MarketingSummary Notes

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Romeodelee1/1/2007

Summary Note Content

Marketing Strategy

Step 1Step 2Step 3Step 4Step 5Step 6Step 7Step 8Step 9Step 10Step 11Step 12

Summary Notes4C Diamond sub model STP: SegmentationSTP: TargetingSTP: PositioningSMD: DifferentiationSMD: Marketing Mix

ProductPricePlaceChapter 13: Retailing and Wholesaling PromotionChapter 15: Advertising, Sales promotions and PRChapter 16: Personal selling and Direct Marketing

SMD: SellingBSP: BrandBSP: ServiceBSP: ProcessBalanced ScorecardChapter 17: CompetitorsChapter 20: The Global Marketplace Chapter 18: Digital age

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It’s all about Marketing Strategy

Step 1 – Analyse your Landscape

I’ll first analyse the landscape of Singapore through the 4C Diamond sub-model. This model consists of 4 mutually exclusive, collective-exhaustive factors: Change, Customer, Competitor and Company. The study of these factors will help to produce an outlook of the future business landscape.

Technology Changes

The advancement in technology has not only helped to make work more efficient but also created new medium for business activities such as the e-commerce. The fierce competitions in the internet service provider also see cheaper package that bring the rise in the number of Singapore internet access users. According to IDA Singapore, there are already 2.2m internet subscribers in 2006. Singapore Government offering 2 years (From Jan 07) free wireless broadband access in Singapore public area will also further increase the number of Singapore internet user. In all, internet access is cheaper to both residential and corporate users. Another area is the advancement in 3G technology. There are 360000 3G users in 2006 and IDC expect it to grow by 50% in 2010. With 3G, users can access the internet anywhere with their mobile phone.

Social Cultural Changes

In 2007, there is an increase in consumer sophistication as they could easily access to the internet to obtain their required information. Consumers now not only want to fulfil their needs, wants but also expectation. Improve in lifestyle also make consumer more empowered to realise their rising expectation.

Political-Legal Changes

Government tried to strengthen its economy by attracting more foreign investment into Singapore. It also created more lenient business regulations that help to do business easier in Singapore. Registrations and regulation information can easily be obtained from the internet. More FTA with foreign countries also helps to doing business easier and cheaper overseas.

Interaction of the force

Advancement in technology has created an “e-lifestyle” where people start doing more things on the internet. More lenient business regulations also increase the popularity of e-commerce.

Economic

Singapore on pace with economic globalization not only help them strengthen their economy and increase their GDP but also help local companies take advantage of the globalization.

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The Market

Singapore’s involvement in the intensive globalization has also invited foreign companies to compete in the domestic market. This mean it is more difficult for companies to survive the fierce competition if they cannot keep up with the changes.

Competitor

I can’t predict who is your competitor now. But fear of those who are established, with competitive advantages and the ability to adapt to the new landscape.

Consumer

Population of 4.5m in 2006. Consumer now can easily obtain information regard most products on the internet easily. Not only an increase in expectation, they are also more careful with their purchase. Generally, they now not look solely at quality and brand as before, but weigh the quality of a product against its price in order to ensure optimum value. They are smart and careful buyer now.

Company

- Quantity and quality of resources- Competitive advantages

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Step 2 – TOWS Analysis

Threats- Regional and Global Competitors- A new competitor in your home

market. - Price wars with competitors. - A competitor has a new, innovative

product or service. - Competitors have superior access to

channels of distribution.

- Taxation is introduced on your product or service.

Example- Competitive market. - Being a global retailer means that you are

exposed to political problems in the countries that you operate in.

- Intense price competition is a threat from lower production cost.

- Copycat competitors

- Exchange currencies

- Substitute products Opportunities

- A developing market such as the Internet.

- Mergers, joint ventures or strategic alliances.

- Moving into new market segments that offer improved profits.

- A new international market.

- A market vacated by an ineffective competitor.

Example- Product development offers Nike many

opportunities- Co-branding with other manufacturers of

food and drink, and brand franchising to manufacturers of other goods and services both have potential.

- To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region.

Weakness- Lack of marketing expertise. - Undifferentiated products or services

(i.e. in relation to your competitors). - Location of your business. - Poor quality goods or services. - Damaged reputation.

Example- Sell products across many sectors (such as

clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.

- Income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes.

Strength- Your specialist marketing expertise- A new, innovative product or service- Location of your business- Quality processes and procedures- Any other aspect of your business

that adds value to your product or service.

Example- Nike is a global brand- Starbucks Corporation is a very profitable

organization, earning in excess of $600 million in 2004.The company generated revenue of more than $5000 million in the same year.

- Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.

- Wal-Mart has grown substantially over recent years, and has experienced global expansion

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Step 3 – Winning the mind share

Segmentation: “View your market creatively”

1. To view the market from a unique angle and in a different way from your competitors. 2. Segmentation used must reflect buying or using behaviour and determine the customer’s

reason to buy.

Static Attribute SegmentationLook at similar, “static” attributes, which do not necessarily reflect buying or using behavior and do not directly influence the customer’s decision to buy.

A. Geographic SegmentationDividing a market into different geographical units such as nations, states, region, counties, cities, or neighbourhoods.

B. Demographic SegmentationDividing the marketing into groups based on demographic variables such as age, sex, family size, family life cycle, income, occupation, education, religion, race and nationality.

- Age and Life-cycle segmentationo Dividing a market into different age and life-cycle groups

- Gender segmentationo Dividing a market into different groups based on gender

- Income segmentationo Dividing a market into different income groups

Dynamic Attribute Segmentation (Use this if possible)Identifies similar “dynamic” attributes, or attributes that reflect human characteristics of customers (interests, habits, attitudes, beliefs) which directly influence the customer’s reason to buy.

A. Psychographic SegmentationDividing a market into different groups based on social class, lifestyle, or personality characteristics.

B. Behavioral SegmentationDividing a market into groups based on consumer attitude, usage and product response.

Individual SegmentationUltimate level of segmentation, where segmentation is performed on the smallest unit of any market (Individual or “segment of one”).

3. Segments targeted must be significant size and have sufficiently good prospects for future growth.

4. Must be creative when performing market segmentation, adopting a different approach from our competitors.

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Step 4 – Winning the mind share

Targeting: “Allocate your resources effectively”

After segments have been identified, the next step is targeting which is to evaluate and determine which one to serve. This strategy help to allocate resources effectively as the company’s resources are limited.

3 Criteria company should address when evaluating and determining which segments to target.

1. Ensure market segment is big enough and will be profitable enough for company to get involved in.

a. Choose segment that is currently small but appear attractive and profitable for the future.

i. Examine current competition in sector and its potential to grow2. Targeting strategy must based on company’s competitive advantage

a. Company need capabilities, core competencies and competitive advantages to carry out differentiation that is aimed at beating competition.

b. Must analyse closely whether chosen market segment is in line with, and supports, company’s long-term objectives.

3. Market segment must be base on competitive situation that will directly or indirectly influence the attractiveness of the target segment.

a. Intensity of segment rivalryb. Potential new entrantsc. Industry’s barriers to entryd. Existence of substitute productse. Presence of complementary productsf. Growth of buyer bargaining power and supplier bargaining power.

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Step 5 - Winning the mind share

Positioning: “Lead your customer credibly”

The strategy for leading your customers credibly. It is about earning customers’ trust to make them willingly follow your company.

Determining positioning based on 4 assessments

- Customer- Company- Competitor- Change

1. CustomerPositioning should be perceived by customers and be their “reason-to-buy”. This will happen if your positioning describes the value that you bring to your customer.

Example

When the newly founded Amazon.com decided its positioning would be “the most convenient book retailer with the biggest selection and the lowest price”, this excellent value was reflected in what the company was trying to offer. And excellent value has become the main determinant for customers who choose to use Amazon’s services.

2. Company’s internal capabilitiesPositioning should reflect the company’s strengths and competitive advantages.

Example

Amazon’s positioning accurately describes the company’s strength and core capabilities that form the basis of its competitive advantage.

3. CompetitorsCompany’s positioning should be unique, so that it can be easily differentiated itself from its competitors.

4. Changes that occur within the business environmentCompany’s positioning must be sustainable and always relevant with the changes in the business environment. Positioning is essentially planting a perception, identify and personality in the mind of consumer. In order to make positioning as strong as possible, they must be consistent and unchanging. This will help to avoid creating confusion for consumer.

Example

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Changi Airport, won Best Airport in the World award many times, positions itself as the “Most User-Friendly Airport in the world”. Its unique marketing research programme provide critical information to its decision makers to keep abreast of developments in its customers, competitors and changing environment, and to leverage its resources to respond accordingly.

Positioning Example

1. Sony – Innovation2. Giordano – Value for Money3. Wal-Mart – Everyday low price4. Singapore Airlines – Excellent service quality

These companies have achieved this because they have consistently used the same positioning statement over a long time, and have not changed them one iota.

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Step 6 – How to win market share

Differentiation: “Integrate your content, context and infrastructure”

We must create a truly different and unique value for customer by satisfying the 3 dimensions of differentiation, which is integrating the content (what to offer), context (how to offer it) and infrastructure (the enabler) of the company’s offers to the customers.

Differentiation- Product

Features, Performance, Style & Design Attributes as consistency, durability, reliability or repairability

- Volvo provides new and better safety features- Whirlpool designs its dishwasher to run more quietly- Bose positions its speakers on their striking design characteristics

- Services Speedy, convenient or careful delivery

- BankOne has opened full-service branches in supermarkets to provide location convenience along with Saturday, Sunday, and weekday-evening hours

After sale service- Channels

Design channel’s coverage, expertise and performance- Amazon.com, Dell and Avon set themselves apart with their high quality

direct channels- People

Hiring and training better people than their competitors do- Disney people are known to be friendly and upbeat- IBM offer people who make sure that the solution customers want is the

solution they get. “People who get it. People who get it done.”- Image

A company or brand’s image should convey the products’ distinctive benefits and positioning

The image must be supported by everything the company says and does. Symbols such as the MacDonald’s golden arches, Nike Swoosh, Google’s colourful

logo can provide strong company or brand recognition and image differentiation The chosen symbols, characters, and other image elements must be communicated

through advertising that conveys the company’s or brand’s personality

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Step 7 – How to win market share

Marketing Mix: “Integrate your offer and access”

Marketing mix is about integrating a company’s offer, logistics and communications. The company’s offer, consisting of products and prices, should be well integrated with access including company’s places (channel distributions) and communications to create a powerful marketing force in the marketplace. Right communication media must be selected to raise awareness and aid recall by the target market.

I therefore recommend the creative marketing mix that supports marketing strategy (segmentation-targeting-positioning) of the company and builds marketing value (brand-service-process).

Show how your company create its products, determine their prices, control their channels and implement their promotion strategy to beat the competition.

4Ps (Product, Price, Place and Promotion)Product (product life cycle and adaptation)

Uniform Product Undifferentiated (Mass) Marketing Fruits, raw materials

Product vary in design Concentrated (Niche) Marketing Differentiated (Segmented) Marketing

Camera, Automobile

Limited Resources Concentrated (Niche) Marketing

Product’s life cycle stageLaunch

Undifferentiated (Mass) MarketingConcentrated (Niche) Marketing

Only one model launched

Product’s life cycle stageMature

Differentiated (Segmented) Marketing

Price (approaches and strategies)- Do not set too high or too low- Price decision must be coordinate with product design, distribution, and promotion

decisions to form consistent and effective marketing programmes.Promotion (Integrated marketing communication, social responsibility, advertising, sales)

- Creative Promotions- Advertising, personal selling, sales promotions, public relations and direct marketing to

reach consumersPlace (location, channel distribution, distribution/wholesaler/retailer and partner idea)

- Retailers select places that are highly accessible to the target markets in areas that are consistent with the retailers’ positioning

- Online retailing

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Step 8 – How to win market share

Selling: “Integrate your company, customer and relationship”

Selling is the tactic of creating a long-term relationship with customers through a company’s products. Company must be able to sell feature, benefit and solution to the customer. Customer relationship management is important here because it help build good relationships and solve customer problems. This will help create superior customer value and satisfaction, which in turn help to turn customer into becoming “loyalists”.

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Step 9 – How to win the Heart share

Brand: “Avoid the commodity-like Trap”Our brand is developed through our positioning and differentiation which supported with solid marketing mix and selling strategy. Brand is a reflection of our value to our customer. Value in this case is defined as “total get” divided by “total give”. We will create a strong brand by ensuring that “total get” of functional benefit and emotional benefit to the customer is greater than “total give” from the customer such as price and other expenses. Also ensure to produce a higher “total get” / ”total give” compared to our competitors. Once strong branding is establish through high satisfaction and recognition of quality, our company can be a price maker and not just a price taker.

Do note that need to position the brand in their customer’s minds.Have to establish mission and vision for the brand. Must deliver promised set of features, benefits, services and experiences consistently to the buyers.

Function BenefitBased on product/services attribute that provides functional utility to your customers.

ExampleCar = durability, safety or driving comfort. Food = taste, nutritional value or freshness.

Case StudyPopular Bookstore offers strong function benefit through its conveniently locations and a wide range of reasonably priced products.

Emotional BenefitBased on product/service attribute that provides emotional utility

ExampleFeeling energetic after drinking CokeFeeling safe driving a Volvo

Price Cost paid to obtain product or servicesOther expensesCost when using and consuming product/service

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For branding decision of new product.

