marketing energy products - hec...
TRANSCRIPT
Course Objectives
• Identify the characteristics of marketing • Apply these concepts to relevant
situations of energy products and/or companies
• Understand the role of marketing in energy firms
2
Pedagogical Approach
• Lectures (introduce terminology, concepts, key approaches, etc.)
• Discussions (how these elements apply or do not apply in your context)
• Case studies (learning-by-doing)
3
Introduction
• Marketing concept • Marketing model • Marketing in different markets
• Discussion: Is there any role for
marketing in the energy sector in Mexico?
4
The Marketing Concept
• Consumers (individual, organizations, etc.) have needs
• Companies attempt to meet consumers’ needs by offering the right product
• Objective of marketing: create a mutually satisfying relationship between firm and client
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Level of Needs
6
BASIC NEEDS
SOCIAL NEEDS
PERSONAL NEEDS
Ex: food, energy
Ex: social status, to identify with others
Ex: personal achievement, values, personality
Marketing and Needs
• Marketing is about: – Identifying needs of different consumers
groups – Understanding the problems induced by
these needs – Developing a product or service able to
satisfy the needs
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How to Satisfy Needs?
• By offering – The right product or service – At the right price – At the right place and time – With the right information
8
Mutual Satisfaction by Exchange
• The two parties achieve their goals by realizing an exchange or a transaction – The customer satisfies its need
• Satisfaction creates a new transaction cycle and loyalty
• Dissatisfaction breaks the transaction cycle – The firm realizes its objective
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The Marketing Model
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The Business firm The Market
Objectives Resources
Needs Demand Segments Consumer behavior
The marketing mix
Product Price Promo Place
Analyze markets
Integrate the marketing variables
Control for profitability and satisfaction
THE ENVIRONMENT OF THE MODEL
The Market
• Set of customers (buying units) characterized by – more or less complex needs – more or less complex buying behavior
• Aggregated needs constitute demand to the firm
• Differentiated needs require different offers (market segments)
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The Integrated Offer
• Product or service: Functionality and other requirements (quality, design, after-sale service, etc.)
• Price: Value, cost, image, competition, etc. • Distribution: Available when and where needed by
consumers • Information: Customer needs information to
complete the exchange
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Control
• Firm must control for two key elements: – How the exchange with markets allowed to
meet the objectives set at the beginning of the period
– How the exchange with the customers have resulted in customers’ satisfaction and loyalty
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The Environment
• Environment is made of uncontrollable forces having an impact on the firm and the market – Competition (direct and indirect) – Regulation (competition rules, environmental
constraints, etc.) – Economic context (interest rates, revenues, etc.)
– Cultural and social contexts – Technology, …
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Applications of Marketing (B2C Marketing)
• Buyer is a person or a household • Many potential buyers dispersed
geographically • Buyers frequently purchase small
quantities • Buying behavior, needs and motivations
are complex
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Applications of Marketing (B2B Marketing)
• Buyer is an organization • Buyers are large and more concentrated • Large quantities • Needs and motivations are mainly
economical • Professional buyers (they do not buy for
themselves)
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Applications of Marketing (Service Marketing)
• Services are sold in both consumer and business markets
• The main peculiarities compared to product are: – Service is intangible – Service is not storable (demand variation) – Quality is difficult to evaluate
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Applications of Marketing (International Marketing)
• Export markets (products or services) • International markets differ with respect to
domestic market in terms of: – needs and cultures – legal and regulation contexts – institutions and political systems and customs – economic and demographic environment,...
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Other Applications of Marketing
• Non-profit organization (e.g., Red Cross, Oxfam)
• Political • High-tech marketing • Tourism (macro and micro) • Art marketing (theatre, museum,
symphony orchestra, etc.)
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Analyzing Markets
1. Defining the market
2. Defining competition
3. Understanding consumer behavior
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The Marketing Model
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The Business firm The Market
Objectives Resources
Needs Demand Segment Consumer behavior
The marketing mix
Product Price Promo Place
Analyze markets
Integrate the marketing variables
Control for profitability and satisfaction
THE ENVIRONMENT OF THE MODEL
Market & Industry
• A market: a demand to satisfy a need • An industry: a group of firms using
(almost) the same technology and producing (almost) the same products
• Different products from different industries can satisfy the same need
• Direct and indirect substitutes
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Competition
• Competition is about consumer choices among a more or less broad array of products or substitutes in order to satisfy a need
• Competition is also about producers of the same or different industries being directly or indirectly in competition for an exclusive relationship with the consumer
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Energy Market
• Demand for energy is derived from other needs, e.g., lighting, cooking, heating, powering equipment, etc.
