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2018-02-27
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Marketing Management
1
Course Outline
1. Understanding Marketing Management2. Analyzing Marketing Opportunities - Customer
Analysis
3. Analyzing Marketing Opportunities - Competitors and SWOT Analysis
4. Strategic Marketing Management 5. Designing Marketing Strategies – Introduction6. Designing Marketing Strategies - STP7. Designing Marketing Strategies - Distribution and
Price8. Designing Marketing Strategies – Product9. Designing Marketing Strategies – Promotion
2
Understanding Marketing Management
3
Outline
� Defining marketing
� The marketing concept
� Company orientations toward the marketplace
� Marketing management
4
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Activities in the company
Financing
Human Resource Management
Research & Development
Marketing
Understanding of customer
value
Creating of customer value
Delivering of customer value
Defining marketing
� Marketing is societal process by which individuals and groups (target market) obtain what they need and want through understanding, creating and delivering and freely exchanging products and services of value with others
Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper
Saddle River, p. 9.
6
Marketing
7
Customer needs and value
� Needs – are the basic human / organizational requirements
� Wants – needs become wants when they are directed to specific objects that might satisfy the need
� Customer value – ratio between what the customer gets and what he gives
8
Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper
Saddle River, p. 9-10.
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Customer needs and valueHuman needs
Self-actualization
needs
Self-actualization
needs
Esteem needsEsteem needs
Social needsSocial needs
Safety needsSafety needs
Physiological needsPhysiological needs
9Source: A.H. Maslow (1970). Motivation and Personality, 2nd ed., Prentice Hall,
Upper Saddle River.,
Customer needs and valueOrganizational needs
Direct
Understanding of customer
value
Creating of customer value
Delivering of customer value
Indirect
Capital items
Supplies
Services
10Source: own preparation .
Customer needs and valueCustomer value
11
Customer value
Customer benefits
Product benefits
Service benefits
Personnel benefits
Image benefits
Customer cost
Price
Purchasing cost
Using cost
Source:own preparation based
on: P. Kotler (2003). Marketing
Management, 11th, Prentice
Hall, Upper Saddle River, p. 60.
Understanding of customer value
12
Market information
Marketing Research
Marketing intelligence
system
Managers experience
Managers Intuition
Source: own preparation .
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Creating and delivering customer
value – marketing mix
13
Marketing mixCreating value Delivering value
Marketing mixCreating value Delivering value
Product
Price
Personnel
Physical evidence
Target market Target market
Promotion Distribution Procedures
Source: own preparation .
14
Creating and delivering customer
value
Source: own preparation based on: R. Lauterborn (1990). „New Marketing Litany: Four P’s Passe: C-Words Take Over”, Advertising Age, 1 October p. 26
„+3P”
Personnel
Physical Evidence
Procedures
Marketing Mix 7P’s or 7C’s?
Organizational perspective
� product
� price
� place
� promotion
� physical evidence
� people
� process
Customer perspective
• customer value
• cost
• convenience
• communication
• confirmation
• consideration
• co-ordination and
concern
Customer satisfaction
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Orientations toward the marketplace - 1
� Production concept
� Product concept
� Selling concept
� Marketing concept
� Customer concept
� Societal marketing concept
17
Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper
Saddle River, p. 17.
Orientations toward the marketplace – 2
Concepts Starting point Focus Means Ends
Production Factory Widely available and
inexpensive products
High production efficiency
Low cost
Mass distribution
Profits through
volume and low cost
Product Factory Superior products Making superior products
and improving them over
time
Profits through high
quality product
Selling Factory Products Aggressive selling and
promotions
Profits through sales
volume
Marketing Target market Customer needs Integrated marketing Profits through
customer
satisfaction
Customer Individual customer Customer needs and
value
One-to-one marketing
Integration and value chain
Profits through
capturing customer
share, loyalty, and
lifetime value
Societal marketing Best long-run
interests customer
and society
Customer needs,
customer interests, and
long-run societal welfare
Integrated marketing and
education customer
Profits through
customer
satisfaction and
society’s well-being
18Source: own preparation based on: P. Kotler (2003). Marketing Management,
11th, Prentice Hall, Upper Saddle River, p. 17-27.
Marketing Management -1
� Marketing management is art and science of choosing target markets and getting, keeping, and growing customers through understanding, creating and delivering superior customer value
19
Source: own preparation based on: P. Kotler (2003). Marketing Management,
11th, Prentice Hall, Upper Saddle River, p. 17-27.