Please refer to note if you are starting a new brand for a new product

Step 10 – How to win the Heart share

Service: “Avoid the business-category trap”

Service is a value enhancer that helps to create a lasting value for customers through products and services.

Enhances value by: More for more (Total get > total give) compared to competitors More for same ( Total get = total give) compared to competitors More for less (Total get > total give) compared to competitors Same for less (Same total get but lower total give) compared to competitors Less for less (Lower total get and lower total give) compared to competitors

With the five formulae above, our company will be able to deliver world-class value, local value and even individual value, suitable to the customer’s characteristics.

Step 11 – How to win the Heart share

Process: “Avoid the function-orientation trap”

It is the value enabler which is reflected through the product quality, cost and delivery of a company to customers. We must ensure high quality in the supply-chain process and maintain it from raw material to finished products. One must also be able to establish relationships with organizations that have the potential to add value. Strategic alliance could be from suppliers, customers or even competitors. (Outsourcing, merging and acquiring help to improve process)

Finally, value should not only be created for external customers and investor customers, but also the people of the organization. They are the one that keep the company going.

Step 12 – Balancing scorecard

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Brand Positioning

Have 3 levels:

Attributes

Benefits

Brand Name Selection

Involves:

Selection

Protection

Brand Sponsorship

4 types:

Manufacturer brand

Private brand

Licensing

Brand development

4 types:

Line extension

Brand extension

Multi-brands

Final step is to be able to create value to the 3 main stakeholder of the company which are the people, customer and shareholder. Scorecard is a controlling and monitoring tool to ensure that the main stakeholders receive an equal dose of superior value. (Refer to note if you have time. Hero, you sure you got time or not!)

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Summary Notes

4C Diamond sub model

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4C Diamond sub model looks at and analyzes various recent developments in the business environment based on Change, Competitors, Customers and Company.

Gives us the existing condition and current developments within the company And also an OUTLOOK of the future business landscape Macro and Micro environment Globalization Technology Ethics TOWS and SWOTS (to do outside in first so that you will not analyze the environment with

what you can do first)

The 4 Cs

1. Change – Forces of change consist of 5 elementsTechnology

Political-legal changes

Social-cultural changes

Economy (central change drivers)

Market (ultimate force of change)

- They are value migrators to product and company. Companies have to consider which product-orientated, process oriented and information-based technologies are likely to become critical value migrates in their respective industries.

2 distinctive Variables

Immediacy of impact Tangibility of impact

Time base

Force of change is immediate or incremental

How distinctive the force of impact on companies

Technology is primary force

4 major streams and 2 minor streams

Technology Economy market

Advancement in Technology, dramatically affect the economy system will then affect the market. (I.e. development of e-commerce, change economy, and new online markets are formed). It calls on the destruction of old ways of living and the realization of new markets/ opportunities.

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Example: Apple came up with PCs, Compaq used the technology to snatch market share, with the intense competition to make everything smaller and faster. The Laptop was invented.

Reverse: Technology Economy market

When composite growth in all markets is seen, it forms a cumulative increase in GDP that will therefore develop the economy which will then determine the level of technology adoption.

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Political Legal Economy Social Cultural

Political change comes first as “buy-ins” by managers. Once staff is committed, a program of economic nature takes place (i.e. new strategies, new plans). Once tasks are schieven, corporate culture should be changes to SUPPORT the new strategy in order to sustain the success of implementation

Reverse: Political Legal Economy Social Cultural

This occurs when values held by society change the rationale of an economic system which then accelerates the shaping of new political/ legal environment.

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Technology Social Cultural

New technologies always provide better accommodations for society as it makes life easier.

Reverse: Technology Social Cultural

People’s lifestyle inspires new technology to be developed.

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Political Legal Market

Changes in political/legal environment affect the market i.e. FTA agreements

Reverse: Political Legal Market

Changes in market also change the political/ legal environment i.e. high demand for pirated goods forces govt. to establish laws against copyright infringement.

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Technology Political /legal

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Increase in technology created more transparency in the legal system, making the country more democratic. Opening up the economy to more international laws that will ultimately affect the political/ legal environment to more variables.

Reverse: Technology Political /legal

New patents will encourage the creation of new technology.

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Social Cultural Market

When people place more emphasis on convenience, there will be an increase demand for markets to go online for people’s preference.

Reverse: Social Cultural Market

With developments in the marker, cultural and society also changes as people are more educated and have more information. Generally, the society in general will “advance”

Info: 78% (from 74% in 2005) of households in Singapore had at least one computer (i.e. desktop/laptop)

Computer users

Computer usage is more common among the young. 85% of the resident population aged 10 to 14 years is computer users, compared to 68% for the 15 to 59 years age group, and 28% for the above 60 years age group. Overall, the proportion of computer users aged 15 years and above remained at 65% in 2006.

Home Internet penetration

The proportion of households with access to the Internet at home accounted for 71% of the total households in 2006. 66% of the households in public housing had access to the Internet at home, compared to 87% of households in private housing. The gap between the home Internet penetration rates of households in private and public housing has narrowed.

Source: http://www.ida.gov.sg/doc/Publications/Publications_Level2/2006_hh_exec%20summary.pdf

2. Competitors

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-Should always keep an eye on competitors in the market, Competition can be stiff in global market setting.

-The company must also provide greater customer value, also gain strategic advantage by positioning their offerings against competitor’s offerings

3 dimensions of analysis

General Aggressiveness Capability

The number of competitors in the industry

Potential competitors

Availability of substitutes

The extent which these competitors implement creative and effective strategies

4 points

Price and quality

Timing and know-how

Stronghold

Deep- pocket

The ability of the competitor to implement the challenge.

Ie. Strong financial backing, huge intangible assets and solid technology backing.

3. Customers ( Customers: Taken from Re-thinking Marketing TB)

Have their needs and wants as well as expectations Customer expectations influences customer satisfaction

Three dimensions you can use to observe a customer profile Enlightened ability to influence other customers through for example education Informationalized ability to evaluate the choices offered to the customer

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Factors that influence customer

expectationCompany

Competitors and the level of competition

Information that can be accessed

easily

o occurs mainly because the customers has easy, swift access to information empowered ability of the customer to realize his or her decisions to buy or use a product

o dominant dimension when the level of competition starts to rise

Three aspects of behavio u r to evaluate the process of forming or changing consumer behavio u r Cognitive what’s in the mind of customers

o the enlighten dimension that is related to product knowledge Affective what’s the customers’ motive

o the informationalized dimension since it causes the customer to evaluate each of the brands that exist in the market

Connative what’s the overt behaviour of customerso the empowered dimension or the tendency to adopt a certain behaviour towards a

certain product

The company thus should assess the competitive setting to entail the identification and evaluate players that are

strong or weak pay attention to potential threats assess the customers’ profile identifying relevant consumer trends and identify the likely

impact of the forces of change on them gather insightful information about customers by studying the likely changes in customer

composition produce a winning value app when the company can offer more comprehensive, solution-

oriented products

3. Customer Value Demander (Textbook)

Types of customersConsumer markets individuals and householdsBusiness markets buy goods and processes for further productionReseller market buys goods and services and reseller at a profitGovt markets govt agencies that buy goods and services to produce public serviceInternational markets consists of those markets in other countries

Consumer Buying BehaviourThe buying behaviour of final consumers – individuals and households who buy goods and services for personal consumption

Characteristics affecting the consumer behavio u r 1. Cultural2. Social3. Personal4. Psychological

Cultural factorCulture the set of values, perceptions, wants and behaviour learned by a member of society from the familyMust understand the culture in each international market and adapt their marketing strategies accordingly

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SubcultureThat of a group of people with shared value systems based on common life experiences nationalities, religions, racial groups and geographic regions

Social classRelatively permanent and ordered divisions in a society whose members share similar values, interests and behavioursMeasured as a combination of occupation, income, wealth and other variables

Social- Family

- most impt consumer buying org in society- Role and status

- a role consists of the activities people are expected to perform according to the persons around them

- each role carries a status reflecting the general esteem given to it by the society

Personal- Age and life cycle stage

- many marketers define their target markets in terms of life-cycle stage and develop appropriate products and marketing plans for each stage

- Occupation- affects the goods and services bought

- Economic situation- marketers of income-sensitive products watch trends in personal income, saving and

interest rates

- Lifestyle- a person’s pattern of living as expressed in his or her activities (work. Hobbies and

social events), interests (food, fashion, family) and opinions (about themselves, social issues, businesses and products)

- Personality and self concept- personality refers to the unique psychological characteristics that lead to relatively

consistent and lasting responses to one’s own environment- a brand personality is a mix of human traits that may be attributed to a particular

brand sincerity (down to earth, honest, wholesome and cheerful) excitement (daring, spirited, imaginative and up to date) competence (reliable, intelligent and successful) sophisticated (upper class and charming) ruggedness (outdoorsy and tough)

Psychological factors- Motivation

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- a need that is sufficiently pressing to direct the person to seek satisfaction of the need

- Maslow’s hierarchy of needs- Perception

- the process by which people select, organize and interpret info to form a meaningful picture of the world

- selective attention, distortion and retention- Learning

- changes in the individual’s behaviour arising from experience- occurs thru the interplay of drives, stimuli, cues, responses and reinforcement

- Beliefs and attitudes- a descriptive thought that a person holds about something- a person’s consistently favourable evaluation, feelings and tendencies toward an

object or idea

Four types of buying behavio u r (see pg 3) Complex buying behaviour

- high consumer involvement in a purchase and significant perceived differences among brands

- consumers may be highly involved when the product is expensive, risky, purchased infrequently and highly self impressive

- Dissonance-reducing buying behaviour- consumers are highly involved with an expensive, infrequent or risky purchase but

see little diff among brands- buy relatively quickly and respond only to a good price or to purchase convenience

- Habitual buying behaviour- lower consumer involvement and few significant perceived brand diff

- Variety seeking buying behaviour - low consumer involvement but significant perceived brand diff- do a lot of brand switching for the sake of variety- must encourage habitual buying behaviour

Stages in the adoption process the mental process through which an individual passes from first awareness – the consumer becomes aware of the new product, but lacks info about it interest – the consumer seeks info about the new product evaluation – the consumer consider whether trying the new product trial – the consumer tries the new product on a small scale to improve his or her estimate of

its value adoption – the consumer decides to make full and regular use of the new products

The buyer decision process need recognition

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information search evaluation of alternatives purchase decision post purchase behaviour

Need recognition recognizes the need or the problem triggered by internal or external stimuli

Information search customer is aroused to search for more information, the consumer may simply have

heightened attention or may go into active info search personal family, friends, acquaintances word of mouth commercial advertising, salesperson, dealer, display public mass media, consumer rating org experiential sources handling, examining, using the product awareness and knowledge of the available brands and features increases

Evaluation of alternatives consumer uses info to evaluate alternative brands in the choice set do careful calculations and logical thinking or not at all

Purchase decision the buyer’s decision about which brand to purchase attitudes of others or unexpected situational factors may cause a diff btw purchase intention

and purchase decision

Post purchase behaviour consumer takes further action after purchase, based on their satisfaction or dissatisfaction r/s btw consumer’s expectations and product’s perceived performance impt to keep them satisfied so as to retain them and build lasting r/s with the customers

4. Company Value Decider

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1. Sets the company’s mission, objectives, broad strategies and policies2. Work in harmony to provide superior customer value and satisfaction3. identify and assess the existing and potential resources that the company owns

a. strength or weakness?b. A source of sustainable competitive advantage?c. Whether they fit the environment in which the company is operatingd. Opportunities and threats that exist

What are resources?- tangible assets- intangible assets- organizational capabilities

Tangible assets- physical resources

- nature of the resources such as condition, capabilities etc- determine their usefulness in gaining a competitive advantage

Intangible assets- Company’s reputation, brand equity, customer r/s, production knowledge, technological

know-how, patents and trademarks- Unique and difficult to be copied by competitors

Organizational capabilities- A combination of assets, people and processes that organizations use to transform input into

output- Include a set of abilities describing efficiency and effectiveness- A sustainable competitive advantage most of the time

- greater efficiency- better quality output

Value of a firm’s resources is the intersection of- Demand - Scarcity- Appropriateness- Cannot be replicated by competitors and it is when the profits it generates are captured by

the firm

Only use the resources if- they able to contribute to the fulfilment of a customer’s needs at a price the customer is

willing to pay- they are rare and in such short supply that your competitors cannot easily acquire them and

replicate your competitive advantage- you can ensure that you can capture profits created by your unique and valuable resources

Once the outlook is conducted, the next step is to design the COMPANY’S ARCHITECTURE

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- Explore: the opportunities and threats to your business environment

- Engage: immerse in the architecture

- Execute: implement the architecture to achieve the vision and mission

Special bond b/w brand, positioning and differentiation

- Positioning: a ‘promise’ from the company to customer

- To give credibility to this promise, and in order to be perceived positively by the customer, the promise must be supported by strong differentiation

- Positioning with strong differentiation strong brand equity strong brand image

strengthens positioning

- Self-reinforcing mechanism which is self repeating and increases in magnitude, becoming more and more solid and hence strengthening the company’s CA

STP: Mind Share Strategy

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- In the Strategic Business Unit (SBU) level of a company

- Company strategy (how we want to approach the whole thing based on 4Cs, STV and PCS):

Porter (cost leader, differentiation and focus)

Treacy and W (operational excellence, customer intimacy, product leader)

1. Segmentation (Pg 57-62)- MAPPING STRATEGY

- ‘Viewing your market creatively’

Establishing the mission( ‘reason for being’) art of identifying and pinpointing opps. emerging in the market e.g. Casio Viewing the market based on geographic, demographic, psychographic and behavior

variables

- Focus more on resource allocation: decide on the segments that can be served best

greatest CA can focus more on customer satisfaction clearer insight into

the competition and determine your market position- dominate your segments

- Basis of STV

- Key factor in beating the competition viewing market from a unique angle from

your competitors

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- Types of segmentation:

Static Attribute Segmentation

Look at similar, “static” attributes, which do not necessarily reflect buying or using behavior and do not directly influence the customer’s decision to buy.