• Households: private use of energy to satisfy needs
• Industries and commerce: energy is an input in production
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Analyzing Consumer Behavior
• Firm must understand consumer behavior in order to plan its offer to consumer and produce satisfaction
• Consumer behavior is a process: – Need is created – Transaction is made – Satisfaction and loyalty are produced
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Consumer Behavior
• The key questions are: – Who buys (a person, a family, a group) – Why? (motives) – When? (timing) – How? (quantity, credit, etc.) – Where? (store, online, etc.) – What is the decision process?
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Buying Behavior
Consumers (individuals and households) Commerce and industry (groups buying for the organization) Governments and state enterprises (Buying under defined set of rules; public markets rules)
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Consumer Buying Behavior
Needs awakening
Information search
Evaluation criteria
Decision Buying Satis
faction ???
The process is influenced by personality, social environment (family, friends, reference group, etc.) and the culture of the buyer
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Information Search
• Consumer looks for information on the possible solutions and the different characteristics of those solutions
• Sources : advertising, Internet, friends, stores, salesmen, newspapers, etc.
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Evaluation Criteria
• Price
• Quality, brand
• Service (in-store, after sale, etc.)
• Reputation of the company
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Decision
• Buy or wait
• Decision rule that takes into account the different criteria: – Compensation or trade-off between criteria
(e.g., weighted average) – Sequential rule (e.g., lexicographic)
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Buying
Buying (or shopping) is more than a simple act, it involves:
• The choice of an outlet (mall, online, specialized boutique, etc.)
• An experience in a store (physical aspect, contact with a salesperson, information, credit, etc.)
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Satisfaction
Satisfaction is a result of: • the experience during the buying process, • the use of the product, • the opinion of reference group, • the after-sale service (especially when there is a
problem). Positive experience reinforces satisfaction and
creates loyalty
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Buying Process
• Short resolution process (routine buying)
• Medium or modified resolution process
• Complete or in depth resolution process
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Industrial Buying Behavior
Context of B2B exchanges Task, buying situations, buying group and influences
Buying policies of governments
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Organizational Buying Context
• Capital goods vs. inputs for production
• Demand for intermediary goods is derived from final demand for their products or services
• Specific needs (specifications, quantities, qualities, service, etc.)
• Buying group (professionals)
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Buying Tasks
STEPS
1. Identifying and analyzing the need (problem) 2. Defining specifications 3. Identifying possible suppliers 4. Evaluating suppliers 5. Asking suppliers for proposals (price, service, etc.) 6. Selecting the best proposal and negotiating 7. Fixing the supply routine (Delivery, payments,
control) 8. Defining an evaluation grid of the different suppliers
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Buying Situations
STRAIGHT REBUY
MODIFIED REBUY
NEW TASK
Supplier chosen. Reorder the same item. Ordering routine, e.g., when remaining quantity reaches a given level (security stock)
Buyer reviews his routine (looking for new specifications, higher quality, new information from a competitor, etc.)
Buyer is making a major new decision (investment). Extensive search (identification and analysis of possible options and alternative suppliers)
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Buying Groups
• User (department) • Professionals (engineers, etc.) to define
specifications and evaluate solutions • Supply dept.: identification and selection
of suppliers • Finance dept. : evaluation of proposals
and negotiation • Top management for approval
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Buying Influences
Identification of needs
Final decision
Economic Motives Noneconomic Motives
Pricing
Quality
Assurance of Supply
Customer Service
Prestige
Career Security
Friendship & Social Needs
Personal Needs
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Characteristics of Industrial Markets
• Stable relationship between buyer and seller – Shifting costs – Tight relationships between people – Common assets and joint projects
• With time, the buyer becomes the center of a
network of complementary suppliers who cooperate for achieving the best result
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Government Buying Behavior
• Laws and rules to preserve public interests
• Different types of markets (bidding process)
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Types of Public Markets
• Least cost markets – commodity products where attributes can be
easily specified – bidding is open to all firms through public
announcement in order to maximize competition
– Select the lowest bid price
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Continued...
• Short listed markets: new tasks. • Buyer is looking for an original and expert
solution and the best price • Two-step bidding process:
– Qualifying potential suppliers on experience and technical competence
– A bidding process among a few selected suppliers
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Continued...
• Complex evaluation process using a weighted average of technical and economic criteria
• Examples of criteria: quality of the people who will work on the project, methodology, price, delivery date, etc.
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Internal and External Actors in Buying
• Who initiates the project? • Who will use? • Who will specify? • Who will finance? • Who will make the decision?
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An Example of Buying Behavior in the Energy Sector
• Suppose a gas company looking to develop the market for heating commercial building
• Gas is efficient for heating, the cost is interesting, pollution is limited
• Suppose a higher investment cost but a lower operating cost than other alternatives
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Continued...
Four Segments
New building Existing building Built for own use
Built for lease to others
A B
C D
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Continued...