Marketing Management - 2
analyzing market situation
designing marketing strategies
implementing and organizing the marketing effort
controlling marketing performance
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Analyzing Marketing Opportunities
Customer Analysis
The Organisation’s Marketing
Environment
Theorganisation
The economy
Socialfactors
Culturalforces
Technology
Political structures
Legalstructures
Demography
Suppliers
Distributors& dealersMarket
demands
CompetitorsCustomers
Customer Analysis
Outline
• types of customers
• the business market versus the consumer market
• DMU (decision-making unit)
• types of buying behaviour
• stages of the buying decision process
Types of Customer Markets
(odtąd)
� consumer markets
� industrial markets
� reseller markets
� government and non-profit markets
� international markets
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The Customer in Context
� Consumer buying behaviour
the decision processes and acts of individuals involved in buying and using products or services (Dibb et al, 1994)
What Influences the Buyer?
� Cultural factors� values, attitudes, beliefs, ideas, artefacts and
symbols
� Social factors� primary membership groups
� secondary member groups
� aspirational groups
� dissociative groups
� Personal factors� age, life cycle, occupation, lifestyle, personality ...
� Psychological factors� motivation, perception,
The Buyer ‘DMU’
Initiator
first suggests buying product
or service
Influencer
whose comments affect the decision
Decider
Ultimately make all or part
of buying decision
Buyer
Physically makes purchase
User
Consumes product or serviceInitiate process / define specs
Help define spec, help inevaluation of alternatives
Product requirementsand suppliers
Formal authority to selectsupplier - negotiate terms
User
Source:Webster and Wind, 1972
Does Behaviour Change in
Relation to What is Purchased?
Degree of involvement
Sig
nif
ican
t d
iffe
ren
ce
betw
een
bra
nd
s
low high
few
many
HABITUAL DISSONANCE
(differing of views)
VARIETY
(seeking)
COMPLEX
Source:Assael, 1987
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Consumer Decision Making Process
� Need recognition� stimuli can be internal or external
� Information search� personal, commercial, public, experiential
� Evaluation of alternatives� forms judgement - conscious & rational
� Purchase decision� commit
� Post-purchase evaluation� re-evaluate and re-assure
The Organisational Buyer
� fewer
� highly concentrated
� close relationship between buyer and seller
� geographically concentrated buyers
� demand for industrial goods is ultimately
derived from the demand for consumer
goods
� professional purchasing
Characteristics of Organisational Markets
� Producer markets
� purchase to make profit from using operationally or to
produce other goods
� Reseller markets
� purchase to make profit from reselling with no or minor
alteration
� Government markets
� buy to support operations - normally purchase through bids
or negotiation
� Institutional markets
� seek to achieve charitable, community, educational or non-
business goals
The Industrial Buyer ‘DMU’
Initiator
first suggests buying product
or service
Influencer
whose comments affect the decision
Decider
Ultimately make all or part
of buying decision
Buyer
Physically makes purchase
User
Consumes product or serviceInitiate process / define specs
Help define spec, help inevaluation of alternatives
Product requirementsand suppliers
Formal authority to selectsupplier - negotiate terms
Approvers
Gatekeepers
User
Authorise decider andbuyer proposals
Control random contactfrom sellers / flow of information
Source: Webster and Wind, 1972
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Types of Purchase
� New Task
� First time purchase, full buying process
� Modified re-buy
� E.g. faster delivery, lower price, specification
� Straight re-buy
� Routine re-purchase, same terms
� Truncated buying process
Organisational Buying Process
� recognise the problem
� develop product specification to solve problem
� search for products / suppliers
� evaluate products to specification
� select and order most appropriate product
� evaluate product and supplier performance
Types of Purchase
Source:Robinson et al, 1967
YYYPerformance review and feedback
YPossiblyNEstablish order routine
YPossiblyNSelection of supplier
YPossiblyNDetailed evaluation of suppliers
YPossiblyNSearch for potential suppliers
YYYSpecific description of product required
YPossiblyNDetermining general need
YPossiblyNRecognition of problem
New
Task
Modified
Re-buy
Straight
Re-buy
Phases of the buying process
Buy classes
Differences Between Industrial and Consumer Marketing
Only on major purchaseContractual normalLegal factor12
Less importantCritical to successCustomer service11