C. Geographic SegmentationDividing a market into different geographical units such as nations, states, region, counties, cities, or neighborhoods.

D. Demographic SegmentationDividing the marketing into groups based on demographic variables such as age, sex, family size, family life cycle, income, occupation, education, religion, race and nationality.

- Age and Life-cycle segmentationo Dividing a market into different age and life-cycle groups

- Gender segmentationo Dividing a market into different groups based on gender

- Income segmentationo Dividing a market into different income groups

Dynamic Attribute Segmentation

Identifies similar “dynamic” attributes, or attributes that reflect human characteristics of customers (interests, habits, attitudes, beliefs) which directly influence the customer’s reason to buy.

C. Psychographic SegmentationDividing a market into different groups based on social class, lifestyle, or personality characteristics.

D. Behavioral SegmentationDividing a market into groups based on consumer attitude, usage and product response.

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Individual Segmentation

Ultimate level of segmentation, where segmentation is performed on the smallest unit of any market (Individual or “segment of one”).

Other Textbook Segmentation

Occasion Segmentation

Dividing the market into groups according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchase, or use the purchased item

Benefit Segmentation

Dividing the market into groups according to the different benefits that consumers seek from the product

Use Multiple Segmentation base

- Help identify smaller, better defined target groups

International Market Segmentation

Forming segments of consumers who have similar needs and buying behavior even through that are located in different countries

Level of Market Segmentation:

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Mass Marketing Same product to all consumer No Segmentation

Segment Marketing Different products to one or more segments

Some Segmentation

Niche Marketing Different products to subgroups within segments

More Segmentation

Micro Marketing Products to suit the tastes of individuals and locations

Complete Segmentation

* Effective Segmentation

- View the market from a unique angle and in a different way from competitors to

dominate over your competitors

- Must be able to reflect buying behavior and determine the customer’s reason to

buy

Dynamic attribute segmentation is superior to static attribute segmentation. This method leads directly to buying behavior; it can yield very valuable information for formulation of a suitable strategy for influencing this behavior

Geographic and demographic segmentation easier to perform, since accurate and precise data is readily available. However, difficult to build complete strategy incorporating positioning, differentiation, marketing mix, selling, services, process and brand building efforts with any kind of accuracy.

- Segments must be of significant size and have good prospects for future growth

- Measurable: size, purchasing power and profiles of the segments can be measured

- Accessible: the market segments can be effectively reached and served

- Substantial: the market segments are large and profitable to serve

- Differential: the segments are conceptually distinguishable and respond differently to different marketing mix elements and programs

- Actionable: effective programs can be designed for attracting and serving the segments

2. Targeting (Pg 62-65)

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- selecting which segments to enter once the market is mapped and segmented into groups of potential customers with similar characteristics and behavior

- Way of allocating resources effectively i.e. selecting the right target market

- FITTING STRATEGY

- ‘Allocating your resources effectively’

1. Ensure market segment is big enough and will be profitable enough for company to get involved in. Choose segment that is currently small but appear attractive and profitable for the

future Examine current competition in sector and its potential to grow

2. Targeting strategy must based on company’s competitive advantage Company needs capabilities, core competencies and competitive advantages to carry

out differentiation that is aimed at beating competition Must analyze closely whether chosen market segment is in line with, and supports,

company’s long-term objectives3. Market segment must be base on competitive situation that will directly or indirectly

influence the attractiveness of the target segment. Intensity of segment rivalry Potential new entrants Industry’s barriers to entry Existence of substitute products Presence of complementary products Growth of buyer bargaining power and supplier bargaining power

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Undifferentiated (Mass)

Differentiated (Segmented) Marketing

Concentrated (Niche) Marketing

Micromarketing (Local or Individual marketing)

Targeting Broadly Targeting Narrowly

Undifferentiated (Mass) Marketing

A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer

Company designs a product and a marketing program that will appeal to the largest number of buyers.

Differentiated (Segmented) Marketing

A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each

Example

Gap Inc has created 3 different retail store format (Gap, Banana Republic, Old Navy) to serve the varied needs of different fashion segment

Developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments.

Concentrated (Niche) Marketing

A market-coverage strategy in which a firm goes after a large share of one or few segments or niches

Company resources are limited.

Through concentrated marketing, the firm achieves a strong market position because of its greater knowledge of consumer needs in the niches it serves and the special reputation it acquires.

- Market more effectively- Fine-tuning its products, prices, and programs to the needs of carefully defined

segments- Market more efficiently

- Targeting its products or services, channel, and communication programs toward only consumers that it can serve best and most profitably

Example

Apple invests in research and development, making it the industry trendsetter. For example, when the company recently introduced iTunes, it captured more than 70% of the music download market. Such innovation has created a loyal base of customers who are willing to pay more for Apple’s cutting edge products

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* Note Concentrated marketing can be highly profitable. At the same time, it involves higher than normal risks. Companies that rely on one or few segments fir all of their business will suffer greatly if the segment turns sour. Or larger competitors may decide to enter the same segment with greater resources.

Best to diversify in several market segment.

Micromarketing

The practice of tailoring products and marketing programs to the needs and wants of specific individuals and local customer group

Local Marketing

- Tailoring brands and promotions to the needs and wants of local customer groups (Cities, neighborhoods, and even specific stores)

Example

Citibank provides different mixes of banking services in each of its branches, depending on neighborhood demographics

Problem

- Drive up marketing and manufacturing costs by reducing economies of scales.- Create logistic problems as companies try to meet the varied requirements of different

regional and local markets.- Brand’s overall image might be diluted if the product and message vary too much

different localities.

Individual Marketing

- Tailoring products and marketing programs to the needs and preferences of individual customers

o Customized Marketingo One-to-one Marketing

Today’s technology has enable company to mass customization. It is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to individual needs.

Example

Dell allows users to create custom-configured computer through the internet. User can choose their own configuration so to pay only what they want.

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Choosing a Target Market Strategy

- Company Resources- Product Variability- Product Life-cycle stage

Uniform Product Undifferentiated (Mass) Marketing

Fruits, raw materials

Product vary in design Concentrated (Niche) Marketing

Differentiated (Segmented) Marketing

Camera, Automobile

Limited Resources Concentrated (Niche) Marketing

Product’s life cycle stage

Launch

Undifferentiated (Mass) Marketing

Concentrated (Niche) Marketing

Only one model launched

Product’s life cycle stage

Mature

Differentiated (Segmented) Marketing

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3. Positioning (Pg 65-68)- After mapping the market and fitting the company’s resources into its selected segment, a company has to define its BEING STRATEGY in the minds of the target market credible position in their minds

- ‘Lead your customers credibly’

- How to establish trustworthiness, confidence and competence for customers

- Once done being in the minds of customers

- Customers:

Positioning should be perceived positively by customers Be their ‘reason to buy’ once it describes the value that you bring to them e.g.

Amazon.com E.g. when the newly founded Amazon.com decided its positioning would be “the most

convenient book retailer with the biggest selection and the lowest price”, this excellent value was reflected in what the company was trying to offer. And excellent value has become the main determinant for customers who choose to use Amazon’s services

- Company’s internal capabilities:

Should reflect their strengths and CA E.g. Amazon’s positioning accurately describes the company’s strength and core

capabilities that form the basis of its competitive advantage

- Company’s competitors

unique positioning so that it can easily differentiate from the rest e.g. Nokia

- Assessment of changes that occur within the business environment

Positioning = planting the personality, identity and perception Hence, it must be consistent and unchanging e.g. Jollibean and Changi Airport E.g. Changi Airport, won Best Airport in the World award many times, positions itself as

the “Most User-Friendly Airport in the world”. Its unique marketing research program provide critical information to its decision makers to keep abreast of developments in its customers, competitors and changing environment, and to leverage its resources to respond accordingly

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Positioning Example

5. Sony – Innovation6. Giordano – Value for Money7. Wal-Mart – Everyday low price8. Singapore Airlines – Excellent service quality

These companies have achieved this because they have consistently used the same positioning statement over a long time, and have not changed them one iota.

Positioning (Textbook)

Product positioning

The way the product is defined by consumers on important attributes (The place the product occupies in consumers’ mind relative to competing product)

Positioning Task

- Identifying a set of possible competitive advantages upon which to build a position- Choosing the right competitive advantages upon which to build a position- Choosing the right competitive advantages- Selecting an overall positioning strategy- Must effectively communicate and deliver the chosen position to the market

Identifying possible Competitive Advantages

Competitive Advantages

An advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices.

Positioning begins with actually differentiating the company offer so that it will give consumers superior value.

Choosing the right competitive advantage

A difference is worth establishing to the extent that it satisfies the following criteria:

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- Important: The difference delivers a highly valued benefit to target buyers- Distinctive: Competitors do not offer the difference, or the company can offer it in a more

distinctive way- Superior: The difference is superior to other ways that customers might obtain the same

benefit- Communicable: The difference is communicable and visible to buyers- Preemptive: Competitors cannot easily copy the difference- Affordable: Buyers can afford to pay for the difference- Profitable: The company can introduce the difference profitably

Selecting an Overall Positioning Strategy

The full positioning of a brand is the brand’s value proposition (the full mix of benefits upon which the brand is positioned.

Example

Volvo’s value proposition hinges on safety but also includes reliability, roominess, and styling, all for a price that is higher than average but seem fair for this mix of benefits.

Possible Value Proposition

More for More

“More for more” positioning involve providing the most upscale product or service and charging a higher price to cover the higher costs.

Example

Ritz-Carlton Hotels, Mont Blanc writing instruments, Mercedes-Benz automobiles each claims superior quality, craftsmanship, durability, performance, or style and charge a price to match. Not only is the marketing offer high in quality, it also give prestige to the buyer. It symbolizes status and a loftier lifestyle. Often, the price difference exceeds the actual increment in quality.

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Problem

They often invite imitator who claim the same quality but at a lower price. Luxury goods that sell well during good times may be at risk during economic downturns when buyers become more cautious in their spending.

More for the Same

Companies can attack a competitor’s more-for-more positioning by introducing a brand offering comparable quality but at a lower price.

Example

Toyota introduces its Lexus line with a “more-for-the-same” value proposition. Not only is it cheaper, it also have comparable high quality to companies such as Mercedes. In fact, it published surveys showing that Lexus dealers were providing customers with better sales and service experiences than were Mercedes dealership. Many Mercedes owners switched to Lexus, and the Lexus repurchase rate has been 60%, twice the industry rate.

Same for Less

Offer same product at less price

Example

Dell offers equivalent quality computers at a lower “price for performance”. Companies that do this are likely to have superior purchasing power and lower-cost operation.

Other companies develop imitative but lower-priced brands in an effort to lure customers away from the market leader. For example, AMD makes less expensive versions of Intel’s market-leading microprocessor chips.

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Less for much Less

“Less for much Less” positioning involves meeting consumers’ lower performance or quality requirements at a much lower price.

Example

Econ minimart offer more affordable goods at very low price. Tiger Airway also practices less for much less positioning. It charges incredibly low prices by not serving food and not using travel agents.

More for Less

Best if possible – winning value proposition

Example

Dell computer to have better product and lower price for a given level of performance.

Problem

In long run, companies find difficult to sustain such best of both positioning. Offering more usually cost more, making it difficult to deliver on the “for less” promise. Companies that try to deliver both may lose out to more focused competitors.

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SMD: Market Share Tactic

1. Differentiation (Pg 69-74)- ‘Integrate your content, context and infrastructure’

- To make the promise given with positioning trustworthy and credible support with strong differentiation to prevent ‘over-promise’ or ‘under-deliver’ strong brand integrity

Content Differentiation:

- value offered to customers

- what you actually offer to them (tangible part)

Context Differentiation:

- way you offer your product and service (intangible)

- efforts you put in to let customers perceive you differently from others

Infrastructure:

- technology, people and facilities used to create content and context differentiation

- e.g. strong culture within the organization employee productivity and innovation due to shared knowledge amongst themselves

- e.g. strong and effective networking system

- e.g. Cisco

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Solid differentiation was formed by offering a uniquely different “one-stop stop” networking solution, which was integrated with a uniquely different delivery through its Value-Chain B-Web Business Model. The business model works excellently and is supported by a solid infrastructure-Cisco’s state-of-the-art technology, constituency-focused people, strong salesmanship, a strong information-sharing culture. They succeeded in integrating content, context, and infrastructure to create a solid whole.

Differentiation

- Product Features, Performance, Style & Design Attributes as consistency, durability, reliability or repairability

- Volvo provides new and better safety features- Whirlpool designs its dishwasher to run more quietly- Bose positions its speakers on their striking design characteristics

- Services Speedy, convenient or careful delivery

- BankOne has opened full-service branches in supermarkets to provide location convenience along with Saturday, Sunday, and weekday-evening hours

After sale service

- Channels Design channel’s coverage, expertise and performance

- Amazon.com, Dell and Avon set themselves apart with their high quality direct channels

- People Hiring and training better people than their competitors do

- Disney people are known to be friendly and upbeat- IBM offer people who make sure that the solution customers want is the

solution they get. “People who get it. People who get it done.”

