critical is done on regular basis Several methods available

Complaint & suggestion systems Customer satisfaction surveys

Ask the customer Telephone Mail out surveys Exit interviews

Ghost shopping -- retail outlets Lost customer analysis

Tracking research very affordable Can also get competitive information at the same time

Porters Value Chain

Support Activities
Firm Infrastructure Human Resource Management Technology Development Procurement

Margin -- end result

Primary steps to create customer satisfaction: bring materials in, operate on them, send them out, market them, service them

Primary Activities
Inbound Logistics Operations Outbound Logistics Marketing & Sales Service

Customer Retention Aftermarketing

Markets are maturing & flattening out Products are also maturing -- approaching parity quality Marketplace grown more complex Marketers are increasingly distanced from their customers
multiplicity of channels

Become more reliant on intermediaries to deliver customer satisfaction

channels are the only contact with the customer

Customer retention will be key to success in the market place

Terry G. Vavra, Ph.D.

Customer Retention Aftermarketing

Requires shift in focus by organization

place emphasis on retention vs. new customer acquisition

Establishing and maintaining a detailed customer base Blueprinting customer contacts Conducting customer satisfaction surveys Analyzing informal customer communications Formulating & managing formal communications programs Hosting special customer events or programs Identifying and reclaiming lost customers

Customer Retention

Acquisition of customers can cost 5 times more than retaining current customers. The average customer loses 10% of its customers each year. A 5% reduction to the customer defection rate can increase profits by 25% to 85%. The customer profit rate increases over the life of a retained customer.

Herrington Customer Satisfaction Hierarchy

Customer is an Integral Team Member Dedicate Resources to Understanding Customer Two-way Relationship (Employees Listen to Customer) Basic Support Services (Billing, Schedule, Service) Meet Core Capabilities (Product Must Work)
Drs.. Michael & George Belch, 1994. All rights reserved

Total Quality Marketing

Customer Perception Every Company Activity Total Employee Commitment High-Quality Partners Quality Can Always Be Improved May Require Quantum Leaps Quality Does Not Cost More Necessary But Not Sufficient Cannot Save Poor Product

Chapter 6

Stages in the Purchase Decision Process

Problem recognition

Information search

Alternative evaluation

Purchase decision

Postpurchase evaluation

Consumer Buyer Behavior

Need to understand target consumer

Who they are Objectives in relation to your product Where & how often they purchase Where they are in the buying process And more...

Need to understand what drives the purchase process

The steps The influences

Culture Social Personal Psychological

The Buying Decision Process

Researching the buying decision process

Interview recent purchasers of your product Interview people who didnt buy Interview people who are thinking about buying

The purchase decision

Brand decision Vendor decision Quantity decision Timing decision Payment method decision

Postpurchase behavior
Relationship marketing Reinforce the decision

The Buying Decision Process

Different buying roles people take on for different buying decisions

Initiator Buyer Influencer Decider User

Various stages customer goes through & tools used

Must know where customer is in the process Match tools to the customers buying stage

Types of buying behavior

Complex buying behavior Dissonance reducing buying behavior Habitual buying behavior Variety seeking buying behavior

Chapter 7

Industrial Buying Decision Process

Need recognition Determine product specifications Information search and evaluation of suppliers

Negotiate a purchase order

Evaluate product and supplier performance

Key Differences Business/ Consumer Markets

Market Structure and Demand

Fewer buyers Larger buyers Close supplier-customer relationship Geographically concentrated buyers Derived demand -- for OEMs Inelastic demand Fluctuating demand

Key Differences Business/ Consumer Markets

Nature of the buying unit

Professional purchasing procedures Several buying influences Direct buying, reciprocity, leasing Human element still enters in -- not totally rational/professional

Key Differences Business/ Consumer Markets

Types of buying decisions

Buying decisions are often complex

Large amounts of money Technical specifications Interaction/coordination of more people

Three basic types of buys

Straight rebuy Modified rebuy New task -- where most marketing effort focused -creating:

Key Differences Business/ Consumer Markets

The Decision Process

More formalized Often detailed written procedures Buying decision more dependent on buyer/seller relationship Both buyer and seller have fewer options to go somewhere else Process often done with RFP

Specifications, pricing Delivery/service terms Payment terms Quantity

Key Differences Business/ Consumer Markets

Who makes the decision

Understanding the decision influencers is critical Often not apparent who real call-maker is Must understand:

Who are the real decision makers What decisions do they make What is their level of influence What evaluation criteria do they use

Gatekeepers are difficult to identify -- influence a no decision, but cant say yes Never under-estimate the purchasing agent Never under-estimate the financial officer Build relationships up and down the organization

Key Differences Business/ Consumer Markets

Role of marketing mix elements vary:
Personal selling Telemarketing Direct mail Trade shows Media advertising Publicity/Public Relations Seminars/Symposia Internet

Of Concern to Business Marketers

Who are the major decision participants? What decisions do they influence? What is their level of influence? What evaluation criteria do they use?

Chapter 8

Targeting and Positioning

Market Segmentation
1. Identify segmentation variables and segment the market 2. Develop profiles of resulting segments

Market Targeting
3. Evaluate the attractiveness of each segment. 4. Select the target segments

Market Positioning
5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen positioning concept

Market Segmentation

Segmentation: the sub-dividing of a market into homogeneous subsets of consumers -- the subset may be reached with a distinct marketing mix.

