1. RMJJ_MK Pam Creighton's Notes Word Format_Update 2008 March

8/18/2019 1. RMJJ_MK Pam Creighton's Notes Word Format_Update 2008 March

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MarketingHeriot Watt Edinburgh Business School

Last revised: March 2008

By: Pamela reighton revised by !emi Malahieude



Part 1 An Overview of MarketingManagement

Module 1 The Marketing Management Process -Content Questions:

1.1 e!ne marketing

Mar"eting is a social #rocess involving the activities necessary to enable individualsand organi$ations to obtain %hat they need and %ant through e&changes %ith othersand to develo# on going e&change relationshi#s'

1." #hat conditions are necessar$ for an e%change to take &lace'

(' )t least t%o #arties2' Both #arties must o*er something o+ value ,e'g' money- goods- services./' Both #arties a%are o+ the e&istence o+ the other ca#able o+ communication an

delivery1' Both #arties +ree to acce#t or reect the others o*er3' Both #arties must be %illing and able to negotiate terms o+ e&change that they

4nd acce#table'5' Both #arties must believe that the e&change creates bene4ts or value'

1.( istinguish )etween a need and a want

*eeds - +asic &h$sical needs critical to our survival i'e' +ood- drin"- %armth shelteslee#

- ,ocial and emotional needs critical to our #sychological %ell being- suchas security- belonging love- esteem and sel+6+ul4llment

#ants - Person7s desires or #re+erences +or s#eci4c %ays o+ satis+ying a basic need-

1. #hat is a market

onsists o+

(' ndividuals and organi$ations-

2' nterested and %illing to buy a #articular #roduct to obtain a bene4t that %ill satis+y a s#eci4c need o

/' Have resources ,time- money. to engage in such a transaction'



1. #hat does strategic marketing involve

Strategic mar"eting involves a seller trying to determine the +ollo%ing #oints in ane*ort to de4ne the target mar"et:

(' Which customer needs and %ants are currently not being satis4ed by com#etitiv#roducts o*erings9

2' Ho% desired bene4ts and choice criteria vary among #otential customers and hoto identi+y the resulting segments by demogra#hic variables such as age- se&-li+estyle9

/' Which segments to target- and %hich #roduct o*erings and mar"eting #rogramsa##eal most to customers in those segments9

1' Ho% to #osition the #roduct to di*erentiate it +rom com#etitors7 o*erings and givthe 4rm a sustainable com#etitive advantage9

1./ #hat 0ows are necessar$ for an e%change to take &lace'

1. #hat functions2activities are necessar$ for e%changetransactions and relationshi&s to occur'

lo%unctions ; )ctivities

3nformationMar"eting communication < )dvertisement- #ersonalselling- sales #romotion- #ublicity

4eed)ack Mar"eting research- Environmental scan-

om#etitive intelligenceTitle Selling denti4cation o+ #otential customers

negotiationBuying denti4cation and evaluation o+ su##liers-negotiation

Ph$sical&roduct

=rans#ortationStorage

Credit andPa$ment

inancing < credit #olicies- billing- collection

,ervice ustomer service < nstallation- re#air- training-alterations- com#laint handling



1.5 #hat is the role of a marketing manager'

!es#onsible +or:

( Evaluating the needs- %ants- and #urchasing #atterns o+ a customersegment

2 >evelo#ing an integrated #lan to +acilitate #urchase transactions by tha

segment/ >esign mar"eting channel system to carry out those activities1 oordinate and monitoring the e*ectiveness o+ those activities over

time'

=he above #lanning and co6ordination res#onsibilities- even though actual #er+ormanc+alls outside the sco#e o+ their authority'

1.6 escri)e what is involved in marketing management

Mar"eting Management is the #rocess o+ analy$ing- #lanning- im#lementing-coordination and controlling #rograms involving the conce#tion- #ricing- #romotion anddistribution o+ #roducts- services- and ideas designed to create and maintain bene4ciae&changes %ith target mar"ets +or the #ur#ose o+ achieving organi$ational obectives'

1.17 #hat is the di8erence )etween a cor&orate and a )usinessstrateg$'

=he cor#orate or business strategy is the direction +or the com#any7s mission- thebusiness it chooses to be in and its gro%th #olicies'

1.11 #hat are the three interrelated decisions needed to design ano)9ective strategic marketing &rogram'

(' Set s#eci4c obectives to be accom#lished %ithin the target mar"et- such as salesvolume-

2' >ecide on an overall mar"eting strategy to a##eal to customers and to gain acom#etitive advantage in the target mar"et' onsistent %ith 4rm7s ca#abilities- itcor#orate and business unit strategies and the #roduct mar"et obectives'

/' Ma"e decisions about each element o+ the tactical mar"eting #rogram used to car

out the strategy' nternally consistent and integrated across all elements o+ themar"eting #rogram'



1.1" #hat are the ma9or recent develo&ments a8ecting marketingmanagement'

lo)ali;ationnternational mar"ets account +or a largeand gro%ing #ortion o+ the sales o+ manyorgani$ations

3ncreased 3m&ortance of ,ervice

>e4ned as any activity or bene4t that one#arty can o*er another that is essentiallyintangible and does not result in theo%nershi# o+ anything' ts #roduction mayor may not be tied to a #hysical #roduct'

3nformation Technolog$ hange the nature o+ mar"etingmanagement in to% im#ortant %ays

(. ?e% technologies are ma"ing it #ossible+or 4rms to collect and analy$e moredetailed in+ormation about #otential

customers and their needs- #re+erencesand buying habits'

2. m#act has been to o#en ne% avenues+or communication and transactinge&changes %ith a 4rm7s customers'





Module " Cor&orate ,trategies and Their Marketing3m&lications

2'( e!ne strateg$.

) strategy is a +undamental #attern o+ #resent and #lanned obectives- resource

de#loyments and interactions o+ an organi$ation %ith mar"ets- com#etitors- and otherenvironmental +actors'

S#eci4es

1. WHAT ,obectives to be accom#lished.

2. WHERE ,on %hich industries and #roduct mar"ets to +ocus.

3. HOW ,%hich resources and activities to allocate to each #roduct mar"et tomeet environmental o##ortunities and threats and to gain a com#etitiveadvantage.

2'2 #hat are the !ve com&onents of strateg$'

,COP< ?umber and ty#es o+ industries- #roduct line mar"etsegments it com#etes in or #lans to enter

OA=, A* O+><CT3?<, Strategies should also detail desired levels o+accom#lishment on one or more dimensions or#er+ormances i'e' volume gro%th- #ro4t contributionreturn on investment

@<,O@C<<P=OBM<*T,

>eciding ho% resources are to be obtained andallocated- across businesses #roduct mar"ets +unctionade#artments and activities

identi4cation o+ a

,,TA3*A+=<COMP<T3T3?<A?A*TA<

Ho% the organi$ation %ill com#ete in each business an#roduct mar"et %ithin its domain' Position itsel+ todevelo# and sustain a di*erential advantage overcurrent and #otential com#etitors'

,B*<@B Business- #roduct mar"ets- resource de#loyments andcom#etencies com#lement and rein+orce one another-total #er+ormance are greater than in it %ould be in#arts'



2'/ ow do the three levels of strateg$ di8er in terms of the issues onwhich the$ focus'

STRATEGYCOMPONENTS

CORPORATE STRATEGY BUSINESS STRATEGY MARKETING STRATEGY

,COP<

or#orate domain: @Whichbusiness should %e in9A

or#orate develo#mentstrategy:

onglomeratediversi4cation,e&#ansion intounrelated businesses.

ertical integration

)cCuisition D divestiture#olices

Business domain: @Which#roduct mar"ets should %e

be in %ithin this businessor industry9A

Business develo#mentstrategy:

oncentric diversi4cation,ne% #roducts +ore&isting customers orne% customers +ore&isting #roducts.

=arget mar"et de4nition

Product6line de#th andbreadth

Branding #olicies

Product6mar"etdevelo#ment #lan

Line e&tension and #roduelimination #lans

OA=, A* O+><CT3?<,

verall cor#orateobectives aggregatedacross businesses:

!evenue gro%th

Pro4tability

! ,return oninvestment.

Earnings #er share

ontributions to othersta"eholders

onstrained by cor#orategoals

bectives aggregatedacross #roduct6mar"etentries in the businessunit:

Sales gro%th

?e% #roduct or mar"etgro%th

Pro4tability

!

ash Fo%

Strengthening bases o+com#etitive advantage

onstrained by cor#orateand business goals

bective +or a s#eci4c#roduct6mar"et entry:

Sales

Mar"et share

ontribution margin

ustomer satis+action

@<,O@C<<P=OBM<*T,

)llocation amongbusinesses in thecor#orate #ort+olio

)llocation across +unctionsshared by multi#lebusinesses

,or#orate !D>- MS.

)llocation among #roduct6mar"et entries in thebusiness unit

)llocation across +unctionalde#artments %ithin thebusiness unit

)llocation acrosscom#onents o+ themar"eting #lan ,elementso+ the mar"eting mi&. +ors#eci4c #roduct6mar"etentry

3<*T343CAT3O* O4 A

,,TA3*A+=<COMP<T3T3?<A?A*TA<

Primarily through su#eriorcor#orate 4nancial or

human resource morecor#orate !D> betterorgani$ational #rocesses orsynergies relative tocom#etitors across allindustries

Primarily throughcom#etitive strategy

business unit7scom#etencies relative tocom#etitors in its industry

Primarily through e*ectiv#roduct #ositioning

su#eriority on one or morcom#onents o+ themar"eting mi& relative tocom#etitors %ithin as#eci4c #roduct mar"et

,B*<@B Shared resources-technologies or +unctionalcom#etencies acrossbusinesses %ithin the 4rm

Shared resources,including +avorablecustomer image. or+unctional com#etencies

Shared mar"etingresources com#etencies oactivities across #roduct6mar"et entries



across #roduct mar"et%ithin an industry

2'1 #hat Duestions should a com&an$Es mission statement answer'

What is our business9

Who are our customers9

What "inds o+ value can %e #rovide to these customers9What should our business be in the +uture9

2'3 #hat criteria should )e used in a cor&orate mission statement'

• Physical terms- +ocusing on #roducts or services or technology

• =he most use+ul mission statements +ocus on the customer need to be satis4ed andthe +unctions that must be #er+ormed to satis+y that need'

• =hey are s#eci4c as to customer grou#s and #roducts or technologies on %hich toconcentrate'

Characteristics of effective corporate mission statements

+@OA ,P<C343C

4*CT3O*A=Based on customer needs =rans#ortation business

Long6distance trans#ortation +orlarge6volume #roducers o+ lo%6value- lo%6density #roducts

PB,3CA=Based on e&isting #roducts ortechnology

!ailroad business Long6haul- coal6carrying railroad

2'5 #hat is the value to the cor&oration of ethical guidelines'

=o reduce inconsistent behaviors among mar"eting reduce ris";damaging ongoing6termrelationshi#s %ith su##liers- channel #artners and customers' =o reduce damaging thetrust bet%een a 4rm and its su##liers or customers- thereby not disru#ting thedevelo#ment o+ long term e&change relationshi#s and resulting in the li"ely loss o+sales and #ro4ts over time'

2'G e!ne strategic intent or vision.

) Motivator +or sta*- #ersonable lending to em#loyee commitment'

2'8 #hat are the four com&onents of a cor&orate o)9ective'

(' ) &erformance dimension or attribute sought

2' ) measure or inde% +or evaluating #rogress

/' ) target or hurdle level to be achieved



1' ) time frame %ithin %hich the target is to be accom#lished'





2'(0 #hat is a &ortfolio model'

Enable managers to classi+y and revie% their current and #ros#ective SBJs by vie%ingthem as #ort+olios o+ investment o##ortunities and then evaluating each businessKscom#etitive strength and the attractiveness o+ the mar"ets it serves'

2'(( #hat are the two dimensions in the +C growth share matri%'#hat are the assum&tions concerning each of these dimensionsescri)e the t$&e of )usiness contained in each of the modelEsfour cells.

Two imensions

Market rowth rate < maturity and attractiveness o+ an industry

(



@elative Market share < a #ro&y +or its com#etitiveness strength %ithin itsindustry

+usiness T$&es

Question Marks Business in high6gro%th industries %ith lo% relative mar"et sharesalso "no%n as #roblem children increase shares o+ a Cuestion mar"business it becomes a star- + they +ail it %ill turn into a dog'

,tars Mar"et leader in a high6gro%th industry- critical to the continued+uture success o+ the 4rm as industries mature they move into cashco%s'

Cash Cows High relative hare o+ lo%6gro%th mar"ets because they are the#rimary generators o+ #ro4ts and cash in a cor#oration' >o notreCuire additional ca#ital mar"ets are stable share leadershi# usuallmean they enoy economies o+ scale and relatively high #ro4tmargins'

ogs Lo% share businesses in lo%6gro%th mar"ets thro% o* some cash-ty#ically generate lo% #ro4ts- or losses'

2'(2 #hat are the ma9or limitations of the +C model'

• Mar"et gro%th rate is an inadeCuate descri#tor o+ overall industry attractiveness

• !elative mar"et share is inadeCuate as a descri#tion o+ overall com#etitivestrength

• =he outcomes o+ a gro%th share analysis are highly sensitive to variations in ho%

gro%th and share are measured• While the matri& s#eci4es a##ro#riate investment strategies +or each business-

#rovides little guidance on ho% best to im#lement those strategies

• =he model im#licitly assumes that all business units are inde#endent o+ oneanother e&ce#t +or the Fo% o+ cash'

(



2'(2b Alternative Portfolio Models 2 im&rove the )asic &ortfolio mode

2'(/ #hat is value-)ased &lanning'

s a resource allocation tool that attem#ts to assess the shareholder value a givenstrategy is li"ely to crease- it is a basis +or com#aring the economic returns to begained +rom investing in di*erent businesses #ursuing di*erent strategies +romalternative strategies that might be ado#ted by a given business unit'

(' )ssess the economic value a strategy is lively to #roduce by e&amining thecash Fo%s it %ill generate rather than relying on distorted accountingmeasures such as return on investment

2' Estimate the shareholder value that strategy %ill #reduce by discounting its+orecasted cash Fo%s by the business7s ris"6adustment cost o+ ca#ital

/' Evaluate strategies based on the li"elihood that the investments reCuired by strategy %ill deliver returns greater tan the cost o+ ca#ital ' =he amount o+return a strategy or o#erating #rogram generates in e&cess o+ the cost o+ca#ital is commonly re+erred to as its economic value added or ES'

(



2'(1 #hat are its limitations'

alue based #lanning is not a substitute +or strategic #lanning it is a tool +or evaluatinstrategy alternative identi4ed and develo#ed through mangers7 udgments' t relies o+orecast o+ many "inds to #ut a 4nancial value on the ho#es- +ears- and e&#ectationsmanagers associate %ith each alterative' 'e' +orecasts o+ sales volumes- #roduct mi&-

unit #rice and com#etitive action

2' ,ource of ,$nerg$

=he total #er+ormance o+ the related businesses is greater than it should be other%ise

1. Fnowledge-+ase ,$nerg$

2. Cor&orate 3dentit$ and the Cor&orate +randFo%s +rom the communications- im#ressions and #ersonality #roected by anorgani$ation' t is sha#ed by the 4rm7s mission and values- its +unctionalcom#etencies- the Cuality and design o+ it goods and services- its mar"eting

communications- the actions o+ it #ersonnel- the image generated by variouscor#orate activities and other +actors'

3. Cor&orate +randing ,trateg$6 ne brand name +or all #roducts6 >ual branding strategy- eg' MS Windo%s- MS %ordN W automobilesN6 Each #roduct %ith a distinct uniCue brand and identity- eg' Jnilever- PDIN

. ,$nerg$ from shared resources

(



2'(G #hat is the role of marketing in formulating and im&lementingstrategies'

Mar"eting mangers bear the #rimary res#onsibility +or +ormulating and im#lementingstrategic mar"eting #lans +or individual #roduct6mar"et entries' Ho%ever +reedom o+action in designing such #lans is o+ten constrained by the 4rm7s cor#orate andbusiness6level strategies'

2'(8 #hat are the more im&ortant characteristics of a market-oriented com&an$'

=he mar"eting conce#t holds that the #lanning and co6ordination o+ all com#anyactivities around the #rimary goal o+ satis+ying customer needs in the most e*ectivemeans to attain and sustain a com#etitive advantage and achieve com#any obectivesover time'

=hey ado#t a variety o+ organi$ational #rocedures and structures to im#rove theres#onsiveness o+ their decision ma"ing- including more detailed environmentalscanning- continuous- real6time in+ormation systems see"ing +reCuent +eedbac" +ormand coordinating #lans %ith "ey customers and maor su##liers decentrali$ation o+strategic decisions- encouragement o+ entre#reneurial thin"ing among lo%er6levelmangers an the use o+ inter +unctional management teams to analy$e issues and

initiate strategic actions outside the +ormal #lanning #rocess'

(



Module ( +usiness ,trategies G Their Mkg3m&lications

The managers in each ,+ must make recommendations a)out:

(' =he unit7s obectives

2' =he sco#e o+ its target customers and o*erings

/' Which broad com#etitive strategy to #ursue to build a com#etitive advantage iits #roduct mar"ets o+ its target customers and o*erings

1' Ho% resources should be allocated across its #roduct6mar"et entries and+unctional de#artments

,+ design

• ) homogenous set o+ mar"ets to serve %ith a limited number o+ related

technologies'• ) uniCue set o+ #roducts mar"ets

• ontrol over those +actors necessary +or success+ul #er+ormance

• !es#onsibility +or their o%n #ro4tability

Three dimensions that de!ne the sco&e and mission of the entire cor&orationalso de!ne individual ,+s:

(' =echnical om#atibility

2' Similarity in the customer needs

/' Similarity in the #ersonal characteristics or customers7 behavior #atterns

+usiness unit o)9ectives H nit &roduct-market entr$ o)9ectives

Subobectives vary across SBJs according to their industry attractiveness- strength,gro%th #otential. o+ their com#etitive #ositions %ith those industries- and resourceallocation decisions by cor#orate management'

(



Content Questions

/'( #hat are the )asic2generic com&etitive strategies' escri)e eac)rie0$.

Michael Porter strategies

(. Overall cost leadershi&

2. i8erentiation < building customer #erce#tions o+ su#erior #roduct Cualitydesign or service

/. 4ocus in %hich the business avoids direct con+rontation %ith its maorcom#etitors by concentration on narro%ly de4ed mar"et niches'

/'2 #hat are the characteristics of Miles and ,nowEs four )usinessstrategies'

Pros&ector • #erates %ithin a broad #roduct6mar"et domain that undergoes #eriodic

rede4nition• alues being a O4rst mover7 in ne% #roduct and mar"et areas- even i+ not all o+

these e*orts #rove to be highly #ro4table

• !es#onds ra#idly to early signals concerning areas o+ o##ortunity and theseres#onses o+ten lead to ne% rounds o+ com#etitive actions

• om#etes #rimarily by stimulating and meeting ne% mar"et o##ortunities but maynot maintain strength over time in all mar"ets it enters

efender • )ttem#ts to locate and maintain a secure #osition in relatively stable #roduct or

service areas

• *ers relatively limited range o+ #roducts or services com#ared to com#etitors

• =ries to #rotect its domain by o*ering lo%er #rice- higher Cuality or better servicethan com#etitors

• Jsually not at the +ore+ront technological ; ne% #roduct develo#ment in itsindustry tends to ignore industry changes not directly related to its area o+ o#eration

Anal$;er• )n intermediate t$&e ma"es +e%er and slo%er #roduct6mar"et changes than

#ros#ectors- but is less committed to stability and eciency than de+enders

• )ttem#ts to maintain a stable- limited line o+ #roducts or services- but care+ully+ollo%s a selected set o+ #romising ne% develo#ments in its industry

• Seldom a 4rst mover- but o+ten a second or third entrant in #roduct mar"ets relatedto its e&isting mar"et base < o+ten %ith a lo%er6cost or higher6Cuality #roduct or serviceo*ering

@eactor• Lac"s any %ell6de4ned com#etitive strategy

• >oes not have as consistent a #roduct mar"et orientation as its com#etitors

(



• ?ot as %ill to assume the ris"s o+ ne%6#roduct or mar"et develo#ment as itscom#etitors

• ?ot as aggressive in mar"eting established #roducts as some com#etitors

• !es#onds #rimarily %hen it is +orced to by environmental #ressures

(



/'/ ow do low-cost defenderI di8erentiated defenderI &ros&ectorand anal$;er di8er with res&ect to their sco&eI cash needs ands$nerg$'

imensions

=ow-costefender

i8erentiatedefender

Pros&ector Anal$;er

,co&e Mature; stable; %ell6de4ned domain maturetechnology and customersegments

Mature; stable; %ell6de4ned domain maturetechnology and customersegments

Broad; dynamic domainstechnology and customersegments not %ellestablished

Mi&ture o+ de+ender a#ros#ector strategies

@esources Ienerate e&cess cash,cash co%.

Ienerate e&cess cash,cash co%.

?eed cash +or #roductdevelo#ment ,Cuestionmar"s or stars.

?eed cash +or #roducdevelo#ment but lesstan do #ros#ectors

,$nerg$ ?eed to see" o#eratingsynergies to achieveeciencies

?eed to see" o#eratingsynergies to achieveeciencies

>anger is sharingo#erating +acilities and#rograms < better toshare technology;

mar"eting s"ills'

>anger in sharingo#erating +acilities an#rograms better to shtechnology ; mar"etin

s"ills

oals and O)9ectives

=hree #er+ormance dimensions:

(' Efectiveness' =he success o+ a business7s #roducts and #rograms relative tothose o+ its com#etitors in the mar"et'

SALES GROWTH relative to com#etitors changes in MARKET SHARE

2' Eciency ' =he outcomes o+ a B7s #rograms relative to the resources used inim#lementing them' PROFITABILITY as a #er cent o+ sales !