Lots, complex channelsLimited – short channelsPlace decision10
Fixed – discounts soughtDetermined before – terms vitalPrice decision9
Mass media advertisingPersonal sellingPromotional dec.8
Low technical contentTechnically sophisticatedProduct detail7
Short-tem relationshipLon-term relationshipTime effect6
Individual / family unitGroup decisionNature of buyer5
Similar group needsBespokeCustomer needs4
Immediate satisfactionEconomic needsEmphasis of seller3
PrimaryDerived or jointNature of demand2
Individual / familyMultiple influencesPurchase motiv.1
Consumer MarketingIndustrial Marketing
Impact on demand directImpact on sales direct / indirectEnvironmental13
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Analyzing Marketing Opportunities
Competitors Analysis
The Organisation’s Marketing
Environment
Theorganisation
The economy
Socialfactors
Culturalforces
Technology
Political structures
Legalstructures
Demography
Suppliers
Distributors& dealersMarket
demands
CompetitorsCustomers
� Porter’s five forces model
� industry’s competitive structure
� product/market battlefield
� roles in the target market
� assessing competitors strengths and weaknesses
� competitors’ reaction patterns
Outline
Porter’s Industry Analysis:
The 5 Forces Model
INDUSTRYCompetitive rivalry
POTENTIALENTRANTS
BUYERSSUPPLIERS
SUBSTITUTES
Threat ofrivalry
Bargainingpower
Threat ofsubstitution
Bargainingpower
Source: Porter, 1985
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Bargaining Power of Suppliers
• the strength of the supplier brand
• the source of supply spans only a small number
of suppliers
• switching supplier
• substitute products of suppliers
• forward integration
Bargaining Power of Buyers
• where few buyers control a large volume of the
market
• where there are a large number of smaller
suppliers fighting for a share of the market
• the cost of switching supplier is low
• the supplier’s product is a mass-market
product and not necessarily differentiated
• strong customer power
• threat of backward vertical integration
The Threat for Potential Entrants
• economies of scale
• access to new distribution channels
• brand loyalty
• capital investment
• competitor retaliation
• regulatory influence
Threat of Substitutes
• a new product or service equivalent
• a new product replacing an existing product
• consumer substitution
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Key Factors Influencing
Competitive Rivalry
• stage of product life cycle of competing product
• use of specialized production techniques
• liquidity of competitor
• ability to achieve differentiation and brand
loyalty
• competitor intentions
• the relative size of the competitor
• barrier of exit from the industry
• number of sellers & degree of products
differentiation
Who Are Our Competitors ?
� only those companies offering similar products / services, same target market, similar technology.E.g. .. Penguin Bar = Kit-Kat 6 pack
� all companies in same product/service category.E.g. .. Penguin = Crisps (chips) / Ice-cream
� all companies manufacturing/supplying products delivering same service.E.g. .. Bus carrier = Railways, cars, planes
� all companies competing for the same spending powerE.g. .. House extension = holiday
Who Are Our Competitors (potentially)?
� smaller companies attacking the market segment
� companies operating in other markets wishing to expand
� companies wishing to diversify
Industry’s Competitive Structure
One seller Few sellers Many sellers
Undifferentiated product
Differentiated product
Pure
monopoly
Pure oligopoly
Differentiated
oligopoly
Pure
competitive
Monopolistic competitive
....How does it matter?
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Roles in the Target Market
• market leader
• market challenger
• market follower
• market nicher
.... and main implications.....
Product/Market Battlefield
• Does competitors offers differ?
- type od product....?
- type of customer (market)...?
• Product/market battlefield map and main
findings.....
Product/Market Battlefield
Kids Teens Adults Olderpeople
In the ear
In thepocket
Behind the ear
Identifying & Evaluating
Competitor’s SW
• First step - collecting information about: sales, market share, cost& profit levels and how they appear to be changing over time, cash flows, return on investment, investment patterns, production process, product portfolio, organisational culture, product quality, the levels of brand loyalty, targets, distribution channels, financial capabilities, management capabilities and attitudes to risk, ownership patterns.....
• Second step - assessment: comparative assessment of competitors, unweighted or weighted strength assessment.....
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Competitors’ Reaction Patterns
• the laid-back competitor (What’s the reason?)