Market Segmentation

Must be:
Measurable Accessible Substantial Responsive

Benefits:
Can spot & compare marketing opportunities Use to allocate/prioritize funds

Segmentation Strategy

Key take-aways:
Allows company to match strengths of product and resources with needs/wants of a target consumer Helps determine positioning strategy Allows concentration of resources -- strength in select area[s] Allows company with limited resources to compete with larger firms -- niche marketing Can limit the organizations opportunities -- and increase vulnerabilities [can over-segment/overtarget]

Market Segmentation

Must decide if will segment or not

Undifferentiated Marketing

One consistent product One marketing mix Mass target market Operate in one or several segments for its product Separate products for each Separate marketing programs for each

Differentiated Marketing

Market Segmentation

Movement to increased segmentation -micro-marketing -- niche marketing Few truly mass products STP marketing: Segmenting, Targeting, Positioning

Target Market Selection

Identify the appropriate targeting strategy Determine which segmentation variables to use Develop market segment profiles Evaluate relevant market segments Select specific target market[s]

Major Segmentation Variables

Demographic Variables
Age Gender Race Ethnicity Income Education Occupation Family Size Family life cycle Religion Social class

Geographic Variables
Region Urban, suburban & rural City size County size Education State Size Market density Climate Terrain

Psychographic Variables
Personality attributes Motives Lifestyles

Behavioristic Variables
Volume usage End use Benefit expectations Brand loyalty Price sensitivity

Target Market Selection

Evaluate relevant market segments

Segment size and growth

Current dollar sales Projected sales growth Expected profit margins by segment Core business strengths Depth of resources Competitive assessment Cost estimates

Company objectives and resources

Segment structural attractiveness

Chapter 9

Brand Decisions

What is a brand ? -- a name, term, design, or any other feature that identifies one sellers good or service as distinct from those of the competition
Have consumer franchise Simplify consumers choice Command consumer loyalty

The Worlds 10 Most Valuable Brands

Rank Brand 1. 2. 3. 4. 5. Coca-Cola Microsoft IBM GE Intel Rank Brand 6. 7. 8. 9. 10. Nokia McDonald's Disney Toyota Marlboro

Source: Business Week, 2005

Brand Decisions

Levels of brand meaning

Attributes Benefits -- link attribute perception to product benefits -- need satisfiers Values -- what communicates about buyers values Personality -- what we aspire to be -- how we want to be perceived

Hierarchy of Brand Bonding

Emotional Bonding Personality Attributes

Brand Decisions

Brand equity
Awareness Preference Loyalty Brand portfolios

Measurement of brand equity -- the price premium it will bring Value of a brand -- competitive advantages
Reduced marketing costs Higher trade leverage Higher prices Can launch brand extensions Defense against price competition

Contributors to Brand Image & Equity

Product Performance Packaging Distribution Advertising Promotions Sales literature Word of mouth Competition Personnel Policies Facilities Perceptions Experiencethe net present value of experience

Major Branding Decisions

Branding decision
Brand Non-brand

Brand-sponsor decision
Manufacturers brand Private brand Licensed brand

Brand repositioning Brand strategy

New brands Brand extensions Line extensions

Brand Strategy Decisions

Line extension -- existing brand name extended to new sizes, flavors Brand extension -- brand name extended to new product categories Multi-brands -- new brand names introduced into same product category New brands -- new brand name for a new category of product

Six Steps to Building a Brand

1. 2. 3. 4. 5. 6. Assess current brand status Determine what we can stand for Develop positioning platform Forge a personality Manage brand identity contact Mind the brands identity

Conducting a Brand Audit

What is our top-of-mind awareness? What are our attribute ratings? Do we have a clear mind association? How do we score on product/ service performance? How are we doing on customer complaints- and what do we do with them?

The Brands Identity

Brand name association Brand name meaning Brand icon Brands current positioning Current strategic personality Brands overall identity-- the essence

What Can We Stand For?

Strengths & Weaknesses Analysis

Update S.W.O.T Determine potential opportunities Research findings as input

Competitive Analysis

Who are all direct competitors?

What are their strengths and weaknesses?

What is the level of intensity of competition? What are our opportunities within the competitive set?

Develop Positioning Platform

Forge A Personality

Brand Personality

Who would this brand be if it were human? The strategic expansion of the brands positioning.

Where do Brand Personalities Come From?

The founders- Apple The owner- United Airlines Product Performance- Lysol Advertising- Federal Express Brands users- American Express; The Gap Bank of America Icons- Wells Fargo; Prudential; Travelers

Manage Brand Contacts

The Core of Brand Identity

Brand Name

TOTAL BRAND IDENTITY

Logo/Graphic System

BRAND
Brand Positioning Strategic Personality

Marketing Communications

ESSENCE
Selling Strategies Product/ Service Performance Promotion/ Merchandising

TOTAL BRAND IDENTITY

The Four Sources of Brand Messages

Planned messages Product messages Service messages Unplanned messages

Mind The Brands Identity

The Brand Triad

The three identities:

The customers The marketers The brands

The Brand Triad Cont..

The customer must: Be clear about what he/she needs Buy it when its delivered Ideally remain loyal to the brand that gets it right The marketer must: Read the customer and understand needs/wants Manage the brand to deliver desired benefits The brand must: Be likable Be accessible Be credible Be relevant Be loyal to its customers

Chapter 10

Differentiating & Positioning

Differentiation -- a way to set yourself apart from the competition. Differentiation allows for price premium based on the extra value perceived by the customer -- the position in the mind Four broad ways to differentiate:
Better Newer Faster Cheaper

Positioning

Positioning starts with a product. A piece of merchandise, a service, a company, an institution, or even a person But positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect.