/' Adata!i"ity ' =he business7s success in res#onding over time to changingconditions and o##ortunities in the environment' number o successu! ne" #ro$uc%s introduced relative to those com#etitors & o sa!es accoun%e$ or b' #ro$uc%s in%ro$uce$ "i%hin %he !as% ( 'ears)

(



/'1 #hat are the a&&ro&riate e%ternal environment conditionsfor a &ros&ector strateg$' A defender strateg$'

E#te$na"%act&$s

P$&sect&$ '&()c&st*e%ende$

*ife$entiated*e%ende$

Ana"y+e$

Ma$,etc-a$acte$istics

ndustry in

introductoryor earlygro%th stageo+ li+e cycle-many#otentialcustomersegments asyetunidenti4edand;orundevelo#ed'

ndustry in maturity

or declinestage o+ li+ecyclecurrento*eringstargeted atall maorsegmentssales#rimarily dueto re#eat#urchases;re#lacementdemand'

Same ndustry in late

gro%th orearlymaturitystage o+ li+ecycle- one omore #roduo*eringscurrentlytargeted atmaorcustomersegments-but some#otential

segmentsmay still beundevelo#e

Tec-n&"&.y ?e%ly emergingtechnologymanya##licationsas yetundevelo#ed'

Basic technology+ullydevelo#edand stable+e% maormodi4cationsorim#rovements li"ely'

Same Basic technology %develo#edbut stillevolving#roductmodi4catioandim#rovemes < as %ell aemergenceo+ ne%com#etingtechnologie< still li"ely'

C&/etiti&n e% establishedcom#etitorsindustrystructure stillemergingsinglecom#etitorholdscommandingshare o+

maor mar"etsegments'

Small to moderatenumber o+%ell6establishedcom#etitorsindustrystructurestable-thoughacCuisitions

andconsolidation#ossiblematurity o+mar"etmeansrelativeshares o+com#etitorstend to be

Same Large number o+com#etitorsbut +uturesha"e6outli"elyindustrystructure stevolving oor morecom#etitors

hold largeshares inmaorsegmentsbutcontinuinggro%th mayallo% ra#idchanges inrelative

2



reasonablystable overtime'

shares'

B0siness1s$e"ativest$en.t-s

SBJ ,or #arent. hasstrong !D>-#roductengineeringandmar"eting

research andmar"etingca#abilities'

SBJ ,or #arent. hassu&eriorsources ofsu&&l$and2or&rocess

engineeringand&roduction ca#abilitiesthat enable itto be =O#-CO,T #roducer!D>- #roductengineering-mar"eting-sales orserviceca#abilities

may not beas strong asthose o+somecom#etitors'

SBJ has *Ooutstanding strengthsin @G or&roductengineering

3<@CO,T, thanthose o+ atleast somecom#etitorsSBJ7sOT,TA*3*,T@<*T,are in#rocessengineeringand QJ)L=Rcontrol

and;or inM)!E=?I-sales-distributionor customerservices

SBJ ,or #arent. hasgood !D>-#roductengineeringandmar"eting

researchca#abilitiesbut not asstrong asthose o+somecom#etitorshas eitherlow-cost #osition orstrongsalesImarketingdistri)utio

or serviceca&a)ilitiein one ormoresegments'

2



/'3 #hat are the marketing im&lications for each of the di8erent)usiness strategies with res&ect to'

A &roduct &olicies+ &ricing &oliciesC distri)ution2. &lace &olicies

&romotion &olicies

St$ate.y

Ma$,etin. &"icies and $&.$a/ c&/&nents P$&sect&

$ *ife$entiated de%ende$

'&()c&stde%ende$

P$&d0ct &"icies

TProduct6line breadth U U 6T=echnical so#histication o+ #roducts U U UTProduct Cuality 9 U 6TService Cuality 9 U 6

P$ice &"icies

TPrice levels U U 6

*ist$i!0ti&n &"icies

T>egree o+ +or%ard vertical integration 6 U 9T=rade #romotion e&#enses as #ercentage o+ sales

U 6 6

P$&/&ti&n &"icies

T)dvertising e&#enses as #ercentage o+ sales U 9 6TSales #romotion e&#enses as #ercentage o+ sales

U 9 6TSales+orce e&#enses as #ercentage o+ sales 9 U 6

Ke' :Plus sign ,U. V greater than the average com#etitor'Minus sign ,6. V smaller than the average com#etitor'Question mar" ,9. V uncertain relationshi# bet%een strategy and mar"eting #olicy or #rogramcom#onent'

!elative to com#etitors

2



/'5 o service )usinesses reDuire di8erent strategies' #h$' #h$not'

Services can be thought o+ as intangibles and goods as tangibles' Service can rarely be&#erienced in advance o+ the sale %hile goods can be e&#erienced even tested be+ore#urchase'

Many organi$ations are concerned %ith #roducing and mar"eting a service as their#rimary o*ering rather than as an adunct to a #hysical #roduct'

Have the same im#lications as those +or goods #roducers'

/'G 3deall$I what characteristics should strategic )usiness unitshave'

• ) homogenous set o+ mar"ets to serve %ith a limited number o+ relatedtechnologies'

• ) uniCue set o+ #roducts mar"ets

• ontrol over those +actors necessary +or success+ul #er+ormance

• !es#onsibility +or their o%n #ro4tability

Three dimensions that de!ne the sco&e and mission of the entirecor&oration also de!ne individual ,+s:

1' =echnical om#atibility

3' Similarity in the customer needs

5' Similarity in the #ersonal characteristics or customers7 behavior #atterns

/'8 #hat are the o)9ectives of a )usiness unit'

+usiness unit o)9ectives H nit &roduct-market entr$ o)9ectives

Subobectives vary across SBJs according to their industry attractiveness- strength,gro%th #otential. o+ their com#etitive #ositions %ith those industries- and resourceallocation decisions by cor#orate management'

2



Part " Market O&&ortunit$ Anal$sis

Module <nvironmental Anal$sisTools to identif$ market attractiveness

Content Questions:

1'( #hat are the ma9or &ro)lems in terms of the &lanetEs &h$sicalenvironment'

>e#letion o+ many o+ the earth7s valuable resources- decline in the earth7s overall health <deserts are gro%ing %hile +orests are shrin"ing- la"es are dying- Cuality and Cuantity o+

ground%ater are declining and rising tem#eratures' Pollution #roblems- inadeCuate su##ly o+munici#al %ater'

1'2 #hat are green &roducts'

Ireen #roducts are those that are environmentally +riendly ie #hos#hate6+ree detergents-recycled motor oil- tuna caught %ithout netting dol#hins- organic +ertili$er- high6eciency lightbulbs- recycled #a#er'

1'/ #hat kinds of risk derive from a change in a countr$Es regulator$environment'

• on4scation ,sei$ure %ithout com#ensations.

• E&#ortation ,sei$ure %ith some com#ensations.

• >omestication ,trans+er o+ o%nershi# to the host country and local management andsourcing.

• hange in e&change control

• local content la%s

• im#ort restriction

• ta&es and #rice controls

>esigned to #rovide advantage to local industry'

1'1 #hat are some of the more im&ortant o&&ortunities resultingfrom research in )iolog$' <lectronics'

=rends in biology es#ecially in gene thera#y' ie' research to discover +aulty geneses is ane&am#le o+ %hat is ho#ed to be gained'

2



=rends in Electronics ; =elecommunication relating to ho% goods and services as %ell as ideasare e&changed and ho% individuals learn and earn as %ell as interact %ith one another'

2



1'3 #hat are the ma9or trends in the worldEs &o&ulation'

)geing o+ the %orld7s #o#ulation- caused #rimarily by declining mortality rates'!a#id shi+t in the #o#ulations o+ less6develo#ed countries +rom rural to urban'

1'5 escri)e the four ma9or shifts taking &lace in the , &o&ulation.

4amil$,tructure

losely structured +amily is less and less ty#ical-households because o+ divorce- remarriage t%o%age earners etc

Ageing Baby boomers (1 < (051 continue to dominategro%th in the age grou#s they #ass through en routeto old age'

eogra&hicistri)ution

mmigrants account +or nearly (;/ o+ JS annualgro%th and end u# residing mostly in the large

metro#olitan areas o+ the South and West'Migration o+ obs and #eo#le to suburban cities <+urther and +urther +orm central cities'

<thnicCom&osition

>iverse ethnically 23 o+ #o#ulation is com#osed o+racial minorities'

1'G e!ne &urchasing &ower &arit$. 4urtherI e%&lain wh$ anunad9usted &er ca&ital *P su)stantiall$ understates thes&ending &ower of ur)an households in the underdevelo&ed

countries.

ross domestic &roduct J*PK measure economic #er+ormance o+ a country on a#er ca#ita basis a+ter accounting +or inFation- in order realistically to com#are incomesacross countries it is necessary to use a &urchasing &ower &arit$ JPPPK a##roachthat ta"es into account the cost o+ a standard bas"et o+ #roducts e&#ressed in JSdollars +or each country' =hus- using a PPP analysis hel#s to com#are the relative#urchasing #o%er o+ a given country +or goods %ith %hat theses same goods %ouldcost in the Jnited States' PPP ty#ically lo%er I>P #er ca#ita income +or %ealthiercountries and higher ones +or the #oorer nations' >es#ite leveling +rom PPP the I>Pga# is less inFation increased bet%een rich and #oor countries < mainly because o+

higher #o#ulation gro%th' PPP does not ta"e into account the subsidies #rovided bymany countries +or such essentials as +ood- utilities- shelter- trans#ortation- educationand medical care- %hich account +or about hal+ o+ the average household e&#endituresin develo#ed countries'

2



1'8 #hat are the ma9or forces driving the com&etitive environment'

no%n as the macro environments

lo)ali;ation of)usiness

=a"es more resources to be a maor global #layer-the number o+ #layers become more and more

limited' )lmost al%ays results in a change in anindustry7s structure- %hich ma"es it more dicult +orentry as %ell as +or com#etitors to survive

Technolog$ !ate and com#le&ity has a strong im#act oninnovations in the #roduction #rocess anddevelo#ment o+ ne% and im#roved #roducts' erticalintegration and mergers'

Changingchannels of

distri)ution

n retailing they have been numerous and +arreaching include:

• ast gro%th o+ general merchandise discountstores o#erating cost lo%er than traditionalretailers

• >irect mar"eting via telemar"eting- direct mailand nternet

• Iro%th in vertical mar"eting systems thatintegrate #roducers- %holesaler and retailer into auni4ed system designed to achieve lo%er costs%hile increasing mar"et #o%er' 'e' +ranchisinge&am#les o+ +ast +oods ,Mc>onalds.

@egulation 2eregulation

n JS >eregulation has had an im#act on airlines-truc"ing ban"ing bringing more com#etition'

)nd !egulation to =ele#hone mar"ets- %hich hadcontrolled o+ the seven OBaby Bells7 the ne%legislation- %ill o#en theses mar"ets to com#etitionand in e&change %ill #ermit the Baby Bells tocom#ete in the long6distance mar"et'

Changing

valuesIAttitudes andlifest$les

=hese are #o%er+ul engines o+ change as com#anies

com#ete to ta"e advantage o+ ne% trends' 'e'increase concern about #hysical 4tness has beenres#onsible +or athletics clubs e&ercise eCui#mentetc'

2



1' escri)e what an o&&ortunit$2threat matri% is and how it can )eused to hel& management identif$I evaluate and res&ond toenvironmental events.

)n o##ortunity;threat matri& enables the e&amination o+ a large number o+ events insuch a %ay that management can +ocus on the most im#ortant ones' n any given

#eriod- many environmental events that could have an im#act on the 4rm < either#ositively or negatively < may be detected'

E&am#le:

1'(0 #hat are the ethical issues arising from the interaction of)usiness and the environment'

• Environmental m#act

• =hird %orld countries concerns +or unhealthy %or"ing environments-

• =hird %orld countries use o+ child labor

• High #rices o+ third %orld countries +or goods #urchase #harmaceutical drugs'

2



Module 3ndustr$ Anal$sis and Com&etitiveAdvantage

Content Questions:

3'( #hat are the various levels at which &roducts can )e de!ned'

eneric categor$ ncludes an array o+ non6com#eting #roducts i'e' carindustry

Product class May serve diverse mar"ets or mar"et segments' =he more generic the de4nition the higher theaggregation level o+ #roducts i'e' desserts versus#astries

Product t$&e Subsets o+ #roduct class contain items that aretechnically the same

+rand level Bottom o+ the aggregation hierarchy- ina##ro#riateunits o+ analysis' Sales largely +unction o+managements strategic decisions-

3'2 escri)e market hierarchies.

Mar"et Hierarchy is a com#le& one to de4ne since there are numerous %aysmar"ets can be arrayed' Levels targeted- the trend is to%ards greater s#eci4city< that is to%ards targeting more #recisely de4ned segments at the lo%er level inthe hierarch e'g' Xohnson D Xohnson targeted children aged 2 < 5years %ith a

s#ecial line o+ bath #roducts +eaturing Winnie the Pooh'

3'/ escri)e what is meant )$ the &roduct life-c$cle conce&t.

Sales history o+ a #roduct and the sales change over time in a #redictable %aythe #roduct go through a series o+ 4ve distinct stages: Each o##ortunities bringsthreats- thereby a*ecting the strategy as %ell as mar"eting #rograms'

2



3'1 #hat are the characteristics and their im&lications of each of the&roduct life-c$cle stages'

Stage in #roduct li+e cycle

3ntroduction rowth ,hake-out Mature ecline

,tage characteristics

Market growth rateJnet ofin0ationK

Moderate High Levelling6o* nsigni4cant ?egative

Technical change in&roductdesign

High Moderate Limited Limited limited

,egments e% e% to many e% to many e% to many e%

Com&etitors Small Large >ecreasing Limited e%

Pro!ta)ilit$ ?egative Large Lo% Large +or high6mar"et6shareholders

Lo%

4irmEs normative res&onses

,trategic mko)9ectives

Stimulate #rimarydemand

Build share Build share Hold share Harvest

Product Qualityim#rovement

ontinue Cualityim#rovement

!ationali$e oncentrate on+eatures

?o change

Product line ?arro% Broad !ationali$e Hold length o+ line !educe length o+line

Price S"imming vs'#enetration

!educe !educe Hold or reduceselectively

!educe

Channels Selective ntensive ntensive ntensive Selective

Communications High High High High to declining !educe

/



3'3 #hat are the strategic im&lications of the &roduct life c$cle'

.( ,tages . Characteristics and 3m&lications . ,trategic 3m&lications

3ntroductio

n

Purchase o+ ne% #roduct limited because members o+ the target mar"et

are insuciently a%are o+ its e&istence' )nd #roduct availability'

ommunications tas" at the outset to build a%areness o+ the ne%#roducts uniCueness- e&#ensive underta"ing #romotional e&#enditures#roduct availability +or trial

Both innovators and +ollo%ers-

accelerate overall mar"etgro%th and #roductacce#tance througha%areness- trial and #roductavailability'

rowth )s #eo#le learn about #roduct and it becomes readily available- salesincrease at a #rogressively +aster rate'

Marketing mi% changesI #rices tend to decline - #rice di*erencesbet%een brands decrease- Sellers build channel or a direct sales system#rovide ma&imum #roduct availability and service at lo%est cost' =hisaccom#lished rivals at disadvantaged-

Promotion costs concerned %ith building demand +or a com#any7s brand,selective demand. than demand +or #roduct class or ty#e ,#rimarydemand. irms strive to build +avorable attitudes to%ard their brand on

uniCue +eatures- #romotion costs remain high- ty#ically decline as a#ercentage o+ sales'

ncrease com#etitive #osition

,hake-out 2Com&etitivetur)ulencestage

Iro%th slo%s as the number o+ buyers nears ma&imum and re#eat salesbecome increasingly more im#ortant than trial sales as number o+buyers and #urchases stabiles

Price cuts- %ea"er com#etitors leave the mar"et- stronger 4rms gainshares' Maor changes in industry7s com#etitive structure occur' irmsrationali$e #roduct line by eliminating %ea"er items- em#hasis creative#romotional #ricing and strengthen its channel relationshi#s'

Marketing mi% changes

More direct #rice com#etition- 4rms ma"e every e*ort to maintain andenhance their distribution system' !educe number o+ #roducts carried%ea"er com#etitors need to o*er buying incentives to continue in the

mar"et'

m#rove;solidi+y com#etitive#osition

Maturit$ Sales #lateau- ty#ically lasts some time- ?et ado#tion rate holds steady-ado#ters dro# out and e&ceed ne% 4rst time users-

Longer stage lasts the more li"ely changes occur' + 4rm does notres#ond success+ully to change its com#etitors do- then a change inindustry structure o+ signi4cant may occur

Marketing mi% changes

arious brands mare similar- brea"throughs by !D> or engineering hel#to di*erentiate #roduct' #tions is to add value to #roduct that bene4tscustomer'- increase service distribution and in6store dis#lays becomeincreasingly im#ortant as does e*ective cost management'

Maintain #osition

eclinesales rate declines and #roduct is said to have reached its 4nal stagethis may be gradual or e&tremely +ast'

Sales decline- costs increase and radical e*orts are needed to reducecosts and the asset base' E&it barriers are lo% - many 4rms vacate themar"et so increasing the sales o+ remaining 4rms- there by delayingtheir e&it' Stronger 4rms may even #ros#er +or a time'

3'5 #hat are the ma9or limitations of the &roduct life-c$cle conce&t'

/



Maor limitations lies in its normative a##roach to #rescribing strategies based onassum#tions about the +eatures or characteristics o+ each stage' t +ails to ta"e intoaccount that the #roduct li+e cycle is in reality driven by mar"et +orces e&#ressing theevolution o+ consumer #re+erences ,the mar"et.- technology ,the #roduct. andcom#etition ,the su##ly side.'

3'G escri)e the ado&tion &rocess.

=he ado#tion #rocess involves the attitudinal changes e&#erienced by individuals +romtime they 4rst hear about a ne% #roduct- serve or idea until they ado#t it' =he 4vestages in the ado#tion #rocess are:

Awareness

Person only a%are o+ the e&istence o+ the ne% #roduct insucientlymotivated to see" in+ormation about it

3nterest ndividual becomes suciently interested in the ne% #roduct- but is notyet involved'

<valuation Mental rehearsal stage- ndividual is mentally a##lying the ne% #roductto his or her o%n use reCuirements and antici#ating the results'

Trial ndividual actually uses the #roduct- but- i+ #ossible- on a limited basis tominimi$e ris"' nly is the use e&#erience is satis+actory %ith the #roducstand a chance o+ being ado#ted'

Ado&tion ndividual not only continues to use the ne% #roduct but ado#ts it in lieuo+ substitutes'

3'8 #hat is the ado&tion rate a function of'

=he time dimension is a +unction o+ the rate at %hich #eo#le in the target grou# movethrough the 4ve stages in ado#tion #rocess' >e#ends on the +ollo%ing +actors

(. !is" ,cost o+ #roduct +ailure or dissatis+action.

2. !elative advantage over other #roducts

/. !elative sim#licity o+ the ne% #roduct

1. om#atibility %ith #reviously ado#ted ideas

3. E&tent to %hich its trial can be accom#lished on a small6scale basis

5. Ease %ith %hich the central idea o+ the #roduct can be communicated'

3' #hat are the various ado&ter categories'

/



3nnovators irst 2'3 o+ all individuals %ho ultimately ado#t a ne% #roduct- moreventuresome more li"ely to be rece#tive to ne% ideas and tend to havehigh incomes %hich reduces the ris" o+ a loss arising +rom an earlyado#tion'

<arl$ado&ters

?e&t (/ <(1 %ho ado#t' Part o+ local scenes- o+ten o#inion leaders-serve as vital lin"s to members o+ the early maority grou#- #artici#atemore in community organi$ations than do later ado#ters'

<arl$ Ma9orit$ /1 o+ those %ho ado#t' >is#lay less leadershi# than early ado#ters-tend to be active in community dis#lay less leadershi# than earlyado#ters- active in community a*airs thereby gain res#ect +orm their#eers0' do not li"e to ta"e unnecessary ris"s and %ant to be sure ne%#roduct %ill #rove success+ul be+ore they ado#t it'

=ate Ma9orit$ )nother /1 reCuently those individuals ado#t a ne% #roduct becausethey are +orced to do so +or either economic or social reasons' =hey#artici#ate in community activities less than the #revious grou#s andonly rarely assume a leadershi# role'

=aggards Last (5 they are the most Olocal ' #artici#ate less in communitymatters than any other grou#s and stubbornly resist change' )do#t a

#roduct so late sometimes that it has already been re#lac/ed by anotherne% #roduct'

3'(0 escri)e the wa$s in which a &roduct marketEs characteristicschange as the market evolves.

Product innovation diminishes over time' =hus the sales o+ a ne% #roducts thoseentering the mar"et +or the 4rst time decline as #ercentage o+ total mar"et volume+orm (0'2 during the gro%th stage o+ evolution to 3'1 during gro%th maturity- to/'3 and /'G during stable maturity and declining maturity and to 2'8 in the

decline stage' =his is "no% as PM ,#ro4t im#act o+ mar"et strategy.

3'(( #hat Duestions need to )e answered in making an industr$anal$sis'

(. Ho% #ro4table is the industry li"ely to be in the short term9 r in the longerterm9

2. What are the more im#ort industry characteristics9

/. What are the industry driving +orces9

a' hanges in the mar"et7s long6term gro%th rate %hich directly a*ectinvestment decisions and intensity o+ com#etition

b' hanges in buyer segments- %hich a*ect demand and strategic mar"etin#rograms

/



c' >i*usion o+ #ro#rietary "no%ledge- %hich controls both the rate at %hich#roducts become ore ali"e and the entry o+ ne% 4rms

d' hanges in cost and eciency- derived +rom scale and learning e*ects%hich have the #otential o+ ma"ing entry more diculty

e' hanges in government regulations- %hich can a*ect entry costs- baseson com#etition and #ro4tability'

1. What the essential determinants o+ success9

3'(2 #hat are the ma9or forcesI which determine industr$com&etition'

=his is a #art o+ industry analysis- 4ve interactive com#etitive +orces that collectivelydetermine an industry7s long6term attractiveness #resent com#etitors- #otentialcom#etitors- the bargaining #o%er o+ su##liers and buyers and substitute #roducts

'

/



Module / nderstanding Consumer +u$ing +ehavio

5'( escri)e each of the four t$&es of &urchasing decision.

<%tent of involvement

<%tent of decisionmaking

igh =ow

E&tended ,in+ormationsearch consideration o+brand alternatives

om#le& decisionma"ing,cars- homes-vacations.

Limited decisionma"ing- includingvariety see"ing andim#ulse #urchasing,adult cereals and snac"+oods.

Habit ;routine ,little orno in+ormation search

+ocus on one brand.

Brand loyalty,athletic shoes- adult

cereals- cologne-deodorant.

nertia ,+ro$envegetables- #a#er

to%els.

5'2 escri)e )rie0$ the !ve ste&s consumers go through when&urchasing high involvement &roducts or services.

Problemidenti4cation

=riggered by unsatis4ed needs or %ants Perceivedi*erences bet%een in deal and actual states onsome #hysical or socio#sychological dimension'See" #roducts or services to hel# bring theircurrent state more into balance %ith the idea

n+ormation search Ho% much in+ormation %ill a consumer see"9Source o+ n+ormation 6 #ersonal < commercial 6#ublic

Evaluation o+alternatives

Product attributes and their relative im#ortancei'e' ost - Per+ormance- Social attributes-)vailability

Purchase hoosing a source +rom %hich to buy the #roductinvolves essential the same mental #rocess i'e'mail order- telesho##ing- catalogue- retail store'

Post PurchaseEvaluation

)s#iration or e&#ectation level ho% %ell the#roduct %as e&#ected to #er+orm'Post #urchase dissonance consumer may doubt%hether they made the best #ossible choices'Such doubts are called cognitive dissonance'

5'/ ow do low-involvement &urchase decisions di8er from high-involvement ones'

/



=hey are not im#ort to consumers- the search +or in+ormation to evaluate alternativebrands is minimal' )s a result- decisions to buy #roducts such as coo"ies or cerealo+ten are made %ithin the store either im#ulsively on the basis o+ brand +amiliarity or aa result o+ com#arisons o+ the brands on the shel+'

5'1 #hat are the marketing im&lications of low-involvement&urchasing'

3m&lications igh3nvolvement

=ow 3nvolvement

Productdesign and&ositioning

onsumersevaluatealternative brandsaccording tochoice criteria thatreFect the bene4tsthey see"

Brand evaluation occurs a+ter the #roductis #urchased- consumers see" brands thatare least li"ely to give them #roblems-ocus on #roduct +eatures that minimi$eany #roblems in using the #roduct'

AdvertisingandPromotion

Printed media are better +orhighly involved%ith the #roductand activelysee"ingin+ormation'

Passive in+ormation gatherer- advertisingshould +ocus on a few main &oints toma"e it as easy as #ossible +or them togain +amiliarity and #ositive association%ith a brand' Television is #rimarymedium +or advertising' < allo%s #assivelearning' istinctive &ackage design hel#s consumers recogni$e brands theyhave seen advertised'

PricingBought o+ten on &rice alone- s#ecialsales or cou#on o*ers can be e*ective' +

no #roblems e&#erienced in use o+ trialconsumers may continue to re#urchasethe brand out o+ inertia until a com#etitoro*ers an attractive #rice #romotion

istri)ution E&tensive retail distribution im#ortantbecause consumers are un%illing tosearch +or a #articular brand'

,trategies toincreaseconsumerinvolvement

Lin" #roduct to some involving issue- i'e'bran cereals associated their #roduct %itha high 4ber diet that may reduce theincidence o+ colon cancer'

/



5'3 escri)e the 4ish)ein model )$ using an e%am&le.