• A and B are the most interesting. Why? • Groups C and D will just consider the
investment cost and they will minimize that cost
• Group B: target old buildings who have to go through major repair. Shifting costs is the limit
• Influence sources?
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Market Segmentation
1. Concept of segmentation
2. Segmentation analysis
3. Segmentation in industrial markets
4. Segmentation strategy
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Concept of Segmentation
• Segmenting a market is: – Discovering meaningful differences among
customers (through extensive analysis)
– Adopting a segmentation strategy: selecting and serving segments
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Markets and Segments
• Markets are (frequently) made of consumers who differs in terms of – consumption patterns – Behavior – reactions to the marketing variables (different
sensitivities to price, promotion, product quality)
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How to Segment a Market?
• Choose a segmentation basis
• Describe the segments
• Measure the segment
• Analyze the segment profitability
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Segmentation Basis
• User status (user or non user of the product)
• Intensity of use ( heavy user vs light user) • Attitude ( loyalty, innovativeness, etc) • Response to marketing variables ( price
elasticity, quality, reputation)
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Descriptors of Segments
• Demographics (age, revenue, schooling, professions, family size, geographic location)
• Psychographics ( personality attributes)
• Benefits searched by using the product
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Segmentation Strategies
• Undifferentiated (no significant differences between group of consumers, or non profitable segments)
• Concentrated (one attractive segment) • Differentiated (different offers to
different segments)
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Industrial Market Segmentation: Macro & Micro MACROSEGMENTATION
Demographics identifiers: -Industry group (ex: steel) -Company size ( ex: large) -Company location
MICROSEGMENTATION -Company technology -Purchasing policies -Buyer-seller relationships -Innovativeness
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Marketing Research
• Place and role of marketing research
• Types of marketing research
• Different steps in a marketing research
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Ex. of Research Questions
• What is the best positioning of a new product? • What is the market potential for a new gasoline? • What is the image of PEMEX? • What is the probable impact of deregulating the
electricity sector? • What are the best media to use to advertise the
merits of energy savings? • What are the characteristics of segments? • What is the market potential in country X?
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Marketing Research (MR)
Definition and scope set of techniques and principles for systematically collecting, recording, analyzing and interpreting data that can aid decision makers who are involved with marketing goods, services or ideas. Key word : Data (information)
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Types of Data
Primary data: Data collected for a special purpose Secondary data: Readily available data Internal (accounting, marketing, etc.) External
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External Data
• Syndicated data – Data provided by commercial firm usually on a
subscription basis (e.g., A.C. Nielsen brands sales) – Data provided by associations to their members (e.g.,
production, investment) • Public sources
– Data provided by national or international (statistics) organisms such as INEGI, Statistics Canada, Unesco (e.g., GNP per head, population, production, consumption, etc.)
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Benefits of Secondary Data
• Benefits of secondary data are usually assessed in terms of : – cost – accessibility – relevance for the problem at hand – accuracy (depend on sources and
methodological considerations)
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Uses of Secondary Data
• Assessing a market’s size • Describing segments (by characteristics
such as geographic, demographic, sociological and economical)
• Location studies • Analysis of an industry • Import/export analysis • Assessing price impact on sales
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Uses of Primary Data
• New product introduction
• Positioning
• Consumer behavior
• Psycho segmentation
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Place and Role of Marketing Research
• Marketing research is part of the marketing information system (MIS) – Acquire and analyze data to understand
needs and consumer behavior – Measure and forecast demand
– Control the efficiency of marketing programs
and evaluate the environment of markets
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Types of Marketing Research
Present Future
Market situation
Market response
Descriptive Research
Predictive Research
Causal Research
Predictive Causal
Research
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1. Define the marketing problem
2. Define the marketing research objectives
3. Choose a research methodology (data collection, instruments, data sources, etc.)
4. Collect data
5. Analyze data
6. Prepare a report
Steps in a marketing research
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Marketing Problem and Research Objectives
• Identification and problem definition – Problem vs. symptoms – Identification of data needs – Study the management and its
environment – Formulate hypothesis
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Research design
• Type of research (exploratory, descriptive, experimental)
• Data collection forms (survey, observation, etc.)
• Measurement instrument (e.g. content of a questionnaire)
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Data Collection Methods
• Data – Secondary, i.e., data are already collected by another
department or organization – Primary, i.e., data need to be collected
• Primary data collection methods: – Qualitative methods, – Experimentation, – Observation, – Survey
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Research Instruments
• Secondary data • Questionnaires • Observation grid • Experimentation devices
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Collecting Data
• Defining and sampling the population • Choosing a collecting method:
– Personal interviews – Phone interviews – Mail questionnaires – Internet questionnaires
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Data Analysis
• Content analysis for qualitative research
• Statistical analysis for quantitative research
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Preliminary Data Analysis
• Before analyzing a data set using sophisticated techniques, a researcher should get a feeling for what the data are like. This is the purpose of preliminary analysis
• Preliminary data analysis involves usually descriptive statistics (central tendency, dispersion, etc.) and eventually two-way tabulation
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Presentation of Research Results
Communication here refers to both written and oral… Communicating the results of a M.R. project to decision makers is the last, but far from being the least important, step
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Preparing Effective Written Reports I
• Make it short – Decision-makers will not devote days to read
your report! – No absolute length standard – It is not necessary to report every single detail
• Make it interesting – Your report is not intended as a cure for
manager’s insomnia!