Ries and Trout

Positioning

Developing a strategy
What position do we hold What position do we want to hold Who is the competition Can we compete Can we implement

Approaches to Positioning a Product or Service

By product or service attributes By price/quality By use or application By product class By product or service user By benefit By image

Positioning

Determining strategy
Identify competitors Assess perception of consumers Determine competitors positions Analyze preferences Position decision Implement Monitor and evaluate

Corporate Positioning:
Assessing & Building a Reputation

Key Questions to Ask:

Whose minds really matter? Whose opinions will influence our reputation? How visible and credible are we relative to the competition? What factors within our control offer the greatest potential for shaping our corporate position? Does our organization have meaningful, believable, unique, and sustainable advantages over other firms? Are our products, product line and corporate positioning strategies and tactics consistent with one another and mutually reinforcing? Should we work toward a global image or tailor our positioning to meet the needs of different market segments? What combination of communication tactics should be used to enhance the visibility and credibility of our organization?

Corporate Positioning:
Alternative Positioning Strategies

Market Leader Quality Leader Value Leader Service Leader Technology Leader

Biggest & most secure Best/most reliable products & services Greatest benefits relative to price Most responsive to customers problem Leader in developing new technologies applying innovations Relationship Leader Most Committed to the customers succ suc Prestige Leader Most exclusive and/or unique image Knowledge Leader The best functional, industry or technica technic expertise Bargain Leader The lowest price

Positioning Criteria

Important -- deliver a highly valued benefit Distinctive -- competitors dont offer, or we offer in more distinctive way Superior -- either real or perceived Communicable -- visible Preemptive -- competitors cant easily copy Affordable -- target buyers must be able to pay the difference Profitable -- must be profitable to the company

Difficulty in Positioning

Mind defends itself:

Selective exposure Selective attention Selective retention

Difficulty in Positioning

How to get through:

Keep it simple
Complex products Confusing products Positioning: over simplify

Focus on one attribute/benefit

Need to Reposition

When companies lose their markets

When companies leave their markets

Consumers dont automatically accept New products may weaken image

Get back to basics

When markets leave companies

Technology shift Change in consumer preferences

NEED LINKAGE IN REPOSITIONING

The Product Life Cycle

Asserts that a product will go through different stages in its life

New stages of buyer interest & requirement Changes in competition Economic changes

Must plan successive strategies for each stage of the products life Strive to extend the products life and profitability PLC asserts:
Products have a limited life Products rise and fall at different stages Different speed of movement across different product categories

Different Forms of Product Life Cycle

Product category
Have the longest life cycles

Product forms
More analogous to the standard

Brands
Can be short or long life Some brands go on forever

Product rejuvenation
Product can go through several life cycles Done by marketing, repositioning, product enhancement

The Product Life Cycle: A Reference Chart on Managing its Constantly Changing Phases
ti ti on C om pe th

Saturation

SALES

G ro w

ec

ev el

op m

en

lin

TIME
Source: Dr. Chester R. Wasson 1971

The Product Life Cycle: A Reference Chart on Managing its Constantly Changing Phases

STRATEGY OBJECTIVE

To d awa and ado Non

The PLC Maturity Stage

Most products are in maturity stage in mature markets Must manage slower growth over longer time Three phases of maturity:
Growth Stable Decaying

Alternate strategies
Market modification -- convert new users, enter new segments, steal competitors customers Product modification -- Quality/feature improvement Marketing mix modification -- price, distribution, promotion, sales, service

Chapter 11

Analyzing the Competition

Why study competition?

Have to grow Mature markets-- mature products Battle for share -- take from your competitors

Shape your product position Need to track latent competitors as well as direct competition Need to be able to strike a balance between competitor and customer orientation Need to understand how to build an intelligence system to monitor competitive movement

Competitor Analysis
Identifying Competitors Determining Objectives

Identifying Strategies

Assessing Strengths & Weaknesses

Estimating Reaction Patterns

Selecting Those To Attack/Avoid

Determining Segment Attractiveness

Threat of New Entrants Bargaining Power of Suppliers

New Entrants
Industry Competitors Intensity of Rivalry
Threat of Substitutes Bargaining Power of Buyers

Suppliers

Buyers

Substitutes

Developing a Competitive Analysis

Identifying the competitors

Competitors include:

Products that compete directly Products that meet the same need Latent competition may be more dangerous than direct Competition may be classified by industry or by product

Industry competition -- all firms that offer a product or products that are close substitutes for each other

Developing a Competitive Analysis

Identifying the competitors

Market concept of competition -- all firms that offer a product or products that satisfy the same customer need Define by the customer served Mapping -- product/market battlefield Battle for the mind

Determining competitors objectives

Profit Market share Service leadership Quality leadership Global leadership Technological leadership Objectives determine how they set strategy and respond to attack

Developing a Competitive Analysis

Identifying Competitors strategies

Closest competitors -- chasing same target consumer with same strategy

Positioning Price Quality, etc.