)ttitude ) V onsumer7s overall attitude to%ards Brand )

Bi V onsumer7s belie+ concerning the e&tent to %hich attribute i is associated%ith Brand )

i * =he im#ortance o+ attribute i to the consumer %hen choosing a brand to buy

+ V =he total attributes considered by the consumer %hen evaluating alternativbrands in the #roduct category'

i V )ny s#eci4c #roduct attribute'

ruise shi# selection

,ervice attri)ute 3m&ortanceweight J7 L17K

@ating

A

@ating

+

@ating

C

>emogra#hics < other#assengers

(0 8 8 8

Entertainment (0 8 (0

Ports o+ all 8 8

ruise ) V ,(0&8.U,(0&8.U,8&8. V 221

ruise B V ,(0&8.U,(0&(0.U,8&. V 232

ruise V ,(0&8.U,(0&.U,8&. V 212

ruise B %ould be selected'

5'5 #hat is the di8erence )etween a com&ensator$ and a non-com&ensator$ model'

n a com#ensatory model a #oor evaluation o+ one attribute can be o*set by a strongevaluation on another'

/



n a non com#ensatory model brands are evaluated one attribute at a time' Jntil one isu#erior

/



5'G ow do demogra&hics and lifest$le have an im&act on )u$ing)ehavior'

emogra&hics in0uence:

(. =he nature o+ consumers needs and %ants

2. =heir ability to buy #roducts or services to satis+y those needs

/. =he #erceived im#ortance o+ various attributes or choice criteria used toevaluate alterative brands

1. onsumers7 attitudes to%ard and #re+erences +or di*erent #roducts and brands

=ifest$les

Peo#le live their lives in di*erent %ays i'e' di*erent o#inions- interests and activitiei'e' buying and using brands in di*erent %ays +or di*erent #ur#osed'

5'8 3dentif$ the ma9or social in0uences on consumersE decision-maki&rocesses.

,ocial

C0"t0$e < set o+ belie+s- attitudes and behaviour #atterns relatively stable over time'

S0! C0"t0$e < share common geogra#hic- ethnic- racial or religious bac"grounds- =hecontinue to hold some values- attitudes and behaviour #attern that are uniCuely their

o%n'

S&cia" C"ass 6 status grou#s largely based on similarities in income- education andoccu#ation'

Re%e$ence G$&0s <grou#s that a*ect consumer behaviour through normativecom#liance- value6e&#ressed inFuence and in+ormational inFuence'

T-e 2a/i"y < it serves as the #rimary sociali$ation agent- hel#ing members acCuire ths"ills- "no%ledge and attitudes to +unction as consumers'

/



1



Module Organi;ational Markets G +u$ing+ehavior

G'( #hat are the ma9or di8erences )etween organi;ational andconsumer markets'

rgani$ational mar"ets are about t%ice as large as consumer mar"ets'

rgani$ational buyers #urchase goods and services +or +urther #roduction- +or usin o#erations or +or resale to other consumers- n contrast to individual andhouseholds %ho buy +or their o%n use and consum#tion'

i8erences )etween organi;ational G consumer markets

emand characteristics =he demand +or industrial goods and services is:

(' >erived +rom the demand +or consumer goods and services'2' !elatively inelastic < #rice changes in the short run are not li"ely to a*ect

demand drastically'/' More erratic because small increases in consumer demand can- over time-

strongly a*ect the demand +or manu+acturing #lants and eCui#ment'1' More cyclical'

Market demogra&hicsrgani$ational buyers- %hen com#ared %ith buyers o+ consumer goods- are:

(' ( e%er in number'2' Larger'/' Ieogra#hically concentrated'1' More a#t to buy on s#eci4cations'

+u$erLseller relationshi&srgani$ational mar"ets are characteri$ed by the +ollo%ing %hen com#ared %iththe mar"ets +or consumer goods:

(' =he use o+ #ro+essional buying s#ecialists +ollo%ing #rescribed #rocedures2' loser buyer<seller relationshi#s'

/' =he #resence o+ multi#le buying inFuences'

1



G'2 #hat grou&s of &eo&le are the &artici&ants in the )u$ing&rocess'

t involves #eo#le +rom various de#artments- and can be:

sersPeo#le %ho must use or %or" %ith the #roduct or service

3n0uencers Provide in+ormation +or evaluating alternative #roducts andservices- usually technical e&#erts +rom variousde#artments' Hel# determine s#eci4cations and criteria touse in ma"ing the #urchase decision'

atekee&ers

ontrol the Fo% o+ in+ormation to other #eo#le in the#urchasing #rocess- #rimarily #urchasing agents andsu##liers sales#eo#le control in+ormation that reachesother decision ma"ers'

+u$ers Purchasing agent or #urchasing manager buyers haveauthority to contact su##liers and negotiate the #urchase

transaction'eciders Person %ho has the authority to ma"e a 4nal #urchasedecision'

G'/ escri)e )rie0$ the organi;ational &urchase decision-making&rocess.

1



G'1 #hat are the marketing im&lications of the following categoriesof industrialgoods and services'

)=EI!R: @A# MAT<@3A=,

escri&tion:!elatively un#rocessed goods that become a##ortion o+ a 4nal #roductCharacteristics: Limited su##ly- +e% #roducers distribution is a "ey +unction #rice is a criticalcom#etitive variable'Marketing 3m&lication: Little #romotional activity e&ce#t +or co6o#erative advertising cam#aigns +undedby trade grou#s to stimulate #rimary demand +or a #roduct'

)=EI!R: COMPO*<*T MAT<@3A=, A* PA@T,.escri&tion:

Processed goods that become a #ortion o+ a 4nal #roduct'Characteristics: High volume #urchases- long6term contracts 4erce com#etition among su##liersreCuires good service and nurturing o+ relationshi#s %ith buyers'Marketing 3m&lication:Manu+acturers buy most com#onents materials and #arts in large Cuantities-usually sold direct- %ithout use o+ middlemen' Wholesale distributors sell to

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smaller manu+actures in some lines o+ trade' =o avoid disru#ting #roduction runsellers must ensure a steady reliable su##ly o+ materials and #arts- X=

)=EI!R: ACC<,,O@B <Q3PM<*Tescri&tion:inished goods that +acilitate #roduction o+ a 4nal #roductCharacteristics: Enduring but less os than installations- more standardi$ed- more +reCuently

#urchased and less costly than ca#ital eCui#ment less com#le& buyingintermediaries may be involved'Marketing 3m&lication:Wide range o+ s#eci4c items- it is hard to generali$e about the most common ora##ro#riate mar"eting strategies +or accessory eCui#ment' - #roducers sellaccessory eCui#ment directly' Presale and #ost sale service reCuirements aresubstantial- but the monetary value o+ the average sale is high enough to usti+ydirect distribution' Personal selling either by the #roducers or a distributor sales+orce is the most im#ortant #romotional method used in selling accessoryeCui#ment' Products standardi$ed and not technically com#le& and thusadvertising and brand name #romotion are also im#ortant'

)=EI!R: 3*,TA==AT3O*,escri&tion:Maor ca#ital goods used to #roduce a 4nal #roduct- but not #art o+ the 4nal#roduct'Characteristics: Long6lasting involved in #roduction o+ many units o+ the 4nal #roduct over severayears involve large monetary outlays ca#ital budgeting committee involved in#urchase decision sold directly +rom manu+acturer'Marketing 3m&lication:Presents real challenge because there are +e% #otential customers at any onetime- average sale is very large' Many installations are custom6made to 4t a#articular customers needs- there+ore sellers must #rovide engineering and desigservices be+ore ma"ing a sale' +ten long #eriod o+ negotiation #rior to 4naltransaction'irms selling installation must usually #rovide many #ost sale services- ieinstallation- training- maintenance re#air and sometimes 4nancing' Small numbeo+ buyers buys large monetary volume o+ each sale and custom engineeringinvolved- distribution usually direct +rom #roducer to customer' Some %holesaledistributors #rovide re#lacement #arts and re#air services +or eCui#ment already o#eration' or similar reasons #romotional em#hasis is usually on #ersonal sellingrather than advertising- High6caliber- %ell6trained sales#eo#le are criticallyim#ortant in the mar"ing o+ installations'

)=EI!R: OP<@AT3* ,PP=3<,.

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(K *ew-task )u$ing organi$ation +aces a ne% and uniCue need or #roblem6 one in %hich buying center members have little or no e&#erience inbuying and thus must e&#end a great deal o+ e*ort to de4ne #urchasings#eci4cations'

G'5 #ho are the ma9or t$&es of organi;ational customers'

@esellers)ll retailers- %holesalers < buy large Cuantities o+ goods+or resale to other organi$ation or household consumers

oodsProducers

Producers o+ ra% materials ,such as +arm and +orest#roducts 4rms and mines.- building contractors andmanu+acturers'

,erviceProducers

Ban"s- Hotels ,lodgings.- inancial- nsurance-entertainment- Education

overnment Large buyers o+ goods and services

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Module 5 Marketing 3nformation and Marketing@esearch

8'( e!ne the term marketing &otentialE.

the li"ely demand +rom all actual and #otential buyers o+ a #roduct or #roduct

class'

8'2 ow can one measure market &otential'

ia ,ingle factor inde% < researchers use it most success+ully %hen the t%oitems have a derived or com#lementary demand'

Multi&le-factor inde%es 6 use a combination o+ t%o or more +actors to estimaterelative mar"et #otentials- multi+actor inde&

8'/ #hat are the )ene!ts and draw)acks of using statistical methodfor estimating market &otential and sales'

,tatistical methods use #ast history and various statistical techniCues- to+orecast the +uture based on an e&tra#olation o+ the #ast'

+ene!ts: n established 4rms- +or established #roducts- statistical methods aree&tremely use+ul- es#ecially i+ 4rms have years o+ e&#erience %ith %hich tocalibrate their statistical model'

raw)acks: =hey assume that the +uture %ill loo" very much li"e the #ast'+ #roduct or mar"et characteristics change- statistical models used %ithoutadeCuate udgment may not "ee# #ace'

8'1 #hat other evidence-)ased methods might $ou use to estimatemarket &otential or forecast sales'

5 maor evidence6based methods:

(' Statistical and Cuantitative-

2' bservation-/' Surveys-1' )nalogy-3' Xudgment-5' Mar"et tests'

G' ?ot evidence6based < the SW)I method ,Silly Wild6)ss Iuess. < is notcondoned here- though there is little else to su##ort some +orecastsY

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8'3 <%&lain some of the )iases in forecasting'

(' subect to anchoring )ias- %here +orecasts are #erha#s ina##ro#riatelyOanchored7 in recent historical 4gures- even though mar"et conditions havemar"edly changed- +or better or %orse

2' Ca&acit$ constraints are sometimes misinter#reted as +orecasts'

/' 3ncentive #ay' Bonus #lans can cause managers to arti4cially inFate or

deFate +orecasts- %hether intentionally or other%ise'Sand!a..in.3: setting the +orecast or target at an easily achievable 4gure iorder to earn bonuses %hen that 4gure is beaten

1' nstated )ut im&licit assum&tions can overstate a %ell6intentioned+orecast'

8'5 escri)e marketing data)ase s$stems and how the$ can )e used

Point o+ Sale ,PS. database are used +or direct mar"eting and #ros#ecting

#rograms +or com#anies that sell directly to end users' ollecting demogra#hicdata and trac"ing #urchases'

Ieodemogra#hic database #rovide 1 ty#es o+ data demogra#hics- geogra#hics-#sychogra#hics and consumer behavior'

8'G e!ne what is meant )$ the term marketing researchE.

=he +unction %hich lin"s the consumer- customer and #ublic to the mar"eterthrough in+ormation < in+ormation used to identi+y and de4ne mar"etingo##ortunities and #roblems generate- re4ne and evaluate mar"eting actionsmonitor mar"eting #er+ormance and im#rove understanding o+ mar"eting as a#rocess'

8'8 #hat is the di8erence )etween &rimar$ and secondar$ datasources'

Primary )re collected s#eci4cally +or the #roblem at hand and reCuirethe 4rm to underta"e the ste#s in the research #rocess or hirean outside agency to do so

Secondary >ata collected by other organi$ations and are not usually tied

directly to the 4rms7 #roblems' =hey have the advantage o+saving time and money- but the data must be com#atible %iththe needs o+ the s#eci4c study'

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8' 3n &erforming marketing researchI what are some im&ortantethical considerations to make when dealing with res&ondents'

Potential to harm individuals %hen such in+ormation is used %ithout their"no%ledge and;or consent- leading them to be e&cluded +rom or included inactivities in such a %ay that they are harmed economically- #sychologically or#hysically'

Stem in large #art +rom the interaction bet%een the researcher and res#ondentsclients and the general #ublic' or instance- res#ondents should not be #ressureto #artici#ate- should have the right to remain anonymous and should not bedeceived by +a"e s#onsorshi#'

8'(0 #hat are the ma9or di8erences )etween &ro)a)ilit$ and non-&ro)a)ilit$ sam&ling'

Pro)a)ilit$ ,am&le

Every #erson in the #o#ulation has an eCual chance

o+ being selected'*on Pro)a)ilit$or Convenience,am&le

Every #erson in the #o#ulation >ES ?= have aneCual chance o+ being selected

=hus- the results cannot be generali$e %ith anydegree o+ certainty to a larger #o#ulation

Margin of error: the larger the sam#le si$e- the smaller the margin o+ error'

)l%ays as" about the sam#le selection method'+ not random- inCuire about ho% the sam#le %as selected

8'(( #hat are sine critical Duestions that managers setting u&com&etitive intelligence s$stems should ask'

1. Ho% ra#idly does the com#etitive climate in our industry change9Ho% im#ortant is it that %e "ee# abreast o+ such changes9

2. What are the obectives o+ in our com#any9

3. Who are the best internal clients +or 9 =o %hom should the e*ort re#ort9

1' What budget should be allocated to 9Will it be sta*ed +ull- or #art6time9

#hat are the ma9or kinds of data $ou would want to collect a)out acom&etitor'

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8'(2 *ame each ste& of the marketing research &rocess and e%&lainwhat could go wrong at each ste&.

<%hi)it 5. ,te&s in the marketing research &rocess: what can go wrong'

Stes W-at %$e40ent"y .&es ($&n.5

,) denti+y managerial#roblem and establish researchobectives

Management identi4es no clearobective- no decision to be madebased on the #ro#osed research'

-) .e%ermine $a%a sources/#rimar' or secon$ar'0 an$ %'#eso $a%a an$ research a##roaches/1ua!i%a%i2e or 1uan%i%a%i2e0re1uire$

Primar' $a%a are co!!ec%e$ "henchea#er an$ as%er secon$ar' $a%a"i!! $o)3uan%i%a%i2e $a%a are co!!ec%e$"i%hou% 4rs% co!!ec%ing 1ua!i%a%i2e$a%a)

5) .esign research6 %'#e os%u$'7 $a%a co!!ec%ion a##roach7sam#!e7 e%c)

These are %echnica! issues bes%manage$ b' s+i!!e$ #rac%i%ioners).oing %hese s%e#s #oor!' cangenera%e mis!ea$ing or incorrec%resu!%s)

8) 9o!!ec% $a%a 9o!!ec%or bias6 hearing "ha% 'ou "an% %o hear)

() Ana!':e $a%a Tabu!a%ion errors or incorrec% use orin%er#re%a%ion o s%a%is%ica! #roce$ures ma' mis!ea$ %he user)

;) Re#or% resu!%s %o %he$ecision ma+er

Some users $o no% rea!!' "an%ob<ec%i2e inorma%ion = %he' "an% %o #ro2e "ha% %he' a!rea$' be!ie2e %o be%rue)

,8'3. ow can secondar$ source data )e evaluated'

!esearchers must ans%er the Cuestion OHo% good are the data97 i+ the sources#eci4es the data6collection method used- it can serve as the basis +or theevaluation' + not the researchers are +orced to udge the Cuality on the basis o+other +actors' 'e' research s#onsors may be +ederal government or a tradeassociation' )nd ho% data %as collected i'e' by mail or #ersonal intervie%'

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,8'5. #hat is the di8erence )etween e%&lorator$ and conclusiveresearch'

<%&lorator$

• Jses secondary data ,case studies and intervie% %ith"no%ledgeable #eo#le.

• Jsed to learn more about the nature and sco#e o+ the #roblem

• Preliminary ste# to be +ollo%ed by conclusive research thattests the relevant 4ndings

• le&ibility is "ey to the investigation

Conclusive

om#rises descri#tive and e&#erimental studiesonclusive research to test alternative solutions to a #roblemstudies'

,8'G. #hat is the di8erence )etween descri&tive and e%&erimentalresearch'

escri&tive

+ten re+erred to as survey research more commonly used design

<%&erimental

)dvantage o+ #ermitting the researcher to sho% cause6and <e*ect relationshi#s bet%een the variables 0 something that canonly be in+erred +rom descri#tive studies'

Some serious disadvantages that limit its use+ulness in mar"eting

(' most e&#eriments can measure only immediate results

2' E&#ensive/' Jse small sam#les that may not be re#resentative o+the national mar"et

1' >iculty holding all variables constant

3' Pose severe administrative #roblems can be audited bycom#etitors

,8'. #h$ is interviewing one of the ma9or sources of error in at$&ical research &ro9ect'

=ele#hone and #ersonal intervie%s- an intervie%er o+ten selects the #erson tointervie%- as"s Cuestions and records the ans%er and errors can occur at eachste#'

!es#ondents re+use to coo#erate

Jnable to remember in+ormation %anted

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Biased by the intervie%ing #rocess

?ot %ant to re#ort things that reFect #oorly on their intelligence or social #osition

>oes Cuestion mean the same to everyone9

ntervie%ing res#ondents it the one maor source o+ error in the ty#ical research#roect

,8'(0. nder what conditions would $ou use each of the various datacollection methods'

Questioning

Most common %ay 6 almost any #roblem can be attac"ed usingit- #roblems involving attitudes- "no%ledge and buyingintentions can be a##roached only by using this method'

bservation

!ecogni$es and notes #eo#le- obects and actions- rather thanas"ing +or in+ormation' Less #o#ular than intervie%ingres#ondents

,8'(2. #hat two kinds of measures need to )e merged to develo& ameaningful measure of customer satisfaction'

=he !rst has to do %ith understanding o+ the criteria used by customers toevaluate the Cuality o+ the 4rm7s relationshi# %ith them' no%ing the#roduct;service attributes that constitute the customers choice' riteria as %elas the relative im#ortance o+ each should +acilitate this tas"' nce theseattributes are identi4ed they serve as the basis +or develo#ing e%&ectationmeasures

=he second ty#e o+ measurement is concerned %ith how well the !rm ismeeting the customerEs e%&ectations on an individual attribute as %ell as aoverall basis- =hus- i+ the choice criteria o+ a cruise line7s target mar"et includedsuch attributes as +ood- e&ercise +acilities and entertainment- then a#er+ormance measure %ould be develo#ed +or each .

,8'(3. #hat is a marketing-decision su&&ort s$stem'

Mar"eting6>ecision Su##ort Systems ,M>SS. deals %ith the use o+ com#utertechnology to enhance a mar"eter7s ability to identi+y and solve #roblem on acontinuous day6in day6out basis using a mar"eting6decision su##ort system' t co

ordinates collection o+ data- systems- tools- and techniCues %ith su##ortingso+t%are and hard%are by %hich organi$ation gathers and inter#rets relevantin+ormation +rom business and its environment and turns into a basis +ormar"eting action'

Highly Fe&ible and action oriented

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,8'(5. #hat is the future of M,,'

Many have not #rogressed +urther in develo#ing more so#histicated system'Maor reason ris" involve din ma"ing large investments- given the diculty o+estimating the return' )l closely related #roblem is that the success o+ suchsystem de#ends heavily on the decision ma"ing ca#abilities o+ the user'

om#anies %ill ado#t during the ne&t decade' ncreasingly em#o%eringmanagers throughout the organi$ation to ma"e bigger- more com#le& decisionsmore Cuic"ly because o+ increased environmental dynamics' Becoming a criticalneeded resource'

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Module 6 Market ,egmentation and MarketTargeting

'( e!ne market segmentation.

nvolves subdividing the mar"et #lace into distinct subsets o+ customers havingsimilar needs and %ants- each o+ %hich can be reached %ith a di*erent mar"etinmi&' Lead them to res#ond in similar %ays to a #articular #roduct o*ering andstrategic mar"eting Program'

Target marketing reCuires evaluating the relative attractiveness o+ varioussegments ,in terms o+ mar"et #otential- gro%th rate- com#etitive intensity- and

other +actors. and the 4rm7s mission and ca#abilities to deliver %hat eachsegment %ants- in order to choose %hich segments it %ill serve'

'2 #h$ is there a strong interde&endenc$ )etween marketsegmentationI market targeting and &ositioning'

>etermination o+ %hich segment target' =o do so %ould reCuire evaluating therelative attractiveness o+ each segment ,si$e- revenue #otential and gro%th rate.-the bene4ts sought and the 4rm7s relative business strengths' =his is called targe

marketing' inally

Product &ositioning < that is- designing #roduct o*erings and develo#ingstrategic mar"eting #rograms that collectively create an enduring com#etitiveadvantage in the target mar"et < %ould need to be underta"en'

)ll must be %ell considered and im#lemented i+ the 4rm is to be success+ul inmanaging a given #roduct6mar"et relationshi#'

'/ #hat is the rationale for market segmentation'

ind an a##ro#riate segmentation scheme that %ill +acilitate mar"et targeting-#roduct #ositioning and the +ormulation o+ success+ul mar"eting strategies and#rograms'

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'1 #h$ is market segmentation of growing im&ortance'

(. Po#ulation gro%th has slo%ed

2. More #roduct mar"ets are maturing in turn s#ar"s more intense com#etitionas 4rms see" gro%th via gains in mar"et share'

/. Social and economic +orces as e&#anding dis#osable incomes- highereducation level and more a%areness o+ the %orld

1. m#ortant trend to%ard micro-segmentation' )ccelerated by ne%technology

3. m#lementation o+ s#eciali$ed mar"eting #rograms by broadening andsegmenting their o%n services'

'3 #hat are the o)9ectives of the market segmentation &rocess'

(' denti+y a homogeneous segment that di*ers +rom other segments

2' S#eci+y criteria that de4ne the segment'

/' >etermine segment si$e and #otential'

'5 #hat are the di8erent t$&es of descri&tors used to segmentconsumer goods markets' 3ndustrial goods markets'

Consumer market Organi;ational market>emogra#hic V WH

age- se&- income- occu#ation- education-geogra#hy- race and ethnic origin

>emogra#hic V WH

1. macro: characteristics o+ the buyingorgani$ation: age- si$e- industry aliation ,Scode.

2. micro: characteristics o+ the individuals %hinFuence the #urchasing decision: age- se&-#osition- N

Ieogra#hic V WHE!EIeodemogra#hic V WHE!E U WHBehavioral V WH)= =HER > ?eeds- bene4ts sought- #urchasing is a #roblem6solving #rocess- choice criteria#roduct6related: usage- loyalty- #redis#osition- #urchase inFuence

Li+estyle or #sychogra#hics grou#sconsumers on the basis o+ their activities-interest- o#inions'social class Z be care+ul- 52 distinct classesin the JS

Purchasing structure: the degree to %hich the#urchasing activity is centrali$ed'Buying situation: straight rebuy- modi4ed rebuy-ne% buying situation

no% the demogra#hic #ro4le- even i+ the driving +orce behind the segmentationscheme is geogra#hical and; or behavioral in nature'

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nsight+ul segmentation shar#ly +ocused in a behavioral %ay

'G escri)e the two-ste& &rocess used to segment industrialmarkets.