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Preparing Effective Written Reports II
• Make it methodical – No magic number of sections
• Preliminary sections – Transmittal letter, Title page, Table of contents – Executive summary
• Body of the report – Purpose, Method, Findings – Conclusions (and recommendations if requested)
• Addenda – List of references – Appendix
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Preparing Effective Written Reports III
• Make it precise – Clear report : unambiguous statements – Comprehensive report : contains all necessary
information • Make it lucid
– Adopt the language of audience – Avoid indigestible technical statements – Use appropriate illustrating tools (tables, etc.)
• Make it error-free – The price of carelessness can be quite high
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Oral Presentations
• Same characteristics of a written report • The following tasks are especially
important for the success of verbal presentations: – Researching the audience (who,
backgrounds, information needs, etc.) – Choosing the main points (not too many) – Making good use of visual aids
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Some Remarks
• Useful vs. needed information – Any information can be useful but may not be
necessary • Cost of gathering and treating information
– Nothing comes free • Value of information is subject to
decreasing marginal returns – Complete and perfect information is probably
not economical (and out of reach)
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Some Remarks
• Delaying a marketing decision – Decide today with imperfect knowledge vs
later on with eventually less imperfect knowledge
• Perceptions may be very different from reality – Importance of methodology
• Cost of a research vs. research at a certain cost – Do the right research or avoid doing research
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M.R. and Decision Making
Role: assisting decision makers in: 1. Setting marketing goals
2. Developing and implementing marketing
plans
3. Evaluating the effectiveness of marketing plans
M.R. does not replace decision making!
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Providers of M.R.
In-house marketing research Commercial marketing research firms (e.g., A.C. Nielsen ). Differ in range and services international vs. national vs. regional custom designed services vs. syndicated services specialized firms : fieldwork services, brand names, packaging studies, etc. Academic consultants Trade agencies: offer a wide range of services but rarely conduct a custom designed research 86
In-house : Advantages and Disadvantages
• Researchers know very well the company and the sector
• Researchers are too much involved to be objective
• Cost effective if M.R. is of regular use • Rapid answers
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When to Use External Services?
• Firm does not have the capacity to conduct the whole or part of the project
• Management needs a credible outside opinion before making a decision
• Lower cost than external services • In many cases the design is made in-
house but field work subcontracted
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Criteria for Selection of an External Supplier
• Competence w.r.t. the problem considered • Prestige or reputation of the supplier • Past experience • Personnel, non-technical skills,
communication, etc. • Price • Weighted average of these factors to
choose among bidding suppliers 89
Marketing Information System
1. Why information is needed?
2. Components of an MIS
3. Advantages of an MIS
4. How to develop one?
90
Why Information is Needed?
• One major task of marketing is to analyze the needs and markets; the firm must: – Continuously collect data on market
environment, demand, competition, customers
– Collect data on sales, prices – Collect data on customer complaints,
satisfaction
91
Marketing Model Integrating MIS
The Firm
Objectives and
Strategy
The Market
Customer Demand Segment
THE MIS Register and classify
transactions for analysis
Register and classify information on the environment
Register and classify
information collected by marketing research
Exchange with the market
The environment of the market 92
Advantages of MIS
• MIS gives the firm – A continuous flow of information on markets,
transactions, customer satisfaction and profitability
– The opportunity to identify new needs and changes in the market
– The means to forecast future customer behavior and demand
93
Continued...