Strategic mapping -- track changing customer needs & wants, and how competition is changing to meet them Competition can reshape consumers wants -change the standard

Developing a Competitive Analysis

Assessing strengths & weaknesses

Benchmarking -- identify the top performers in the category & measure against their strengths Mapping -- track -- build a matrix

Sales Market share Profit margins, ROI, new products, etc

Sources of information
Secondary data, personal contact, observation, hearsay Primary research -- tracking studies Monitoring -- share of market, mind, heart Share of mind & heart should lead to share of market and profitability

Developing a Competitive Analysis

Benchmarking
Determine functions to benchmark Identify key performance variables Measure performance in best-in-class companies Measure the companys performance Specify actions and programs to close the gap Implement and monitor results

Designing Marketing Strategies

Strategy selection dependent on organizations position in the market:

Market leader Market challenger Market follower Market nicher

Each position has its challenges and opportunities -- and available strategies:
Increase share in the market we are in Be content where we are -- short term Know we are sliding -- manage accordingly Try to expand total market

Market Leader Strategies

Expand total market

New users New uses More usage

Defending market share

Must constantly innovate Determine which terrain to defend Key strategic alternatives

Expanding market share

Profitability related to market share Market share -- cost vs. value

Position defense Preemptive defense Counteroffensive Market broadening/diversification Consolidation defense

Market Challenger Strategies

Two alternatives
Can attack the leader & others for share Can play ball -not rock the boat

Market Challenger Strategies

Attack strategies
Price discount Cheaper goods Prestige goods Product proliferation Product innovation Improved service Distribution innovation Manufacturing efficiencies Intensive advertising & promotion

Market Follower Strategies

Requires specific strategy to be effective Often, more profitable to follow "Followership" often not profitable if below the number 2 or 3 share Strategies for followers
Cloner -- follow closely the product and marketing mix of the leader Imitator-- copies some things, maintains some differentiation Adapter -- builds on leader

Market Nicher Strategies

Leader in a small industry/market Can be very profitable

Know their market well Meet needs better Usually sell at high margins -- high value

Market Nicher Strategies

The ideal niche

Sufficient size Growth potential Negligible interest to majors Firm has required resources & skills to meet needs of the niche market Can defend against attack with goodwill

Key is specialization -- do better than any one else Multiple nicher vs. single Effective market entry strategy

Specialist Roles For Market Nichers

End-use specialist Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist Product or feature specialist Quality-price specialist Service specialist

Chapter 12

What is a Product?

Anything that can be offered for attention, acquisition, use or consumption that might satisfy a need or want -- can be physical objects, services, places, organizations, persons or ideas. Marketing focuses on the product benefit -- not the attribute Marketing cannot make up for a bad product -- can sell it once! In fact, good marketing will hasten a bad products death

Product Classifications

Three classifications
Non-durable goods Durable goods Services

Product Classifications

Consumer goods
Convenience goods -- purchased frequently, minimum comparison

Staples Impulse Emergency

Shopping goods -- more comparison on quality, style, price, suitability Specialty goods -- unique characteristics or identification Unsought goods -- not normally considered for purchase -- require special marketing efforts

Product Classifications

Industrial goods
Materials and parts -- part of the manufacturing process Capital items -- installations and accessories Supplies and services -- do not enter the production -- operating supplies, repair and maintenance

Product Mix Decisions

Product mix width -- number of product lines Product mix length -- number of items in the mix Product mix depth -- variation of product within each product line Product mix consistency -- how closely related product lines are in end-use

All define the companys product strategy -- the companys product portfolio

Chapter 13

Unique Service Characteristics

Intangibility Inseparability of production and consumption Variability Perishability Heterogeneity Client-based relationships Customer contact

The Service Quality Model

Understanding Customer Needs
Marketing research Open communication with employees

Service Quality Specifications

Service goals Management commitment to service quality

q Service Quality
Tangibles Reliability Responsiveness Assurance Empathy

Employee Performance
Employee training Evaluation and compensation systems

Managing Service Expectations

Advertising Good internal communication

Marketing Strategies for Service Firms

Requires external and internal marketing
Internal marketing

Training & support of customer-contact employees Supporting service people committed to customer satisfaction Interpersonal interaction evaluation Technical/functional quality -- high touch-high tech Often cant evaluate technical performance only evaluate touch Service often now the differentiater Innovative features/delivery People, physical environment, process

Interactive marketing

External marketing

Achieving Service Excellence

1. Recruiting the right employees & training them properly 2. Creating a user-friendly environment 3. Educating the customer 4. Be efficient first, nice second 5. Standardize response system 6. Developing a pricing policy for service 7. Taking a proactive perspective

Achieving Service Excellence (cont.)

8. Evaluating performance regularly 9. Acknowledging & affirming good work 10. Taking corrective actions on defective work 11. Understanding & listening to the customer 12. Having the basics of service down pat 13. Taking a moments-of-truth focus 14. Developing an effective service implementation 15. Believing that service & quality drive profits

Selling the Invisible

The great misconception about marketing services Getting better isnt enough - be different The Butterfly Effect - tiny cause, huge effect

Selling the Invisible Cont.

Positioning
If all you appeal to is a prospects reason, you will often have no appeal at all American Express To broaden your appeal, narrow your focus - Sears Focus and simplify - give one good reason

The power of a brand Execute with a passion

Chapter 14

Pricing Decisions
Organizational and marketing objectives Pricing objectives Costs Other marketing mix variables

Pricing decisions

Channel member expectations

Buyers perceptions

Competition

Legal and regulatory issues

Stages for Establishing Prices

Development of pricing objectives Assessment of target markets evaluation of price and its ability to purchase Determination of demand Analysis of demand, cost, and profit relationships Evaluation of competitors prices Selection of a pricing policy Selection of a pricing method Determination of a specific price

Selecting the Pricing Objective

Must fit positioning strategy Must be part of marketing mix strategy Alternatives
Survival Maximum current profit Maximum current revenue Maximum sales growth Maximum market skimming Product-quality leadership