• the selective competitor
• the tiger competitor
• the stochastic competitor
54
Macro Environmental Analysis
&
SWOT Analysis
55
The Organisation’s Marketing
Environment
Theorganisation
The economy
Socialfactors
Culturalforces
Technology
Political structures
Legalstructures
Demography
Suppliers
Distributors& dealersMarket
demands
CompetitorsCustomers
Macro Analysis Frameworks
PEST
PESTEL
SLEPT
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The PEST Framework
Political / Legal
Legislative structuresMonopoly restrictionsPolitical / gov. stabilityPolitical orientationTaxation policiesEmployment legislationForeign trade regulations
Socio-Cultural
DemographicsLifestylesSocial mobilityEducation levelsAttitudesConsumerismReligion
Economic
Business cyclesMoney supplyInflation ratesInvestment levelsUnemploymentEnergy costs
Technological
Speed of changeRate of technological transferProduct life-cyclesAvailabilityCostLevels of industrial and gov. R&D expenditure
Org
an
isa
tio
n
SWOT Analysis
SWOT analysis draws together key strengths, weaknesses, opportunities and threats that have been derived as a result of the marketing audit, i.e. the macro and micro analysis and assessment
SWOT Analysis
Financial resources, product portfolio, economies of scale, technical capability,management ability, innovative design, profitability, R&D, marketing
intelligence
Global markets, investment opportunities, diversification, technology innovation, internet,
Lack of skilled labour, high workforce turnover, lack of financial investment, poor internal communications, lack of management commitment, supplier
relationships, management weaknesses, over-capacity
Global markets, competitive activity, competitive investment, supplier desertion, substitute products, market saturation,
resistance to change
Internal
External
Strengths Weaknesses
Opportunities Threatsconvert
convert
Marketing Objectives
S Specific - descriptive, succinct and provide clarity throughout the organization as to what is to be achieved
M Measurable - clearly state tangible targets that can be measured in the future
A Aspirational - challenging but achievable, motivational
R Realistic - based on sound market analysis, financial, human & physical resources should underpin the objectives
T Timebound - a timescale should be set against the achievment of each objective in order for performance measurement to be undertaken
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Marketing Objectives e.g.
� rate of return on investment
� net profits
� cash flow
� total sales revenue
� sales volume
� market share
� consumer awareness
� number of distribution outlets
� average realized price
Designing Marketing Strategies
S- T - P
S - T - P
Outline
� market segmentation
� market targeting
� positioning
� Segmenting� Dividing market according to some set of criteria into
relatively homogeneous groups of customers
� Targeting� Involves determining the atracttiveness and profitability
of created segments and then choosing the strategy
� Positioning� Creating value and image of company’s offer, which
should lead to getting a distinguished and importantplace in consumers’ minds through differentiation anddeveloping competitive advantage
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STP – What Is It?
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SEGMENTATION
Phases in STP Procedure
Segmenting 1. Identification of segmentation criteria2. Dividing the market3. Defining a profile of each segment
Targeting 1. Segment attractiveness assessment2. Choosing market strategy
Positioning 1. Differentiation tools2. Positioning process
66
Segmentation: Conditions
Do customers have similar
needs and wants?
Can we collect information
about the segment?
Are the segments profitable?
Can the segments
be reached?
SEGMENTATION
SENSITIVITY
MEASURABILITY
ACCESSABILITY
SIZEABLE
Internally homogeneous, externally heterogeneous
Segmentation
� Basis for segmentation:
� geographics
� demographics
� geodemographics
� psychographics
� behaviour
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• Gender, age, family size, family life cycleDemographics
• Size of town, administrative, climateGeographic
•Education, job, social class, religion, race, nationality, income
Socio-economical/ demographic
•Personality, lifestyle, innovativeness, risk taking
Psychographic
•Status, consumption level, brand loyalty, attitude towards the product, purchase readinessBehavioral
• type of prefered benefits, place of purchase, reason of purchasePreferencial
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Segmentation Criteria 4 B2C
Family life cycle
� Single
� DINKS
� Full Nest
� Empty nest
� Survival
70
� Typical segmentation criteria: region,
voivodship, district, municipality, town
� Also: climate, population density
� Advantages: easy access to info
� Disadvantages: too general, ignores other
important characteristics
� Needs also other criteria
Geographical Criteria
Socio-economic Grading
� A
� Upper middle class
� B
� Middle class
� C1
� Lower middle class
� C2
� Skilled working class
� D
� Manual workers
� E
� Lowest subsisence
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Geodemographic Segmentation
� analysis of people according to where they live
� based on belief that people live in homogenous neighbourhoods
� ‘birds of a feather flock together’
� Acorn
� Mosaic
The Acorn Segmentation
� Thriving (19,7%)
� Expanding (11,6%)
� Rising (7,8%)
� Settling (24,1%)
� Aspiring (13,7 %)
� Striving (22,7 %)
� As an example of a more detailed breakdown, group Aspiringcontains the following groups:
- new home owners, mature communities (9,7%): council areas, some new home-owners; mature home-owning areas, skilled workers; low rise estates, older workers, new home-owners
- white collar workers, better off multi-ethnic areas (4%): home-owning multi-ethnic areas, young families; multioccupied town centres, mixed occupations, multi-ethnic areas, white collar workers
� Typical segmentation basis:
Occasions – ordinary vs special
Expected benefits – quality, service, savings, speed
User status – non-user, ex-user, potential, regular
Usage intensiveness – occasional, average, intensive
Loyalty – none, average, strong
Purchase readiness – unaware, aware, informed, interested,
wanting to buy
Attitudes toward the product – enthusiastic, positive,
neutral, negative, hostile
Behavioral Criteria
� Type of preferred benefits
� Low price, economy, convenience, durability, reliability, etc.