– The means to assess the probable impact
of marketing decisions (pricing decisions, advertising decisions, new services introduction,…)
– The means to improve customer service by having online all the necessary information on customers
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Components of an MIS
• Internal data (mostly from accounting department and marketing department)
• External secondary data (government, association, private sources)
• Marketing research • Marketing models and decision support
models
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Internal Data
• Accounting department: sales and profits by product category, by customer and customers group, by region, by segment, by period
• Marketing department: salesmen reports, customer complaints, new customers, lost customers
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External Secondary Data
• Data from statistical bureau (population data, industries data, investment data, new construction, prices index, regulation)
• Data from industry associations (national and international) ex: trends in technology, in deregulation, in new products
• Data on competition: monitoring competition in the market
97
Marketing Research
• Marketing research methods, instruments, etc
• Marketing research reports (in house or specialized companies)
• Data basis created from previous surveys
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Marketing Models
• Sales forecasting techniques (time series models, causal models)
• Assessment models (for measuring, e.g., impact of price variation on demand or impact of an advertising campaign)
• Simulation models of market acceptance of new products or services
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How to Develop an MIS
• MIS development involves many departments (accounting and finance, marketing, information systems, production)
• MIS must be tailored for the marketing strategy (product lines, customer groups, etc)
• MIS requires an integration of information technologies and databasis
100
Product and Service Policy
• Concept of product or service • Product or service line • Trademarks for product or service • Positioning product or service • Product or service life cycle • Marketing at different moment of the life
cycle
101
The Marketing Model
The Business firm The Market
Objectives Resources
Needs Demand Segment Consumer behavior
The marketing mix
Product Price Promo Place
Analyze markets
Integrate the marketing variables
Control for profitability and satisfaction
THE ENVIRONMENT OF THE MODEL
102
Points of View on the Product or Service
• Firm: the product or service is mainly a bundle of technical attributes, which creates the functionality of the product
• Consumer: a much larger vision…
103
An Example: Electricity
• Core service: current with its technical characteristics
• Enhanced service: constant, continuous, provided by a company of good reputation
• Enlarged service: low cost, efficiency, service, advisory services etc.
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Product or Service Line
• Different customer groups
• Different products or services (in terms of characteristics, price, quality, packaging, etc)
• Offer of the firm: one or many product lines, each having one or many articles
106
Product Line of Electricity Services for Residential Customers
Basic electricity supply for home needs
Diagnosis of energy use and efficiency
Appliances rental and sale for home
Appliances repair services
107
Line of Electricity Services for Commercial Customers
Electricity supply programs
Environmental services (technology solutions to minimize environmental impact)
Diagnosis of energy use and efficiency
Small power services on site in case of power interruption
108
Line of Electricity Services for Industrial Customer
Electricity supply under different contract terms (power, interruption etc.)
Diagnosis of energy use and efficiency
R&D for applications of electrotechnologies to production
Energy management for the customer (electricity, gas, oil)
Power services on site for interruption
109
Trademarks
• A trademark is a name, a picture or a logo which is used to designate a product or a service
• Functions of a trademark: – Helps to identify the product or the service – Protects legally that name from use by others – Facilitates advertising and promotion
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Why Use Trademarks in Services?
• Services are intangible and difficult to remember for customers
• Consumers are looking for good reputation of services
• Services are easily copied by competitors
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Product or Service Positioning
• Positioning:
choice of characteristics and communication for each product or service
in order to be perceived by consumers as a
valuable solution
112
How to Do Positioning?
• By identifying the main evaluation criteria used by consumers when deciding which product to buy
• By knowing how customers evaluate our product compared to main competitors’ products on the key evaluation criteria
113
Strategy for Introduction
• Product or service is not known • Demand is limited to innovators
(consumers who are not sensitive to price but to newness)
• Main task is to communicate with target – to increase awareness of the product – to provide information about main product’s
characteristics – to bring the consumer to try the product
115
Strategy during Growth
• Customers know the product (through firm’s communication and word-of-mouth
• Demand is now growing fast • Main task is to
– position well the product – analyze market segmentation – develop the product line – increase the distribution
116
Strategy for Mature Markets
• Competitors are already in • Price competition is frequent • Watch for changes in customer needs, • Preserve customers (loyalty programs and
good customer service)
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Strategy for Declining Markets
• The product is losing ground (better technological solution or change in tastes)
• The firm has the option of – Repositioning the product on a small segment
of traditional users, or – Withdrawing the product
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The Marketing Model
The Business firm The Market
Objectives Resources
Needs Demand Segment Consumer behavior
The marketing mix
Product Price Promo Place
Analyze markets
Integrate the marketing variables
Control for profitability and satisfaction
THE ENVIRONMENT OF THE MODEL
120
Price Determinants
Costs Competition, Regulation
Consumer perception
Price Objectives of company
Pricing policy
121
Objectives
Objectives
Profit
Sales
Competitive equilibrium
Image & reputation
Profit maximisation; target return on investment; acceptable profits
Growth; market share
Same price as competitors; make price less important for customers
Quality, reputation of brand, service
122
Pricing in the Electricity Industry
• Often, flat tariff for large customer groups.
