MARKETING STRATEGY MARKETING STRATEGY IS THE SOLUTION TO PROVIDE SUPERIOR CUSTOMER VALUE TO THE TARGET MARKET
MARKETING STRATEGY
MARKETING STRATEGY IS THE SOLUTION TO PROVIDE SUPERIOR
CUSTOMER VALUE TO THE TARGET MARKET
STRATEGY FORMULATION
STARTING POINT-----MARKET ANALYSIS
CONSUMER
COMPANYCOMPETITION
CONDITION
MARKET SEGMENTATION-THE 2ND STEP
THE THREE MAJOR SEGMENTS COULD BE
1. THE GEOGRAPHIC SEGMENT2. THE DEMOGRAPHIC SEGMENT3. THE PSYCHOGRAPHIC SEGMENT4. BEHAVIORAL SEGMENT
Cont..
MARKET ANALYSIS
COMPETITION:-Michael Porter’s Five Forces Analysis-Value Chain Analysis-SWOT Analysis
Michael Porter’s Five Forces Model
THREAT OF NEW ENTRANT DEPENDS UPON:-economies of scale-Capital /investment requirement-Customer switching costs-Access to distribution channel-Access to technology-Brand loyalty-Degree of retaliation from existing players-Government policies
THREAT OF SUBSTITUTES DEPENDS UPON:
-quality of the substitute-Buyer’s willingness to substitute-Relative price and performance of
substitutes-Switching costs to substitutes
BARGAINING POWERS OF SUPPLIERS DEPENDS UPON:
-concentration of suppliers Vs the buyers-branding of the supplier-suppliers threat to integrate forward-quality n service-switching cost of the suppliers
BARGAINING POWER OF BUYERS DEPENDS UPON:
-concentration of buyers VS the suppliers-products represents a significant amount of
buyer’s costs or purchases-differentiated/undifferentiated product-switching costs to the buyers-buyers threat of backward integration-information update of the buyers
INTENSITY OF RIVALRY DEPENDS UPON:
-structure of competition;numerous competitors vs clear cut market leader
-degree of product differentiation-structure of industry costs;high fixed costs
leading to price cutting-exit barriers; high leads to intense rivalry
VALUE CHAIN –MICHAEL PORTER
IDENTIFIES 9 WAYS TO CREATE MORE CUSTOMER VALUES THROUGH PRIMARY AND SECONDARY ACTIVITIES
PRIMARY ACTIVITIES:1. INBOUND LOGISTICS2. OPERATIONS3. OUTBOUND LOGISTICS4. MARKETING AND SALES5. SERVICE
Cont….
SECONDARY ACTIVITIES:6.FIRM INFRASTRUCTURE7.HUMAN RESOURCE MANAGEMENT8.TECHNOLOGICAL DEVELOPMENT9.PROCUREMENT
Framework for competitor analysis
Future goals current strategy
competitor’s response profile
Assumptions capabilities
FUTURE GOALS:Business Unit Goals-financial goals-values and beliefs-organisational structure-control and incentive system
Parent Company-current sales of the parent company-overall goals -strategic relevance of the business unit to the
parent company-diversification plansPORTFOLIO ANALYSIS-BCG-GE
ASSUMPTIONS• Competitor’s assumptions about itself• Competitor’s assumptions about the
industryCURRENT STRATEGY-competitor’s key
operating policies in each functional area of the business
CAPABILITIES-assessment of competitor’s strengths and
weakness in varied areas-core capabilities of the competitor’s in each
of the functional areas-Ability to grow-quick response capability-Staying power
COMPETITOR’S RESPONSE PROFILE-is the competitor satisfied with its current
position?-what likely moves or strategy shifts will the
competitor make?-where is the competitor vulnerable?-what will provoke the greatest and most
effective retaliation by the competitor?
CONDITION
MACRO ENVIRONMENT
DEMOGRAPHIC ENVIRONMENTSOCIO-CULTURAL ENVIRONMENTECONOMIC ENVIRONMENTPOLITICAL ENVIRONMENTNATURAL ENVIRONMENTTECHNOLOGICAL ENVIRONMENT LEGAL ENVIRONMENT
COMPANY
Internal Appraisal-BCG -GE McKinsey-SWOTStrategies in terms of 4 Ps:-Product-Price-Place-Promotion
PRODUCT
AN OFFERING THAT SATISFIES THE NEEDS OF THE CUSTOMER
Major tasks in Product Management
I. MANAGING THE PLC :--
STAGES:-INTRODUCTIONGROWTHMATURITYDECLINE
NEW PRODUCT DECISIONS
SIGNIFICANCE OF NEW PRODUCT:• MEETING CHANGES IN CONSUMER
DEMAND• MAKING NEW PROFITS• COMBATING ENVIRONMENTAL THREATSNEW PRODUCTS CAN BE:• NEW ARISING OUT OF TECHNOLOGICAL
INNOVATION• NEW DUE TO MARKET-ORIENTED
MODIFICATIONS
STAGES IN NEW PRODUCT DEVELOPMENT
• IDEA GENERATION• IDEA SCREENING• CONCEPT TESTING• MARKETING STRATEGY• BUSINESS/MARKET ANALYSIS• PRODUCT DEVELOPMENT• MARKET TESTING• COMMERCIALISATION
STRATEGIES AT VARIOUS STAGES
INTRODUCTION:-strategies to be aimed at• Attracting customers by raising awareness of,
and interest in the product through advertising, public relations and publicity efforts that stress key product features and benefits.
• Inducing customers to try and buy the product through the use of various sales tools and pricing activities.