- Image A company or brand’s image should convey the products’ distinctive benefits and

positioning The image must be supported by everything the company says and does. Symbols such as the MacDonald’s golden arches, Nike Swoosh, Google’s colourful

logo can provide strong company or brand recognition and image differentiation

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The chosen symbols, characters, and other image elements must be communicated through advertising that conveys the company’s or brand’s personality

2. Marketing Mix (Pg74-75)- ‘Integrate your offer and access’

Marketing mix is about integrating a company’s offer, logistics and communications. The company’s offer, consisting of products and prices, should be well integrated with access including company’s places (channel distributions) and communications to create a powerful marketing force in the marketplace. Right communication media must be selected to raise awareness and aid recall by the target market.

- creates the content-context-infrastructure differentiation

3 types of marketing mix:

1. Destructive marketing mix-does not add customer value and does not build the company’s brand

2. Me-too marketing mix-imitates other existing marketing mix from other players in the same industry

3. *creative marketing mix-supports marketing strategy (segmentation-targeting-positioning) of the company and builds marketing value (brand-service-process)

- 4Ps (Product, Price, Place and Promotion)

- Product (product life cycle and adaptation)

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- Price (approaches and strategies)

- Promotion (Integrated marketing comm., social responsibility, advertising, sales)

- Place (location, channel distribution, distribution/wholesaler/retailer and partner idea)

Marketing mix – MICE

Matching prices e.g. do not set too high or too low

Innovative products – differentiation

Creative promotions

Effective placing

4Cs

- Customer soln

- Customer cost

- Convenience

- Comm.

- Company’s offer, consisting of products and prices, should be well integrated with access

including company’s places and the right comm. media powerful marketing force

- creates the content-context-infrastructure differentiation CREATION TACTIC

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Product

Chapter 8: Product, Services and Branding strategy

Product: anything that can be offered to a market for attention, acquisition, use/consumption and that might satisfy a want or a need.

Consumer products: products and services bought by final consumers for personal consumption

Industrial product: products that are purchased for further processing or for use in conducting business.

For consumer products-go for differentiation advertisement

For industrial products-no need for advertisements as its more of quality that is important.

Marketing considerations for the various types of consumer products (Table 8.1 pg 221)

These consumer products differ in the way consumers buy them and therefore in how they are being marketed.

When making a product decision, you must consider these factors:

-Product attributes

-Branding

-Packaging

-Labeling

-Product support services

1. Product attributes (pg 225) Product quality (total quality management-pg 226)

- The ability of a product to perform its functions; it includes the product’s overall durability, reliability, ease of operation and repair, and other valued attributes.

Product features

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- Features are a competitive tool for differentiating the company’s product from competitors’ products

Product styles and design

- Good design contributes to a product’s usefulness as well as to it looks

2. Branding (pg 235) - helps consumers identify products that might benefit them

- tells buyer about product quality

- provides legal protection for unique product features

- helps seller segment the target markets

* refer to STV-value-branding as well

Brand equity: the positive differential effect that knowing the brand name has on customer response to the product/services.

When positioning a brand, should establish a mission for the brand and a vision of what the brand must be and do. A brand is a company’s promise to the customer that guarantees a specific set of features, benefits

Brand positioning:

Lowest level: product attributes (least desirable as competitors can easily copy)

Mid level: desirable benefit

Highest level: strong beliefs and values

3. Packaging (pg 230) - To attract attention

- To describe the product

- To provide instant customer recognition

E.g. Dutch Boy Paint- Twist and Pour paint container (paint that’s easy to carry, doesn’t take a screwdriver to pry open and doesn’t dribble when pouring and doesn’t take a hammer to bang close again)

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4. Labeling (pg 231) - Identifies product or brand

-Promote products through attractive graphics

5. Product support services (pg 232) -Services that augment actual products

-Assessment of the value of the support services

-Costs of providing the services

After consideration, come up with a package of services that will both delight customers and yield profits to the company

E.g. Hewlett Packard send pop-up chat boxes to visitors who were shopping on HP.com’s pages for digital photography products. If a shopper takes a few minutes to view some gear, up pops a photo of an attractive woman with the words, “Hello, need information? An HP live chat representative is standing by to assist you.”

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Product life cycle

Sales and profits over the product’s lifetime

Refer to pg 274

Product development: begins when company finds and develops a new-product idea

Sales are zero and the company’s investment costs mount

Introduction: period of slow sales growth as the product is introduced in the market

Growth: period of rapid market acceptance and increasing profits

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Maturity: period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition

Decline: period when sales fall off and profits drop

E.g. Of products that tap the product life cycle curve effectively, Volkswagen beetle and crayola crayons pg 278

Alternative PLC shapes in various industries

Price

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Chapter 10: Pricing products

Price: amount of money and services/gds the buyer exchanges for an assortment of products and services provided by the seller

-Element that captures the value created (becomes revenue to the firm)

Pricing decisions are affected by:

Internal factors:

Marketing objectives (pg 291)

E.g. Toyota developed its Lexus brands to compete with European luxury-performance cars (BMW and Mercedes Benz) in the higher-income segment; this required charging a high price.

Marketing mix strategy (pg 292)

-Price decision must be coordinate with product design, distribution, and promotion decisions to form consistent and effective marketing programmes.

-Position their products on price and then tailor other marketing mix decisions to the prices they want to charge.

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-Price is a crucial product-positioning factor that defines the product’s market, competition and design.

-Target costing

Reverses the usual process of first designing a new product, determining its cost and then finding out whether it is possible to sell at that price. It starts with an ideal selling price that is based on customer considerations, and then target costs that will ensure that the price is met.

E.g. Procter & Gamble

Costs factors (pg 294)

- Fixed costs (overhead): costs that do not vary with sales of production levels

E.g. Executive salaries, rent

Variable costs: costs that vary directly with the levels of production (Pg 292)

E.g. Raw materials

Total costs: sum of the fixed and variable costs for a given level of production

- To price wisely, management needs to know how its costs vary with different levels of production (Pg 295)

Organizational considerations (pg 297)

-Decide who within the organization should set the prices

-Small companies; prices are often set by top mgt rather than by marketing/sales departments

-Large companies; prices are typically handles by divisional/product line managers

-Industrial markets; salespeople might be allowed to negotiate with customers within certain price ranges

External factors:

Nature of market and demand (pg 297)

-Costs set the lower limit of prices, market and demand set the upper limit

Competition (pg 301)

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-Must consider competitors’ costs and prices and possible competitor reactions to the company’s own pricing moves

Other external factors (pg 301)

-Economic conditions

-Government

-Social concerns

General Pricing approaches:

Cost-based pricing (cost-plus pricing) (pg 302)

-Adding a standard markup to the cost of the product

Break-even pricing (target profit pricing) (pg 303)

-Setting price to break even on the costs of making and marketing a product; or setting price to make a target profit

Value-based pricing (pg 304)

-Setting price based on buyers’ perceptions of value rather than on the seller’s cost

Competition-based pricing (pg 306)

-Setting prices based on the prices that competitors charge for similar products

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Place

Chapter 12: Channel Distribution and Supply Chain management

1. How channel members add value - Intermediaries buy large quantities from many products and break down into the smaller quantities and broader assortments wanted by consumers

- play a very important part in matching supply and demand

- Bridges time, place and possession gaps that separate goods and services from those who will use them

- Completes transactions like information, promotion, contact, matching, negotiation, physical distribution, financing and risk taking

- From supply chain value delivery network

2. No. of channel levels- Direct marketing channel: no intermediary levels and the company sells directly to the customers

- Indirect marketing channels: one or more intermediaries

E.g. businesses can sell products directly to their business customers

E.g. businesses can sell to intermediaries to sell to customers

- Producers’ point of view: greater no. of levels less control and greater channel complexity

E.g. physical flow of products, flow of ownership, payment flow, information flow and promotion flow

3. Channel behavior- A marketing channel consists of firms that have partnered for the same good

- Depends on each other

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- E.g. Ford dealer depends on Ford to design cars that meet consumer needs; while Ford depends on their dealers to attract customers, persuade them to buy Ford cars and service cars after sales

- The channel will be most effective if each member is assigned the tasks it can do best

- E.g. Sony produces consumer electronic products that consumers will like and to create demand through advertising; Best Buy displays their products in convenient locations, answers their questions and complete sales

- Should understand and accept their roles, coordinate their activities and cooperate to attain overall channel goals

Channel conflict (cooperating to meet common goals means giving up individual roles like acting for their self interests; argue who should do what and for what rewards)

Horizontal conflict Vertical conflict

4. Vertical Marketing systems- Producers, wholesalers, retailers act as a unified system

- Corporate VMS

channel leadership is attained through common ownership integrates successive stages of production and distribution under single ownership coordination and conflict management are attained through regular organizations E.g. Zara has control over every aspect of its supply chain, from design and production to

its distribution network: makes their own fabrics, produces more that half of their clothes, new styles take place in their own design centers ship finished products straight to the stores, eliminating warehouses faster, more flexible and more efficient

- Contractual VMS

independent firms at different levels and distribution who join together through contracts to obtain more EOS

coordination and conflict management are attained through contractual agreements among channel members

Franchises E.g. Ford and their independent dealers (manufacturer-sponsored retailer franchise) E.g. Coca-Cola licensing bottlers who buy their syrup and bottles and sells to retailers

(manufacturer-sponsored wholesaler franchise)

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E.g. Auto rental like Hertz and Fast food chains like McDonalds (service-firm- sponsored retailer franchise)

- Administered VMS

Leadership assumed through the size and power of one or a few dominant channel members

E.g. GE command unusual cooperation from retailers regarding shelf space, promotions and price policies

E.g. Wal-Mart exert strong influence on the manufacturers

5. Horizontal Marketing Systems- Two or more companies at one level join together to follow a new marketing opportunity

- Can combine their financial, production, or marketing resources to accomplish more than any company can alone

- E.g. McDonald’s partners with Wal-Mart to place express versions of its restaurants in Wal-Mart stores

- Coca-Cola and Nestle jointly venture to market ready to drink coffee and tea

6. Multichannel Distribution systems- sets up two or more marketing channels to reach one or more customer segments

- E.g. IBM uses multiple channels to serve dozens of segments and niches, ranging from large corporate buyers to small businesses to home office buyers. They also sell through resellers and distributors so that consumers can easily get them at specialty stores. They also use telemarketing to service the needs of smaller companies

7. Changing channel organization- Disintermediation

Due to technology and direct and online marketing more and more products and service producers are bypassing intermediaries and

going directly to final buyers HP opened 3 direct web sites but sends orders to resellers who will complete the

orders, ship the products and get the commissions => uses direct marketing but also helps retailers

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Channel Design decisions

1. Analyze consumer needs- Marketing channels are part of the overall customer value delivery network

- Each channel member adds value for the customer

- Must find out what target customers want from the channels

Faster delivery, greater variety, more add-ons services greater the channel service level

Must also balance costs and customer price preferences

2. Setting channel objectives- Which segments to serve and the best channels to use

- Aim is to minimize the cost of meeting cust. service requirements

- Also affected by company size and financial situation. the product (if it is perishable, direct marketing must be used), competitors (not using their channels), economic and legal constraints (depressed economy, use shorter channels to economize)

3. Identify major alternatives- Type of intermediaries

any alternatives: expanding the company’s sales force manufacturer’s agency industrial distributors in different regions

- No. of intermediaries

intensive distribution (convenience products) exclusive distribution (luxury automobiles, prestige women clothing) selective distribution (television, furniture)

4. Evaluating the major alternatives- Economic criteria: compares the sales, costs and profitability

- Control issues

- Adaptive issues: long term but the channels must be flexible to adapt to environmental factors

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5. Designing International Distribution channels - Each country has its own unique characteristics and hence global marketers must adapt their channel strategies to existing structures

Channel Management decisions

1. Selecting channel members- Determine what characteristics they have that can distinguish them from the rest

- E.g. years in businesses, growth and profit record, cooperativeness, reputation, size and quality of salesforce, location, customers and future growth potential

2. Managing and motivating channel members- Must be able to practice strong PRM to forge strong LT rls with channel members

- See them as their first line customers and partners

- E.g. Wal-Mart and P & G work together to create superior value for customers, planning goals and strategies, inventory levels and advertising and promotions

3. Evaluating channel members- Checking their performance

- Reward intermediaries who are performing well and adding good value to customers

- Assist poor performers or replace them

- Must be sensitive to their dealers

Logistics

Involves getting the right product to the right customers in the right place at the right time

To provide a targeted level of customer service at the least cost

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1. Warehousing- Storage warehouses: store goods for moderate to long periods

- Distribution centers: designed to move goods rather than support them (large and highly automated)

2. Inventory management- Affects customer satisfaction

- E.g. with too little stock, risks not having products when customers want to buy

- E.g. with too much stock, it will lead to increase costs

- Just- in-time: carry small amts of stock for a few days of operations, but this requires accurate forecasting with fast, frequent, and flexible delivery so that new supplies will be available when needed

- RFID, smart tag tech: fully automated handing of inventory

3. Transportation- Speed

- Dependability

- Avaliability

- Costs

- affects the price, delivery performance, condition of goods when they arrive cust satisfaction

- E.g. train, truck, air, water and Internet

- Can also use intermodal transportation: combining two or more modes of transports

4. Logistics Information management- channel partners linking up to share info and to make better joint logistics decisions

Integrated Logistics management

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The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system