� Preferred purchase place
� Modern-traditional trade
� Electronic-stationary trade (click vs brick)
� Reasons of purchase
� business, holidays, family (trip)
� For self, gift
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Preferences Require empirical
research
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� Segmentation basis include: lifestyle, personality,
interests, etc.
� Basic areas of marketer’s interest include:
Social behavior – free time activity, recreation, sport, holidays,
shopping habits
Interests – music, books/magazines, science, history, fashion
Opinions – social issues, aesthetics, economical, political, cultural,
religious, educational
Psychographic Criteria
Business Markets Segmentation
� demographic
� industry, company size, location
� operational variables
� technology, user or nonuser status, customer capabilities
status
� purchasing approaches
� general purchase policies, purchasing criteria, nature of
existing relationships
� situational factors
� urgency, specific applications, size of orders
� personal characteristic
� buyers-seller similiarity, attitudes towards risk, loyality
•Organization size, geographical scope, industry, type of organization, user status, locationMain
•technology, average product usage, average order size, financial capabilitiesOperational
•Organizational structure, supply funcion, way of dealing with transactions
Attitude towards purchase
•Preferred benefits, ways of obtaining products, length of contract Preferrences
•Buyer-seller likeliness, loyalty, risk taking
Personal qualities
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Segmentation Criteria 4 B2B
Cost Effective Segmentation
� Measurable� Can you define what it is?
� Accessible� If you can define it - can you get at it?
� Substantial� Is it large enough to be profitable?
� Unique� What makes it different from other segments?
� Appropriate� Does it meet your resources and objectives, can it be actioned?
� Stable� Can you predict how it will develop?
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Segment Attractiveness
Demand Criteria
Current size
Growth dynamics
Potential size
Competition Criteria
Number of competitors
Exit barriers
Offerdifferentiation
Substitutes
Accessability Criteria
Company awareness
Access to distribution
Adjustment
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Segment Attractiveness Assessment
Mass marketing
Full-scopemarketing
Selectivemarketing
Concentratedmarketing –big segment
Concentratedmarketing –
smallsegment
Nichemarketing
1-2-1 marketing
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Market Targeting Options
Positioning
� positioning is how the product is perceived and evaluated by the target audience relative to competitor products
� companies must differentiate products or services
� positioning must promise the benefit the customer will receive
� should not be all things to all people
� should be believable
Identification of attributes which distinguishthe offer on the market
Defining competitors’ market position
Market position selection – positioning process
Matching the offer with positioning strategy
Communication
84
Positioning - Phases
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Choosing Market Position – Positioning
• 1 dimension
• 2 dimensions
• Multidimentional
How many differences
• Important
• Out-standing
• Safe
• Connected
• Additional criteria
Whatdifferences
• Strengthening current position
• Seeking new position
• Competition repositiongHow
Positioning Strategies
… Overall Focus Options
� attribute
� customer benefit
� price and quality
� use / application
� product user
� product class
� competitor
Major Positioning Errors
� underpositioning - brand does not have a clear identity in the eyes of the customer
� overpositioning - buyers may have too narrow image of a brand
� confused positioning - too many claims might be made for a brand
� doubtful positioning - positioning may not be credible in the eyes of buyer
Designing Marketing Strategies
Product
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Product
Outline
� product decisions
- product mix decisions
- product attributes
- new product development
- product life cycle
� Product – everything (set offunctional, social & psychologicalbenefits for a customer), which canbe offered for consumption, usage,spending time, etc., in order tosatisfy customer’s needs in theexchange process
90
Product – definition
� Tangible goods
� Services
� Celebrities
� Organizations
� Places
� Ideas
� Events
� Symbols
91
Types of Product
1. Market assortment planning
2. Individual product attributes
3. New product planning
4. Product life cycle
92
Marketing Decisions Regarding Product
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� Assortment width
� Length of product line
� Depth of product type
� Assortment integrity
� Product system
93
Market Assortment
number of assortment groups in the company
94
Assortment Width
variety of product types and brands within each of the assortment group
95
Assortment Length
96
Assortment Length
Brand A
Brand B
Startingpoint
Brand C
Brand B
Brand A
Up-stretching
Down-stretching
Brand A Brand A
Brand B Brand B
Brand D Brand D
Brand C
Up&downstretching
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Assortment Length
Brand A
Brand B
Startingpoint
Brand C
Brand B
Brand A
Filling-in theline
Modernizingthe line
Brand A
Brand A
Brand C
Brand B
Brand B
Brand D
Brand C
Deleting productforms
� Variety of item options within a particular product type
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Assortment Depth
� customer� Are the products offered to the same customer group?