Macro segmentation

>ivides the mar"et according to the characteristics o+ the buyingorgani$ation using such descri#tors a geogra&h$- location-

com#any si;e and industr$ aNliation' ,S. nternationalcounter#art o+ S is the trade6category code

Micro segmentation Irou#s customers by the characteristics o+ the individuals %hoinFuent the #urchasing decision +or instance- age- se% and&osition %ithin the organi$ation

'8 #hat is geodemogra&hic segmentation' #h$ is it )ecomingincreasingl$ im&ortant'

t attem#ts to #redict consumer behavior by ma"ing demogra#hic- #sychogra#hics and consumein+ormation available at the bloc and $i# code levels'

' #hat are the ste&s in constructing a market-attractiveness2)usiness-&osition matri% for evaluating &otentialtarget markets'

(' hoose criteria to measure attractiveness and com#etitive #osition

2' Weight each +actors to reFect their relative im#ortance

/' )ssess the current #osition o+ each #otential target mar"et on each +actor

1' Proect the +uture #osition o+ each mar"etbased on e&#ected environmental- customer and com#etitive trends

3' hoose segments to target- )llocate resourcesEvaluate im#lications o+ #ossible +uture changes +or business strategies D resources reCuireme

Market-attractiveness2 )usiness-&osition matri%

3



'(0 #hat are the three most common t$&es of targeting strateg$'iscuss each.

*iche Market nvolves serving one or more segments that- %hile not the largest- consist o+substantial numbers o+ customer see"ing some%hat s#eciali$ed bene4ts +rom#roduct or service'>esigned to avoid direct com#etition %ith larger 4rms #ursing bigger segmen

Mass Market (' gnore any segment di*erences and design a single #roduct andmar"eting #rogram that %ill a##eal to the largest number o+ consumers'a#ture sucient volume to gain economies o+ scale and a cost advantag

2' >esign se#arate #roducts and mar"eting #rograms +or the di*erinsegments' i8erentiated marketing'

rowthMarket

=arget one or more +ast6gro%th segments even though they may not currentbe very large' avored by smaller com#etitors to avoid direct con+rontation %larger 4rms %hile building volume and share +or the +uture

,'(0. #hat are the reDuirements for e8ective segmentation'

(. )deCuate si$e

2. Measurability

/. )ccessibility

1. >i*erent res#onse'

,'((. #hat are the two emerging inter-countr$ glo)al segments'

denti+y consumers %ith similar needs and %ants reFected in their behavior in thmar"et#lace across a range o+ countries' denti4es consumer homogenousgrou#s o+ consumers across country segments'

3



,'(2. #h$I for man$ &roductsI are international markets )ecomingmore homogeneous'

Similar segments have emerged in di*erent countries at the same time becauseo+ technological develo#ments a*ecting communications- trans#ortation andtravel- develo#ing Ilobal segments'

,'(3. iscuss the ma9or inclusion and e%clusion ethical issuesinvolved in market targeting.

3nclusion

Jndesirable stereoty#es' nclude se& role- race or agestereoty#es ie %omen a se& obects'

<%clusion

ertain grou#s are de#rived o+ the #roducts or services butalso that they may #ay more +or those they do receive'

,'1. #hat are the )ene!ts of market segmentation'

(. denti4es o##ortunities +or ne%6#roduct develo#ment

2. Segmentation hel#s in the design o+ mar"eting #rograms that are moste*ective +or reaching homogenous grou#s o+ customers

/. t im#roves the strategic allocation o+ mar"eting resources'

5



Module 17 Positioning ecisions

(0'( #hat is meant )$ &ositioning'

>i*erentiation < the #erceived 4t bet%een a #articular #roduct and the needs o+the target mar"et' >e4ned relative to com#etitive o*erings and consumer

needs'

(0'2 #hat are the di8erences )etween &h$sical and &erce&tual&ositioning'

) business #ositions its o*ering so that customers in the target mar"et #erceive as #roviding the desired bene4ts- thereby giving it an advantage over current an#otential customers'

Physical #osition o*erings are based on com#arison on some set o+ obective#hysical characteristics

(0'/ #hat are the limitations of &h$sical &ositioning'

) sim#le com#arison o+ only the #hysical dimensions o+ alterative o*eringsusually does not #rovide a com#lete #icture o+ relative #ositions because#ositioning ultimately ta"es #lace in customer7s minds'

(0'1 #hat are the ste&s in the &ositioning &rocess'

1) denti+y relevant set o+ com#etitive #roducts

2) denti+y the set o+ determinant attributes that de4ne the O#roduct s#ace7 in%hich the #ositions o+ current o*erings are located'

3) ollect in+ormation +rom a sam#le o+ customers and #otential customers abou#erce#tions o+ each #roduct on the determinant attributes

4) )naly$e intensity o+ a #roduct7s current #osition in customers7 minds'

5) >etermine #roduct7s current location in the #roduct s#ace ,#roduct#ositioning.

6) >etermine customers7 most #re+erred combination o+ determinant attributes

7) E&amination the 4t bet%een #re+erences o+ mar"et segments and the current#ositions o+ #roduct ,mar"et #ositioning.'

8. Select #ositioning or re#ositioning strategy'

5



(0'3 #hat are some of the more common t$&es of )ases used todistinguish one &roduct or service from another'

1) 4eatures < #hysical #roduct #osition and industrial #roducts2) +ene!ts < directly related to a #roduct3) sage including end use- demogra#hic- #sychogra#hics or behavioral and

#o#ularity'4) Parentage L %ho ma"es it-5) Manufacturing &rocess L the subect o+ a 4rm7s #ositioning e*orts'6) 3ngredients - #ositioning conce#t illustrated by ie #ure cotton7) <ndorsements t%o ty#es those by e&#erts ie medical #ro+essionals and

those via emulation Michael Xordan using ?i"e shoes'8) Com&arison %ith a com#etitor7s #roduct is common#lace9) Pro-environment L #ositioning see"s to #ortray a com#any as a good

citi$en10)Product Class < ne% di*erent #roduct ty#e

11)Price2Dualit$ <1"K Countr$ or geogra&hic area

(0'5 #hat constraints are im&osed on a )rand with an intense&osition'

>evelo#ing a strong relationshi# bet%een a brand and a limited number o+attributes'

(0'G #hat are the limitations of a &roduct &ositioning anal$sis'

t indicates ho% alterative #roducts or brands are #ositioned relative to oneanother in costumers minds' >oes not tell the mar"eter %hich #ositions are mosa##ealing to customers'

(0'8 3n choosing a given &osition for a given )randI what factorsshould one consider'

Mar"et targeting analysis and the results o+ a mar"et #ositioning analysis'

Position should match the #re+erences o+ a #articular mar"et segment and shouldta"e into account the current #ositions o+ com#eting brands' )lso reFect thecurrent and +uture attractiveness o+ the target mar"et and the relative strengthsand %ea"nesses o+ the com#etitors'

,(0'. #hat is a &roduct intent share'

5



Product intent share re#resents the #ercentage o+ consumers %ho intend to buya s#eci4c brand be+ore actually searching +or it' ntegrates all +actors thatinFuence the #erceived Cualities o+ a #roduct'

,(0'(0. ow can the &urchase intent share that a )rand might acDuirin a given segment )e estimated'

Based on the #ositions o+ e&isting brands and the #re+erences o+ consumers inthe segments' n a #erce#tual ma# obtained via multidimensional scaling-based on the distance bet%een a brands #osition and the ideal #oints'

,(0'((. #hat market d$namics should )e considered in evaluating thsales &otential of alternative &ositions'

(. Iro%th o+ mar"et segments2. Evolution o+ segments ideal #ints/. hanges in #osition intensity1. Evolution o+ e&isting brands #ositions

3. Emerging attributes5. >evelo#ment o+ ne% segmentsG. ntroduction o+ ne% brands'

,(0'(2. escri)e each of the various market &ositioning strategies.

Monosegment#ositioning

>evelo#ing a #roduct and mar"eting Program tailored to the#re+erences o+ a single mar"et segment'

Multisegment#ositioning

Position a #roduct so as to attract consumers +rom di*erentsegments' Provides higher economies o+ scale- reCuires

smaller investments and avoids dis#ersion o+ managerialattention

Standby#ositioning

?ot in best economic interest o+ a 4rm to s%itch +rommultisegment #osition to monosegment ,assumes useseveral brands- each #ositioned to serve the needs o+ onlyone segment. only im#lement monosegment %hen +orced todo so'

mitative#ositioning

Head6on strategy %here a ne% brand targets a #ositionsimilar to that o+ an e&isting success+ul brand'

)ntici#atory#ositioning

Position ane% brand in antici#ation o+ the evolution o+ asegment7s needs' =his is #articularly a##ro#riate %hen the

ne% brand is not e&#ected to have a +ast acce#tance andmar"et share %ill build as the needs o+ consumers becomemore and more aligned %ith the bene4ts being o*ered'

)da#tivePositioning

Periodically re#ositioning a brand to +ollo% the evolution o+the segment7s needs'

>e+ensive#ositioning'

When a 4rm occu#ies a strong #osition in a mar"et segment%ith a single brand- it is vulnerable to imitative #ositioning

5



strategies' Pre6em#t com#etitive strategies by introducingsimilar #oison +or the same segment'

Part ( evelo&ing,trategic

Marketing Programs

Module 11Product ecisions

(('( #hat is a &roduct' escri)e its various com&onents.

) #roduct can be de4ned as anything that satis4es a %ant or need through use-consum#tion or acCuisition' t includes subects- services- #laces- #eo#le activities- anideas'

(('2 escri)e the four su)grou&s of consumer goods.

oods G,ervices

<%am&les ,trateg$ elements stressed

Convenience

=ooth#aste- soa#- ra$or blades-

maga$ines- haircuts- many #ac"aged+ood #roducts

Ma&imum distribution ,availability.

onsumer advertising ,a%areness- brand recognitMerchandi$ing ,in6store dis#lays.

,ho&&ing

olor =- cars- maor a##liances-homes- car re#air- +amily doctors

)vailable in limited number o+ stores-Personal selling im#ortantLimited to e&tensive advertisingSeller o+ten o*er 4nancing- %arranties and ##urchase service

,&ecialt$Musical instruments- stereoeCui#ment- some brands o+ men7sclothing- college consultants

Limited distribution high #rice strongadvertising to #romote brand uniCueness and%here available locally

nsought ertain medical services- insurance -encyclo#edias

Strong #romotion- including #ersonal selling

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(('/ #hat are the eight dimensions of Dualit$'ow do these a8ect a !rmEs Dualit$ strategies'

Performance

Has to do %ith a #roduct7s basic o#erating characteristics-

4eatures Secondary #roduct characteristics that are designed to enhancethe #roducts basic +unctions'

@elia)ilit$ s the #robability that a #roduct %ill #er+orm satis+actorily over agiven #eriod'

Conformance

=he e&tent to %hich a #roduct7s o#erating characteristics meetcertain s#eci4cations'

ura)ilit$ Measure o+ the li+e o+ a #roduct- technical ,re#lacement. andeconomic ,re#air cost.

,ervicea)ilit$

oncerned %ith the s#eed and ease o+ obtaining com#etent re#air

Aesthetics Ho% #roduct loo"s- +eels- sounds- tastes- and smells

PerceivedDualit$

!esults +rom the use o+ indirect measures since the consumer maylac" or not understand in+ormation about a #roduct7s attributes'

(('1 ow does )randing )ene!t consumers' ,ellers'

Consumers

Sim#li4es sho##ing- +acilitates the #rocessing o+ in+ormationconcerned %ith #urchase o#tions- #rovides con4dence that theconsumer made the right decision'

,eller Enhances:6 E*ectiveness o+ their mar"eting Programs < #articularly #romotion

6 Brand loyalty %hich in turn leads to greater #ro4tability6 ##ortunities +or success+ully launching brand e&tensions6 Prices and margins resulting +rom a com#etitive advantage6 hannel relationshi#s'

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(('3 iscuss )rie0$ the various )randing strateg$ o&tions.

3ndividual +randing Each #roduct has a distinctive name' 'e' Proctor andIamble ,=ide- Luvs- rest- Pringles.

4amil$ +randing Same brand name to cover a grou# o+ #roducts i'e'

am#bell7s sou#s Sears enmore a##liances

*o +rand *ame E&am#les include generic- no6+rills- unbranded-

Multi&le +randsstrateg$

om#any deliberately com#etes against itsel+ i'e'Ieneral Motors ,Buic" versus ldsmobile versusPontiac.

Co-+randing Multi#le brand names %ith a single #roduct or serviceo*erings- eg Smart car- H[egen6>a$s7 Baileys rishream ice cream

lo)al +randing >icult- negative associations in some countries-#resence o+ strong local brands- heavy investmentsreCuired' + success+ul- scale e*ects dramaticallyenhance sales and #ro4ts' oca- ?i"e- Starbuc"s- Sony

(('5 e!ne each of the following:

=ine !lling Lengthens the #roduct line by adding items %ithin the#resent range - obective to satis+y more customers- increassales and #ro4ts- %ard o* com#etitors

=ine stretching Lengthening the #roduct line beyond its current range o+variables- such as si$e and #rice' J#%ard stretch,higher6Cuality. X Penney- do%n%ard stretch ,lo%er6Cuality.Mercedes minicar

=ine e%tensions ntroduction o+ ne% #roducts that di*er signi4cantly +ormthose in the e&isting line certainly by more than ust si$e an#rice' 6 Ireater costs

and 4nancial ris"s than #roduct line 4lling or stretchingstrategies

5



(('G iscuss )rie0$ the !ve criteria consumers use to evaluateservice Dualit$.

Tangi)les )##earance o+ #hysical characteristics

@elia)ilit$ >e#endable #er+ormance

@es&onsiveness

Prom#tness and hel#+ulness

Assurance om#etence- courtesy and credibility

<m&ath$ Iood communication and understanding o+ customer7sneeds and concerns

(('8 ow can the variation in new-&roduct failure-rate estimates )ee%&lained'

Some studies e&amine the #ro#ortion o+ ne%6#roduct conce#ts or ideas that +ailto achieve commercial success- %hile others +ocus only on #roducts that +ail a+tebeing introduced into the mar"et'

((' #h$ are more and more !rms using teams to introduce new&roducts'

ne o+ the advantages o+ using #artici#ative structures %ith cross6+unctionalteams is their ability to reduce the time o+ the ne% #roduct develo#ment #rocessby +ostering closer relations bet%een various +unctional areas'

!educes time to gain a##roval +rom one area ,mar"eting. +or another7s %or"

,#roduct design.'

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(('(0 #hat are the ma9or ste&s of the new-&roduct develo&ment&rocess'

(('(( #hat are the more im&ortant sources of new &roduct ideas'

ustomers- !D>- Sales+orce- Product Managers- Mar"eting- >istribution-om#etitors'

(('(2 #hat are the various wa$s new &roduct ideas can )e tested'

,creening &rocess largely or entirely based on secondary data- on the mar"eton technical "no%6ho% resident in the com#any ,Module 8 estimating mar"et

#otential.'

,coring models use limited number o+ revie% criteria to more so#histicatedones'Easy to use and lo% in cost' When only rough distinctions are reCuired among#roects'

5

" ( /



(('(/ escri)e a la)orator$ test market and how it o&erates.

Pac"aged consumer #roducts- mainly +ood- household and some #ersonal careitems' Measures the #rocess by %hich a consumer ado#ts a ne% #roduct' =hree maor ste#s: awareness- trial and re&eat )u$ing'

!es#ondents re#resentative o+ the target audience see commercials about the

ne% #roduct imbedded in a = #rogram' =hen they are given the o#tion o+ buyinsuch a #roduct in a simulated store also stoc"ed %ith com#eting brands' + theychoose the test #roduct- then researchers ma"e +ollo%6u# intervie%s to determinthe e&tent o+ satis+action ,including #re+erence over their regular brand. andre#urchase intentions'

(('(1 #hat factors might in0uence a !rmEs decision a)out whetherto conduct a !eld test market.

m#lemented in a small geogra#hical area to ensure that it %ill deliver the

e&#ected results'

ost reasons and com#etitor threats giving them the o##ortunity to evaluate theresults- even to the #oint o+ introducing their o%n ne% #roduct'

(('(3 escri)e )rie0$ the various commerciali;ation strategies.

orego mar"et testing and move directly to a roll6out region by region ornationally +rom the outset'

E&tension o+ the +ull6scale test mar"et- %hich %as designed to test a national

introductory #lan'

!oll6out test rather than an elaborate mar"et test- #rovided the results +rom themar"et simulation studies are strongly #ositive' =hus- they launch their #roduct (0 o+ the country and rely on +ast sales results data ,by scanners %hen#ossible. to chec" ho% %ell the #roduct is doing'

=esting in a +e% countries be+ore global rollout'

=est area %here the com#any has strong resources in order to lead +rom strengthto get things moving'

Multi#le channels roll out

Based on the trade6o*s bet%een ris" and the need to #lan the cash Fo% +or theintroduction and the s#eed %ith %hich com#etitors are li"ely to react'See"ing national rollout asa#'

5



,(('1. ow do the earlier decisions concerning targeting and&ositioning a8ect the com&osition of the &roduct line as well asthe attri)utes of individual &roducts'

Earlier ste#s in the mar"eting management #rocess constrain a business unit7s#roduct strategy < es#ecially mar"et targeting and mar"et #ositioning %hich havan im#act on the com#osition o+ the #roduct line and the attributes o+ individual

#roducts'

,(('3. ow do the various stages in the &roduct life c$cle constrain&roduct strateg$'

)s times change the environment in %hich the business unit com#etes- the resuis li"ely to be a change in its #roduct strategy- constrained by the #roduct7s li+ecycle'

,(('5. #hat are the characteristics of a high-share glo)al strateg$'

(' ) drive +or a strong international mar"et6share #osition2' Products %ith a high degree o+ international standardi$ation

/' ) mar"eting Program < es#ecially #rice- #roduct line and advertising < gearedto the mass mar"et'

1' Large e&#enditures on design and !D> relative to the industry7s norm'Because o+ the large volume o+ sales- these costs on a unit basis are lo%'

3' =he use o+ regional #roduction +acilities or a rationali$ed global net%or"designed to reduce logistics costs'

,(('G. nder what conditions should a !rm ado&t a locali;ationstrateg$'

=he #remise that #roducts and #rograms must be ada#ted to the needs and%ants o+ individual countries because o+ environmental di*erences es#eciallycultural ones' +ten occurs because o+ mandatory ada#tation ,that is- the +oreignmar"et reCuires it.'

,(('8. iscuss )rie0$ the e8ect of each &ositioning strateg$ on&roduct decisions.

,ingle JmonoK #roduct line is ty#ically shorten than i+ it underta"es amultisegment #ositioning strategy- n a defensive &ositioning strategy a 4rm%ith a success+ul brand introduces a second similar brand to #re6em#t acom#etitors initiative strategy- similar to a 0anker or !ghting )rand- %hichcounters the moves made by com#etitors by o*ering retailers certain #rice andadvertising concessions'

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,(('. ow does each of the three ma9or t$&es of )usiness strateg$constraina !rmEs &roduct strateg$'

Pros&ector,trategies

enter on ne%6#roduct develo#ment- %hich encouragesbroad and technically advanced lines

Anal$;ers oncerned %ith de+ending their established business-either by using a lo% cost a##roach or by di*erentiatingtheir #roduct o*ering on the basis o+ Cuality andservice' Some attention to ne%6#roduct develo#ment'

efender Similar to )naly$ers e&ce#t the de+enders devote +e%erresources to the develo#ment o+ ne% #roducts- havesmaller #roduct lines ,on average. and %herever#ossible di*erentiate themselves +rom com#etitors viaservice'

=hree maor ty#es o+ business strategies constrain a 4rm7s #roduct strategy %ithres#ect to its breadth- technical so#histication- Cuality and service'

,(('(2. nder what conditions is )randing &articularl$ e8ective'

When it is dicult +or the consumer to measure the #roducts Cuality obectively'Status- large enough mar"et to %arrant the cost o+ branding- di*erentiate#roduct'

,(('(/. #h$ in America have high Dualit$ store )rands gainedconsidera)leshare as against national )rands'

n the 807s the national brands regularly increased their #rices along %ithma"ing massive distributions o+ cou#ons- thereby training consumers to sho#on #rice' Large number o+ line e&tensions and in general- +ocused less onbrand eCuity' =a"ing advantage o+ the #rice vulnerability o+ many nationalbrands'Strong in the so+t goods trade'

,(('(5. ow does the fact that services are intangi)leE a8ectmarketing management'

>i*erentiates service +rom a good' =he degree to %hich a service is intangiblea*ects the getting and "ee#ing o+ customers' onsumers are +orced to buy the#romise o+ a service' =hey are intangible hence mar"eters need to ma"e themtangible to #ros#ective buyers'

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G



Module 1" Pricing ecisions

(2'( #h$ has &rice )ecome a more im&ortant &art of a !rmEsmarketing strateg$

in recent $ears'

Slo%er gro%th- the maturing o+ many basic industries- im#roved #roductivity- thgro%ing #o%er o+ retailers and their #rivate labels and the increasedaggressiveness o+ lo%6cost global com#etitors have made domestic mar"ets mo#rice com#etitive' !esulting in #ricing and #rice com#etition becoming numberone #riority in the (0s'

(2'2 #h$ is &rice an area in which managers feel the most &ressureto &erform

$et the least certain the$ are doing a good 9o)'

or the most #art- managers believe that they don7t have control over #rice' =hmar"et dictates it yet anything closer to the @rightA #rice can have a tremendousim#act'

(2'/ #hat are the ste&s in the &rice-setting decision &rocess'

3n0uences and Constraints

• SBJ and mar"eting strategies

• =arget mar"et characteristics

• Product characteristics

• om#etitor characteristics

• om#any strengths and %ea"nesses

• Environmental inFuences

♦ Economic trends

♦ Legal restrictions

The &rice-setting decision &rocess

(' Set strategic #ricing obective2' Estimate demand and #rice elasticity o+ demand/' >etermine cost and their relationshi# to volume1' E&amine com#etitors7 #rices and costs3' Select a method +or calculating #rince5' Set a #rice levelG' )da#t #rice structure to meet variations in demand and cost across

geogra#hic territories- mar"et segments- etc'

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(2'1 nder what conditions is &enetration &ricing a&&ro&riate'

When in addition to a large mar"et:

(' =arget customers are relatively sensitive to #rice

2' =he 4rm7s costs are lo% com#ared to those o+ com#etitors and the SBJ is#ursing a lo%6cost strategy

/' Production and distribution costs #er unit are li"ely to +all substantially %ithincreasing volume'

1' Lo% #rices may discourage #otential com#etitors +rom entering the mar"et'

(2'3 escri)e a skimming &rice &olic$.

Setting the #rice very high and a##ealing to only the least #rice6sensitive

segment o+ #otential customers' =his can also be accom#lished over time- as inO#eriodic discounting7- %hen the seller #rices high at the beginning o+ each #erioand lo% at the end' Jsed normally in #ioneer develo#ment o+ a ne% #roductmar"et' Ma&imi$e short6run #ro4ts'

(2'5 escri)e a harvesting &rice strateg$.

Ma&imi$e short6term #ro4ts be+ore demand +or the #roduct disa##ears' =y#icallyinvolves cutting mar"eting- #roduction and o#erating costs o+ the #roduct %hilesetting a relatively high #rice to maintain margins and ma&imi$e #ro4ts'

(2'G #hat are the ma9or factors a8ecting a customerEs sensitivit$ to&rice'

(' Buyers7 %illingness to #ay a given #rice +or a #roduct is inFuenced by their#erce#tion and #re+erences: their needs- desires- a%areness o+ and attitudeto%ards the item in Cuestion

2' =he #rice- availability and attractiveness o+ alternative brands and substitute#roducts a*ect buyers7 %illingness to buy the #roduct'

/' Si$e o+ their incomes relative to the #rice inFuences customers7 ability to #ay+or a #roduct or service'

=a"en together- these +actors determine the #erceived value a #otential customer%ill associate %ith a given #roduct6mar"et entry and #rice he or she %ill #ay'

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(2'8 e!ne the term elasticit$ of demandE.