- Cross functional teamwork inside the company

- Building logistics partnerships

- 3rd party logistics

outsourcing logistics tasks to other companies to increase efficiency at lower costs allows the company to focus more on their core business integrated logistics companies are able to understand increasingly complex logistics

environment and can help them expand their global marketing coverage

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Chapter 13- Retailing and Wholesaling

Retailing

All the activities involved in selling products directly to final consumers for their personal, non-business use

Classifications of retailers (Pg 373-378)

Amount of service

- Self service retailer: provides few or no services to buyers, usually for convenience goods e.g. Best Buy

- Limited service retailers: provides a no. of services to shoppers e.g. Sears that provides more sales assistance as they carry more shopping goods that need more info

- Full service retailers: provide full range of services to shoppers as they carry more specialty goods for which customers wish to be waited on e.g. Neiman Marcus

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Product line

Relative prices

Organizational approach

Target market and positioning decisions:

- must be able to define their target markets well and position themselves strongly (Pg 379)

Product assortment and services decisions:

Product assortment

- Differentiate the retailer while matching target shopper’s expectations

- Offer merchandise that no other competitor carries

- Offer surprise merchandise

- Highly targeted product assortment

Services mix

- E.g. some retailers invite customers to ask questions or consult service representatives in person or via phone/keyboard

Store’s atmosphere

- plan one that suits the target market and moves them to buy

Experimental marketing transporting customers into unusual, exciting shopping environment

Price decision:

- High markups or lower volume (mostly specialty stores)

- Low markups on higher volume (mass merchandisers and discount stores)

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- E.g. Bijan boutique on Rodeo Drive in Beverly hills sells the most expensive menswear in the world. Its ‘by appointment only’ policy is designed to make its wealthy, high profile clients comfortable with these prices. Hence, they sell a low volume but make hefty profits

Promotion decision: Pg 383

- Advertising, personal selling, sales promotions, public relations and direct marketing to reach consumers

Place decision:

- Retailers select places that are highly accessible to the target markets in areas that are consistent with the retailers’ positioning

- Most stores today cluster together to increase their customer pulling power and to give them the convenience of a one stop shopping

- E.g. Central business districts

- E.g. Shopping centers

Future of retailing: Pg 385-389

New retail forms and shortens retail life cycles

Wheel-of-retailing concept:

- Many start off as low margin, low price, low status operations

- Challenge established retailers by increasing their costs and margins increase

- However, as time goes by, the new retailers’ costs will start to increase with more offers of services after their success

- have to increase their prices and will be replaced again

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Nonstore retailing

- Online retailing

- Easier to use websites

- Improved online service

- E.g. online auctions like e-Bay, online travel companies like Travelocity

Retail convergence

- Increasingly selling the same products at the same prices to the same consumers in competition with a wider variety of other retailers

- Eg. You can buy books at independent local bookstores or at discount stores like Borders

- Greater competition for retailers and greater difficulty in differentiating offerings b/w chain superstores and independently owned stores

Growing importance of retail technology

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- Advanced IT and software systems to produce better forecasts, control inventory costs, order electronically, send emails b/w stores, and even sell to customers within stores

- E.g. touch screen kiosks in petrol kiosks, self scanning systems, smart cards

making shopping easier for customers

Wholesaling

Activities involved in selling goods and services to those buying for resale or business E

Functions of Wholesalers:

Selling and promoting

- Help manufacturers reach many small customers at a low cost

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- Wholesalers have more contacts and is often more trusted

Buying and assortment building

- Select items and build assortments needed by their customers, thereby saving the consumers much work

Bulk breaking

- Break bulk into small qtys

- Save their customers money

Warehousing

- Hold inventories reducing costs and risks of suppliers and customers

Transportation

- Quicker delivery as they are closer to producers

Financing

- Gives customers credit and finance their suppliers by ordering early and paying bills on time

Risk bearing

- Taking title and bearing the costs of theft, damage, spoilage and obsolescence

Market Info

- Gives customers and suppliers about competitors, new products and price developments

Management services and advice

- Helps retailers train their sales clerks, improve store layouts and displays and set up accounting and inventory control systems

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Types of wholesalers:

Wholesaler marketing decisions:

Target market and positioning decisions

- Choose a target group by size of customer (only large retailers)

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- Need for service (customers who need credit)

- Type of customers (convenience stores)

- Identify the more profitable customers, design stronger offers and build better rls with them

Marketing mix decisions

- Cutting down on the no. of lines they carry, choosing to carry only the more profitable customers

- Also rethinking which services count most in building strong customer rls and which should be dropped or charged for

Find the mix of services most valued by their target customers

- Price: new pricing approaches

E.g. cut margins on some lines to win impt new custs and may ask supplier for price breaks which in turn can lead to higher suppliers’ sales

- Promotion: trade advertising, sales promotions, personal selling and public relations; need to come up with an overall positioning strategy and to make greater use of supplier promotion materials and programs

- Place: choose their locations, facilities and Web locations carefully

Trends in wholesaling

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In the LR, their only reason for existence comes from adding value by increasing effectiveness and efficiency of the entire marketing channel

Must constantly increase their services and reduce costs

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Promotion

Chapter 14: Integrated Marketing communications strategy (IMC)

The changing comm. environment:

1. More and more marketers are developing focused marketing programs designed to build closer rls with customers in more narrowly defined micro-markets

2. Vast improvements in IT are speeding the movement toward segmented markets and hence shifting away from mass marketing

The need for IMC:

- Shift from mass marketing to target marketing

- Corresponding use of a larger, richer mix of comm. channels and promotion channels: advertising messages from different media and different promotional approaches all become part of a single message conflicting messages confused company images and brand positions

- Comm. often comes from different company sources

IMC company carefully integrates and coordinates its many comm. channels to deliver a clear,

consistent and compelling message about the organization and its brands

builds brand equity and strong rls by tying tog all the images and brand messages

company’s advertising and personal selling comm. have the same message, look and feel as

its website; public relations materials say the same thing as its direct mail campaign

recognizes all contact pts where the cust may encounter the company, products and its

brands

produces better comm. consistency and greater sales impact

may have a marketing comm. director that has overall responsibility for all comm. efforts

The view of IMC: Pg 404 - 405

- Identify the target audience

- Shaping a well-coordinated promotional program to obtain the desired audience response

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- Viewing comm. as managing the cust rls over time

- Customers differ comm. programs must be developed for specific segments, niches and individuals

- To comm. effectively, marketers need to understand how comm. works

Steps in developing effective IMC:

1. Identifying the target audience- individuals, groups, special publics or the general public

- will affect what will be said, how it will be said, when it will be said, where it will be said and who will say it

2. Determining the comm. objectives (Pg 406-407)

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3. Designing a message Message content- Rational appeals: audience’s self interests, showing that the product will produce the desired benefits

- Emotional appeals: stir up either positive or negative emotions e.g. happiness, joy, guilt, fear; can also use humor to capture attention, make people feel good and give a brand personality

- Moral appeals: audience’s sense of what is ‘right’ and ‘proper’; urge people to support social causes like a cleaner environment, better race relations, equal rights for women and aid to the disadvantaged

Message structure- draw a conclusion or leave it to the audience

- whether to present a one-sided argument (mentioning only their strengths) or a two-sided argument (mentioning their strengths and shortcomings)

Message format- strong format to capture attention

- presenters image like dress, poise, gestures, facial expressions

- sound, words and voices

- eye catching pictures, headlines

- watch the texture, color, size and shape

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Personal comm. channels- two or more people comm. directly with each other, face to face, over the telephone, through the mail, or even through an Internet chat

- allows for personal and feedbacks

- carries great weight for products that are risky, expensive or highly visible seek opinions of knowledgeable people

- opinion leaders people whose opinions are sought by others by supplying influencer with the product on attractive terms or by educating them so that they can inform others

- Buzz marketing involves cultivating opinion leaders and getting them to spread info abt a product or service to others in their communities

Non-personal comm. channels- media that carry messages w/o personal contact or feedback e.g. mass media, atmospheres and events

- e.g. television, radio, newspapers, signs, posters, designed environments that create or reinforce the buyer’s learning toward buying a product, staged occurrences that comm. msgs to target audiences

4. Selecting the message source- using highly credible sources

- celebrity endorsers

Must ensure that they are reputable so that it will not lead to embarrassment and a tarnished image

5. Collecting feedback- asking the target audience members whether they remember the message, how many times they saw it, what points they recall, how they felt about the message, and their past and present attitudes toward the product and company

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The impact of marketing comm. tools on customers’ responses

Setting the total promotion budget:

4 steps:

1. Affordable method - sets the promotion budget at the level they think they can afford

completely ignores the effects of promotions on sales as they place it as last spending priority

2. Percentage-of-sales method- setting their promotion budget at a certain % of current or forecasted sales

- simple to use, helps management think about the rls b/w promotional selling, selling price and profit per unit

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A – PR and Publicity

B – Advertising

C- Personal selling

D- Sales promotions

see sales as the cause of promotions rather than the results based on availability of funds rather than opportunities budget varies from yr-to-yr, long range planning is difficult

3. Competitive-parity method- setting promotion budget to match competitors

- competitors’ budgets represent the collective wisdom of the industry

- spending what competitors spend helps prevent promotion wars

companies differ greatly and have their own promotion needs does not necessarily prevent promotion wars

4. Objective-and-task method

- sets its promotion budget based on what it wants to accomplish with promotion

- defining specific promotion objectives

- determining the tasks needed to achieve those objectives

- estimates the costs of performing these tasks

- forces management to spell out its assumptions abt the rls b/w $ spent and promotion results

hard to identify what specific tasks will achieve stated objectives

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Setting the overall communication mix:

Advertising

- reach masses of geographically dispersed buyers at low cost per exposure

- enables the users to repeat the message many times

- large scale: seller is large, popular and successful tend to view the advertised products more legitimately

- very expressive

- build long term image for a product

- trigger quick sales

impersonal and cannot be directly persuasive

Sales promotions (Chapter 15)

Public relations (Chapter 15)

Personal selling (Chapter 16)

Direct marketing (Chapter 16)

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Promotion mix strategies:

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Push strategy

- pushing the product through distribution channels to final consumers

- producer directs its marketing toward channel members to induce them to carry the product and to promote it to final consumers

Pull strategy

- producer directs its marketing activities toward final consumers to induce them to buy the product

Depends on type of market

- B2C – ‘pull’ more, putting more funds into advertising, followed by sales promotions, personal selling, and then public relations

- B2B – ‘push’ more, putting more funds into personal selling, followed by sales promotions, advertising and public relations

Depends on PLC

- Introduction stage – more advertising and PR for high awareness, sales promotions for early trial, personal selling for carrying the product

- Growth stage – advertising and PR continues but sales promotions can be reduced

- Mature stage – sales promotions more impt than advertising as cust alr know the brands

- Decline stage - advertising, PR, personal selling fall but sales promotions may still be strong

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Integration promotion mix: Pg 420

- Analyze internal and external trends that can affect the company’s ability to do business

E.g. determine the strengths and weaknesses of each comm. function develop combi of promotional tools

- Audit the packages of comm. spreading thrg the organization

- Identify all contact points for the company and its brands

E.g. ensure consistency of comm. at each pts with the overall strategy

- Team up in comm. planning

Socially responsible marketing comm.: Pg 420-421

Advertising and sales promotions

- must avoid deceptive and false advertising

- avoid bait and switch advertising that attracts buyers under false pretences

- companies can use advertising and other forms of promotion to encourage and promote socially responsible programs and actions e.g. Caterpillar protects the Amazon rainforest by advertising to promote the cause

Personal selling

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- must follow the rules of fair competition

- must not lie to customers or mislead them abt the advantages of buying a product

- must match advertising claims

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Chapter 15 – Advertising, Sales promotions and PR

Advertising

Setting advertising objective:

Specific comm. task to be accomplished with a specific target market during a specific period of time

Informative advertising Used heavily when introducing a new productUsed to build primary demand

Persuasive advertising More important as competition risesBuild selective demandHave to persuade that its brand offered the best quality for their moneySome may become comparative advertising: directly or indirectly compares with other brands

Reminder advertising Important for mature products – keeps consumers thinking about the product e.g. Coca-Cola

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Setting the advertising budget:

Depends on PLC

- new products need large advertising budget to build awareness and gain consumer trial

- mature brands usually require lower budgets as a ratio to sales

Depends on market share

- when building the market share, more advertising is needed compared to maintaining it only

Depends on no of competitors

- the greater the no of competitors, the more advertising is needed to differentiate themselves against the rest

Depends on undifferentiated brands

- need more advertising to set them apart from the rest

Developing advertising strategy:

Creating the advertising message

- To gain and hold attention, they must be better planned, more imaginative, more entertaining and more rewarding to customers

- New trends: TiVo trend companies are coming up with 6-second ad spots that run in the time it takes for a customer to fast forward through a commercial break

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- decide what message will be comm. to customers

- must get consumers to think about or react to the product or company in a certain way

must make them believe they will benefit from doing so

- identify customer benefits

- developing compelling creative concept ‘Big Idea’ bring the message strategy into life and memorable

- advertising appeals should be meaningful, believable and distinctive (must be better than the rest, believe that it will deliver the promised benefits)

- must also choose a positive tone/ edgy humor to break the clutter

- memorable and attention getting words

- format elements e.g. illustration must be strong to draw attention; headline must be enticing; copy i.e. the main block must be simple but strong and convincing

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Selecting advertising media

- Deciding on reach, frequency and impact (more it is, the higher the impact)

- Media habits of the target consumers (must reach them effectively)

- Nature of product e.g. fashion magazines are best in color magazines and automobiles on TV)

- Different types of messages e.g. announcing sale in TV or over the radio, technical data in magazines

- Cost e.g. TV is generally more costly

- Type of media vehicles (specific media within each general media type)

- Media timing (decide how to schedule the advertising over the yr; follow seasonal patterns, oppose seasonal patterns or same coverage)

- Choose the pattern of the ads (continuity and pulsing)

Evaluating advertising

Communication effects

- copy testing tells us whether the ad is communicating well

Sales effects

- compare past yr sales with past yr advertising expenditures

- experiments (e.g. vary the amt it spends on advertising in different markets and measure the differences in sales)

Organizing for Advertising

- Advertising agencies (Pg 440)

International Advertising decisions

- standardization lowers costs, greater global advertising coordination and a more consistent worldwide image

- however, different countries have different cultures, demographics and economic conditions

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think global but act locally!