� functional� Are assortment groups complementary or satisfy different needs?
� technological� Can the same machines, technology, know how be used to produce these goods?
� supply� Can the same materials, resources and components be used?
� distribution� Cant the same distribution channels and sales methods be used?
� promotional� Can the same promotion forms and tools be used?
� logistics� Can the goods be offered, transported, stored in the same way?
� vertical� Is company’s activity a part of the same market system (industry, branch)?
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Market Assortment Integrity
Product - levels
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Product Levels
Core productTangible(formal)
product
Augmented
(enhanced) product
packaging
brand
quality
features
styling
core benefit ...
installation
delivery
credit
warranty
after sale service
� Set of benefits offered to consumers within a particular product
� basic benefits
� supplementing benefits
drill – making holes
car – transportation
beer – entertaining way of satisfying thirst
Core Product
Sum of utilitarian and functional value (quality) in a particular project offered in a packaging(sometimes) and under a certain brand name –which allows realization of a particular set of benefits delivered in a product
� Technical characteristics� Technical parameters� Accordance of quality with technical parameters� Style� Size � Identification, instruction� Packaging � Brand (name, logo)
Formal Product
Brand
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Brand
Brand - name, sign, symbol,pattern or a combination of all theabove, given by a seller in order toidentify and differentiate theproduct among the competition
Functions:
� Identification
� Guarrante
� Promotional
Meaning of a brand:
� qualities
� benefits
� values
� culture
� personality
� user
Brand: Decisions
� YES
� NO –GENERIC products
1. Shall We Brand?..
� Producer
� Intermediary
� Mixed
2. Who Is The Sponsor?
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� create own
� buy
� licence
3. How Can We Obtain a Brand?
� individual brand name
� family brand (the same for all theassortment)
� mixed brand
4. How To Brand?
� Higher price
� Convenient ordering
� Allows legal protection of a product
� Helps building customer loyalty
� Facilitates market segmentation
� Helps building company’s image
Benefits From Branding
� Pre&post sales services
� Guarantee – length and scope
� Service – speed and scope
� Alternative usage forms
� Loans
� Return policy
� Re-buying of the used product
� Sale of certified products
Enhanced Product
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time
introduction growth maturity decline
profit
Cycle - Profit Relationship
The Process of NPD
� idea generation
� screening
� concept development and testing
� marketing strategy
� business analysis
� product development
� market testing
� commercialisation
Designing Marketing Strategies
Promotion
Promotion
� promotion tools- advertising- sales promotion- public relations- personal selling- direct selling
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Direct
Marketing
Advertising
Public
Relations
Personal
Selling
Sales
Promotion
Principle Methods
Communication at Work
� Differentiates
� between competitors, substitutes and alternatives.
� Reminds
� and re-enforces past transactions. Makes future dealings desirable.
� Informs� makes potential customers / users aware of offer. Essential to
diffuse information.
� Persuades
� influences the decision making process. Makes the exchange desirable.
A management process through which an organisation
enters into a dialogue with its various audiences ….
…. the objective of the process is to (re)position the
organisation and/or their offerings, in the mind of each
member of the target audience in a consistent and
likeable way.
Source: Fill, 1999
Marketing Communications
Website
Direct
marketingExhibitions Branding Perception
Public
relations
Corporate
identity
Commerce
Personal
selling
Word of
mouth
AdvertisingField
marketing
Packaging
Sponsorship
Internal
marketing
Sales
promotion
Point of
Purchase
?