• Tariff based on average generation, transmission and distribution historical costs plus a reasonable margin
• Prices do not change frequently; any price change is the result of a long political process
123
Limitations of Flat Rate Pricing
• Costs (generation, transmission, distribution) vary with time of use (seasons, months, weeks, days, hours) and demand variation
• Customers have no incentives to change behavior. They can use electricity inefficiently (almost) without cost
• Having no inventories, producers must meet demand with extra high cost capacity
124
Best Solution to Pricing
• Flexible pricing system, i.e., a tariff based on a series of variables
• Examples: time of use, quantity, reliability of service, predictability of use, willingness to forgo consumption in emergencies, location of customers
• Price is a signal that reflects marginal cost
125
Problems with Pricing at Marginal Cost
• Continuous fluctuations with changes in supply and demand conditions
• Company needs a real time two-way communication systems with customers (collect real-time demand and provides a price)
126
Continued...
• Difficulties of pricing at marginal cost: – Technological constraints (meters, telecom
infrastructure, computer capacity, software)
– Information overflow: at the limit the pricing system is working like a spot market where supply and demand are continuously adjusted by prices
127
Intermediate Solutions
• Develop a price structure that takes into account key variables determining costs – The main elements of time of use – Quantity used – Predictability of use, etc
• The limit to such a price structure is in its complexity and the capacity of customer to understand it and use it for decision making
128
Communication & Promotion
1.Communication variables
2.Direct and indirect communication
3.Decisions in indirect communication
129
The Marketing Model
The Business firm The Market
Objectives Resources
Needs Demand Segment Consumer behavior
The marketing mix
Product Price Promo Place
Analyze markets
Integrate the marketing variables
Control for profitability and satisfaction
THE ENVIRONMENT OF THE MODEL
130
Promotion
• Promotion: communication organized by the firm with all its publics – Customer groups – Government – Media – Financial community, suppliers, etc.
131
Promotional Variables
• Personal selling and representation • Advertising • Promotional actions • Public relations • Corporate image management
132
Personal Selling and Advertising
• Personal selling: direct face to face communication
• Advertising: an indirect mode of communication using a media
• They differ in terms of the cost and the extent of the message
133
Cost vs. Effectiveness
Communication effectiveness
Cost per contact
HIGH LOW Field sales
Tele marketing
Direct mail Trade
journal
Electronic advertising
134
Direct vs. Indirect Communication
Direct Indirect
Message Tailor made by the salesman
Standardized message
Feedback Immediate
Slow and indirect
TARGET
A potential customer
General
CONTENT
Message can be long, complex and specific
Message is short, simple and general
135
Promotional Actions
• Promotional actions are events created by the firm in order to communicate with customers for a defined period and a defined objective
• Examples of objectives: favor trial of a new product, reduce inventories, modify pattern of demand, etc.
• Examples : price discount, two for one, coupons, etc. 136
Public Relations
• Communication with media, government, financial community and the general public about the firm as a corporate citizen
• Announcing major events : new investment, major change, new products or services etc
• Manage crisis, e.g., technical accidents, financial or commercial scandals
• Inform the public of firm’s point of view and try to create a good image in the public
137
Corporate Image Management
• Coordination and integration of all elements that could communicate the identity, the value and the style of the company in order to have a maximum impact – Name and logo of the company on all official
documentation (paper, business cards, documentation, internet site)
– Name and the logo on buildings, vehicles, products, etc
138
Advertising Management
• Advertising: standard, short and simple message to a vast audience almost impossible to reach by direct contact
• Three players: – the sponsor (the company), – the advertising agency – the media (tv, radio, newspapers, etc.)
139
Managing Advertising
ADVERTISING BUDGET COMMUNICATION
OBJECTIVES
CREATION STRATEGY
MEDIA STRATEGY
PRINT MEDIA
ELECTRONIC MEDIA
CONTENT PRODUCTION
DIFFUSION OF THE MESSAGE AND EFFICIENCY MEASURES 140
How to Define Objectives
• Target population • End result expected from the advertising
campaign • Quantify the end result, the time period • Example: In 6 month, the company
would like 30% of the population of this city to be aware of the new service offered by the company
141
Types of Effects of Advertising
AWARENESS
KNOWLEDGE
ATTRACTIVENESS
PREFERENCES
ADOPTING A NEW BEHAVIOR OR BUYING
142
Creation Strategy
• Message to deliver and its production
• The message has two key dimensions: – The content of the message (what do we
have to say) – The form of the message ( the way we are
saying it) • The content and the form influence the
production of the message
143
Expressing a Message
• Informative mode: an objective statement of facts and evidence about the product
• Convincing mode: a statement of arguments in favor of the product
• Psychological mode: an emotional situation related to the adoption or the use of the product
• Imperative mode: a message inviting customers to action
144
Production of the Message
• Message must be made for different media (tv, radio, print media)
• Plan the verbal or written message, the visual elements, the scenario, the actors etc.
• Produce messages of different sizes: 30 second spots, 1 page or half page print, other advertising materials
145
The Media Strategy
• What are the available media? • Which mix of media permits to optimally reach the
target? (cost and benefits) • Which media or mix of media are best to support the
message? • Which mix of media permits to have the desired
frequency of the message? • Is the media compatible with the image of the firm
or the product?