Sales promotions

Consists of ST incentives to encourage the purchase or sales of a product or service

Reasons for rapid sales growth

- Generate immediate sales

- Company faces more competitions and competing brands are less differentiating

- Advertising efficiency has declined because of rising costs, media clutter and legal restraints

- Customers are becoming more deal oriented and ever-larger retailers are demanding more deals from manufacturers

- reinforces the product’s position and build LT rls with customers e.g. frequency market programs or loyalty clubs

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Major sales promotion tools

Consumer promotions (Pg 443-445)

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Trade promotions (Pg 445)

Business promotion tools

- generate business leads, stimulate purchases, reward customers and motivate salespeople

- e.g. conventions, trade shows and sales contest (motivates salespersons to increase performance)

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Developing the sales promotion program

- decide how to promote and distribute the promotion program

- evaluate their sales promotion programs by comparing sales before, during and after

- surveys to provide info on customers recalling the promotion, what they thought of it, how many took advantage of it and how it affected their buying

Public relations

• Very believable

• Reaches people who avoid salespeople and ads

• Can dramatize a company or product

• Tends to be used as an afterthought

• Planned use can be effective and economical

E.g. news, speeches, special events and buzz marketing campaigns to spread brand message

Should be blended well with other promotional activities within the company’s overall integrated marketing comm. effort

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Chapter 16: Personal selling and Direct Marketing

Personal selling

Involves 2 way comm. b/w salespeople and individual customers, whether face to face, by telephone, through video or Web conferences

The role of the salesforce:

- works directly with customers

- works with retailers and wholesalers to gain their support and to help them to be more effective in selling the company’s products

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- represent the company to customers

find and develop new customers and comm. info abt the company’s products and services

sell products by approaching customers, presenting their products, answering objections, negotiating prices and closing sales

provide cust service, carry out market research and intelligence work

- represent customers to company

relay customers concerns learn abt cust needs and work with marketing and non-marketing people to create more

cust value

- should be more concerned with more than just producing sales and should work with others to produce cust satisfaction and company profit

Designing sales force structure and strategy: Pg 459- 470

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Customer

Product

Territorial

- to reduce the time demands on their outside sales force, many companies have increased the size of the inside sales force

- E.g. of an inside sales force Experienced telemarketers sell

complex chemical products by

telephone at DuPont’s Customer

Telecontact Center

Recruiting and selecting salespeople:

- performance difference

- intrinsic motivation

- disciplined work style

- ability to close a deal

- ability to build rls with custs

- top salespeople are customer problem solvers and rls builders: see the world through the eyes of the customers

- companies must analyze the job and the characteristics of the most successful salespeople to identify the traits needed

Training salespeople:

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Inside

- must know and identify with the company

- learn about the products

- learn about the competitors’ and customers’ characteristics e.g. buying habits and motives

- learn how to make effective presentations hence must be trained in the basics of the selling process

- understand field procedures and responsibilities

Compensating salespeople:

- Fixed amt (salary)

- Variable amt (usually commissions or bonuses)

- Expense allowance for job related expenses

- Fringe benefits give job security and satisfaction

Supervising salespeople:

- Some companies set sales quota to motivate employees, sales contests to spur the selling force to make a selling effort above what would be normally expected and sales meetings to air feelings and identify in a group

Evaluating salespeople:

- sales reports

- salespeople have to write up their completed activities on call reports and submit expense reports

- personal observations

- customer surveys

- talks with other salespeople

The Personal selling process:

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Prospecting

Pre-approach

Approach

Presentation

Direct Marketing

Benefits to buyers:

– Convenient

– Easy to use

– Private

– Ready access to products and information

– Immediate and interactive

Benefits to sellers:

– Powerful tool for building customer

relationships

– Can target small groups or individuals

– Can tailor offers to individual needs

– Can be timed to reach prospects at just the

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right moment

– Gives access to buyers they could not reach

through other channels

– Offers a low-cost, efficient way to reach

markets

Forms of direct marketing:

- Telephone marketing: Accounts for more than 36% of all direct marketing sales; used in both consumer and B2B markets and can be outbound or inbound

- Direct mail marketing: sending an offer, announcement, reminder or other item to a person e.g. flyers, brochures; personal and flexible, easy to measure results and permits high target-market selectivity

- Catalog marketing: more and more are going electronic with the Internet

- Direct response TV marketing: direct response advertising (gives you a no to call), infomercials (provide info and edn msgs) and home shopping channels

- Kiosk marketing: info and ordering machines e.g. in stores, airports

3. Selling

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- ‘Integrate your company, customer and rls’

- creating a LT rls with customers through a company’s products

- to generate the financial returns after ST CAPTURE TACTIC

- feature selling benefit selling soln selling

- best salespersons are those that are good rls builders and customer problem solvers

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BSP: Heart Share Value

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1. Brand- ‘Avoid the commodity-like trap

- When we determine positioning and differentiation, and support them with solid marketing mix and selling strategy, we are developing brand

- Developed through the application of the right S, T and V

- creativity in determining segmentation and targeting; right choice of positioning; development of strong differentiation supported by appropriate marketing mix and selling strategy; and development of solid service and process

- V = (Fb + Eb)/ P + E

- Total get:

Functional benefit (Benefit based on a product attribute that provides functional utility to customers; relates directly to the functions performed by the product and service)

Emotional benefit (Benefit based on a product attribute that provides emotional utility)

- Total give:

Price (cost paid by the customer to obtain your product and service) Other expenses (cost to the customer when using and consuming product and

service)

- Brand is the equity of the firm that add value to the products and services it offers

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- Creates value for the consumers by enhancing satisfaction and recognition of quality

- Liberate itself from the supply and demand curve

2. Service- ‘Avoid the Business-Category trap’

- VALUE ENHANCER

- creates a lasting value for customers through products and services

- Service = Solution gives real soln to customers

- Enhances value by:

More for more (Total get > total give) More for same ( Total get = total give) More for less (Total get > total give) Same for less (Same total get but lower total give) Less for less (Lower total get and lower total give)

3. Process- ‘Avoid the function-orientation trap’

- Reflects the product quality, cost and delivery of a company to customers

- VALUE ENABLER

- Manage the supply-chain process

- Requires hub of network organizations where it can establish rls with organizations that have potential to add value Strategic Alliance

- Must be able to create value for external and investor customers and the people in the organization

- your people, your goods and cash flow the image that you create

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The S-T-V Triangle: Value

“How to win the heart share”

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Value

Responsibility of the corporate level and is intended to win the heart share of the of target markets.

Value can be defined as “total get” divided by “total give” :

Value = Total Get / Total Give = (Functional Benefit + Emotional Benefit) / ( Price + Other expenses)

Total Get : Benefit Functional Benefit (Fb) Product attribute that provides functional utility to customer.This benefit is directly attributed to functions performed by the product or service.Eg. : car : durability, driving comfort, safety Food : taste,nutritional value or freshnessExample: Popular Bookstore offers strong functional benefit to its customers through its convenient locations and wide range of reasonably priced products.

Emotional Benefit (Eb) Product attribute that provides emotional utility.Eg: feel energetic after drinking Coke, feeling safe when driving Volvo

Total Give : Cost Price (P) Cost paid by customer to obtain productOther Expenses (Oe) Cost to customer when using and consuming

the product or service Strong Brand = High functional and emotional benefits, low price and low other expenses

Note: Every company must do its utmost to produce higher “total get”- “total give” compared to its competitors.E.g. of value: Legend is very successful in China because consumers perceive it as offering a very good value for its computer. Affordable price for high quality products comparable to famous brand name.

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The 3 elements under value are:

Brand Value Indicator Enables the company to avoid the commodity trapService Value Enhancer Paradigm of the company to always meet or exceed the

customer’s needs, wants and expectationsProcess Value Enabler Enables the company to deliver the value to customers

through the process both internally and externally.

The Jollibee case shows how this Filipino fast-food market leader has won the heart share (value) with:

Brand Conceived as a fast-food outlet of high quality but reasonably priced food productsService(FSC)

Food(F)Deliver quality foodService (S)Efficient ServiceComfortable Setting(C)

Process

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Brand: Avoid the Commodity-like trap

The right application of STV is important to build a brand

S - Creative in determining segmentation and targeting, right choice of positioning,

T - Developing a strong differentiation supported by appropriate marketing mix and selling strategy

V - Developing solid service and process

Developing Brand = Positioning + [Differentiation + support (solid marketing mix + selling strategy)] + (solid service and process)

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Brand is a reflection of the value that you give to your customer – value indicator of company and product

Base on the Value Formula, a strong brand will be marked by :

Total Get: High Functional and Emotional Benefit

Total Give: Low price and other expenses

Must try to get the largest possible “Total Get” – “Total Give” ratio.

Definition: Brand is the equity of the firm that adds value to the products and services it offers. Brand is an asset that creates value for customers by enhancing satisfaction and recognition of quality.

With brand, the company can liberate itself from supply-demand curve and be the price- maker

Branding Strategy (Lecture Notes- Products, Services and Branding)

A brand is not a differentiation strategy; it is an identifier that distinguishes the company from competitors.

To the Customer…Consumers use brands to identify products they wish to:

Purchase repeatedly OR Avoid Purchasing

Brands: Simplify Shopping Imply Consistent quality Reduce perceived risk in buying

An Overview of Branding Decisions

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Brand Positioning

Has 3 levels:

Attributes Benefits Beliefs and

values

Brand Name Selection

Involves:

Selection Protection

Brand Sponsorship

4 types:

Manufacturer brand Private brand Licensing Co-branding

Brand development

4 types:

Line extension Brand extension Multi-brands New Brands

Step 1: Brand Positioning

Brand Positioning Need to position their brands in their customer’s minds.Have to establish mission and vision for the brand. Should deliver to customer promised set of features, benefits, services and experiences consistently to the buyers.

They can position on 3 levels: 1. Attributes

Least desirable level because competitors can copy easily2. Benefits

Go beyond attributes of product3. Strong Beliefs and Values

Build on emotions Brands must engage customers on a deeper level, touching on universal emotion. The strongest brands are positioned on strong belief and values.

When positioning a brand, marketers should establish a mission and vision for the brand. Brand is the company’s promise to deliver specific set of features, benefits, services, and experiences consistently to the buyers.

Step 2: Brand Name Selection

Step 2: Brand Name Selection

Desirable quality for a brand name:1. Suggest something about the product’s benefit and qualities2. Easy to pronounce, recognize and remember - 3. Distinctive – Kodak4. Extendable 5. Translate easily to foreign language meanings6. Capable of registration and legal protection

Step 3: Brand Sponsor Decision

Manufacturer Brand Sell their output based on their own manufacturer’s brand name

IBM sell their own output under their own manufacturer brand name.

Private Brand A brand created and owned by a reseller of a product or service

NTUC

Licensing Get brand name from previously created by other manufacturers, celebrities, for a fee. This will give them instant and proven brand name.

Disney

Co-branding Practice of using the established name of 2 different companies on the same product

Sony-Ericsson

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Step 4: Brand Development

Product CategoryExisting New

Brand Name

Existing Line ExtensionUsing a successful brand name to introduce additional items in a given product category under the same name, such as flavors, colour, or package size.Low-cost,low-riskEg: Mercedes S,E,C,A class

Brand ExtensionUsing a successful brand to launch a new or modified product in a new category.Instant recognition and faster acceptanceShould not confuse customer on the image of the main brandEg. Disney Cruise Line

New MultibrandsIntroducing additional brands in the same category. A way to establish different features and appeal to different buying motives. Each brand might obtain small market shareEg. P&G, Nestle

New BrandsWhen the power of its existing brand names are getting weak or inappropriate and a new brand is needed.Like multibranding, will result in the company spreading its resources.Eg. Honda created Acura to differentiate its luxury car from its established Honda line.

Managing Brands - Brand Repositioning Decision

Must continuously communicate brand’s position to the public. Marketers spend huge amount of money on advertising to create awareness and build preference and loyalty.

Company need to train employee to be customer-centered and carry on internal brand building to make them enthusiastic and understand about the brand promise.

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Brand Equity

Def: The positive differential effect that knowing the brand has on customer response to the product or service.

It is how much a consumer is willing to pay more for the brand name. Once have taken the steps in establishing brand, a successful brand will have high brand equity.

E.g. Coke, Nike

Pyramid shows the different level of brand loyalty that exists:

* Beware when building up brand Equity

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Brand becomes so established that they end up being a generic name for the item. The item is then recognized with the brand. Examples of such cases are:

Xerox for photocopy Pampers for diapers Kleenex for facial tissue Scotch tape for adhesive tape Classic case in Singapore : F&N vs. Mirinda – Sarsi

Companies eventually lose the name of product and brand equity as a generic name.