�Consumer Audience
�Channel Audience
�Stakeholder Audience
The ‘Promotional’ Toolbox - a Bag of
Marbles
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Push and Pull Strategy
� Push strategy - decision to concentrate communications effort on the members of the distribution channel, i.e. the wholesaler and retailers
� Pull strategy - in contrast to the push, creating demand for the product through direct communication with the customers
� both push & pull strategy - in order to assert as much influence as possible on the supply chain and the customer
Possible Communications Objectives
� clarification of customer needs
� increasing brand awareness
� increasing product knowledge
� improving brand image
� improving company image
� increasing brand preference
� stimulating search behaviour
� increasing trial purchase
� increasing repeat purchase
� increasing word-of-mouth recommendation
� improving financial position
� increasing co-operation from the trade
� enhancing the reputation with key stakeholder
� building up management ego...
Advertising
� Is any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor
� Major decisions (5 Ms):
- Mission: What are the advertising objectives?
- Money: How much can be spend?
- Message: What message should be sent?
- Media: What media should be used?
- Measurement: How should the results be evaluated?
� Wide range
� Low cost of reaching a single customer
� High control
� Appeals to emotions
� Feedback may be delayed
� Highly standardized message
� Some forms very expensive
� Limited information capacity
Pros Cons
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• High visibility� Appeals to emotions� Close in time and space� Originality…
• Accessible information� repetitive� Associated with info already known:
memories, tradition, stereotypes
• Persuasive
Good Advertisement:
� TV commercials
� Radio commercials
� Newspaper and magazine ads
� Exhibition and POS
� Outdoor
� Internet
Advertising Tools
Sales Promotion
A range of tactical marketing techniques
designed within a strategic marketing
framework to add value to a product or service
in order to achieve specific sales and marketing
objectives
Short-term incentives motivating customers to
(faster) purchase decision or buying more;
intermediaries are encouraged to sell more and
more actively
Customer incentives
- Free samples
- Lotteries and contests
- Discounts
- Coupons
- Refunds
- Presentations, degustation, demonstrations
- Prizes for loyalty
Intermediaries’ incentives
- Price discounts
- Help with exhibitions
- Product samples
- Information and promotion materials
- Influencing the staff
- Exhibitions, trade shows, etc
- Refunds
Sales Promotion
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+ quick feedback
+ liked by buyers
+ increases impulse shopping
+ adds value to a product
+ develops cooperation in distribution channels
- Can be used in short-term
- Later customers do not want to buy products on regular conditions
- Worsens company’s image
- May push customer’s attention towards less important factors (price-payment)
Pros Cons
Public Relations
PR is a planned and sustained efford to establish
and maintain goodwill and mutual understanding
between an organization and its publics (e.g.
Customer groups, local and central government, the
general public, financial institution, the media,
employees)
Public Relations Objectives
� to create and maintain the corporate and brand image
� to enhance the position and standing of the
organization in the eyes of public
� to communicate the organization’s ethos, philosophy, corporate values
� to disseminate information to the public
� to undertake damage limitation activities to overcome poor publicity for the organization
� to raise the company profile and forge stronger,
lasting, customer and supply chain relationships
+ high credibility+ lower costs+ can be used when
advertising is prohibited
+ mass receiver+ can reach customers
avoiding advertising
- Low control over the place, time, and content of information presented
- Difficulty in planning activities
- Impossible to familiarize customers with offer details
Pros Cons
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Public Relations
� publicity
� internal communication and with co-
operators
� sponsoring
� corporate identity
� lobbying
� crisis communication
Personal Selling
An interpersonal communication tool which involves
face-to-face activities undertaken by individuals, often
representing an organization, in order to inform,
persuade or remind an individual or group to take
appropriate action, as required by the sponsor’s
representative
+ Fast feedback
+ Information range can be easily adjusted
+ Possibility of info exchange
+ Relatively high effectiveness of seller’s personal influence on purchase decisions
- High cost of reaching a customer and passing the info
- Low effectiveness when a customer does not know much about the offer
- Only a very limited number of customers can be reached
Pros Cons
Direct Marketing
� Direct Marketing
� Personal, persuasive communication by people both employed and not employed by the company
� OR
� An interactive system of marketing which uses one or more advertising media to effect a measurable response and or transaction at any location (US Direct Marketing Association)
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Direct Marketing
� Includes
� Direct Mail
� Telemarketing
� Magazine Inserts
� Door to Door Distributions
� Mail Order
� Features
� Advertising and selling combined
� Results are measurable
� High degree of flexibility
� Easily controllable
� Highly selective
� Economic
Direct Marketing Benefits
� ability to target to the ‘individual’
� allows personalisation
� supplies a response mechanism and
reinforcement for other media
� scope for vast use of different creative
formats
� highly sophisticated testing
The Principal Characteristics of
Communications Tools
Advert. Salespromotion
PR Personalselling
Directmarketing
Communications
Ability to deliver
personalmessages
Low Low Low High High
Scope for
reaching largeaudiences
High Medium Medium Low Medium
Degree ofinteraction
Low Low Low High High
Perceivedcredibility by
target audiences
Low Medium High Medium Medium
The Principal Characteristics of
Communications Tools
Advert. Salespromotion
PR Personalselling
Directmarketing
Costs
Absolute costs High Medium Low High Medium
Cost per contact Low Medium Low High High
Wastage levels High Medium High Low Low
Level ofinvestment
High Medium Low High Medium
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The Principal Characteristics of
Communications Tools
Advert. Salespromotion
PR Personalselling
Directmarketing
Control
Scope for
targeting specificaudiences
Medium High Low Medium High
Management’sability to adjust
the deploymentof the tool ws
circumstanceschange
Medium High Low Medium High
Designing Marketing Strategies
Distribution
Distribution
Outline
� selecting marketing channels- direct vs. indirect channels- number of channel levels- number of intermediaries- vertical marketing systems
Distribution channels
The distribution channel consists of agroup of individuals or organizations thatassists in getting the product to the rightplace at the right time.