Strategic Pricing Objectives

Objective
Maximize sales growth and penetration

Conditions Where Most Appropriate

Product-market is in introductory or growth stage of lifecycle; firm is early entrant; target customers are sensitive to price; firm has low-cost position and is pursuing a low-cost business strategy; firm can gain experience-curve effects with increasing volume; low price may preempt potential competitors. Product market is in growth or maturity stage of life cycle; firms offering is perceived to have a quality or service advantage over competitive offerings; firm does extensive advertising to maintain the products quality image; firm has high costs; firm is pursuing differentiated defender strategy; target customers are relatively insensitive to price. Product-market is in introductory or early growth stage of life cycle; firm is the first entrant; firm is pursuing a prospector strategy; firm has limited capacity; advanced technology or other barriers prevent immediate entry by competitors. Product-market is in late maturity or decline stage of life cycle; firm is pursuing differentiated defender strategy; there is no basis (e.g., product improvements, increased promotion) to sustain product demand or competitive position into the near future; product is cash cow funding growth in other product-markets. Firms product has a weak competitive position, but major shortcomings are correctable; firm needs to buy time and maintain cash flow to make necessary adjustments; productmarket is still in growth or maturity stage of life cycle. Firm is a not-for-profit organization; costs are subsidized in part by tax revenues or contributions; one or more segments need the product or service but are unwilling or unable to pay full costs.

Implications for relative price level

Set relatively low price - slightly above costs; penetration pricing policy aimed at winning new customers, expanding realized demand, and capturing as large a market share as possible.

Maintain quality or service differentiation

Set price high relative to competitors to cover high production, distribution, and advertising costs; price high to reinforce prestige image.

Maximize current profit - Skimming

Set price very high to appeal to only the most price-insensitive customer segment; as market matures and competitors enter, firm can (a) reduce price to attract new segments, or (b) withdraw from the product-market. Set price to maintain margins and maximize profit or return on investment even though some customers may switch to competitive brands or substitutes.

Maximize current profit - Harvesting

Survival

Reduce price, perhaps even below total cost, as long as price covers variable costs and makes a contribution to overhead.

Social Objectives

Set low price, perhaps below total cost for some segments, to stimulate or subsidize demand.

EMC-Entrepreneurship Program 1996

Pricing Policies
Pioneer Professional Psychological Promotional Experience Curve

Price Skimming

Odd-Even Customary

Special-Event

Price Leaders

Penetration Pricing

Prestige Superficial Price Lining

8 Steps to Better Pricing

1. Assess what value your customers place on a product or service. 2. Look for variation in the way customers value the product. 3. Assess customers price sensitivity. 4. Identify an optimal pricing structure. 5. Consider competitors reactions. 6. Monitor prices realized at the transactional level. 7. Assess customers emotional response. 8. Analyze whether the returns are worth the cost to serve.

Selecting a Pricing Method

Methods
Markup pricing Target-return pricing Perceived-value pricing

Estimate customer value Price to that value vs. costs Charge low price for high value More for more, more for same, more for less

Value pricing

Going-rate pricing Sealed-bid pricing

Chapter 15

Selecting & Managing Marketing Channels

Distribution channel -- set of interdependent

organizations involved in making a product or service available for use or consumption by the user

Types of channels
Wholesalers, retailers, merchant middlemen -take title and resell Brokers, manufacturers reps, sales agents -dont take title, sell for the manufacturer but never own Facilitators -- transportation, etc.

Channels and Marketing Decisions

Push Strategy

Pull Strategy

Distribution Channel Functions

Information - gathering and distributing marketing research & intelligence scanner data Promotion - developing & communicating an offer Negotiation - reaching agreement on price and terms Ordering - communication to manufacturers

Distribution Channel Functions

Financing - cost of funds to cover functions of channel Risk taking - risk of taking ownership, etc. Physical possession - transporting & storing Payment - buyers paying their bills Title - transfer of ownership from one organization to another

Distribution Steps
A
Producer

B
Producer

C
Producer

D
Producer

Wholesalers

Agents or brokers Retailers

Retailers

Retailers

Consumers

Consumers

Consumers

Consumers

Distribution Steps
E
Producer

F
Producer

G
Producer

H
Producer

Agents

Agents

Industrial Distributors Industrial Buyers Industrial Buyers Industrial Buyers

Industrial Distributors Industrial Buyers

Channel Alternatives

Types of intermediaries
Company salesforce Manufacturers agent Industrial distributors Intensive distribution Exclusive distribution Selective distribution Price Conditions Territory Services

Number of intermediaries

Channel responsibilities

Motivating Channel Members

Training
Product differentiation Sell beyond price

Supervision
Constant presence Provide selling tools

Motivating Channel Members

Encouragement
High margins Special deals Premiums Co-op advertising, allowances, etc.

Long-term partnership
Program selling Marketing development Win -- win

Modifying Channel Arrangements

Consumer buying patterns change The market expands The product matures New competitors arrive -- change the rules New, innovative channels arise -change the rules Change over life cycle of the product

Channel Dynamics

Channel innovations
Horizontal marketing systems Multi-channel marketing systems

Channel conflicts
Horizontal conflict Vertical conflict

Vertical marketing systems

Corporate -- owned Contractual -- no ownership -- banding together for efficiencies Administered -- no ownership -- power of one dominant member

Marketing Channels/Systems
A Conventional Marketing Channel Members Functions Design Make Brand Manufacturer Price Promote Sell Buy Stock Promote Display Sell Deliver Finance Buy Stock Promote Display Sell Deliver Finance A Vertical Marketing System Members Functions Manufacturer Design Make Brand Price Promote Buy Stock Display Sell Deliver Finance