146
Media Decisions
• Mix of media to use (main media, support media)
• Number of time the message will be repeated over a period
• Size or duration of the message, the colors, the graphical aspects
147
Distribution
• Definition • The main functions of distribution • Types of intermediaries working in
distribution • Distribution channels • Factors determining channels • Example of electricity • Franchising in oil sector
148
The Marketing Model
The Business firm The Market
Objectives Resources
Needs Demand Segment Consumer behavior
The marketing mix
Product Price Promo Place
Analyze markets
Integrate the marketing variables
Control for profitability and satisfaction
THE ENVIRONMENT OF THE MODEL
149
Distribution Definition
• Distribution is finding a way to accomplish all necessary tasks in order – to make the product or service available to
the customer (when it is needed), – to complete the transaction, – to insure customer satisfaction
150
Distribution Functions
• Managing inventories to make the product available at the right place and time (level of service)
• Providing information to consumers • Grouping products in a convenient way for the
customer to minimize shopping costs • Completing the transaction (delivering, cashing) • Providing credit and after sale service
151
Intermediaries
• Wholesalers: they buy products from manufacturers and resell to distributors
• Distributors: they buy products from wholesalers and sell to the final customer
• Agents: they arrange for transactions (do not buy products or stock them)
152
Types of Channel
DIRECT Firm Customer
SHORT CHANNEL Firm Customer Distributor
LONG CHANNEL
Firm Customer Distributor Wholesaler
VERY LONG CHANNEL
Firm Customer Distributor Wholesaler Agent
153
Factors Affecting Distribution Channels
• Customers: – When customers are numerous, spread all
over the market, are buying in small quantities then channels tend to be long
– When customers are limited in number and/or concentrated geographically, buying in large volume and/or less frequently, then channels tend to be short
154
Continued
• Product: – When product is standardized and of small value, channels
tend to be long – When products are technologically complex and of high
value, channels tend to be short • Resources of the firm:
– Type of channel is a function of the financial resources available to the firm. If the firm decides to develop and own the channel, the investment will be very high
155
Continued
• Competition – If a channel is already taken by competition,
then the firm is forced to develop its own
– The firm may want to differentiate itself from competitors by using a different channel
156
Electricity Industry
• Electrical utilities are (or used to be) vertically integrated.
• As in many network industries (telecom, water) the reasons have been financial and technical
157
A Changing Logic
• The logic of distribution in network industries is changing, e.g., telecom industry
• The idea is to separate production from distribution and sometimes to develop alternative and competitive distribution channels.
158
Wheeling
• The concept of wheeling refers to the use of transmission facilities of one network to deliver power of and for another entity
• The concept is based on independent and competitive power generators, competitive energy brokers and regulated transmission and distribution networks
159
Future Structure?
THE POWER
GENERATORS
FINAL CUSTOMER
REGULATED TRANSMISSION AND
DISTRIBUTION
ENERGY BROKER
BUY SELL
WHEELING TO CUSTOMER
160
Franchising
• Players: Franchisor and Franchisees • Rule of the game specified by a contract
(Entry fee, Royalty, Exclusivity, Responsibilities, Termination, etc.)
• Advantages: Brand equity, Standardization of quality, Management, etc.
161
Customer Service
• A definition of customer service • Customer service components • The key steps in a customer service
approach • Continuous improvement • The outcomes of a better customer
service
162
Definition
• Definition: Customer service is about all experiences the customer gets through in doing business with the firm
• Customer service looks at all relationships the customer is having with any components of the firm in order to organize those relationships in a way that will make the customer satisfied
163
Components of Customer Services
CUSTOMER SERVICE
PRETRANSACTION ELEMENTS: organizational structure, system flexibility written policies
TRANSACTION ELEMENTS: order information, order cycle, shipments, system accuracy, payments, credit
POSTTRANSACTION ELEMENTS: installation, warranty, repairs, customer complaints, demand of information
164
Key Steps in a Customer Service Approach
TOP MANAGEMENT PHILOSOPHY AND INVOLVEMENT
ANALYSIS OF THE SITUATION
DECISIONS RELATED TO CUSTOMER SERVICE POLICY
IMPLEMENTATION OF CUSTOMER SERVICE
CONTROL THE LEVEL OF SERVICE
165
Top Management Philosophy and Involvement
• Customer service is the result of a strong commitment of the firm for customer satisfaction involving all the departments and a philosophy of continuous improvement
• Top management must state that the reason for the existence of the firm is their customer satisfaction
166
Continued...