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Selecting the Channels of Distribution
• What are the product characteristics and how do they affect methods of distribution?
• Who are our customers?
• Where are our customers?
• What are our customers requirements?
• How, when and where do they want to buy our products?
• What are our competitors doing by way of distribution?
• What is the cost of distribution?
• What are the legal and regulatory constraints of distribution?
Company Sales Force or
Manufacturer’s Sales Agency?
Selling costs ($)
Level of sales ($)
Company sales force
Manufacturer’s sales agency
Channel Design Decisions
• channels levels
• number of intermediaries at each channel level
• vertical marketing systems
Channel Levels
• short vs. long channel (from one to three level)
• key factors:
- average order size
- geographic concentration of customers
- seasonality of sales
- geographical distance from producer to market
- perishability of the product
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Number of intermediaries
Three strategies:
• intensive distribution - as many available outlets as possible hold this product; products for which consumers require a great deal of location convenience
• selective distribution - more than a few but less than all of the intermediaries
• exclusive distribution - severely limiting the number of intermediaries; even only one outlet in a certain geographic area supplies a product
Intensive distribution
Key characteristic include:
• maximum number of outlets covered to maximize availability
• target outlets in as many geographical regions as possible
• consumer convenience products
• high number of purchasers
• high purchase frequency
• impulsive purchase
• low price
Selective distribution
Key characteristic include:
• medium level of customers - but likely to be significant
• less intensive distribution f outlets
• retailers may require specialist knowledge
• shopping based products
• purchase is occasional
• purchase is more likely to be planned
• medium price
Exclusive distribution
Key characteristic include:
• relatively few customers
• limited retail outlet
• close retailer/customer relationship
• speciality products
• infrequent purchase
• high involvement and planned purchase
• high price
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Impact of Internet on Channel Decisions
• Significant for financial services, leisure industry & others...
• Endless potential benefits: improve corporate image, improve customer service, increase visibility, create market growth opportunities, lower overall business costs, increase speed of transactions, improve management of information, constraints removal of time and distance, ability to full competitive area, cost-effectiveness, more effective/closer relationships....
(an insight into the views of 300 executives from across Europe, source: Chaffey et al.,
2000)
. Designing Marketing Strategies
Price
Price
Outline
� setting price
- calculation of price range- selecting the final price
Price decisions
� selecting the pricing objective
� determining demand
� estimating costs
� analyzing competitors’ costs, prices and
offers
� selecting a pricing method
� selecting the final price
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Selecting the Pricing Objective
� survival
� maximum current profit
� maximum current revenue
� maximum sales growth
� maximum market skimming
� product-quality leadership
Determining Demand
� price sensitivity
� price elasticity of demand
Estimating Costs
� fixed costs
� variable costs
� total costs
Analyzing Competitors’ Costs,
Prices and Offers
� typical methods
� main findings
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Selecting a Pricing Method
� markup pricing
� target-return pricing
� perceived-value pricing
� value pricing
� going-rate pricing
� auction-type pricing
� group pricing
Selecting the Final Price
� psychological pricing
� gain-and-risk-sharing pricing
� influence of other marketing-mix elements
� company pricing policies
Adapting the Price
� geographical pricing
� price discounts
� promotional pricing
� discriminatory pricing
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