Wholesaler

Wholesaler

Retailer

Retailer

Consumer

Consumer

Source: Strategic Marketing by David J. Kollar, Roger D. Blackwell, and James F. Robeson (Holt, Rinehart and Winston, 1972)

e-Commerce Marketing Practices

Pure-click Brick-and-click Brick-and-mortar

Chapter 16

Major Retailer Types (Stores)

Specialty Stores Department Stores Supermarkets Convenience Stores Discount stores Off-Price Retailers Superstores Catalog Showrooms

Classifying Retail Outlets

Amount of service
Self Limited Full

Product line sold

Specialty Department Super Convenience Combination Service

Relative price emphasis

Discount Off-price Catalog

Non-store Retailing

Direct selling
- One- to- one - One- to- many - Multilevel ( Network)

Direct marketing Automatic vending Buying Service E-tailing

Retailer Marketing Decisions

Target market -- who to serve Product assortment & services -- how differentiate Price -- mark-up/volume Promotion -- support position Location -- stand-alone or group -- trade-off traffic/rent

Trends in Retailing

New retail forms Shortening life cycles Non-store retailing Intertype competition Polarity of retailing Giant retailers -- big getting bigger

Trends in Retailing

Growth of specialty stores Growth of vertical marketing systems Portfolios -- multiple formats Growth of retail technology Global expansion of retailers Shift of power

Wholesaling Functions

Selling and promoting Buying and assortment building Bulk breaking Warehousing

Transportation Financing Risk bearing Market information Management services and counseling

Major Wholesaler Types

Merchant Full service Limited service

Brokers and agents Manufacturers Specialized

Wholesalers Marketing Decisions

Target market Product assortment Price Promotion Place

Chapter 17

Major Tools of Promotion Mix

Advertising Direct Marketing Interactive/Internet Marketing Sales Promotion Public Relations/Publicity Personal Selling Internet

Integrated Marketing Communications Planning Model

Review of marketing plan Promotional program situation analysis Analysis of the communications process Budget determination Develop integrated marketing communications programs Advertising Advertising objectives Message strategy Sales promotion Sales promotion objectives Sales promotion strategy PR/ publicity PR/ publicity objectives PR/ publicity strategy Personal selling Personal selling objectives Personal selling strategy Direct marketing Direct marketing objectives Direct marketing strategy Internet/ interactive Internet/ interactive objectives Internet/ interactive strategy

Integrate and implement marketing communications strategies Monitor, evaluate and control IMC Program
2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Role of Promotion Program

Create awareness Stimulate demand Encourage product trial Identify prospects Retain loyal customers Facilitate reseller support Combat competitive promotional efforts Reduce sales fluctuations

Steps in Developing Effective Communications

Identify target audience Determine communication objectives Design the message strategy Design the messages Select communication channels

Steps in Developing Effective Communications

Establish promotional budget Determine promotion mix Implement programs Measure promotion program results Manage and modify programs

Establish Communication Objectives

Awareness Knowledge Liking/Preference Conviction Purchase/Trial Reinforce Purchase Create Emotional Bond -- Brand Loyalty

The Promotion Budget

Affordable Method
Ignores causal effect Wrong people making decision

Percentage-of-sales Method
Percentage of current or projected sales Confuses causal effect of promotion

The Promotion Budget (cont.)

Competitive-Parity Method
In-line with competition Assumes competition knows what they are doing

Objective-and-Task Method
Define specific promotion objectives Determine tasks required Determine costs to accomplish Proactive management

Characteristics of Communications
Advertising Pervasiveness Amplified expressiveness Impersonality Sales Promotion Communication Incentive Invitation

Characteristics of Communications
Public Relations and Publicity High credibility Ability to catch buyers off guard Dramatization Events and Experiences Relevant Involving Implicit

Characteristics of Communications
Direct Marketing Customized Up-to-date Interactive Personal Selling Personal interaction Cultivation Response

Measuring Promotions Results

Sales tracking not enough

Too many variables to rely solely on sales

Measure change in:

Awareness Attitude/Image Advertising recall How many saw? How many liked? How many will purchase? How many purchased as a result of message? How many will re-purchase?

Measure response to message:

Managing Integrated Marketing

Usually not done, or done well Learning curve on multi-functions Must monitor:
New media Micro-markets versus mass New trade channels New communication tools

Cohesive management of all functions

Chapter 18

Major Advertising Decisions

Identify and analyze target audience Define advertising objectives Create advertising platform Determine advertising appropriation Develop media plan Create advertising messages Execute campaign Evaluate advertising effectiveness

Major Advertising Decisions

Setting advertising objectives

Setting objectives: In line with positioning In line with marketing mix Specific task and achievement level to specific audience & time Based on market situation, brand position Measurable

Sales objectives

Major Advertising Decisions

Establish advertising appropriation

Key considerations

Stage in product life cycle Market share Competition and clutter Required frequency Product differentiation

Major Advertising Decisions

Establish advertising appropriation

Primary methods

Affordable Percent of sales Competitive/parity Objective & task

Major Advertising Decisions

Create advertising platform

Basic issues or selling points

USP Positioning platform

Consists of issues of key importance to consumer Creative strategy

Driven by consumer research Strategy must be in line with consumer needs/wants

Major Advertising Decisions

Develop media plan

Sets forth exact media vehicles with dates & times Reach largest number of target audience per dollar spent

Reach Vs. frequency

Select major media types to use -- print, electronic, outdoor, mass transit, etc.. Consider cost of media Consider message content Consider product/service needs -- impact -demonstration, need for color, sound, etc... Timing -- flighting Evaluate qualitative as well as quantitative issue

Major Advertising Decisions

Create advertising messages

Products features, uses & benefits affect content of message Characteristics of target audience influence content & form -- i.e. age, sex, race, income Objectives of advertising platform