=he larger the #ro#ortion o+ #rice6sensitive customers in a #roduct7s mar"et themore sensitive overall demand is to a change in the #roduct7s #rice' =he degreeo+ res#onsiveness o+ demand to a #rice change is re+erred to as the &riceelasticit$ of demand.

(2' #hat is the formula for calculating the &rice elasticit$ ofdemand for a

&roduct or service'

Price elasticit$ of demand J<K H

(2'(0 #hat are the ma9or &ro)lems in using this formula'

6 ailure to consider the res#onse o+ com#etitors to the com#any7s change in#rice

6 =he demand may be inelastic +or a given #rice change- but elastic +or a largeramount

6 =hat elasticity is measure din terms o+ sales revenues not #ro4t margins ,onereason being that it does not ta"e into account scale e*ects.

6 ) lo%ering o+ #rice may a*ect the sales o+ others in the com#any7s #roduct line

6 t ignores any societal bene4ts that may be accorded to the com#any +orbene4ting lo%6income segments via a #rice reduction

(2'(( #hat are the more common wa$s of estimating a &roductEsdemand

curve'

1. )##roach is to survey a sam#le o+ consumers- or bring them into a laboratorysetting- and as" them ho% much o+ the #roduct they %ould buy at di*erent#ossible #rices' 6alidity is Cuestionable-

2. Estimating the #rice6Cuantity relationshi# via the regression analysis o+historical sales using consumer #anel data-

3. n6store e&#eriments %here a #roduct7s #rice is systematically varied- or

4. Multi#le test mar"ets' =his is e&#ensive'

G

change in Cuantity demanded

change in #rice



(2'(2 ow can com&etitorsE costs and &rices )e estimated'

=rac" the #rice- cost and relative Cuality o+ each com#etitor7s o*er'

om#etitors7 costs are harder to measure than their #rice' !everse engineeringcan be used to ta"e a#art com#eting #roducts and e&aminee the cost o+ theircom#onents- #ac"ing and #roduction #rocess'

(2'(/ escri)e Jusing an e%am&leK cost-&lus or mark-u& &ricingI rateof-return

or target return &ricing and )reak-even &ricing.

Cost-&lus or mark-u& &ricing is sim#ly to add a standard mar"6u# to the costo+ the #roduct'

@ate-of-return or target return this uses the same method as mar"u# #ricebut adds the cost o+ ca#ital tied u# in #roducing and distributing the #roduct'

+reak-even &ricing =his is the variable cost #er unit and 4&ed costs thevolume necessary to ust cover total costs'

(2'(1 escri)e the various com&etition-oriented &ricing methods.

oing L rate or com&etitive &arit$ 6 %here all try to maintain #rices eCual tothose o+ one or more maor com#etitors' Jsed %hen little #roduct di*erentiationand a +e% large com#etitors'

iscount or &remium &rice &olicies < base its #ricing on %hat its com#etitorsare charging- but try to hold its #rice either belo% or above the com#etition'

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,ealed )idding buyers reCuest a +ormal bid %ith no later o##ortunity +orchange'

(2'(3 e!ne the following terms:

4O+ origin&ricing.

=he manu+acturer #laces the goods O+ree onboard7 a trans#ortation carrier' )t this #oint

the title and res#onsibility #ass to thecustomer- %ho #ays the +reight +orm the+actory to the destination'

4reighta)sor&tion&ricing.

=he seller #ic"s u# all or #art o+ the +reightcharges' ?e% com#etitors trying to#enetrate ne% mar"ets and smallercom#etitors in maturing industries trying toincrease their share

one &ricing. s another com#romise a##roach that +allsbet%een B and uni+orm delivered #ricing'Here the com#any divides the country intot%o or more #ricing $ones' = charges allcustomers %ithin the same $one the samedelivered #rice- but a higher #rice is set +ordistant $ones than +or those closer to the#lant.

(2'(5 escri)e the various forms counter trade can take.

+arter >irect e&change o+ goods %ith no money and no third#arty involved'

Com&ensation deals Seller agrees to ta"e some o+ the #ayment in cashand the rest in goods'

+u$)ackarrangements

Seller o*ers a #lant- eCui#ment- or technical e&erciseto a customer and agrees to acce#t a #artial #ayment#roducts manu+actured %ith the eCui#ment or training

su##lied'

O8sets Seller com#ensated in cash but agrees to s#end asubstantial amount o+ that cash %ith e customer or itsgovernment over a stated time #eriod'

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(2'(8 e!ne trade or functional discountsI Duantit$ discountsIco-o&erative advertising allowances and re)ates.

Trade or functional discounts ) discount +rom the suggested retail list #rice' =his discount is given to the %holesaler and ; retailer'

Quantit$ discounts >iscount increases as order si$e increases'

Coo&erative advertising ) tem#orary reduction in the #roduct7s #rice''e' Pe#si7s o*er o+ (3 cans o+ soda +or the #rico+ a (26#ac"'

Allowance Similar to discounts n they inducements toencourage channel members or 4nal custometo engage in s#eci4c behaviors in su##ort o+the #roduct' 'e' car is a trade6in allo%ance'

@e)ates !ebates reduce the #rice o+ the #roductthrough a money6re+und o*er' E&am#le mail irebate'

(2'( #hat conditions allow for di8erential &ricing

?ot al%ays #ossible or %ise to set di*erent #rices +or essential the same #roduct

(' Must be obviously be identi4able customer segments %ith di*erent #ricesensitivities

2' Either the customer segments must be #hysically se#arated +rom one anotheor the 4rm must institute control #rocedures to ensure that the segment#aying the lo%er #rice cannot resell the #roduct to customers #aying thehigher #rice'

/' =he cost to the manu+acturer o+ segmenting and monitoring the mar"et shounot e&ceed the e&tra revenue generated by the discriminatory #ricing'

1' =he 4rm should be con4dent that resentment among customer as"ed to #aythe higher #rice- or com#etitive conditions in the mar"et- %ill not leave itvulnerable to com#etitive attac"s in the high #rice segments'

3' =he 4rm should #ay care+ul attention to the legal restrictions involved in #ricediscrimination'

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(2'(3 escri)e the various customer-oriented &ricing methods.

Perceived ?alue Potential customers usually have some idea o+ %hatconstitutes a good or bad #rice'

Customar$ Prices onsumers e&#ect a single customary #rice +or

#roducts i'e' andy bars at a customary #rice o+ (0cents %hen cost #ut #ressure on manu+acturesmargins- they reduced si$e o+ bar rather than u#setcustomers e&#ectation by raising the #rice'

Price =ining Selling all #roducts in a category at one o+ several#redetermined O#rice #oints or levels' Each #rice linere#resents a di*erent level o+ Cuality'

Ps$chological &ricing Jsers use #rice as an indication o+ Cuality'

Promotional &ricing Most common ty#e is sale: the o*er o+ a reduced #riceon a #roduct +or a limited time'

1".1 ) value6based #ricing strategy em#hasi$es the value o+ a brand to the consumet ho#es to ca#ture the consumer7s #erceived value o+ the #roduct' =o ado#t suca strategy- a manu+acturer o+ consumer household #roducts %ould have consider ho% and on %hat basis its #roducts di*ered +rom com#eting #roducand use the #erce#tion o+ these di*erences to set a #rice relative to the #ricebeing charged by com#eting #roducts' =o e&#loit these #erceived di*erences atranslated into stable- relative #rice di*erences ,as against the use o+ +reCue#romotional deals involving #rice.- the manu+acturer %ould need to abandon it#romotional #ricing' =his %ould not only stabili$e #rices over time- but savmoney- thereby #ermitting a reduction in #rice' =o ease the #ain o+ acce#tinvalue #ricing by retailers- a 4rm should reduce the retailer7s costs o+ selling th#roduct ,e'g' better control over inventories.'

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1".( irms sometimes set a lo% #rice in a ne% #roduct mar"et ,#enetration #ricing. todiscourage #otential com#etitors +rom entering the mar"et' an you thin" o+ anycircumstances %here a com#any might deliberately %ant to attract com#etitorsto a ne% mar"et and set a high #rice to hel# accom#lish such an obective9

) 4rm %anting to maintain a high Cuality image and "ee# #roduction Cuantitiesdo%n may %ish to ado#t a high #rice in order to: ,(. limit demand amongcustomers ,2. rein+orce the Cuality image o+ the #roduct and ,/. attract other

com#etitors to hel# build #rimary demand' onseCuently- the com#any may %acom#etitors to come in at the other end o+ the mar"et to satis+y consumerdemand +or lo%er #riced #roducts %hile the com#any continues to sell its#roducts at the high end' )lso- i+ the #ioneer has limited mar"eting resources- itmay %ant com#etitors to hel# build #rimary demand +or the ne% #roduct'

1". What is #rice elasticity9 >istinguish bet%een #rice6elastic demand and#riceinelastic demand' What are the #ricing im#lications o+ each ty#e o+elasticity9

Price elasticit$ < ) small #rice increase leads to a relatively large dro# in

Cuantity demanded'

Price inelasticit$ < ) small #rice increase leads to a relatively small decline inCuantity demanded'

When the #rice is elastic the 4rm may %ish to lo%er the #rice- %hile the 4rm may%ant to consider raising the #rice %hen the #rice is inelastic'

1".17 Manu+acturer ) has e&#erienced cost increases +or its #roduct in recentmonths't %ould li"e to initiate a #rice increase- but only i+ its maor com#etitors are li"elto +ollo% )7s lead %ith #rice increases o+ their o%n' Which characteristics o+Manu+acturer ) and %hich mar"et and com#etitive conditions- are most li"ely toencourage )7s com#etitors to +ollo% its lead in increasing #rices9

Manu+acturer ) must: ,(. )e one of the most eNcient &roducers in theindustr$ ,2. be &erceived to have good marketing e%&ertise %hich %illhel# move the #roduct even %ith a #rice increase or ,/. have a histor$ ofmaking &rice increases stick ' t is more than li"ely that the industry isoligo&olistic %ith little &roduct di8erentiation and a +e% large com#etitors,e'g' steel.'

8



1".11 ord Motor om#any o*ers a number o+ car models in di*erent #riceranges'n addition to the usual cost and demand considerations- %hat other +actorsshould the com#any consider %hen determining the relative #rices +or various#roducts in its line9

) "ey +actor to consider is the cross6elasticity bet%een models ,cannibali$ation.%hich is the #ercentage change in sales o+ one #roduct induced by a ( #er cent

change in the #rice o+ another' =his %ould enable ord to e&amine ho% #riceincreases in one model %ould a*ect demand +or the other models in its line' naddition- the com#any must consider the costs and demand +or re#lacement#arts and ho% much o+ each car model should be com#osed o+ #arts +rom othermodels ,e'g' bum#ers.'

1".1" Some com#anies are using the 3nternet to sell their #roducts < both ne%and old'Ho% could the nternet be used to develo& a demand curve +or a ne% #roduct

)n established #roduct9

4or a new &roduct the com#any could use the nternet to auction it o*' =o doso %ould reCuire a descri#tion o+ the #roduct- its uses- the bene4ts it #rovides-the amount involved- and com#etitive;substitute #roducts and their #rices'Bidders %ould receive some "ind o+ incentive to enter a bid' =he range o+ bid#rices cou#led %ith their +reCuency could be used as an estimate o+ the #erceivevalue o+ the ne% #roduct'

4or an esta)lished &roduct consumers could be as"ed to estimate the #ercent increase or decrease in sales resulting +rom each increment u&E anddown'7 =he assum#tion here is that in res#onding the consumer is actuallyrevealing his;her demand schedule' )gain- there %ould have to be a Ore%ard7 +orres#onding' =he diculty %ould be that the com#any %ould not "no% %hetherthose ans%ering %ere re#resentative o+ the 4rm7s customers'

8



Module 1( istri)ution Channel ecisions

(/'( e!ne a marketing channel.

=he set o+ interde#endent organi$ations involved in the #rocess o+ ma"ing a#roduct or service available +or consum#tion or use by consumers or industrialusers'

(/'2 e!ne each of the institutions found in marketing channels.

Merchantwholesalers

=a"e title to the goods they handle sell #rimarily to otherresellers industrial and commercial customers rather than toindividual customers'

Agent middlemen ncludes manu+acturer7s re#resentatives and bro"ers' )lsosell to other resellers and industrial or commercial customers-but do not ta"e title to the goods' Jsually s#eciali$e in theselling +unction and re#resent client manu+acturers on acommission basis'

@etailers Sell goods and services directly to ultimately consumer s +ortheir #ersonal- non6business use' Jsually ta"e title to goodsthey handle are com#ensated by the margin bet%een the#rice they #ay +or those goods and the #rice they receive +romtheir customers'

4acilitating agencies nclude advertising agencies- mar"eting research 4rms-collection agencies- truc"ing 4rms and rail%ays s#eciali$e dinone or more mar"eting +unctions- %or" on a +ee6+0r6service

basis to hel# clients #er+orm those +unctions more e*ectivelyand eciently'

8



(/'/ e!ne the following:

ManufacturerEsagents

Wor" +or several manu+actures- carry non6com#etitive-com#lementary merchandise in an e&clusive territory anconcentrate only on the selling +unction' m#ortant %hea manu+acturer7s sales are not sucient to su##ort a

com#any sales#erson in a #articular territory'

+roker nde#endent 4rms %hose #ur#ose is to bring buyers andsellers together +or an e&change' Bro"ers usuallyhave no continuing relationshi# %ith a #articular

buyer or seller'

@ack 9o))er ne uniCue +orm o+ +ull6service %holesaler' n recentyears su#ermar"ets and drugstores have addednon6traditional #roduct lines such a maga$ines-house%ares- and health and beauty aids about

%hich they have little "no%ledge' !ac" obbershave #ros#ered by not only #er+orming a +ull rangeo+ %holesaling activities by also ta"ing over someretain +unctions such as #roviding dis#lay rac"s-#romotional materials- stoc"ing and selling onconsignment'

(/'1 #hat are the ma9or t$&es of retailer'

eneralmerchandisediscount chains

,Wal6Mart. carry a broad assortment o+ goods

#holesale clu)s ,Sams. cash6any carry %holesalers selling to smallbusinesses and individual consumers

,u&ermarkets ,Sa+e%ay. +ull lien sel+6service store selling +ood andrelated #roducts'

,ingle-line mass-merchandiserstores

,=oys7!7Js .o*ering in6de#th assortment %ithin alimited number o+ lines at lo% #rices'

(/'3 #hat are the ma9or t$&es of non-store retailing'

>irect selling ( all retail sales ie )von < house to house

atalogue sales 3 all retail sales general merchandise and s#ecialty

= home sho##ing 20 all retail sales home sho##ing channel

ending machines ood snac"s- beverages- cigarettes

8



=he World Wide Web Ireat #otential +or selling goods and services toconsumers around the %orld'

(/'5 escri)e each of the four alternative consumer goods channels.

(/'G escri)e each of the four alternative industrial goods channels.

8



(/'8 4irms design channels to accom&lish one or more o)9ectives'#hat are the$'

(' ncrease #roduct availability to #otential buyers

2' Satis+y customers7 service reCuirement:rder cycle time- >e#endability- ommunication- onvenience- Postsale services

/' Ensure #romotional e*ort

1' btain mar"et in+ormation

3' ncrease cost6e*ectiveness

5' Maintain Fe&ibility

(/' Describe the three basic strategies of retail coverage.

@etailCoverage

Ma9or strength Ma9or #eakness Product mosta&&ro&riate for

3ntensive

Ma&imum Ma&imi$es #roductavailability

Lac" o+ retailersu##ort

Lo% involvementconsumer convenientgoods

<%clusive

Single Matches retailerclientele %ith targetmar"et +acilitates closeco6o#eration %ithretailer'

!is" o+ relying onsingle retailer

High6involvements#ecialty or sho##inggoods

,elective

Limited

,more than ( but+e%er than allretailers.

Provide adeCuatecoverage but not at

e&#ense o+manu+acturer6retailerco6o#eration

>icult to im#lementgiven interstore

com#etition-es#ecially %herediscounts may occur

n+reCuently #urchasedsho##ing goods

,eg' automobiles.

(/'(0 escri)e the various t$&es of vertical marketing s$stem.

Cor&orate ?M, nvolves a vertically integrated system

Contractual ?M, ormulates agreements s#elling out a coordinated set o+ rights and obligations +or members o+ the system

Administered?M,

o6o#eration bet%een t%o or more channel #artners isbased on norms o+ mutual trust and the e&#ectationthat co6o#eration %ill increase the total systems successthereby ma"e all members better o* in the long term

8



(/'(( #hat are the ma9or sources of channel &ower'

<conomic &ower Members #erceive that a 4rm can mediate economicre%ards +or them i+ they +ollo% its directives

Coercive &ower Perce#tion that one channel member %ill #unish another+or +ailure to co6o#erate' nverse o+ economic #o%er'Punishments usually ta"e the +orm o+ a reduction in or %ithholding o+ economic re%ards

<%&ert &ower Perce#tion one channel member has s#ecial "no%ledge ore&#ertise that can bene4t other members o+ the system

@eferent &ower Belie+s that the bene4ts generated are li"ely to continue'

BG;3: based on the e&tent to %hich the #o%er6holder is %ell li"ed D admired by othersattached to the #erson- not to the #osition

=egitimate &ower Belie+ that one channel member has the right to ma"ecertain decisions or demands and to e&#ect com#liance+rom other members- result o+ o%nershi# or contractualagreements but in some instances it is based on moralauthority or common belie+s'

1(.1" nder what conditions should a manufacturer use a &ullstrateg$'

A &ush strateg$'

Pull ,trateg$:) share leader o+ most #restigious brand in its category has substantial #o%er toinFuence other channel members- #articularly i+ the #roduct is in the gro%thstage o+ its li+e cycle' or ne% #roduct- the #roducer must demonstrate that itsmar"eting #rogram can Cuic"ly build strong customer demand and loyalty +or thne% brand' t7s easier +or 4rms %ith substantial resources- %ho are #erceived tohave a great deal o+ mar"eting e&#ertise- and has an e&tensive trac" record or#ast ne% #roduct successes' Large consumer goods mar"eters em#loy #ullstrategies'

Push strategies:

Smaller 4rms %ith limited resources- those %ithout established re#utations assavvy mar"eters- and those attem#ting to gain better channel su##ort +ore&isting #roducts %ith relatively small shares and volumes o+ten have dicultyachieving coo#eration solely on the #romise o+ +uture sales and #ro4ts'

8



1(.1( iscuss )rie0$ the various &ur&oses channel incentives areused for'

20ncti&na" e$%&$/ance di/ensi&ns E#a/"es &% c-anne" incentives

3ncreased &urchases2carr$ largerinventories

Larger margins- e&clusive territories- buy6in

#romotions- Cuantity discounts- seasonal discountbuy6bac" allo%ances- +ree goods- shel+6stoc"ing#rograms- slotting allo%ances'

3ncreased &ersonal selling e8ort Sales training #rograms- instructional materials-incentive #rograms +or channel members7sales#eo#le'

3ncreased local &romotional e8ort

• Local advertising o6o#erative advertising advertising allo%ances#rint- radio or s#ot television advertisements +oruse by local retailers'

• ncreased dis#lay s#ace Promotion allo%ances tied to shel+ s#ace'

• n6store #romotions >is#lay rac"s and signs- in6store demonstrations-

in6store sam#ling'• Price #romotions *6invoice allo%ances'

3m&roved customer service Service training #rograms- instructional materialshigh margins on re#lacement #arts- liberal laborcost allo%ances +or %arranty service'

<%hi)it 1(.17 3ncentives for motivating channel mem)er &erforma

(/'(1 iscuss the three ma9or wa$s of entering a foreign countr$'

<%&orting• >irect - oreign based distributors; agents

- #erating units ,branches or

subsidiaries.• ndirect !elies on the e&#ertise o+ domestic international

middlemen:- E&#ort merchants- buy the #roduct

and sell it overseas +or their o%n account

- E&#ort agents- sell on a commissionbasis

- oo#erative organi$ations- e&#ort +several #roducers- es#ecially +arm #roducts

Contractual entr$ modes - Licensing

- ranchising- ontract manu+acturing ,sourcing a

#roduct +rom a manu+acturer located in a+oreigh country +or sale there or else%here

- =urn"ey construction contract- o#roduction- ontertrade transactions ,M(2:

barter- com#ensation #ac"ages-counter#urchase- buybac" arrangement.

Overseas direct investment Xoint venture ,oint o%nershi# arrangement.

8



Sole o%nershi# ,setting u# a #roduction +acility.

,(/'(0. The design of a distri)ution channel involves a series ofinterrelated

decisions. #hat are the$'

3n0uencingfactors

SBJ andmar"etingstrategies

=arget mar"etcharacteristics

Productcharacteristics

om#etitorcharacteristics

om#anystrengths and%ea"nesses

Environmental+actors

S#eci+y obectives to be achieved bydistribution channels

>etermine desired number o+ retailoutlets ,+or consumer goods and servicesonly.