Brand Life Cycle

Branding is closely related the marketing mix (4Ps) throughout its life cycle.

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Modifying the market

Finding new uses to your product increases the popularity of your brand and the item

E.g. WD-40

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Service: “Avoid the business-category trap”

Paradigm of the company to always meet or exceed the customer’s needs, wants and expectations

To become a real service business a company must continuously enhance the value of its products and service. It will then be able to provide constant value, which will create a long lasting value and build customer relationship.

Referring to the value formula, there are 5 generic value strategies to enhance value.

Generic Value Application Formulae

Winning Value Application“Get” (for) “Give” (compared to competitors)

More (for) MoreMore (for) SameMore (for) LessSame (for) LessLess (for) Less

With these strategies, players will be able to deliver:

world-class value local value individual value

Nature and characteristics of services:

To distinguish if it is a Product or a Service

Intangibility Cannot be seen, tasted, felt, heard or smelled before purchaseInseparability Produced and consumed at the same timeVariability Quality may vary, depending on who provides, when, were and howPerishability Cannot be stored for later sale or use.

The Service Profit Chain

The chain that links service firm profits with employee and customer satisfaction.

The 3 types of marketing in service industries: (Figure 8.6 pg 246)

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Internal Marketing Marketing by a service firm to train and effectively motivate its customer-contact employees and all the supporting service people to work as a team to provide customer satisfaction.Marketers get everyone to be customer centered.

Interactive Marketing

Marketing by a service firm that recognizes that perceived service quality depends heavily on the quality depends heavily on the quality of buyer-seller interaction.In service marketing, service quality depends on both service deliverer and quality of the delivery.

External Marketing Traditional marketing using the 4 Ps.Managing Service Differentiation (pg 243)

Managing Service Quality

Managing Service Productivity

Customers do not merely want a product/ service. They are purchasing the whole experience

Elements of service Example from Hilton HotelTangible Fine Dining

Executive Club5* luxuryShopping

Augmented Corporate AccountLoyalty ProgrammesCredit Cards

Complementary Wedding ExhibitionBoard and Logging

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Process: “Avoid the function-orientation trap”

Enables the company to deliver the value to customers through the process both internally and externally

Process reflects the product quality, cost and delivery of a company to customers

Company has to be the captain of the supply-chain process. They should manage the supply-chain process from raw materials to finished products, in a way that would enhance value-creating activities and reduce or eliminate value-eroding activities within the company.

Case: Café de Coral in Hong Kong (pg 99-rethinking marketing)

A firm should also be the hub of network organization, where it can establish relationship with organization that has the potential to add value. The best known term for this is strategic alliance These partnering organizations may be the company’s suppliers, customers or even competitors

Examples of Strategic Alliances:

BenchmarkingRe-engineeringOutsourcingMerging POSB and DBSAcquisition

Supply Chain and the Value Delivery Network pg 339

Value delivery Network

Definition: The network made up of the company, suppliers, distributors and customers who partner with each other to improve the performance of the entire system.

Major Logistics Functions

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Balance scorecard

Purpose of the Scorecard

- Tool for controlling and monitoring the company’s mission to deliver value to the three main stakeholders

- People, Customers and Shareholders

- The right customers will keep an ongoing rls with the people and have a sense of ownership and belonging. In addition, the right shareholders will provide superior perceived value to the customer PCS is a two-way closed loop

- Hence, a scorecard is needed to keep it moving along this loop

Value equation

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Company and buyer:

- Buyer’s total get = functional and emotional benefit

- Buyer’s total give = price he pays for the good + any other expenses incurred during consumption

- Company’s total get = revenue and cash

- Company’s total give = offer in terms of products and services to the buyer and improvement

Company and worker:

- Worker’s total get = salaries, bonus or stock options; self fulfillment

- Worker’s total give = professional engagement and personal involvement

- Company’s get = productivity and creativity

- Company’s give = rewards given to workers

Company and investor:

- Investor’s get = dividends and gains from increase in share value

- Investor’s give = share price and o/c when they buy the shares

- Company’s get = money + commitment and trust of investor to the company’s performance (monetary and non-monetary)

Acquiring, Satisfying and retaining the three main stakeholders

- Once they have become your customers, people and stakeholders, you must satisfy and retain them by converting them into loyal customers, committed people and LT shareholders

- Value exchange must take place in a win-win manner:

Increasing customer’s, people’s and shareholder’s total get and reducing as far as possible their total give

Must also increase your company’s value by increasing your company’s total get and reducing total give

Customer acquisition Customer satisfaction Customer retention

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Scorecard: Controlling and monitoring value drivers

- Must know what drives value and where value is created in the SBUs so that company will be able to allocate its resources in a more focused way

- Value drivers: value levers and value risk

Value risk (employee turnover as company has no direct control) Value lever (employee compensation as you can directly control it through direct managerial

action; customer satisfaction as you can directly implement programs)

- Value indicators:

Best way to translate your main stakeholders’ value message into action Gives your organization a view on how management wants strategies to be carried out Find and develop value levers and value risk indicators that are specific to its organization Must look at both historic and predictive measures ( performance measures to create value

in the past and future) E.g. from EPS, ROI, ROE and ROA to new ones like FCF, economic profit like EVA and residual

income E.g. TSR (total shareholder return) company to achieve a healthy cash flow so that it can

drive dividends and share price appreciation E.g. EVA (economic value added) true profit

Value culture

- All people throughout the organization share the view that the company’s most important mission is to create value for its three main stakeholders

- Must state what values you want the people in your organization to have

- Once created, they must be able to influence, be manifest in, the people’s behavior

Amazon – creative destruction

MarkPlus – crisis

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Converse – structural change

Kodak - inability to adapt to external change

Secret Recipe and Kinokuniya – Differentiation

Scorecard – Customer

Customer Relationship Marketing (Lecture 6)

Cost 5 times to attract a customer than to retain an old one.

Losing a customer means losing the entire stream of purchases over a lifetime of patronage- the customer lifetime value

Customer delivered Value

Total Customer Value Total Customer CostProduct Value MonetaryServices TimePersonal EnergyImage Psychic

Customer Satisfaction

Expectations based on customer’s past buying experiences, opinions of friends & marketer and competitor Information and Promises.

The key is to promise only what you can deliver and deliver more than what you promise.

Customer Loyalty and Retention (lecture 6 Notes- Competitor, CRM, and personal selling)

Highly satisfied customers produce benefits because:

They are less price sensitive They remain customers longer They talk favorably about the company and products to others

Extras: Customer Equity

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Customer Relationship management (CRM)

- Overall process of building and maintaining profitable cust rls by delivering superior cust value and satisfaction

- Deals with all aspects of acquiring, keeping and growing customers

- Important as losing a customer means losing the entire stream of purchases over a lifetime of patronage Customer lifetime value (Customer equity)

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Customer’s perceived value:

- cust evaluation of the difference b/w all benefits and all the costs of a marketing offer relative to those competing offers

E.g. FedEx gives fast and reliable package delivery and makes cust feel impt, compares value of them with UPS etc. However, it is only based on perceived value

Customer satisfaction:

- depends on the product’s perceived performance relative to a buyer’s expectations

- aim is to delight cust by promising only what companies can deliver

- aim is to generate cust value profitability and not to maximize cust satisfaction as lowering prices, increasing services will increase their costs

Customer loyalty and retention:

Highly satisfied (Delighted) cust produce benefits:

- less price sensitive

- remain cust longer

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Expectations

- talk favorably abt the company and products to others

e.g. frequency market programs that reward cust who buy frequently or in large amt: Airlines offering frequent flier programs like Singapore SIA KrisFlyer

e.g. club marketing programs that offer members special discounts and create member commitments like Harley Davidson

e.g. can also add structural ties as well as financial and social benefits: McKesson Corporation sets up an online system to help small pharmacies manage their inventories, order entry and shelf space

Chapter 17- Competitors

Michael Treacy and Fred Wiersema

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Competitive strategies based on Value disciplines

How it delivers superior value to gain leadership positions

Operational excellence - Leading the industry by price and convenience- Works to reduce costs and to create a lean and efficient value delivery system- Customers: those who want reliable, good quality products and services but want it cheaply and easilyE.g. McDonald’s is extremely efficient and their service is top notchE.g. Wal-Mart delivers cheap but good quality goods to customersE.g. Southwest Airlines has cheap airfares but good service and quality

Customer intimacy - Precisely segmenting its markets and tailoring its products/services to match exactly the needs of the customers- Satisfies them by having a close rls and intimate knowledge abt them- Builds detailed customer bases- Empowers their marketers to respond quickly to cust needs- Customers: those who are willing to pay a premium to get precisely what they wantE.g. The Ritz-Carlton gives top service and cust are willing to pay more for that satisfaction

Product Leadership - Offers a continuous stream of leading edge products/services- Aims to make its own and competing products obsolete by coming up with new ideas, products and solutions- Customers: those who want new soln regardless of costs like price and inconvenienceE.g. Intel and Microsoft

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Michael Porter

Strategies that firms can adopt for basic competitive positioning

How it is approached

Overall cost leadership - Lowest production and distribution costs- Low costs lower prices compared to competitors larger market shareE.g. Wal-Mart and Dell

Differentiation - Highly differentiated product line and marketing program class leader- Customers will own this brand if its price is not too highE.g. IBM and Caterpillar (IT and heavy construction equipment)

Focus - Focuses on a few market segments rather than the whole marketE.g. Ritz-Carlton focuses on top 5% of the corporate and leisure travelers

Middle-of-the-road (losing strategy) - Do not carry out a clear strategy and hence does the worst- Not standing out as the lowest cost, highest perceived value or best in serving - Try to be good at all strategic counts but end up good at noneE.g. Sears, Holiday Inn and Kmart

Competitive strategies based on the firm’s roles in the target market

Description

Market leader - Firm with the largest market share- Usually leads the rest in price changes, new product innovations, distribution coverage and promotion spending- To remain no. 1

1. Expand the total market (Refer to Ansoff’s Product/ Market expansion grid)

- Developing new uses, new users and more usage of its products through demographic or geographic segmentation E.g. Revlon found new users by convincing women to do not wear perfume to try- Discovering and promoting new uses for the products E.g. Intel invests heavily to develop new PC, networking and telecomm to increase dd for microprocessors

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- Encourage more usage by convincing people to use the product more often or more per usage E.g. Campbell urges people to drink soup more often by running more ads containing new recipes

2. Protect market share by expanding market share- Prevent/fix weaknesses that can be opportunities for competitors- Prices must always be consistent with the value that cust desires- Must maintain good cust rls ‘plug holes’ so that competitors cannot enter- Continuous innovation so that it can increases its effectiveness and value to cust

- Profitability increases as a business gains share relative to competitors in its served market E.g. Lexus holds only a small share in the total car market, but it is a high share company in its luxury performance car segment- Profitability may not necessary come from higher share. Must make sure your costs in gaining higher share < profits

Market Challenger - Must define which competitors to challenge and its strategic objectives1. Can attack the market leader to take over market

leadershipE.g. Wal-Mart began as a nicher in small towns and went on to challenge Sears, gaining leadership less than 25 yrs later

2. Gain more market share by attacking other firms- direct challenge

3. Avoid the leader and challenge firms of its own size, or smaller ones

4. Full frontal attack- Attacking the competitors’ strengths, matching their products, advertising, price and distribution

5. Indirect attack- When they have fewer resources- Attack competitors’ weaknessesE.g. Dell found a foothold against IBM in the personal computer market by selling directly to consumersE.g. Southwest Airlines challenged American by serving the over-looked short haul, no frills commuter segment at smaller, out of the way airports

Market Follower - Must be able to find the right balance b/w following closely enough to win customers from the market leader

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but following at a close enough distance to avoid retaliation- Must keep costs low, service and quality high

1. Imitator - Copies but differentiates from the leaderE.g. Crocodile and Lacoste

2. Adaptor- Adapts the leader’s productsE.g. Krispy Kreme and J Co. successfully adapted KK and overtook them. J Co. started off with a good reputation as they had celebrity endorsement

3. Cloner- emulates the leader’s products- complete imitationE.g. Roda and Rado watches

Market Nicher - Firms that serve small segments not pursued by other firms- Profitable as they end up knowing the target customer group so well that it meets their needs best- Because of the added value, they can charge higher prices

Premium priceE.g. Bulthaup is a furniture company that offers holistic services and good quality

High valueE.g. Patek Philippe

High qualityE.g. HP calculators operate in high end and high quality market

High serviceE.g. Oriental hotel in Bangkok

SpecializationE.g. Neville Clark

- Multiple niching to increase their chances of survivals E.g. Alberto Culver niches in hair, skin, and personal care products, seasonings and sweeteners and home products

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Defence strategies

1. Position defence- Complacency, ignoring competition

2. Flanking- looking out for areas that are not covered by other competitors and cover with an extent that it will not be disastrous

- Not leaving any areas out by covering all aspects so that competitors cannot take over you

E.g. Adidas, Nike and Reebok

3. Preemptive

4. Counter offensive- By giving better services

5. Mobile- Move away to other new market segment areas when attacked and venture into them

6. Strategic withdrawal - ‘Not your cup of tea’ withdraws from the market

E.g. FisherPrice vs. Quateroats

Attack Strategies

1. Frontal- tend to end up as suicidal

- should always avoid this strategy

E.g. Nike is very difficult to counter, Asics came up with ‘Just did it’ but Nike is still dominant

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2. Flanking- targeting at different markets segments

E.g. Harley-Davidson targets at hurly burly people vs. Honda targets at more friendly, quieter feel

3. Encirclement- Gradual step by step attack

4. BypassE.g. Colgate does not overtake Crest

Balancing Customer and competitor orientations

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Product orientation

Customer orientation

Competitor orientation

Market orientation

Product orientation:

- Do not care abt cust and competitors

Customer orientation:

- Only care abt cust developments and strategies

- In a better position to identify new opps and LR strategies

- Know what the emerging needs to be served best are and can give superior value to these cust

Competitor orientation:

- Only care abt competitors

- Always tracking competitor’s moves and trying to find strategies to counter them

- Allows the company to develop a fighter orientation, watching for its weaknesses and searches for competitors’ weaknesses

- However, the company becomes too reactive and carries out on their moves based on competitors’ moves rather than cust rls strategy

Market orientation:

- Covers all aspects

- Watches competitors and try to beat them

- Also watches cust and find innovative ways to build profitable cust rls by delivering more value than competitors do

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Chapter 20- The Global Marketplace

Ansoff’s Growth Matrix

- Diversification: new products new customers in new markets Going Global!