Image building Vs. sales Direct response Vs. awareness Emotional Vs. Rational

Type of media used -- coordination of media selection & message needs

Outdoor Magazine Newspaper Radio Television Internet

Major Advertising Decisions

Advertising evaluation
Measurement prior to campaign -- pre-test Measurement during campaign

Sales Inquiries Measure against advertising objectives Recognition/recall -- Awareness, attitude Share Sales Conduct in timely manner

Measurement following campaign -- post-test

Role of Sales Promotion

Incentivize new trial Reward loyal customers Increase repurchase Build brand loyalty Contribute to brand equity

Key Factors in Sales Promotion

Growth
Today 65 to 75% of promotion budget Growing at 12% per year Vs. 7.6% for advertising

Sales promotion objectives Sales promotion tools

Consumer tools Business tools

Key Factors in Sales Promotion

Developing the program

Incentives Conditions/restrictions Distribution vehicles Duration Timing Budget

Role of Public Relations

Non-paid communication to a larger set of publics -- anyone who can affect the company -- customers, vendors, employees, stockholders, political, etc..

Role of Public Relations

Launching new products Assist re-positioning a mature product Build interest in a category Influence specific target groups Damage control Build corporate image

Key Factors in Public Relations

Activities

Press relations Product publicity Corporate communications Lobbying Counseling Public service activities Special event

Key Factors in Public Relations

Objectives

Build awareness Build credibility Stimulate sales force and dealers Reduce promotion costs

Messaging Evaluation

Chapter 19

Direct Marketing

Attempts to compress the elements of awareness, leads, and sales into one effort -- do all three Very targeted to specific customers High growth rate and more dominant role in the mix

Direct Marketing

Interactive system, multiple media which effects transaction at any location Direct relationship marketing Direct growing at 10% Vs. 6% retail Represents 58.3% of US advertising expenditures - $247.8 billion Demassification of the market -targeted -- where they are/demos

Direct Marketing

Major tools:
Catalogs, Direct mail Telemarketing Newspaper, magazine Radio , television Electronic Kiosks Online Channels

Major Decisions in Direct Marketing

Objectives
Response rate Lead production Awareness/image building Demos/psychographics Occasions Enthusiasts, buffs, special interests All drive list acquisition

Target customers

Major Decisions in Direct Marketing

(cont.)

Offer strategy Testing elements

Can test under real situations Testing never stops

Measuring success
Customer lifetime value

Public Issues in Direct Marketing

Irritation Unfairness Deception/fraud Invasion of privacy

Sales Management Process

Sales plan formulation

Setting objectives

Customer satisfaction Sales Profits Structure Size

Organizing the salesforce

Developing account management policies

Discount levels Territories/geography/hous e accounts

Sales Management Process

Sales plan implementation

Salesforce recruitment and selection Salesforce training Salesforce motivation and compensation

Chapter 20

New Product Success Rate

Twenty five years ago, approximately 65% of new products failed. Today, 90% fail!

Categories of New Products

New-to-the-world Products New product lines Additions to existing product lines Improvements and revisions to existing products Repositionings Cost reductions
Only 10% of new products are truly new -- risk

Why New Products Fail

Shortage of good ideas Fragmented markets Social & government constraints Costliness of process Capital shortage Not driven by the market!

Faster development time Shorter product life cycles Fail to meet a need There is no need Failure to anticipate competition

Key Factors to Successful Products

Unique, superior product Well defined product concept prior to launch Technological and marketing synergy Great execution Market attractiveness -- is there a need/want?

New Product Development Process

Idea generation
Employees, consultants Competitors, customers R&D

Screening
Profit, sales, sales growth objectives Resources -- capitol, skills Distribution required

New Product Development Process

Business analysis
Review sales, costs & profit projections First time sales/repeat sales On-going adoption & repeat

Concept development
Translate idea into product concept Detailed version of idea in consumer terms Form consumer can touch & feel

New Product Development Process

Concept testing
Who will use the product What primary benefits should be in the product What is primary occasion Need/gap score Perceived value User/purchaser targets

Marketing strategy development

Size, structure & behavior of target market -planned positioning, market share, etc. Planned price, distribution strategy, etc. Long-term marketing mix strategy

Concept Testing

Present symbolically or physically Questions to be asked of the consumer:

Communicability and believability

Are the benefits clear to you and believable? Do you see the product solving a problem or filling a need for you? Do other products currently meet this need and satisfy you?

Need level

Need/gap score

Concept Testing (cont.)

Perceived Value

Is the price reasonable in relation to the value? Would you ( definitely, probably not, definitely not) buy the product?

Purchase intention

User targets and purchase occasions/ frequency

Who would use the product and when and how often will the product be used?

New Product Development Process

Product development Test marketing

Measure four variables

Trial First repeat Adoption Purchase frequency

New Product Development Process

Test marketing
Methods -- consumer goods

Sales-wave research Simulated store technique Controlled test marketing Test markets Alpha sites Trade shows Distributor & dealer display rooms

Methods -- industrial goods

New Product Development Process

Commercialization
Develop marketing strategy

Timing -- first entry, parallel, late Geographical strategy -- single market, regional, national, global Target market prospects Early adopters Heavy users Opinion leaders Introductory market strategy Pricing strategy Promotion Distribution

Consumer Adoption Process

Awareness Interest Evaluation Trial Adoption

Factors Affecting Acceptance of Innovations (Diffusion)

Relative advantage Complexity/Simplicity Compatibility Trialability Observability/Communicability Degree of risk Symbolism Marketing strategy

Chapter 21

Key Decisions in International Marketing

Deciding whether to go abroad Deciding which markets to enter Deciding how to enter the selected market[s] Deciding on the marketing program Deciding on the marketing organization

Globalization

The development of marketing strategies as though the entire world (or regions of it) were a single entity; a globalized firm markets standardized products in the same way everywhere.