>etermine a##ro#riate number o+%holesale distribution #oints

Select ty#es o+ institution to be used ateach channel level

,(/'1. #hat are the ma9or trends in wholesaling'

6 ne %holesaler to acCuire ; merge %ith another %holesaler that has +avorablylocated branches and one or more ne% #roduct lines

6 ncrease the number o+ value6added services o*ered- such as 4nancingarrangements- engineering consultants- ust6in time inventory control- overnightdeliveries and store layouts'

6 Large %holesalers are also im#lementing a combination o+ strategies to im#rove

lo% margins' utting o#erating costs by using their resources more eciently'

(/'G #hat are the ma9or trends in retailing'

6 =he demogra#hic changes ie t%o %age earner households- aging baby boomers

6 onsumer attitudes more health care concerns

8



6 !etailers carrying more diverse me1rchandise lines

6 Slo%ing o+ retail sales- little ne% sho##ing center construction greater em#hasison #rice- greater com#etition and more and more consolidation through mergers

6 !etailers investing heavily in sate o+ the art technology to ma&imi$e o#eratingeciencies'

,elective

Limited ProvidesadeCuatecoverage but notat e&#ense o+manu+acturerretailer co6o#eration

>icult toim#lement giveninter storecom#etition-es#ecially %herediscounts mayoccur

n+reCuently#urchasedsho##ing goods'

1(.( Jnder %hat conditions is a manu+acturer most li"ely to consider the use o+mu!%i#!e $is%ribu%ion channe!s +or mar"eting a #roduct9 >escribe an e&am#le o+multi#le channels involving a consumer good or service'

Answer:) 4rm is most li"ely to consider the use o+ multi#le distribution channels %hen it itrying to reach several mar"ets simultaneously and each mar"et has uniCuecharacteristics %hich reCuire di*erent levels o+ #er+ormance +rom channelmembers'

BM has its o%n direct sales+orce and also sells via retailers'

1(. alvin lein eans are se!ec%i2e!' $is%ribu%e$ through a limited number o++ashionable de#artment and s#ecialty stores' s this an a##ro#riate channel desig+or such a #roduct9 Why or %hy not9

Answer:n the case o+ alvin lein eans this is an a##ro#riate channel design- since the eans are considered sho##ing goods that customers buy in+reCuently and com#aon #rice and #roduct +eatures' t is also a##ro#riate since certain retailers such asmass merchandisers ,mart. do not 4t the image set by lein +or their eans'

8



1(. ne o+ a number o+ trends a*ecting %holesalers in the Jnited States- Euro#e and Xa#an is <us%>in>%ime' >escribe %hat this term means and e&#lain %hat +orces arema"ing it a more and more im#ortant business #ractice' or a %holesaler to ado#tthis #ractice- %hat must it be able to do9

Answer: Xust6in6time has to do %ith inventory control' t #rograms the delivery o+ a

com#onent by a su##lier to a customer at literally the moment %hen the lastcom#onent in stoc" has been used' =he obective o+ a ust6in6time system is $eroinventory %hich %ould im#ly not only a uniCue #hysical logistics system- but#roducts %ith $ero Cuality de+ects' n order to be able to ma"e such a system %ora %holesaler must be able to %or" closely %ith a client- develo# and constantlyu#date a decision su##ort system and stoc" error +ree #roducts'

1(.5 ) +e% years ago- large manu+acturers %ith %ell6"no%n brands < Ieneral oodsand Procter D Iamble < held substantial #o%er over even the largest retailers intheir distribution channels' =oday- large retailers such as the Sa+e%ay su#ermar"e

chain have the #o%er to demand more re%ards and su##ort +rom maormanu+acturers' What has caused this change in the balance o+ #o%er9 What arethe bases ,or sources. o+ retailers7 #o%er over their su##liers9

Answer:n+ormation and the technology to su##ly it Cuic"ly are the #rimary reasons +or theincreased #o%er o+ retailers' E&#ert #o%er is su##lied by the ability o+ retailers tohave access to u#6to6the6minute in+ormation on sales o+ #roducts'

1(.6 Why %ould an inde#endent hard%are store o%ner agree to become a member o+a co>o#era%i2e chain9 What bene4ts %ould the store o%ner receive9 Ho% %ould th

develo#ment and gro%th o+ the co6o#erative chain a*ect the balance o+ #o%er inhard%are distribution channels9

Answer:) coo#erative chain gives the individual retailer greater #o%er in dealing %ithsu##liers- economies o+ scale in advertising- lo%er #rices and s#ecial #romotionalmaterials'

=he bene4ts are: ,(. ability to com#ete %ith national chains more e*ectively,2. better- more #ro4table relationshi# %ith su##liers'

=he gro%th o+ a coo#erative chain %ould shi+t #o%er to%ards the retail end o+ thechannel'



1(.17 ) small and relatively un"no%n manu+acturer o+ valves and 4ttings %ants toinduce large #lumbing %holesalers to carry and #romote its #roducts' Whichstrategy should it #ursue9 Which s#eci4c incentives might it o*er to %holesalers tgain their su##ort9

1(.17 Answer:) #ush strategy %ould be most a##ro#riate in the situation described'

S#eci4cally- the com#any should:

,(. *er higher margins on some o+ its #roducts than its com#etitors,2. Provide sales training #rograms to the sales sta* o+ each o+ the %holesalers,/. >evelo# a coo#erative advertising #rogram %ith the %holesaler to subsidi$e its

advertising #rogram,1. Provide in6store dis#lay rac"s or demonstrations and,3. Enhance #roduct return and re#lacement #olicies to ma"e the #roduct more

attractive'

1(.11 ) cereal manu+acturer is considering using a #ull strategy to gain e&tensiveretail coverage +or a ne% cereal brand targeted at health6conscious adults' Whichcharacteristics and ca#abilities o+ the manu+acturer can hel# determine its abilityto success+ully im#lement such a strategy9

1(.11 Answer:+ the cereal manu+acturer is the mar"et leader and its other #roducts hold strongmar"et shares- the manu+acturer has a better o##ortunity to ma"e a #ull strategy%or" success+ully' S#eci4cally- the manu+acturer should:,(. Have substantial resources to devote to the #roduct7s mar"eting #rogram,2. Be #erceived to have a great deal o+ mar"eting e&#ertise and

,/. Have an e&tensive trac" record o+ #ast ne%6#roduct successes'

1(.1( n establishing and maintaining a channel system in the develo#ing countries in)+rica- %hat #roblems might the manu+acturer o+ small electrical a##liances e&#ecto encounter9 or each such #roblem- %hat can be done to solve it9

1(.1( Answer:n many #arts o+ )+rica- the manu+acturer %ould 4nd no channels suitable +or thesale and servicing o+ a line o+ small electrical a##liances < or- at best- inadeCuate

ones' + the latter- the manu+acturer could try to augment the channel7s e*ort <e'g' by #roviding inventory items on a consignment basis- #roviding credit at theretail level and hel#ing retailers to o#en ne% accounts %ith com#any sales#erson+ no channels are available- the manu+acturer can either set u# its o%n channel olocate a %holesaler %ho is %illing to %or" %ith the manu+acturer in selling andservicing retail accounts'



Module 1 3ntegrated Promotion ecisions

(1'( e!ne each of the &romotion mi% com&onents.

Advertising )ny #aid +orm o+ non6#ersonal #resentation and #romotion o+ideas- goods- or services by an identi4ed s#onsor'

Personalselling

) #rocess o+ hel#ing and #ersuading one or more #ros#ects to#urchase a good or service or to act on any idea through theuse o+ an oral #resentation ,#erson6to6#erson communication.

,ales&romotion

ncentives designed to stimulate the #urchase or sale o+ a#roduct < usually in the short term'

Pu)licrelations

?on6#aid- non6#ersonal stimulation o+ demand +or a #roduct-service or business unit by #lanting signi4cant ne%s about itor a +avorable #resentation o+ it in the media'

(1'2 #hat are the ste&s needed to develo& a &romotion &rogram'

>evelo#ing an integrated Mar"eting ommunication Plan;ProgramPromotion mar"eting communication Plan;Program

<%hi)it 1." ecision seDuence for develo&ing the &romotion mi%



(1'/ #hat su)9ects is advertising decision making concerned with'

6 Setting bectives and Budget6 hoosing media ty#es and vehicles choice6 What +reCuency6 >eciding %hat the message should be and6 Ho% to #resent it and6 )naly$ing the e*ectiveness o+ the advertising #rogram

(1'1 #hat are the contents of a co&$ &latform'

6 Basic issue or #roblem advertising must address6 )dvertising obective6 =arget audience6 Maor selling idea < or "ey bene4ts6 reative strategy statement ,cam#aign theme- a##eal and e&ecution techniCue.

6 Su##ort in+ormation

(1'3 escri)e the various wa$s to &re-test message e8ectiveness.

@ecall testPrint ads are inserted into a simulated maga$ine andres#ondents are told to read %hatever interests them')+ter doing so- they are as"ed to O#ly bac"7 ads they remember'

,ales test )dministered by commercial research 4rmsmeasure the e*ects o+ = commercials through the use o+consumer #anels located in a number o+ small cities'

T? Commercials =ested by e&#osing them in one or more cities and +ollo%ing u# %ithseveral hundred #hone intervie% to 4nd out ho% many remember themessage

Pro9ect tests Iive res#ondents an ad and using a variety o+ #roective techniCues toelicit res#onses'

Ph$siologicaltest

Jse s#ecial machines to measure #hysiological res#onses toadvertising'

Pu&il ilation When #erson is vie%ing or listening to interesting #leasant messagethe #u#il dilates'

Theatre tests Similar to the above e&ce#t the audience7s reaction to commercials ismeasured electronically during the sho%ing via buttons the audience#ushes to indicate li"ing ; disli"ing'

On Air testing Jsing H or cable television channel to air a given #rogram in %hichthe advertisement %ill a##ear'



(1'5 escri)e the various wa$s to measure the e8ects of anadvertising

message after it has run.

@ecognitiontest

Most #o#ular #ost6e&#osure testing +or #rint media'ield %or"ers intervie% #eo#le %ho say they have read a given

issue o+ a maga$ine' !es#ondent goes through the issue #ointingout %hat %as seen and read' ntervie%er as"s %hich #arts %ereread' ntervie%er starts each intervie% at a random #oint %ithinthe issue- so that ratings are not a*ected by res#ondent +atigue'

@ecall tests Measure the e*ectiveness o+ an advertising message <es#ecially = commercials a+ter it has been run'!es#ondents are ty#ically aided in their recall' ntervie%s sho%them a list o+ the advertisers and brands #resented and as" %hichones they have seen recently' ntervie%ers #roceed to obtain #laybac"s o+ these advertisements +rom the res#ondents'

(1'G e!ne the term sales &romotionE.

=hose mar"eting activities- other than #ersonal selling- advertising and #ublicitythat stimulate consumer #urchasing and dealer e*ectiveness'

(1'8 #hat are the most commonl$ used sales &romotion techniDues'

6 Price o* #romotions6 Premiums < bundled good or service

6 Sam#ling

6 !ebates6 ontests6 S%ee#sta"es6 =rade #romotions

(1' e!ne the term integrated marketing communications &lanE3MC.

=he #rocess o+ building and rein+orcing mutually #ro4table relationshi#s %ithem#loyees- customers- other sta"eholders and the general #ublic by develo#ingand coordinating a strategic communications #rogram that enables them to ma"

constructive contact %ith the com#any brand through a variety o+ media'



,(1'2. 3n recent $ears su)stantial changes have occurred in the wa$!rms market their goods L all of which have a8ected the !rmEs&romotion decisions. #hat are the$'

6 =argeting o+ smaller and smaller segments including individual consumers'

6 Iro%th in no6traditional media resulted in increase in direct mar"eting' e nterne

6 ncrease com#etition that +orced 4rms to become more #rice conscious'

6 Shi+t in #o%er +rom manu+acturers to retailers that have resulted +rom gro%th o+large discount general merchandise and O"iller category7 chains'

,(1'/. escri)e the communication &rocess.

,ource =he communicator

Message a set o+ symbols

Medium =he communication channel@eceived

=he target audience

@es&onse

) set o+ reactions

4eed)ack

,(1'1. Consumers engage in &ractices designed to &rotect themselvefrom receiving unwanted messages. escri)e these &ractices.

,electivee%&osure

E&#ose themselves to messages and media that arecom#atible %ith their e&isting attitudes- )void messages notcom#atible %ith their attitudes or that they 4nd irritating orboring'

,elective&erce&tion

Peo#le distort or misinter#ret the intended meaning o+ amessage %hen it di*ers +rom their attitudes' =he greater theattitude change reCuired to ma"e res#ondents acce#t the

#osition advocated in the message- the more li"ely themessage is to be distorted or reected'

,electiveretention

Peo#le the to +orget more Cuic"ly communications that aresubstantially at variance %ith their attitudes' Peo#leremember +or a longer time messages that rein+orce theirattitudes'





,(1'G. #hat are the ma9or t$&es of advertising'

obranding Enables a brand to be leveraged by enteringanother #roduct call as a braded ingredient- %hich

has less ris" than a brand e&tension or combiningt%o brands

Selective demand Most brand advertising +ocus on stimulatingselective demand +or a #articular #roduct'

Primary >emand See"s to e&#and the mar"et +or a #roduct ty#e

o6o#erative )dvertising Xoint e*ort by manu+acturers and retainers to sell a#articular #roduct'

or#orate ,institutional.)dvertising

>i*ers +rom #roduct advertising in that its #ur#oseto bene4t the cor#oration by building +avorableattitudes to%ard the overall 4rm'

ssue advertising Su##ort a given social or economic issue in %hichthe 4rm has a strong interest'

nvestor relations >esigned to generate a%areness andunderstanding o+ a com#any7s 4nancial#er+ormance'

,(1'8. #hat is the hierarch$-of-e8ect model'

Move #ros#ective buyers through a series o+ ste#s < a%areness- com#rehensionconviction- action < to the ultimate goal o+ #urchasing the #roduct or service'

,(1'. escri)e @a$Es three-order hierarch$ models

Learning Hierarchy =he mental stages #eo#le go through %hendeciding to #urchase relatively high6involvementconsumer or industrial #roducts'

>issonance6attributionHierarchy

onsists o+ action +ollo%ed by attitude changeand learning do- +eel- learn-

Lo% nvolvementHierarchy

onsisting o+ a general a%areness +ollo%ed byaction and then attitude change and learning:do- +eel



,(1'((. #hat have researchers concluded regarding what messagestructures are most e8ective'

Success o+ any message de#ends not only on its content- but also on itsstructure'

=%o6sided #resentationsgenerally more e*ective %ith those members o+ the audience %ho are %eleducated or o##osed to the communicator7s #osition' Pre#are #eo#le +orcounterarguments'

>ra%ing conclusionsthe best thing to do- although advertisability o+ doing so de#ends on theintelligence o+ the audient- the com#le&ity o+ the subect matter #resentedand the e&tend to %hich the audience is involved'

#timum si$eo+ a message is dicult to ascertain because o+ the interactions o+ messagsi$e- the #o%er o+ the message itsel+ and e*ect o+ re#letion on consumerlearning' Strongly li"ed to the degree o+ consumer interest in the #roduct'Lo% interest reCuire high or large unit message i'e' +ull #age advertisemen/0 second television s#ot'

Message is o+ great interest to the target audience a smaller unit maysuce'

,(1'(2. #hat &ro)lems arise from using reach and freDuenc$measures'

(' >e4ning the target audience and correlating it %ith audiences reached bythe various media vehicles'

2' >e4ning e&#osure < is it an o##ortunity to be e&#osed to a given messageor is it an actual reading o+ a #rint advertisement- the actual %atching o+ atelevision commercial or the actual listening to an advertisement on radio>icult tas" to measure e&#osure- no matter ho% it is de4ned'

/' ?ot all %ho are e&#osed are o+ eCual value to the advertiser 0 some maynot even be #ros#ects

1' Ho% should successive e&#osures be %eighted9 s a second e&#osure%orth more than third9 Ho% much9 )nd ho% much time should elsebet%een e&#osures'



,(1'(/. #hat are the advantages and limitations of each of the fourt$&esof mass media'

TelevisionBest at communicating images and symbols because itcan demonstrate #roduct usage and consumer reactions'Enormous reach almost all JS households have a = set'

@adio Less involving than television- but o*ers economy and theo##ortunity to target s#eci4c audiences6 His#anics-blac"s- teenagers- senior citi$ens'

ne&#ensive com#ared %ith =

!eaches #eo#le mostly %hen they are doing somethingelse6%or"ing- driving or %al"ing' +ten used to rein+orce

= advertising

Printed media More involving than broadcast media- !eaders select %hatadvertising they %ant to read and ta"e as much time as

they %ish to read it' E*ective in communicating s#eci4cin+ormation about a #roduct' Particular im#ortant +or mostindustrial #roducts and high6involvement consumer goods',=hree maor ty#es o+ maga$ines- consumer- +arm andbusiness.- ?e%s#a#ers advertise consists mainly o+ retailand classi4ed'

Out of homeIe%hi)ition andsu&&lementar$ media

over %ide variety o+ media ty#ed ut6o+ home <Billboards are most #rominent E&hibition < in6storedis#lay materials

,u&&lementar$

irectories and$ellow &ages

<vent s&onsorshi& Become increasingly #o#ular high visibility in terms o+media coverage-

,(1'(1. #h$ have retailers had diNcult$ in using the #e)'

t reCuires subscribing to an nternet access service as %ell as the hard%are anso+t%are to +acilitate accessing the site and e&#loring the com#any in+ormation4elds- =echnical su##ort needed to maintain the system- including its u#date

and security' )dvertising costs associated %ith ma&imi$ing site trac andguiding visitors through the 4les'

,(1'(3. ow are &rint medium audiences t$&icall$ measured'

!esearches conduct intervie%s ho%ever %hen to conduct the intervie% is also #roblem



,(1'(5. #hat are the ma9or &ro)lems in measuring televisionaudiences'

!esearchers can measure the number o+ sets tuned to a given #rogram- ho%long they are tuned to a given #rogram but do not "no% the demogra#hics o+the individual vie%ing - the number o+ actual vie%s- does not record %ho isloo"ing at the television es#ecially during commercials'

,(1'(. iscuss the use of a glo)ali;ed advertising strateg$ ascom&ared with a locali;ed one.

=he bene4t o+ globali$e is in the +orm o+ economies o+ scale- %hich relate#rimarily to #roduction costs and to a lesser e&tent to the use internationalmedia'

"ay +or #roduct com#onent o+ the mar"eting mi& es#ecially +or industrialgoods and consumer durables'

>iculties encountered by di*erences in local cultures- translation- ho%consumer res#ond to humorous a##eals- se&ual a##eals reactions- Start %ithstandard ; globali$e and e&#and to local as reCuired'

,(1'22. e!ne the term &u)lic relationsE.

) #romotional +unction that uses t%o6%ay communication to mesh the needsand interest o+ an institution or #ersons %ith the needs and interests o+ thevarious #ublics %ith %hich that intuition or #erson must communicate'

,(1'21. iscuss the &ro)lems in regulating and controlling dece&tionin advertising.

t is dicult to detect in many cases because o+ the subtle %ays in %hich it can%or"' En+orcement is hindered by the +act that advertisers can legally em#loy

O#u*ery7 %hich uses subective claims the Obest7 or Ogreatest7 to #romote a#roduct'

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1." Rou are the mar"eting manager +or a maor airline' Ho% %ould you vary theem#hasis among the %oo!s in 'our #romo%ion mi? %hen designing #romotionalstrategies +or ,a. individual consumers %ho travel +or #leasure and ,b. cor#oratetravel de#artments that select the airlines to be used by com#any em#loyees9

Answer 1."Individ0a" c&ns0/e$s +ocus on advertising media %hich reach consumers suchas #rint media ,local ne%s#a#ers- national ne%s maga$ines such as Time.' >evelo

incentive ,+reCuent Fyer. #romotions' =arget certain segments in order to increasethe load +actor' )lso develo# #ac"age vacations'

C&$&$ate t$ave"e$s +ocus on media designed to reach decision ma"ers in thetravel de#artment +or e&am#le- trade #ublications %ithin the travel industry' )lsoi+ the com#any maintains a sales+orce- it should have them call on largecor#orations to e&#lain in detail %hat e&actly each airline is o*ering and at %hat#rice'

1. =he advertising manager +or a large 4rm as"ed you < the mar"eting vice #reside

< to a##rove a \300 000 increase in %he a$2er%ising bu$ge% +or one o+ thecom#any7s #roducts' She #redicts that the additional advertising %ill #roduce a \2million increase in the #roduct7s sales' What additional in+ormation %ould you as"+or be+ore ma"ing a decision9

Answer 1.,a. Ho% %ill the money be s#ent < ho% %ill it be divided among various advertising

media9,b. ver %hat time +rame are the additional +unds to be s#ent9,c. What is the time +rame +or the #roected sales increase < ho% long %ill it ta"e t

achieve the \2 million sales increase9

,d. What #ercentage increase in total sales does this \2 million re#resent and %hais the #ercentage increase in the advertising budget i+ the \300 000 isa##ro#riated9

,e. What is the amount o+ the marginal contribution generated by this e&#enditure ,+. ould a better return be achieved by s#ending the \300 000 on other

#romotional tools- such as hiring more sales#eo#le9

1./ ) car com#any sets the advertising and #romotion budget +or one o+ its car linesby allocating a 4&ed number o+ dollars +or each car it +orecasts %ill be sold in thecom#any year' What are the advantages and limitations o+ this a##roach todetermining a #romotional budget9

Answer 1./ Advanta.es: ,(. sim#le to calculate ,2. ris" adverse < since s#ending is tied tosales it "ee#s the com#any +rom getting too +ar out o+ line %ith the rest o+ theindustry'

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*isadvanta.es: ,(. #rovides little direction in setting #romotional budgets ,2.does not %or" %ell %ith ne% brands or in situations %here sales volume is unstablor declining'

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Part ,trategic MarketingPrograms for ,elected ,ituations

Module 1 ,trategies for *ew and rowing Markets

(3'( escri)e the su)categories of new &roducts )asedon their degree of newness.

*ew-to-the-world &roduct =rue innovations ne% to the 4rm and create anentirely ne% mar"et (0

*ew &roduct lines Product category that is ne% +or the com#anyintroducing it- but not ne% to customers in thetarget mar"et com#etitive brands e&ist 20

Additions to e%isting&roduct lines

?e% items that su##lement a 4rm7s established#roduct line 25

3m&rovements in orrevisions of e%isting&roduct

Provide im#roved #er+ormance or greater#erceived value brought out to re#lace e&isting#roduct 25

@e&ositioning E&isting #roducts that are targeted at ne%a##lications and ne% mar"et segments G

Cost reductions Product modi4cations #roving similar #er+ormanceat lo%er cost ((

(3'2 #hat are the &otential sources of com&etitive advantagesavaila)le to a &ioneer'

(' Economies o+ scales and e&#erience2' High s%itching costs +or early ado#ters/' Pioneer de4nes the rules o+ the game1' >istribution advantage3' irst choice o+ mar"et segments and #ositioning5' Possibility o+ net%or" e&ternalities or #ositive net%or" e*ectsG' Possibility o+ #re6em#ting scarce resources

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(3'/ #hat are the &ossi)le advantages of ado&ting a followerstrateg$'

(' )bility to ta"e advantage o+ #ioneer7s #ositioning mista"es2' N #roduct mista"es/' N mar"eting mista"es1' N limited resource3' )bility to ta"e advantage o+ the latest technology

(3'1 #hat are the determinants of success for a &ioneer strateg$'

(' ?e% #roduct mar"et is insulated +orm the entry o+ com#etitors- at least +or a %hileby strong #atent #rotection- #ro#rietary technology ,such as uniCue #roduction#rocess.- substantial investment reCuirements- or #ositive net%or" e*ects

2' =he 4rm has sucient si$e- resources- and com#etencies to ta"e +ull advantage o+its #ioneering #osition and #reserve it in the +ace o+ late com#etitive entries'

6 Large entry scale

6 Broad #roduct line6 High Cuality #roduct6 Heavy #romotional e&#enditures'

Success+ul +ast +ollo%ers: 6 Larger entry scale than #ioneer6 lea#+rogging the #ioneer %; su#erior

#roduct technology #roduct Cuality customer service

Success+ul last entrants: ocus on #eri#heral target mar"ets or niches

(3'3 iscuss each of the three t$&es of &ioneer strateg$.