Looking at the Global marketing environment

The International trade system: Pg 554

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- Restrictions e.g. tariffs, quotas, embargos, exchange controls and non-tariff trade barriers

The World Trade Organization and GATT (General Agreement on Tariffs and Trade): Pg 555

- Helps trade as they reduce tariffs and other international trade barriers

- Sets global standards for trade

- WTO enforces GATT rules, overseeing GATT, mediating global disputes and imposing trade sanctions

Regional Free Trade zone/ Economic communities: Pg 556

- Groups of nations organized to work toward common goals in the regulation of international trade

E.g. EU set up to create a single European market by reducing barriers to the free flow of products, services, finances and labor among member countries and developing policies on trade to non members

E.g. NAFTA (North American Free Trade Agreement) establishes a free trade zone among the U.S, Mexico and Canada

- Reducing tariffs and legislation

- Expand the business markets

- Place high duties on imports and local goods will be cheaper price differentiation

Industrial analysis

Economic environment:

- Subsistence economies (few market opps)

- Raw materials exporting economies (rich in one or more n/r and poor in other ways, good markets for large equip. tools and supplies; if there are many wealthy foreigners, market for luxury goods)

- Industrializing economies (manufacturing more imports needed)

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- Industrial economies (major exports of manufactured goods, services and I; trade among themselves)

- Income distribution

Political-Legal Environment:

- Attitudes towards international buying (Are they receptive or hostile?)

E.g. India bothered foreign businesses with import quotas, currency restrictions etc. and hence U.S left India

E.g. Singapore is very open to foreign investors and give them more incentives and favorable conditions

- Government bureaucracy (extent to which the host govt. runs an efficient system for helping foreign companies e.g. efficient custom handling, good market info)

E.g. bribery in some countries makes it easy for U.S to enter

- Political stability (some prefer to do in unstable situations but this will affect the way they handle business matters and finances)

- Monetary regulations (paying in what currencies, are the currencies blocked, exchange rate risks to sellers)

Cultural environment:

- Sellers must examine the ways consumers in different countries think abt and use products before planning a marketing environment

- Must always be respectful, not abt right or wrong

E.g. McDonald’s and Coca-Cola placed the Saudi-Arabian flag on their packaging, offending the Muslims as it includes a passage from the Koran and they feel that such a holy message should not be tossed in the garbage

E.g. Nike came up with their ‘Air’ logo that resembled ‘Allah’ in Arabic script and immediately apologized and pulled them out of distribution

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- Business norms vary from country to country

E.g. South Americans like contact when they talk business but Americans will back off. In the end, both will feel offended

E.g. Americans tend to become impatient while having to spend time in polite conversations with Japanese

- Understanding cultural nuances can give companies advantage when positioning their products internationally

Corporate strategy should go int? SWOTS which market to enter industrial analysis competitive forces (Porter’s forces, stronger than SWOTS as you are now looking at the market)

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Deciding to go international:

- Counter foreign attacks on the domestic market

- Foreign markets have higher profit opportunities

- Stagnant of shrinking domestic markets

- Need larger cust base to achieve EOS

- Reduce dependency on single market

- Follow cust who are expanding

- Sourcing for supplies that are cheaper and of better quality

Deciding what markets to enter

Must define what their international objectives and policies are

- What vol. of foreign sales (Does it want to start small or expand more than its own domestic mrk)

- How many countries to market in (Must be careful not to spread them too thinly or expand beyond their capabilities)

- What type of countries to enter (attractiveness depend on product, geographical factors, income, climate, population etc.)

Choose the possible countries and rank them based on market size, market growth, cost of doing business, competitive advantage and risk level

Deciding on how to enter (Pg 565-568)

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Joint ownership:

- May be buying an interest in the firm or the two parties will be forming a new business

- Needed for political and economic reasons (firm may lack the financial, physical and managerial resources and the foreign govt. may require it as a reason for entry)

E.g. KFC entered Japan through a joint ownership venture with Japanese conglomerate Mitsubishi

-> However, the partners may disagree with what should be done with earnings

E.g. Americans like to reinvest earnings for growth while local firms like to keep them

Direct I:

- Development of foreign-based assembly or manufacturing facilities

- Lower costs in the form of cheaper labor or raw materials

- Foreign firms having I incentives and freight savings

- Improves image in host cty as it creates jobs

- Able to have a deeper rls with govt. cust, local suppliers, distributors allowing it to adapt its products to the local firms better

- Full control over I develop marketing and manufacturing policies to serve its LT objectives

- Value added- skilled labor can also be an attraction

- By having full control over investment, it can better serve its long term international objectives

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-> Many risks involved such as restricted or devalued currencies, falling markets or govt. changes (political problems, not democratic but even in democratic countries, elections do happen and there may be changed policies)

-> Money problems: difficult to bring your profits in; exchange rate risks

-> Some form of control needed

-> There may be a chance that they can take over your investment

Deciding on the Global marketing program

Standardized marketing mix

- selling largely the same products and using the same marketing approaches worldwide

- especially true with globalization and tech which makes cust wants and needs more similar

- global branding greater brand power reduced costs from EOS

Adapted marketing mix

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- producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return

- better to tailor the products to fit the specific needs of cust

- cust in diff ctys have varied cultures and differ significantly in spending power, product preferences, shopping patterns hard to change adapt their marketing mix to fit their needs

E.g. McDonald’s uses the same basic operating formula in its rests. all around the world but adapts its menu to the local culture (uses chili instead of ketchup in Mexico; roast pork on a bun in Korea; serves chicken, fish and veg in India with 2 mutton burgers)

Five Global Product and Promotion strategies:

Straight product extension

- marketing a product in a foreign product w/o any change

- need to find out if the product will be used by foreign cust and what form they prefer

E.g. Kellogg cereal, Gillette razors, Heineken beer

E.g. General Foods came up with a standard powdered Jell-O, only to find out that British cust prefer a solid wafer or cake form

E.g. Philips only started to profit in Japan after reducing the size of their coffeemakers to fit into smaller Japanese kitchens

Product adaptation

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- changing the product to meet the local cust needs and wants

E.g. Procter & Gamble’s Vidal Sassoon shampoos contain a fragrance that varies in amt, more in Europe and less in Japan

E.g. Nokia customizes all their phones according to different groups

Product invention

- creating something new for a specific country market

- can be maintaining or reinforcing earlier products forms that can be well adapted to the needs

E.g. Volkswagen continued to sell its VV-Beetle model in Mexico

- can also be creating a new product to meet a need in a given cty

E.g. Sony added the ‘U’ model to VAIO personal com line to meet the unique needs of the Japanese

Communication adaptation

- fully adapting their advertising messages to local markets

- changes have to be made due to media availability

E.g. Coca-Cola sells low calorie beverages Diet coke in North America, U.K but light elsewhere

E.g. Guy Laroche uses similar ads in Europe and Arab countries but lesser sensuality in the latter

Dual adaptation

Pricing

- charging a uniform price all around the world

- charge what consumers in each country will pay

- use a standard markup of costs everywhere

- International prices > domestic prices due to price escalation

- additions of transportation costs, tariffs, importer wholesaler and retailer margin to its factory price

E.g. Gucci

E.g. Levis

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- Companies may be guilty of dumping (foreign subsidiary charging less than its costs or less than it charges in its home market e.g. R&D costs all absorbed into its home market)

- Economic and tech forces have led to an impact on global pricing

E.g. Twelve European Union countries have adopted the euro as a common currency, creating “pricing transparency” and forcing companies to harmonize their prices throughout Europe

Distribution channels

(ii) Supervises the channels as part of the channel itself

(iii) Moves the products to the borders of the foreign nations

(iv) Moves the products from their foreign entry point to the final consumers

- no and type of intermediaries e.g. When Coca-Cola first entered China, cust have to cycle to bottling plants to get their soft drink. Now, Coca-Cola has set up direct distribution channels, investing heavily in refrigerators and trucks and upgrading wiring so that retailers can have coolers

- size and character of retail units abroad e.g. large scale retailers in U.S and small tiny shops in India

Deciding on the Global Marketing Organization Pg 576-577

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Organize an export department

- sales increase, it will expand to include various marketing services so that it can actively go after businesses

- will not exist in joint ventures or direct I

Create international divisions/ subsidiaries

- geographical organizations

- world product groups

- international subsidiaries

Become a global organization

- think of them as global marketers and not national marketers who sell their products abroad go Global but act locally!

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Chapter 18- Digital age

Marketing strategy in the Digital age

E commerce:

- Involves all the buying and selling processes supported by electronic means, primarily the Internet

- Different from e-business, which includes all electronics-based info exchanges within or between companies and customers)

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- Includes e-marketing and e-purchasing

- E-marketing is the marketing side of e-commerce: company efforts to comm. about, promote and sell products and services over the Internet

- E-purchasing is the flip side of e-marketing; buying side of e-commerce: companies purchasing goods, services and info from online suppliers

Benefits to buyers

1. Convenient- can avoid the traffic and finding of parking spaces

- can do comparative shopping by surfing the web sites

2. Easy and private- encounter fewer hassles and do not need to meet salespeople or open themselves up to persuasion

- do not need to wait for or spend time with salespeople as they can just know about products and services

3. Greater product access and selection- unrestrained by physical boundaries and can offer an almost unlimited selection to consumers almost anywhere in the world

4. Comparative info - provides more info in more useful forms

E.g. Amazon.com offers top 10 product lists, extensive product descriptions, expert and user product reviews and recommendations

5. Interactive and immediate- can interact with sellers’ sites to create exactly the configuration of info, products or services they desire then order dl them from the spot

Benefits to sellers

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1. Build cust relationships- one-to-one, interactive nature

- companies can interact online with cust to learn more abt specific needs and wants

- online cust can ask qns and volunteer feedback

increase cust value and satisfaction through product and service refinements

2. Reduce costs and increase speed and efficiency- link directly to suppliers, factories, distributors and customers and hence businesses can cut costs and pass savings on to cust

- e-marketers avoid the maintaining of a store and the relates costs of rent, insurance and utilities

- cust deal directly with sellers and hence it results in lower costs and improved efficiency for channel and logistics functions

- costs of producing digital catalogs is much lesser than printing and mailing paper ones

3. Greater flexibility- E.g. online catalog can be adjusted daily or even hourly, adapting product assortments, prices and promotions to match changing market conditions

4. Truly global medium- allows buyers and sellers to click from one cty to another in seconds

B2C (Business-to-consumer)

- the online selling of goods and services to final services

- the Internet demographics have changed significantly and almost 2/3 of the U.S. households surf the Internet

- Internet provides e-marketers access to a broad range of demographics segment

E.g. reaches consumers in all age groups; teens using the net for entertainment while the older generations uses it for more serious stuff like investment, buying of automobiles and travel packages

- the exchange process via the Internet has become more cust initiated and cust controlled

- people using the Internet places greater value on info and tend to respond negatively to messages aimed only at selling vs. traditional markets that target a somewhat more passive audience

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- most useful for products and services when the shopper seeks greater ordering convenience or lower costs

- provides great value to buyers looking for info abt differences in product value and features

B2B (Business-to-business)

- offer product info, cust purchasing and cust support services online

- open trading exchanges: huge e-marketspaces in which buyers and sellers find each other online and share info and complete transactions efficiently

- private trading exchanges: links a particular seller to its own trading partners; gives sellers greater control over product presentation and allow them to build deeper rls with buyers and sellers by providing value-added services

E.g. corporate buyers can visit Sun Microsystems’ Web site (www.sun.com), select detailed descriptions of Sun’s products and solns, request sales and service info and interact with staff members

C2C (Consumer-to-consumer)

E.g. Ebay

- gives people more access to much larger audiences than the local flea market or newspapers classified

- involves interchange of info through Internet forums that appeal to specific special-interest groups; for commercial or non-commercial purposes e.g. web-logs/ blogs which are used as a medium for reaching carefully targeted consumers

- means that online visitors do not just consume product info – increasingly they create it

C2B (Consumer-to-business)

- consumers can search out sellers on the Web, learn about their offers, initiate purchases, and give feedback

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- consumers can drive transactions with businesses

E.g. Priceline.com where buyers bid for airline tickets, hotel rooms, rental cars and home mortgages, leaving the sellers to decide whether they want to accept their offers

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