Deciding to go Abroad

Do we understand foreign customer preferences? Is our product attractive in other countries Do we understand the business cultures? Do we understand the consumer cultures? Do we have the resources? Do we understand the laws and regulations of each country? Have we made a risk/reward evaluation?

Deciding to go Abroad

Assessing the international environment

Trade system concerns -- tariffs, quotas, nontariff barriers to entry Economic environment -- industrial structure of the country -- opportunity available for our product Political/legal environments -- vary country to country -- attitude toward foreign firms must be understood in each country Cultural differences -- advertising and product images are culturally based -- could be inappropriate, ineffective, even offensive

Deciding Which Markets to Enter

Set objectives & policies Set expectations Many countries or few -- cost of entry & barriers Criteria for selection
Estimate of current market potential Forecast of future market potential Forecast of sales potential Forecast of costs and profits Estimate of ROI -- including people/management resources

Risk analysis -- research driven

Deciding How to Enter the Market

Exporting
Indirect export -- independent middlemen Minimum risk Minimum investment Direct export -- firm establishes presence Higher risk -- greater potential reward Increased investment

Joint venturing
Licensing -- allows manufacturer the process -- little risk/low reward Contract manufacturing -- foreign producer manufactures in host country for firm Management contracting -- exporting firm provides the management team, host country provides capitol Joint ownership -- create local business with shared ownership

Deciding How to Enter the Market

Direct investment
Foreign-based assembly/manufacturing Highest risk -- highest potential reward Provides local control Can provide economies Risk from economy, legal/political

The internationalization process

More than one method going at a time Four basic stages No regular export activities Export via independent reps Establishment of one or more subsidiaries Establishment of production facilities abroad

Commitment

Risk

Control

Profit

Deciding on the Marketing Program

Decide on standardization vs. adaptation of entire marketing mix Evaluate for all four Ps
Product

Straight product extension Product adaptation Product invention/innovation Creative messaging Media selection Uniform Market-based by country Cost-based by country

Promotion -- communication adaptation

Price

Distribution channels

Chapter 22

Marketing-Oriented vs. Traditional Organization

CUSTOMERS CEO Middle management Front-line management Front-line employees CUSTOMERS Front-line employees Front-line management Middle management CEO

Traditional Organization

Marketing-Oriented Organization

Marketing Orientation

Shared Goals -- customer focused Marketing Strategy Marketing Structure Leadership People Resources Systems

Marketings Relation within Organization

Control over marketing research, salesforce, advertising and promotion Must work well with and have the cooperation of all functions
R&D -- marketing/customer driven Vs. technology driven Engineering -- represents needs/wants Purchasing -- quality control Manufacturing -- sales forecasts, balanced orientation of customer/organization needs Finance, accounting, credit

Organizing The Marketing Department

Functional organization Activities grouped by marketing function Centralized marketing organization Product and brand organization Useful for diverse product offerings Product manager has full responsibility Flexibility of special marketing mixes

Organizing The Marketing Department

Geographical organization Local area experts Micro-markets Vs. national mass Market management organization Organize by customer Same product for different markets Corporate/Divisional organization Can be a mixture Can be a battleground

Role of Marketing at the Corporate Level

To promote a culture of customer orientation To be an advocate for the customer To assess market attractiveness To develop firms overall value proposition, the vision, and articulation of how it proposes to deliver superior value to customers

Corporate Social Responsibility

Legal behavior Ethical behavior Socially responsible behavior

Marketing Implementation
Marketing Strategy

Marketing Implementation

Internal Marketing Program Marketing Mix

External Marketing Program Marketing Mix

Target groups within the organization

Customer groups or target markets

Marketing Implementation

Develop action plan

Determine required mix activities Estimate time required for each Arrange activities in logical sequence Establish start and completion dates for each Assign responsibilities Determine costs and budgets

Determine organization structure Develop human resources Provide the right climate & culture

Establish Control & Evaluation Criteria ...Implement

Identify key performance areas Set performance standards Measure performance results Compare results with standards Identify discrepancies Diagnose causes of discrepancies Determine corrective action

Annual Plan Control

Sales Analysis
Compare actual to goal Analyze cause for gap if one present

Market Share Analysis

Overall market share Served market share Leading competitor market share

Annual Plan Control

Marketing Expense-to-Sales Analysis

Track the ratio Share of voice Vs. share of market

Financial Analysis Customer Attitude Tracking

Awareness tracking Satisfaction tracking

Corrective Action

Components of a Marketing Audit

Marketing Environment
Macroenvironmental issues -- demographics, economic, cultural, etc. Task environmental issues -- customers, competitors, channels, publics, etc.

Marketing Strategy
Business mission Marketing objectives Marketing strategy Budgetary issues

Components of a Marketing Audit

Marketing Organization
Formal structure Efficiencies Interface efficiencies MIS Marketing planning system Marketing control systems New product development

Marketing Systems

Components of a Marketing Audit

Marketing Productivity
Profitability Cost effectiveness

Marketing Function
Evaluate the entire marketing mix

Products Pricing Distribution channels Advertising/sales promotion/publicity Salesforce

Marketing excellence review

Performance Failures

Reasons for Performance Failure

Unrealistic Standards Environmental change Poor Implementation