Mass MarketPenetration

a#ture and maintain a commanding share o+ the totalmar"et +or the ne% #roduct' < Most success+ul %ith entrybarriers inhibit or delay a##earance o+ com#etitors'

*iche &enetration ocus on a single mar"et segment' Lets smaller #ioneergain the biggest bang +or its limited buc"s and avoiddirect con+rontation %ith bigger com#etitors'

,kimming G <arl$withdrawal

om#etition is usually inevitable- and #rices and marginstend to dro# dramatically a+ter +ollo%ers enter themar"et' S"imming strategy %hile #lanning an early%ithdra%al involves setting a high #rice and engaging inonly limited advertising and #romotion to ma&imi$e #er6unit #ro4ts and recover the #roduct7s develo#ment costsas Cuic"ly as #ossible'

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(3'5 #hat marketing activities should a !rm engage in to increasecustomersE awareness and willingness to )u$'And to increase the customersE a)ilit$ to )u$'

3ncrease Awareness

6 Heavy e&#enditures on advertising- introductory #romotionssuch as sam#ling D cou#oning- and #ersonal selling e*orts

6 Broadly +ocus #romotional e*orts to e&#ose D attract as many #otentialcustomers as #ossible be+ore com#etitors sho% u#

3ncrease #illingness to +u$

6 !educing the ris" associated %ith buying something ne%

6 letting customer try %ithout obligationtest6drive- 50 days +ree trial version-

6 liberal return #olicies

6 e&tended %arranties

3ncrease Customers a)ilit$ to )u$

6 Pursuing mass6mar"eting #enetration to "ee# #rices lo% ,#enetration #ricing.

6 Liberal 4nancing arrangements

6 Easy credit terms

6 Iaining adeCuate distribution +or increasing availability be+ore #romotionalcam#aigns 6] e&tensive #ersonal selling and trade #romotions

6 om#atible %ith related eCui#ment

6 nstallation assistance6 =raining #rograms

(3'G #hat marketing &rogram com&onents are im&ortant for askimming strateg$'

6 !elatively high #rice

6 ntroductory #romotional #rograms best +ocus on customer grou#s %ho areleast sensitive to #rice and most li"ely to be early ado#ters o+ ne% #roducts

6 ocus on u#scale customers

6 Predation the 4rm7s avenue o+ esca#e +rom the mar"et by

oncentrating on the ne&t generation o+ technology

denti+ying ne% a##lication segments

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1.( !esearch sho%s that com#anies that increase #ro4ts mostly by cutting the costso+ their ne% #roduct entries have substantially lo%er #ro4ts than those thatem#hasi$e revenue gro%th %ith their ne% entries' Ho% do you e&#lain this 4nding

Answer 1.( =his di*erence in #ro4ts results +rom the +act that cost cutting has a largely short6term a*ect %hereas revenue gro%th < #articularly that derived +rom innovativene% #roducts < has a much longer6term im#act' =his is es#ecially true i+ the

com#any7s initial #roduct generates a #roduct line o+ considerable conseCuenceand the com#any develo#s and holds the largest mar"et share'

1. Jnder %hat conditions do #ioneer and +ollo%er strategies each have the greatest#robability o+ long6term success9

Answer 1. ) #ioneering 4rm has the best chance +or long6term success inmar"et6share leadershi# and #ro4tability %hen the ne%6#roduct mar"et is insulate

+rom the entry o+ com#etitors and;or the 4rm has sucient si$e- resources andcom#etencies to ta"e +ull advantage o+ its #ioneering #osition and #reserve it inthe +ace o+ later com#etitive entries' ollo%ers are most li"ely to succeed %henthere are +e% legal- technological or 4nancial barriers to inhibit entry and %hen ithas sucient resources or com#etencies to over%helm the #ioneer7s earlyadvantage'

1. With the e&ce#tion o+ certain core businesses < such as adhesives andin+ormation6storage technology < the /M om#any has o+ten +ollo%ed a strategy o%ithdra%ing +rom mar"ets in %hich it %as the #ioneer a+ter other com#etitors enteand #ro4t margins start to decline' t ty#ically does this by licensing #roducts toother 4rms' Jnder %hat "inds o+ mar"et and com#etitive situations is such a%ithdra%al strategy most a##ro#riate9 What "inds o+ #roducts do you thin" /M ismost li"ely to license to other 4rms9

Answer 1.S"imming %ith early %ithdra%al is most success+ul %hen there is limited #otentialdemand- customers are li"ely to ado#t early and #ay a #remium and %hen there issubstantial #otential com#etition'

/M is most li"ely to engage in s"imming and s#inning o* %hen the #roducttechnology cannot be e*ectively #rotected- %hen the resources to #roduce the#roduct are commonly available and %hen #roduction is relatively sim#le'

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Module 1/ Marketing ,trategies for rowthMarkets

(5'( iscuss the marketing actions and strategies to achieve theshare maintenance o)9ectives of a market leader.

1. 4ortress or Position defense

". 4lanker

(. Confrontation

. Market e%&ansion

. Contraction or ,trategic withdrawal

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1. 4ortress or Position defensePrimar$ O)9ectives: ncrease satis+action- loyalty D re#eat #urchase among current customers by building oe&isting strengthsa##eal to late ado#ters %ith same attributes D bene4ts o*ered to early ado#ters'Market Characteristics:!elatively homogeneous mar"et %ith res#ect to customer needs and #urchase criteriastrong #re+erence +or leader7s #roduct among largest segment o+ customers'

Com&etitors Characteristics:urrent and #otential com#etitors have relatively limited resources and com#etencies4irmEs Characteristics:urrent #roduct o*ering enoys high a%areness and #re+erence among maor segment ocurrent and #otential customers 4rm has mar"eting and !D> resources andcom#etencies eCual to or greater than those o+ any current or #otential com#etitor'

". 4lankerPrimar$ O)9ectives: Protect against loss o+ s#eci4c segment o+ current customers by develo#ing a secondentry that covers a %ea"ness in originalim#rove ability to attract ne% customers %ith needs or #urchase criteria di*erent +rom

those o+ early ado#ters'Market Characteristics: =%o or more maor mar"et segments ,+ragmented mar"et. %ith distinct needs or#urchase criteria'Com&etitors Characteristics:ne or more current or #otential com#etitors %ith sucient resources and com#etencieto e*ectively im#lement a di*erentiation strategy'4irmEs Characteristics:urrent #roduct o*ering #erceived as %ea" on at least one attribute by a maor segmeno+ current or #otential customers 4rm has sucient !D> and mar"eting resources tointroduce and su##ort a second o*ering aimed at the disa*ected segment'

(. ConfrontationPrimar$ O)9ectives: Protect against loss o+ share among current customers by meeting or beating a head6tohead com#etitive o*ering im#rove ability to %in ne% customers %ho might other%iseMarket Characteristics:!elatively homogeneous mar"et %ith res#ect to customers7 needs and #urchase criterialittle #re+erence +or- or loyalty to%ards leader7s #roduct among largest segment o+customers'Com&etitors Characteristics:ne or more current or #otential com#etitors %ith sucient resources and com#etencieto e*ectively im#lement a head6to6head strategy'4irmEs Characteristics:

urrent #roduct o*ering su*ers lo% a%areness- #re+erence and;or loyalty among maorsegment o+ current or #otential customersirm has !D> and mar"eting resources and com#etencies eCual to or greater than thoseo+ any current or #otential com#etitor'

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. Market e%&ansionPrimar$ O)9ectives: ncrease ability to attract ne% customers by develo#ing ne% #roduct o*erings or linee&tensions aimed at a variety o+ ne% a##lications and user segmentsm#rove ability to retain current customers as mar"et +ragments'Market Characteristics:!elatively heterogeneous mar"et %ith res#ect to customers7 need s and #urchasecriteriaMulti#le #roduct uses reCuiring di*erent #roduct or service attributes'Com&etitors Characteristics:urrent and #otential com#etitors have relatively limited resources and com#etencies-#articularly %ith res#ect to !D> and mar"eting'4irmEs Characteristics:?o current o*erings in one or more #otential a##lications segments 4rm has mar"etingand !D> resources and com#etencies eCual to or greater than those o+ any current or#otential com#etitor'

. Contraction or ,trategic withdrawalPrimar$ O)9ectives: ncrease ability to attract ne% customers in selected high6gro%th segments by +ocusingo*erings and resources on those segmentsWithdra% +rom smaller or slo%er6gro%ing segments to conserve resources'Market Characteristics:!elatively heterogeneous mar"et %ith res#ect to customers7 needs- #urchase criteria angro%th #otentialMulti#le #roduct uses reCuiring di*erent #roduct or service attributes'Com&etitors Characteristics:ne or more current or #otential com#etitors %ith sucient resources and com#etencieto #resent a strong challenge in one or more gro%th segments'4irmEs Characteristics:urrent #roduct o*ering su*ers lo% a%areness- #re+erence and;or loyalty among currenand #otential customers in one or more maor gro%th segmentsirm7s !D> and mar"eting resources and com#etencies are limited to those o+ one ormore com#etitors'

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<%hi)it 1/." Marketing actions to achieve share-maintenance o)9ectives

Ma$,etin. &!6ectives P&ssi!"e /a$,etin. acti&ns

Re%ain curren% cus%omers b'6

1. T Maintaining;im#rovingsatis+action and loyalty

T ncrease attention to Cuality control as out#ut e&#ands'T ontinue #roduct modi4cation and im#rovement e*orts to increase customer

bene4ts and;or reduce costs'

T ocus advertising on stimulation o+ selective demand stress #roduct7s su#erior+eatures and bene4ts reminder advertising'

T ncrease sales+orce7s servicing o+ current accounts consider +ormation o+national or "ey account re#resentatives to maor customers consider re#lacinginde#endent manu+acturer7s re#s %ith com#any sales#eo#le %here a##ro#riate

T E&#and #ost6sale service ca#abilities develo# or e&#and com#any7s o%n servi+orce- or develo# training #rograms +or distributors7 and dealers7 service #eo#le&#and #arts inventory consider develo#ment o+ customer service hotline'

2. T Encourage;sim#li+yre#eat #urchase

T E&#and #roduction ca#acity in advance o+ increasing demand to avoid stoc"ouT m#rove inventory control and logistics systems to reduce delivery times'T ontinue to build distribution channels use #eriodic trade #romotions to gain

more e&tensive retail coverage and maintain shel+ +acings strengthenrelationshi#s %ith strongest distributors;dealers'

T onsider negotiating long6term reCuirements contracts %ith maor customers'

T onsider develo#ing automatic reorder systems +or maor customers'

3. T !educe attractivenesso+ s%itching

T >evelo# a second brand or #roduct line %ith +eatures or #rice more a##ealing ta s#eci4c segment o+ current customers ,7an,e$ st$ate.y = see E&hibit (G' (G'(0.'

T >evelo# multi#le6line e&tensions or brand o*erings targeted to the needs o+several user segments %ithin the mar"et ,/a$,et e#ansi&n.'

T Meet or beat lo%er #rices or heavier #romotional e*orts by com#etitors < or tryto #re6em#t such e*orts by #otential com#etitors < %hen necessary to retaincustomers and %hen lo%er unit costs allo% ,c&n%$&ntati&n st$ate.y .'

S%imu!a%e se!ec%i2e $eman$among !a%er a$o#%ers b'6

1. Head6to6head #ositioningagainst more com#etitiveo*ering or #otential o*erings

T >evelo# a second brand or #roduct line %ith +eatures or #rice more a##ealing ta s#eci4c segment o+ #otential customers ,7an,e$ st$ate.y .'

T Ma"e #roduct modi4cations or im#rovements to match or beat su#eriorcom#etitive o*erings ,c&n%$&ntati&n st$ate.y .'

T Meet or beat lo%er #rices or heavier #romotional e*orts by com#etitors %hennecessary to retain customers and %hen lo%er unit costs allo% ,c&n%$&ntati&nst$ate.y .'

T When resources are limited relative to com#etitor7s- consider %ithdra%ing +romsmaller or slo%er6gro%ing segments to +ocus #roduct develo#ment and#romotional e*orts on higher #otential segments threatened by com#etitor,c&nt$acti&n &$ st$ate.ic)(it-d$a(a" st$ate.y .'

2. >i*erentiated #ositioningagainst com#etitive o*erings

or #otential o*erings

T >evelo# multi#le6line e&tensions or brand o*erings targeted to the needs o+various #otential user a##lications- or geogra#hical segments %ithin the mar"e,/a$,et e#ansi&n.'

T Build uniCue distribution channels more e*ectively to reach s#eci4c segments #otential customers ,/a$,et e#ansi&n st$ate.y .'T >esign multi#le advertising and;or sales #romotion cam#aigns targeted at

s#eci4c segments o+ #otential customers ,/a$,et e#ansi&n st$ate.y .'

((



(5'2 #hat marketing activities and strategies are needed for achallenger to achieve share growth'

1. 4rontal attack

". =ea&frog

(. 4lank attack

. <ncirclement

. uerrilla attack

((



1. 4rontal attack Primar$ O)9ectives: a#ture substantial re#eat;re#lacement #urchases +rom target com#etitor7s currentcustomers)ttract ne% customers among later ado#ters by o*ering lo%er #rice or more attractive+eatures ie' di*erentiated #osition'Market Characteristics:!elatively homogeneous mar"et %ith res#ect to customers7 needs and #urchase criteria!elatively little #re+erence or loyalty +or e&isting brands'Com&etitors Characteristics:

=arget com#etitor has relatively limited resources and com#etencies- #articularly inmar"eting and !D>Would #robably be vulnerable to direct attac"'4irmEs Characteristics:irm has stronger resources and com#etencies in !D> and mar"eting and;or lo%ero#erating costs than target com#etitor'

!R)? )! lo% #rice

". =ea&frogPrimar$ O)9ectives: nduce current customers in mass mar"et to re#lace their current brand %ith su#eriorne% o*ering)ttract ne% customers by #roviding enhanced bene4ts'Market Characteristics:!elatively homogeneous mar"et %ith res#ect to customers7 needs and #urchase criteriabut some needs or criteria not currently met by e&isting brands'Com&etitors Characteristics:ne or more current com#etitors have relatively strong resources and com#etencies inmar"eting- but relatively unso#histicated technology and limited !D> com#etencies'4irmEs Characteristics:irm has #ro#rietary technology su#erior to that o+ com#etitorsirm has necessary mar"eting and #roduction resources to stimulate and meet #rimarydemand +or ne% generation o+ #roducts'

(. 4lank attack Primar$ O)9ectives: )ttract substantial share o+ ne% customers in one or more maor segments %herecustomers7 needs are di*erent +rom those o+ early ado#ters in the mass mar"et'Market Characteristics:

=%o or more maor segments %ith distinct needs and #urchase criteria?eeds o+ customers in at least one segment not currently met by e&isting brands'Com&etitors Characteristics:

=arget com#etitor has relatively strong resources and com#etencies- #articularly in

mar"eting and !D>Would #robably be able to %ithstand direct attac"'4irmEs Characteristics:irm7s resources and com#etencies are limited- but sucient to e*ectively #enetrate anserve at least one maor mar"et segment'

. <ncirclementPrimar$ O)9ectives:

((

X)P)?ES )! M!S- lo% #rice in the JS>S=!BJ=? L7EIIS- #antyhose



)ttract a substantial share o+ ne% customers in a variety o+ smaller- s#eciali$edsegments %here customers7 needs or #re+erences di*er +rom those o+ early ado#ters inthe mass mar"et'Market Characteristics:!elatively heterogeneous mar"et %ith a number o+ small- s#eciali$ed segments?eeds and #re+erences o+ customers in some segments not currently satis4ed bycom#eting brands'Com&etitors Characteristics:ne or more com#etitors have relatively strong mar"eting- !D> resources andcom#etencies and;or lo%er costsould #robably %ithstand a direct attac"'4irmEs Characteristics:irm has mar"eting- !D> and #roductions resources and com#etencies necessary toserve multi#le smaller segmentsirm has decentrali$ed and ada#table management structure'

. uerrilla attack Primar$ O)9ectives: a#ture gro%th share by attac"ing com#etition %ea"ness s#ots' Sur#rise raids againstmore established com#etitors' S#oradic- limited geogra#hic areas %here the targetcom#etitor is not #articularly %ell entrenched'Market Characteristics:

Com&etitors Characteristics:Well established com#etitors already covering all maor segments- %ith large mar"eting!D> resources and com#etencies'4irmEs Characteristics:hallenger7s resources relatively limited- Fan"ing- encirclement- or all6out +rontal attac"may be im#ossible

Sales #romotion e*orts- local advertising blit$es- and even legal actions ,by one orseveral smaller com#etitors.'Short term #rice reductions ,consumer goods mar"ets.are+ully targeted direct mail- nternet mar"eting cam#aigns

)I)?S= )=D=

<%hi)it 1/. Marketing actions to achieve share-growth o)9ectives

Ma$,etin. &!6ectives P&ssi!"e /a$,etin. acti&ns

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Ca&ture re&eat2re&lacement &urchases from current customers of the leader or other targetcom&etitor )$:

(' Head6to6head #ositioningagainst com#etitor7s o*eringin #rimary target mar"et'

T >evelo# #roducts %ith +eatures and;or #er+ormance levels su#erior to those o+ thetarget com#etitor'

T >ra% on su#erior #roduct design- #rocess engineering and su##lier relationshi#s toachieve lo%er unit costs'

T Set #rices belo% target com#etitor7s +or com#arable level o+ Cuality or #er+ormancebut only i+ lo%6cost #osition is achieved'

T uts#end the target com#etitor on #romotion aimed at stimulating selective deman

< om#arative advertising a##eals directed at gaining a more +avorable #ositioningthan the target com#etitor7s brand enoys among customers in the mass mar"et'

< Sales #romotions to encourage trial i+ o*ering7s Cuality or #er+ormance is#erce#tively better than target com#etitor7s- or to induce brand s%itching'

< Build more e&tensive and;or better6trained sales+orce than target com#etitor7s'T uts#end the target com#etitor on trade #romotion to attain more e&tensive retail

coverage- better shel+ s#ace and;or re#resentation by the best distributors;dealers'T ut#er+orm the target com#etitor on customer service:

< >evelo# su#erior #roduction scheduling- inventory control and logistics systems tominimi$e delivery times and stoc"outs'

< >evelo# su#erior #ost6sale service ca#abilities build a more e&tensive com#anyservice +orce- or #rovide better training #rograms +or distributor;dealer service#eo#le than those o+ target com#etitor'

2' =echnological di*erentiation+rom target com#etitor7so*ering in its #rimary targetmar"et

T >evelo# a ne% generation o+ #roducts based on di*erent technology that o*erssu#erior #er+ormance or additional bene4ts desired by current and #otential

customers in the mass mar"et ,"ea%$&. st$ate.y .'T Build a%areness- #re+erence and re#lacement demand through heavy introductory

#romotion:< om#arative advertising stressing #roduct7s su#eriority'< Sales #romotions to stimulate trial or encourage s%itching'< E&tensive- %ell6trained sales+orce heavy use o+ #roduct demonstrations in sales

#resentations'T Build adeCuate distribution through trade #romotions and dealer training #rograms'

,timulate selective demand among later ado&ters )$:

(' Head6to6head #ositioningagainst target com#etitor7so*ering in established

mar"et segments'

T See #receding actions'

2' >i*erentiated #ositioning+ocused on unta##ed orunderdevelo#ed segments'

T >evelo# a di*erentiated brand or #roduct line %ith uniCue +eatures or #rice that ismore a##ealing to a maor segment o+ #otential customers %hose needs are not meby e&isting o*erings ,7an,in. st$ate.y .'

T r

T >evelo# multi#le line e&tensions or brand o*erings %ith +eatures or #rices targeted the uniCue needs and #re+erences o+ several smaller #otential a##lications or regionsegments ,enci$c"e/ent st$ate.y .'

T >esign advertising- #ersonal selling and;or sales #romotion cam#aigns that addresss#eci4c interests and concerns o+ #otential customers in one or multi#leunderdevelo#ed segments to stimulate selective demand'

T Build uniCue distribution channels to more e*ectively reach #otential customers inone or multi#le underdevelo#ed segments'

T >esign service #rograms to reduce the #erceived ris"s o+ trial and;or solve the uniC

#roblems +aced by #otential customers in one or multi#le underdevelo#ed segment,e'g' systems engineering- installation- o#erator training or e&tended %arranties.'

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1/.1 Stou*er7s oods holds a commanding share o+ the gro%ing mar"et +or lo%6calorie +ro$en entr^es%ith its Lean uisine #roduct line' =o maintain its lead as the mar"et continues to gro%- %hat strategicmar"eting obectives should Stou*er +ocus on and %hy9

Answer 1/.1Stou*er should +ocus on retaining current customers by:

,(. maintaining and im#roving satis+action and loyalty,2. encouraging and sim#li+ying re#eat #urchases and,/. reducing the attractiveness o+ s%itching' t should also stimulate selective demand among late

ado#ters by:,(. head6to6head #ositioning against com#etitive o*erings or #otential o*erings and,2. di*erentiated #ositioning against com#etitive o*erings or #otential o*erings'

1/." Iiven your ans%er to Cuestion (5'(- %hich s#eci4c mar"eting actions %ould you recommend +oraccom#lishing Stou*er7s obectives9 Be s#eci4c %ith regard to each o+ the 1 Ps in the 4rm7s mar"eting#rogram'

Answer 1/."

Mar+e%inge!emen%

S#eci4c ac%ions

Product ncrease Cuality control'ontinue #roduct modi4cation'E&#and #roduction ca#acity'

Price Meet #rices as needed selective sales #romotion'

Place m#rove inventory control'ontinue building distribution channels'

Promotion ocus advertisements on selective demand'ncrease sales+orce servicing o+ current accounts'

1/.( ) number o+ years ago Ieneral oods7 ool Whi# +ro$en dessert to##ing held nearly a t%o6thirdsshare o+ the mar"et- but it %as gradually losing share to lo%6#riced #rivate label com#etitors in manyregional mar"ets' >escribe t%o strategies that Ieneral oods might have ado#ted to de+end its leadingshare #osition and the mar"eting actions necessary to im#lement them' Which o+ the t%o %ould yourecommend and %hy9

Answer 1/.(:S%ra%eg' Mar+e%ing ac%ions

ortress ncrease satis+action- loyalty- and re#eat #urchase by current customers a##eal tolate ado#ters'ontinue Cuality control'ontinue #roduct modi4cation;im#rovement'Jse ads to stimulate selective demand'

lan"er >evelo# a second entry ,in this case- #erha#s a budget to##ing.'

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1/. + you had been the to# mar"eting e&ecutive at Ieneral Motors during the early years o+ the Xa#anese invasion o+ the JS car mar"et- %hich strategy %ould you have recommended to de+end IM7sleading mar"et share against this ne% com#etitive threat9 Why do you thin" IM +ailed to ado#t such astrategy at the time9

Answer 1/.Maor JS car ma"ers #robably should have #ursued a Fan"er maintenance strategy- designing and#roducing cars +or the segment,s. o+ the mar"et see"ing +uel6ecient- ine&#ensive- reasonably reliabletrans#ortation'

=here are #robably several reasons this a##roach %as not #ursued' irst- car #lant construction- orretooling o+ e&isting #lants- is e&#ensive and reCuires a long lead time' JS car ma"ers may have avoidethe e&#ense until too late- and then the lead time #revented share maintenance' Second- the larger-more e&#ensive models #roduced by JS 4rms had higher margins- and JS car ma"ers %ere #robablyreluctant to divert attention +rom that mar"et ,or #erha#s to admit it %as declining.' =hird- Xa#anese#roduction systems are a uniCue combination o+ culture and cultivation achieved over a long #eriod' ?oall JS car ma"ers demonstrated an ability to ma"e cars o+ such Cuality'

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Module 1 ,trategies for Mature and ecliningMarkets

(G'( ,uccess in mature markets reDuires two sets of strategicactions:#hat are the$'

(' >evelo#ment o+ a well-im&lemented )usiness strateg$ to sustain acom#etitive advantage- customer satis+action- and loyalty

2' le%i)le and creative marketing &rograms geared to #urse gro%th or #ro4o##ortunities as conditions change in s#eci4c #roduct6mar"ets'

(G'2 #hat strateg$ o&tions are availa)le to )oth anal$;ers anddefenders in their attem&t to sustain a com&etitive advantage inmature markets'

>i*erentiation o+ their #roduct o*ering ,on the basis o+ either su#erior Cuality orservice- or customer intimacy.

Maintaining a lo%6cost #osition'

(G'/ #hat dimensions J5K do customers use to &erceive underl$ingdi8erences across &roducts in a given categor$'

Per+ormance Ho% %ell does it %or"9

>urability Ho% long %ill it last9

on+ormance %ith s#eci4cations What is the incidence o+ #roduct de+ects9

eatures >oes an airline Fight o*er a movie and dinner9

!eliability Will each visit to a restaurant result in consistentCuality9

Serviceability s the #roduct easy to service9

it and 4nish >oes the #roduct loo" and +eel li"e a Cuality #roduct9

Brand name s this a name that customers associate %ith Cuality9

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(G'1 #hat dimensions do customers use to 9udge the Dualit$ of theservicesthe$ receive'

Tangi)les )##earance o+ #hysical +acilities- eCui#ment #ersonnel andcommunications materials

@elia)ilit$ )bility to #er+orm the #romised service de#endably andaccurately

@es&onsiveness

Willingness to hel# customers and #rovide #rom#t service

Assurance no%ledge and courtesy o+ em#loyees and their ability toconvey trust and con4dence

<m&ath$ aring- individuali$ed attention the 4rm #rovides its

customers'

(G'3 #hat are the more im&ortant wa$s in which a com&an$ canim&rove customer &erce&tions of service Dualit$'

Ia# bet%een

customer7s e&#ectations Dthe mar"eter7s #erce#tion

>etermine %hat service attributes customers considim#ortant through collect o+ in+ormation

management #erce#tions Dservice Cuality s#eci4cations

Ensure em#loyees "no% %hat the com#any7s servic#olicies are and believe that management is seriouscommitted to those standards their #er+ormance isli"ely to +all short o+ desired levels'

service6Cuality s#eci4cationsD service delivery

Em#loyees must be #rovided %ith training- eCui#meand time necessary to deliver good service' Service#er+ormance must be measured and evaluated' Io#er+ormance must be re%arded

service delivery D

e&ternal communications

Iood service #er+ormance may disa##oint some

customers i+ the 4rms mar"eting communicationscause them to have unrealistically high e&#ectations

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(G'5 iscuss )rie0$ the various wa$s a !rm can maintain a low-cost&osition.