• Each employee must understand that customer satisfaction is his own responsibility
• All the company policies and procedures must be made in order to facilitate the many interactions the customer is having with the firm
167
Analysis of the Situation
• The analysis of the situation is the starting point of a customer service approach
• Identify all the key experiences (contact points) the customer is having with the firm, (salesperson, phone with different departments, Internet, production employees, accounting department, after-sale service)
168
Continued...
• Analyze customer satisfaction in all those interactions with the firm by marketing research and by analyzing customer complaints
• Analyze the organization motivations for customer service and all policies, procedures and tools which have an impact on the quality of the service to customers
169
Results of the Analysis
• A measure of customer satisfaction in dealing with the firm, e.g., delays, inefficiencies, irresponsible behavior, quality defects etc.
• Identification of causes of dissatisfaction: employee motivation, employee training, bad job definition, inefficient procedures, lack of information systems, etc.
170
Decisions on Customer Service Policy
• Define the relationship between customer service and the overall firms objectives
• Define a concept of customer service appropriate to the objective of the firm
• Translate that customer service concept in terms of norms ( ex: 24 hour/ service, etc)
• Translate that customer service in a promise that will be transmitted and promoted to customers
171
Continued...
• Define objectives for each department and employee groups in terms of customer service
• Identify the key areas and the key processes within the company that will have to be improved in order to deliver the customer service you are promising
172
Implementation
• Run a full examination and diagnosis of the things to change in the key areas identified
• Revise policies and procedures in those areas
• Revise physical layouts and equipment • Revise employee tasks definition • Prepare a training program for employees
173
Control
• Define mechanism to control customer services and customer satisfaction
• Measure continuously the level of customer service and customer satisfaction – Questionnaires – Complaints, etc
174
Continuous Improvement
• Create a committee of customer service involving different departments
• Allocate a budget for customer service implementation
• Define an agenda for different actions to be taken in order to improve customer service
• Mobilize employee toward the objectives and the promise of customer service
175
Outcomes
• Better customer satisfaction, better competitive position, less lost customers
• A strong basis to build customer long term relationship
• Efficiency gains through reviewing procedures (gains in time, gains in costs) 176
Continued...
• Better communication, coordination and cooperation between departments in order to serve customer
• Better employee motivation and involvement in the company mission
177
Marketing Strategy and Control
• Marketing strategy and plan definition
• Generic marketing strategies
• The marketing planning process
• Marketing audit
178
Marketing Strategy
• Definition: – Marketing plan is responsive to the overall
corporate strategy
– Marketing plan describes all components of the marketing strategy: markets or segments to be served, products or services to be marketed, marketing programs to be implemented over the planned period
179
Generic Marketing Strategies
Market
Product
ACTUAL
NEW
ACTUAL NEW
MARKET PENETRATION
MARKET DEVELOPMENT
NEW PRODUCT DEVELOPMENT
PRODUCT AND MARKET DIVERSIFICATION
180
Marketing Planning Process
Preplanning requirements
Situation analysis
Problems and opportunities
Defining marketing objectives
Strategies and tactics
Marketing detailed plan
Control and measurement
181
Preplanning Requirements
• Top management expectations • Marketing strategy must be in line with
the overall corporate strategy. – How marketing will serve growth,
profitability, diversification and leadership objectives in the industry
• Marketing strategy must be coordinated with other functional strategies of the firm
182
Situation Analysis
• Questions – where are we in the market? – where are we going in the next few years?
• Review market needs, analyze competition,
review company performance, identify outside influences, assess strengths and weaknesses
183
Problems and Opportunities
• What are the marketing success factors in the market?
• Are we having problems in the market?
• What are the opportunities for growth and profits in the market we are serving or in new markets?
184
Defining Marketing Objectives for Years to Come
• Marketing objectives are defined in terms of • markets and segments targeted • positioning against competition • volume of sales • market share • profit contribution • customer satisfaction
185
Strategies and Tactics
• Ways to reach the objectives for each product / market or segment
• For marketing those ways are – Pricing policies – Product and new product policies – Distribution policies – Promotion policies – Customer service policies
186
Marketing Detailed Plan
• Marketing detailed plan answer the question: how we will do it?
• Schedule all marketing activities during the forthcoming period, for each marketing variable
• Define responsibilities to conduct the programs
• Plan for changes in order to meet unforeseen events
187
Continued...
• Estimate and prepare the marketing budget
• Evaluate human resources needed to support the marketing plan (ex: new salesperson, need to hire marketing research specialists, etc.)
• Define measures to control the success of the plan and the way to control
188
Control
• Three levels of controls: – Budgetary control: ensure that the marketing
budget is on target – Marketing plan control: ensure that the plan is
executed on time and as planned – Marketing objectives control: ensure that the
objectives are met by plan
189
Continued...
• Control of the objectives must be regular in order to identify any deviation from the objectives during the execution of the plan
• Corrective actions could be needed in order to refocus the plan on meeting objectives
190