6 ?o6+rills #roduct6 nnovative #roduct design6 hea#er ra% materials6 nnovative #roduction #rocesses6 Lo%6cost distribution6 !eductions in overhead

(G'G #hat should a !rm strive to achieve during the earl$ $ears ofmarket maturit$'

Ma&imi$e the Fo% o+ #ro4ts over the remaining li+e o+ the #roduct mar"et'

Maintain and #rotect the business7s mar"et share'

ontinue strengthen their #osition through a +ortress de+ense'

(G'8 iscuss the strategies that can )e used to e%tend the volumegrowth of &roducts

3ncreased-&enetration

ncrease the #ro#ortion o+ users by converting currentnon6users in one or more maor mar"et segments

<%tended use ncrease the amount o+ #roduct used by the average

customer by increasing +reCuency o+ use ordevelo#ing ne% and more varied %ays to use the#roduct

Market e%&ansion E&#and the number o+ #otential customers bytargeting underdevelo#ed geogra#hic areas ora##lications segments'

(G' iscuss )rie0$ how a !rm can use seDuential strategies toe%&and a glo)al market.

>evelo# home mar"et and then e&#and- 4rms can enter +oreign mar"ets in avariety o+ %ays: m#ort agents ; Xoint ventures ; Wholly o%ned subsidiaries'

1. ome market evelo&ing countries evelo&ed countries

". ome market evelo&ed countries evelo&ing countries ,high6tech

#roducts.

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(. ome market evelo&ing countries ,discretionary goods such as so+t drin"s.

. i8erent world )randsE ,L7real.

(2



(G'(0 #hat are the three sets of factors that hel& determine thestrategic attractiveness of declining &roduct markets'

Conditions of demand ncluding the rate and certainty o+ +uturedeclines in volume

<%it )arriers =he ease %ith %hich %ea"er com#etitorscan leave the mar"et

3ntensit$ of future com&etitiverivalr$

ntense #rice com#etition and maintainreasonable margins

(G'(( iscuss )rie0$ the strategic o&tions &ossi)le in decliningmarkets.

arvesting Ma&imi$e short term cash Fo% maintain or increasemargins even at the e&#ense o+ a slo% decline inmar"et share

Maintenance Maintain share in short term as mar"et declines- eveni+ margins must be sacri4ced'

Pro!ta)le,urvivor

ncrease share o+ the declining mar"et %ith an eye to+uture #ro4ts encourage %ea"er com#etitors to leave'

*iche ocus on strengthening #osition in one or a +e%relatively substantial segments %ith #otential +or+uture #ro4ts'

,(G'(. #hat strategic issues are involved with mature markets'eclining markets'

6 Hold e&isting customers < to sustain a meaning+ul com#etitive advantage'

6 Success de#ends heavily on 4rm7s ability to achieve and sustain a lo%erdelivered cost or some #erceived #roduct6Cuality or customer6service

su#eriority'6 Passively de+end mature #roducts %hile using the bul" o+ revenue to develo#

aggressively mar"et ne% #roduct %ith more gro%th #otential'

#erceived service De&#ected service

Management +ails to close one or moreo+ the above 1 ga#s'

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(2



1.1 ) leading Euro#ean airline has as"ed you- a consultant- to suggest areas thecom#any should em#hasi$e to di*erentiate itsel+ +rom com#eting airlines' n sodoing- you are told to assume that the airline %ould continue to be #ricecom#etitive'

Answer 1.1 =he service dimensions and mar"eting actions needed to develo# a high Cuality image+or the airline are:

*i/ensi&ns Ma$,etin. acti&ns

=angibles lean +acilities including interior and e&terior o+ #lane < and#ro+essional a##earance o+ all Fight #ersonnel

!eliability n6time #er+ormance

!es#onsiveness )gent;Fight attendant;training in reacting to customers7needs- Cueries- etc'

om#etence Pilot;Fight attendant;agent training in o#erating #rocedures

Em#athy

ourtesy

ommunications

light attendant;agent training in customer contact #rotocol

1." )+ter com#leting your assignment +rom the Euro#ean airline- you are as"ed to

develo# a #rocedure by %hich the com#any can measure customer loyalty andcustomer satis+action' utline your #lan +or measuring each o+ these t%o areas'

Answer 1.") measure o+ customer loyalty ,re#eat #atronage. could be obtained by surveying asam#le o+ the airline7s #assengers ,%hile en rou%e. as"ing +or in+ormation concerningthe last 4ve or so Fights < month- cities involved ,+rom;to.- day o+ %ee"- time o+ dayand airline' =his %ould #rovide an overall measure o+ loyalty as %ell as loyalty bygeogra#hical area and demogra#hics and loyalty to other carriers'

) measure o+ customer satis+action is derived +rom an e&#ectancy measure based on

the %eight ,relative im#ortance. given to all airlines- as cited in the ans%er to Cuestion(G'(- cou#led %ith customers7 rating o+ the image o+ the airlines- as mentioned in theloyalty ans%er above' =hese Cuestions %ould be included in the survey o+ customerloyalty' =hus- the satis+actions measured;obtained can be tied directly into the loyaltydata'

(2



1. While %e have seen that a business may have a number o+ other strategico#tions- the conventional %isdom suggests that a declining business should be eitherdivested or harvested +or ma&imum cash Fo%' Jnder %hat "inds o+ mar"et andcom#etitive conditions do each o+ these t%o conventional strategies ma"e good senseWhat "inds o+ mar"eting actions are ty#ically involved in success+ully im#lementing aharvesting strategy9

Answer 1.Harvesting ma"es sense %hen the mar"et is e&#ected to decline at a steady rate- therare +e% strong com#etitors- lo% e&it barriers and the 4rm has a leading share #osition'When the decline is e&#ected to be relatively ra#id- divestment ma"es sense'

Mar"eting actions consistent %ith harvesting include: ,(. eliminating !D> e&#enditure,2. reducing mar"eting e&#enditures ,/. see"ing %ays to reduce #roduction costs and,1. raising #rices as needed to maintain margins'

(2



Part 3m&lementing G Controlling ,trategic

MarketingPrograms

Module 15Organi;ing G Planning for <8ective 3m&lementation

(8'( #hat are the three as&ects of the relationshi& )etweencor&orate headDuarters and the )usiness unit that determine th,+Es success in im&lementing a &articular com&etitivestrateg$'

(' =he degree o+ autonomy #rovided to each business unit manager'

2' =he degree to %hich the business unit shares +unctional #rograms and+acilities %ith other units'

/' =he manner in %hich the cor#oration evaluates and re%ards the#er+ormance o+ its SBJ managers'

(8'2 ,uccessful im&lementation of a given strateg$ is more likel$under what conditions'

When the business has the +unctional com#etencies demanded by its strategy ansu##orts them %ith substantial resources relative to those o+ com#etitors- isorgani$ed suitably +or its technical- mar"et and com#etitive environment and hasdevelo#ed a##ro#riate mechanisms +or coordinating e*orts and resolving conFictacross +unctional de#artments'

(2



(8'/ #hat additional functional-area com&etencies are needed forsuccess for service organi;ations L es&eciall$ those involvinghigh customer contact'

Service organi$ations and manu+acturers that #rovide high levels o+ customerservice as #art o+ their #roduct o*ering < o+ten need some additional +unctional

com#etencies because o+ the uniCue #roblems involved in delivering Cualityservice'

lose co6ordination bet%een o#erations- sales and mar"eting is crucial' )lso-because many di*erent em#loyees may be involved in #roducing and deliveringthe service- #roduction #lanning and standardi$ation are needed to reducevariations in Cuality +rom one transaction to the ne&t' Similarly- detailed #oliciesand #rocedures +or dealing %ith customers are necessary to reduce variability incustomer treatment across em#loyees' )ll o+ this suggests that #ersonnelmanagement < #articularly the activities o+ em#loyee selection- training-motivation and evaluation < is an im#ortant adunct to the #roduction and

mar"eting e*orts o+ high6contact service organi$ations'

(8'1 Organi;ational ada&tiveness and innovativeness are enhancedunder what conditions'

1. >ecision6ma"ing authority is decentrali$ed

2. Managerial discretion and in+ormal co6ordination mechanisms re#lace rigidrules and #olicies

3. More s#ecialists are #resent' =hus- #ros#ector business units and theirmar"eting de#artments are li"ely to #er+orm better %hen they aredecentrali$ed- have little +ormali$ation and are highly s#eciali$ed

(2



(8'3 nder what conditions is a functional t$&e of organi;ation )estto use'And a &roduct-management t$&e'

4unctionalt$&e

om#anies o#erating in stable and slo%6gro%th industries %herethe environments are #redictable' =hus- the +orm is a##ro#riate

+or lo%6cost de+ender SBJs attem#ting to ma&imi$e theireciency and #ro4tability in mature or declining industries'

Productmanagementt$&e

When an SBJ has many #roduct6mar"et entries- this +orm addsan additional layer o+ managers to the mar"eting de#artment-usually called #roduct managers- brand managers or mar"etingmanagers- each o+ %hom has the res#onsibility to #lan andmanage the mar"eting #rograms and to co6ordinate the activitieso+ other +unctional de#artments +or a s#eci4c #roduct or #roductline'

(8'5 iscuss )rie0$ the recent organi;ational design develo&ments.

Managing o+ business #rocesses in contrast to +unctional areas' Every businesshas about si& basic or core #rocesses- such as- +or e&am#le- ne%6#roductdevelo#ment and materials Fo%' =he +ormer %ould be sta*ed by individuals +rommar"eting- !D>- manu+acturing and 4nance' =he latter %ould contain #eo#le %ithe&#ertise in #urchasing- manu+acturing- order delivery and billing'

Managing &rocesses %ill ma"e the organi$ation essentially hori$ontal < Fat ,+e%

layers. and lean < in contrast to a vertical or hierarchical model' =hus- e&ecutive#ositions %ill no longer be de4ned in terms o+ managing a grou# o+ +unctionallyoriented #eo#le instead- e&ecutives %ill be concerned %ith a #rocess that strongem#hasi$es the im#ortance o+ customer satis+action' Process management isCuite di*erent +rom the management o+ a +unction because-

1. t uses e&ternal obectives < +or e&am#le- customer satis+action rather thansim#le revenues'

2. Peo#le %ith di*erent s"ills are grou#ed to underta"e a com#lete #iece o+ %or"their %or" is done simultaneously- not in seCuence'

3. n+ormation Fo%s directly to %here it is used' =hus- i+ you have an u#stream#roblem- you deal %ith the #eo#le involved directly rather than via your boss'

(2



(8'G #hat are the more common organi;ational designs for selling inglo)al markets'

4unctional t$&e Would have vice #residents ,%orld%ide. +or such areas asmanu+acturing- mar"eting and 4nance < all re#orting to the#resident.

Products )ased Iiving SBJs %orld%ide control over their #roduct lines' =he mainadvantages o+ this ty#e o+ structure are the economies derived+rom centrali$ing manu+acturing activities and the ability tores#ond Cuic"ly to #roduct6related #roblems originating inoverseas mar"ets' Mar"eting is locali$ed at the country or regionalevel'

Area structure When there is considerable variance across mar"ets regarding#roduct acce#tance and mar"eting activities' irms ty#icallyorgani$e on a regional basis ,?orth )merica- Latin )merica- arEast- Middle East and )+rica. using a central sta* that co6ordinate

%orld%ide #lanning and control activities'

$)ridorgani;ation

ombination o+ the +unctional- #roduct or area ty#es o+ structure' =he global matri& is one such attem#t' t has individual businessmanagers re#orting to both area and +unctional grou#s- or areamanagers re#orting to business and +unctional grou#s- therebyenabling the com#any to balance the need +or centrali$edeciency and its res#onsiveness to local needs' But the dualre#orting sets u# conFicts and slo%s the management #rocess tosuch an e&tent that many com#anies- have returned to moretraditional organi$ational designs

(2



(8'8 #hat are the ma9or com&onents of an annual marketing &lan foa given &roduct'

<%ecutive summar$ Presents a short overvie% o+ the issues- obectives- strategy andactions incor#orated in the #lan and their e&#ected outcomes +orCuic" management revie%'

Current situation Summari$es relevant bac"ground in+ormation on the mar"et-com#etition- #ast #er+ormance o+ the #roduct and the variouselements o+ its mar"eting #rogram ,e'g' distribution- #romotion-etc'. and trends in the macroenvironment'

Fe$ issues denti4es the main o##ortunities and threats to the #roduct thatthe #lan must deal %ith in the coming year and the relativestrengths and %ea"nesses o+ the #roduct and business unit thatmust be ta"en into account in +acing those issues'

O)9ectives S#eci4es the goals to be accom#lished in terms o+ sales volume-

mar"et share and #ro4t'

Marketing strateg$ Summari$es the overall strategic a##roach that %ill be used tomeet the #lanKs obectives'

Action &lans =his is the most critical section o+ the annual #lan +or hel#ing toensure e*ective im#lementation and co6ordination o+ activitiesacross +unctional de#artments' t s#eci4es:

6 What s#eci4c actions are to be ta"en9

6 Who is res#onsible +or each action9

6 When the action %ill be engaged in9

6 Ho% much %ill be budgeted9

Pro9ected&ro!t-and-lossstatement

Presents the e&#ected 4nancial #ayo* +rom the #lan'

Controls >iscusses ho% the #lanKs #rogress %ill be monitored may#resent contingency #lans to be used i+ #er+ormance +alls belo%e&#ectations or the situation changes'

(2



(8' #hat su)9ect areas should )e discussed under the anal$sis ofthe current situation section of the annual marketing &lan'

Market ,ituation >ata relating to the #resent target mar"et' 'e' mar"et si$egro%th trends- variations across geogra#hic regions or othermar"et segments' Mar"et research in+ormation re customer#erce#tions and buying behavior trends

Com&etitive ,ituation denti4es and describes the #roduct7s maor com#etitors interms o+ their si$e- mar"et share- #roduct Cuality- mar"etingstrategies and other relevant +actions' Li"elihood that other#otential com#etitors %ill enter the mar"et in near +uture and#ossible im#act o+ such entry'

Macro environmental,ituation

Broad environmental occurrences or trends that my have abearing on the #roduct7s +uture' !elevant economic-technological- #olitical; legal or social;cultural changes'

Past Product Performance Products #er+ormance on sales volume- margins- mar"etinge&#enditures- and #ro4t contribution +or several recent yearsJsually #resented in +orm o+ a table

(8'(0 escri)e what should )e included in the discussion of acom&an$Es action &lan for a given &roduct.

S#eci4c actions necessary to im#lement the strategy +or the #roduct are listed-together %ith a clear statement o+ %ho is res#onsible +or each action- %hen it %ibe done and ho% much is to s#end o each activity'

15./ Iiven your ans%er to Cuestion (8'3- ho% %ould #otential conFicts bet%een+unctional de#artments %ithin the industrial ta#e SBJ be resolved9 Who %ould beres#onsible +or co6ordinating the activities o+ the various +unctional de#artments +oreach o+ the SBJ7s #roduct6mar"et entries9

Answer 15./) #artici#ative a##roach %ould be the best %ay to handle #otential conFicts' ) generamanager %ould be given the res#onsibility o+ coordinating all the +unctional activitiesone level above each o+ the #roduct grou#s'

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Module 16 Controlling Marketing ,trategies andPrograms

('( #hat are the ma9or ste&s in the control &rocess'

('2 #h$ are more and more !rms using non-!nancial controlmeasures in addition to the traditional !nancial-)asedmeasures' #hat are some of the more commonl$ used non-!nancial measures'

om#anies are turning to measure they +eel better reFect ho% their mangers thinabout %hat decision areas drive the 4rm7s success < such as

6 ustomer satis+action

6 Product Cuality

6 Mar"et share

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6 ?e%6#roduct develo#ment

('/ escri)e the use of )enchmarking as a &erformance t$&e ofmeasure.

=he 4rm7s #er+ormance in a given area is com#ared against the #er+ormance o+other com#anies' =he com#arison does not ho%ever have to be %ith com#anies ithe same industry'

('1 #hat are the advantages of using the marginal contri)utionmethod to determine a &roductEs &ro!ta)ilit$'

) #roduct or mar"et may ma"e a contribution to #ro4ts even though it sho%s aloss' =hus- even though the com#any must eventually absorb its overhead coststhe contribution method indicates %hat is gained by adding or dro##ing a #roducor a customer'

('3 #hat does strategic control ho&e to accom&lish'

Monitoring and evaluating a 4rm7s SBJ level strategies' Strategic control must#rovide some %ay o+ changing the 4rm7s thrust i+ ne% in+ormation about theenvironment and; or the 4rm7s #er+ormance so dictates'

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('5 #hat are the various t$&es of marketing audit'

Marketing <nvironment Audit )nalysis o+ current and +uture macro6environment

O)9ectives and ,trateg$ Audit )ssess ho% a##ro#riate these are- given macro

trends

Planning and Control ,$stemAudit

Evaluate adeCuacy o+ systems develo#ing ne%#roduct6m"t entries and control systems

Organisation Audit Structure- ho% M de#t is organised- synergybet%een M units

Market Productivit$ Audit Pro4tability o+ com#any7s individual #roducts-"ey accounts- and mar"ets

Marketing 4unctions Audit Ho% adeCuately 4rm handles mar"eting mi&

elements

<thical Audit E&tent to %hich com#any acts in ethical andsocially;environmentally res#onsible %ay

Product Manager Audit >etermine i+ #roduct managers are channellinge*orts in best #ossible %ay

('G #hat are the ma9or ste&s in the contingenc$ &lanning &rocess'

(' denti+ying critical assum#tions about the +uture

2' Measuring #robability o+ each critical assum#tion7s being right

/' !an" ordering o+ critical assum#tions

1' =rac"ing ; monitoring o+ action #lan

3' S#eci+ying alternative res#onse o#tions

5' Setting triggers to activate contingency #lan

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#hat is a )alanced scorecard'

=he Balanced Scorecard ,develo#ed by !obert S a#lan and >avid P ?orton. is a to+or im#lementing strategy'

t uses +our #ers#ectives on the com#anyKs vision and strategy to identi+y valu

creating activities at the SBJ level:

• inancial

• nternal Business Processes

• ustomer

• Learning and Iro%th

)nd +or each o+ these it sets out:

• bectives

• Measures

• =argets

• nitiatives

By being e&#licit about value creating activities and ho% to develo# and measure them

the a##roach #rovides a +rame%or" +or translating a strategy into o#erational termand contributes to the develo#ment o+ a strategic management system'

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Question 16." >iscuss the relative advantages and limitations o+ the u!! cos%in2ersus %he con%ribu%ion margin a##roaches +or determining the #ro4tability o+ as#eci4c item %ithin a 4rm7s #roduct line' Which a##roach do you thin" is mostcommonly used by large- multi6SBJ cor#orations9 Why9

Answer 16."

Fu!! cos%ing < )nalysts assign both direct or variable and indirect costs to the unit o+analysis' >irect costs are directly associated %ith the unit o+ analysis ,#roduction costsdirect mar"eting costs.' ndirect costs involve certain 4&ed oint costs that cannot belin"ed directly to a single unit o+ analysis ,general management- costs o+ occu#ying a+acility.'

9on%ribu%ion margin < =his a##roach argues that there is really no accurate %ay toassign indirect costs' n addition- because indirect costs are mostly 4&ed costs- a#roduct or mar"et may ma"e a contribution to #ro4ts even i+ it sho%s a loss' =hus- evethough overhead must eventually be absorbed- the contribution method clearlyindicates %hat is gained by adding or dro##ing a #roduct or customer'

Large- multi6SBJ cor#orations %ould most #robably use a contribution margina##roach- since it enables the 4rm to better assess the %ay a #roduct adds or subtrac+rom overall #ro4tability'

Question 16. Rou are a mar"eting manager in an SBJ o+ a large consumer +oodmanu+acturer' =he SBJ7s general manager has as"ed you to conduct a mar+e%ing au$io+ the SBJ as a basis +or evaluating its strategic and o#erations strengths and%ea"nesses' What issues or areas o+ concern should be covered by your audit9 )+tercom#leting your mar"eting audit- you are as"ed to develo# a contingency #lan +or the

SBJ7s maor #roduct line' utline the #lan you %ould recommend'

Answer 16.

(' Mar"eting environment'

2' bectives and strategy'

/' Planning and controlsystem'

1' rgani$ation'

3' Mar"eting #roductivity'

5' Mar"eting +unctions'

(' denti+ying critical assum#tions about the +uture

2' )ssigning #robability o+ each critical assum#tion7s beingright

/' !an" ordering o+ critical assum#tions

1' =rac"ing;monitoring o+ action #lan

3' Setting triggers to activate contingency #lan

5' S#eci+ying alternative res#onse o#tions

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Question 16./ or each set o+ issues to be included in the audit you designed in yourans%er to Cuestion ('3- s#eci+y the "inds o+ in+ormation you %ould need to collect anthe maor sources you might use to obtain that in+ormation'

Answer 16./

1 Ma$,etin. envi$&n/ent < What o##ortunities and;or threats derive +rom the 4rm7s

#resent and +uture environment: that is- %hat technological- #olitical and social trendsare signi4cant9 Sources < ne%s maga$ines- government #ublications'

" O!6ectives and st$ate.y < Ho% logical are the com#any7s obectives- given themore signi4cant o##ortunities;threats and its relative resources9 Ho% valid is the 4rm7strategy- given the antici#ated environment9 Sources < internal com#any strategicdocuments'

( P"annin. and c&nt$&" syste/ < >oes the 4rm have adeCuate and timelyin+ormation about consumers7 satis+action %ith the #roducts9 With the actions o+com#etitors9 Sources < internal mar"eting in+ormation system'

O$.anisati&n < >oes the organisation structure 4t the evolving needs o+ themar"et#lace9

Ma$,etin. $&d0ctivity < Ho% #ro4table are each o+ the 4rm7s #roducts; brands9Ho% e*ective are each o+ the 4rm7s mar"eting activities9 Sources < internal com#anycost and mar"eting documents ,invoices.'

8 Ma$,etin. %0ncti&ns < Ho% %ell does the #roduct line meet the unit7s obectives9Ho% %ell do the other mar"eting6mi& elements 4t cor#orate obectives9 Sources <internal com#any documents'

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Question 16. When they sa% the result o+ the sa!es %erri%or' ana!'sis #resented inE&hibit (' in the te&t- the 4rm7s to# managers concluded that Barlo% in territory (%as not devoting sucient e*ort to her ob- since her #er+ormance %as more than \/2000 belo% Cuota' =hey have as"ed you < the 4rm7s sales manager < to have a tal" %ithBarlo% and suggest a %ay to im#rove her #er+ormance' >o you agree that Barlo%7s#er+ormance is #robably the result o+ too little e*ort on her #art9 Why or %hy not9

Answer 16. t is dicult %ithout +urther in+ormation to say +or certain %hat is thecause o+ Barlo% not reaching her Cuota' n her behal+- she is +airly close to reachingher Cuota ,1 #er cent.' =his might suggest that #erha#s a little more e*ort %ould #uther over the to#' Ho%ever- there might be other +actors ,more training- #ersonalreasons- etc'. at #lay' t is also #ossible that her Cuota %as set too high in vie% o+com#etitive conditions or other uncontrollable +actors'

Question 16 5 What other causes might be res#onsible +or Barlo%7s +ailure to ma"e

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1. RMJJ_MK Pam Creighton's Notes Word Format_Update 2008 March

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