• Strengthening and expanding channel and supply chain relationships to gain sufficient product distribution to make the accessible to target market.
• Setting pricing objectives that will balance the firm’s need to recoup the investment with the competitive realities of the marketplace
GROWTH –strategies to be aimed at• Improving product quality,adding new product
features and style• Entering new market segments• Increasing distribution coverage• Shift from product awareness advertising to
product preference advertising
• Finding an ideal balance between price and demand as the price elasticity becomes more important as product moves towards the maturity stage
MATURITY strategies to be aimed at• Generating cash flow• Holding market share• Stealing market share• Increasing share of customers
DECLINE –options available are• Postpone the decline• Accept its decline
II. APPRAISAL OF THE PRODUCTLINE
• ALTERING THE LENGTH OF THE LINE THROUGH:– STRETCHING THE LINE -UP or DOWN– LINE FILLING– LINE PRUNNING
III. MANAGING BRAND EQUITY
• BRAND EQUITY- TOTAL WEIGHTAGE THE CUSTOMER GIVES TO THE BRAND
• BRAND =BASIC PRODUCT+NAME+LOGO+MARKETING STRATEGY
STAGES OF BRANDING:1.BRAND AWARENESS2.BRAND ACCEPTANCE3.BRAND PRIORITY4.BRAND LOYALTY
NAMING THE BRAND• INDIVIDUAL BRAND NAMES
ex: Breeze, Camay• FAMILY/UMBRELLA BRAND
ex: Lakme, Ponds• COMPANY NAME AS BRAND NAME
ex: Godrej, Tata , BPL• MIDDLEMEN’S/STORE BRAND/PRIVATE
LABELex: Shopper’s Stop, Pantaloons
NEED FOR BRANDING• MARKET IDENTITY• LEGAL PROTECTION• CUSTOMER LOYALTY• PROFIT MARGINS • SEGMENTATION• BARGAINING CAPACITY• CORPORATE IMAGE
PRICING
MONETARY VALUE IN RETURN OF PRODUCT/SERVICE
OCCASIONS OF PRICING:-1. SETTING A PRICE OF A NEW PRODUCT2. INTRODUCTION OF EXISTING PRODUCT IN
A NEW MARKET3. RESETTING /ADJUSTING THE CURRENT
PRICE
THE PROCESS…..
• SELECTING THE PRICING OBJECTIVES• DETERMINING THE DEMAND• ESTIMATING COST• ANALYSING COMPETITOR’S
COSTS,PRICES AND OFFERS• SELECT A PRICING METHOD• SELECTING THE FINAL PRICE
SELECTING THE PRICING OBJECTIVES
THE COMPANY FIRST DECIDES WHERE IT WANTS TO POSITION ITS MARKET OFFERING. THE CLEARER A FIRM’S OBJECTIVES, THE EASIER IT IS TO SET PRICE.
• Survival.• Maximum current profit.• Maximum market share.• Maximum market skimming.• Product-quality leadership
Demand estimationFactors contributing to Price sensitivity:• Unique Value effect• Substitute Awareness effect• Difficult Comparison effect• Total expenditure effect• End-Benefit effect• Shared Cost effect• Sunk Investment Effect• Price Quality effect• Inventory effect
Measuring demand curves:-controlled experimentation-Direct probing-Statistical analysis of past dataDemand is likely to be less elastic under the
following conditions:• There are few or no substitutes or competitors.• Buyers do not readily notice a higher price.• Buyers are slow to change their buying habits.• Buyers think the higher prices are justified.
• Costs set the floor to the price.• Competitors’ prices and the price of substitutes
provide an orienting point.• Customers’ assessment of unique features
establish the price ceiling.
• There are five price-setting methods:• Markup pricing.• Target-return pricing.• Perceived-value pricing.• Value pricing.• Going-rate pricing.
Other price adaptationsa) Price discrimination
customer segment pricingTrade discriminationLocation pricingTime pricing
b) Discounts Cash discountQuantity discountTrade discountSeasonal discount
c) Promotional pricingLoss Leader pricingSpecial event pricingLonger payment termsLow interest financingWarranties and service contracts
d) Product mix pricingProduct line pricingCaptive product pricingTwo part pricingProduct bundling pricing
DISTRIBUTION NETWORK
• Know what work marketing channels perform
• Know how channels should be designed• Know what decisions companies face in
managing their channels• Know how companies should integrate
channels and manage channel conflict
NEED FOR A DISTRIBUTION SYSTEM
GENERAL DISCREPANCY EXISTING :• SPATIAL DISCREPANCY• TEMPORAL DISCREPANCY• NEED TO BREAK THE BULK• NEED TO PROVIDE ASSORTMENT• INFORMATION GAP
ENTITIES
1)PHYSICAL DISTRIBUTION
2) MARKETING CHANNELS
PHYSICAL DISTRIBUTION
1.TRANSPORTATION-MODE:air,rail,road,water,pipeline
-ROUTING
-COST
….cont.
2. WAREHOUSINGa. Critical storage points
nos. Location
b. Inventory control-costs
ordering carrying stockout
MARKETING CHANNELS
MOST PRODUCERS DO NOT SELL THEIR GOODS DIRECTLY TO THE FINAL USERS; BETWEEN THEM STANDS A SET OF INTERMEDIARIES PERFORMING A VARIETY OF FUNCTIONS
These intermediaries constitute a marketing channel
SET OF INDEPENDENT ORGANISATIONS INVOLVED IN THE PROCESS OF MAKING A PRODUCT OR SERVICE AVAILABLE FOR USE/CONSUMPTION.
INTERMEDIARIES:
TYPES OF MARKETING INTERMEDIARIES
• CFAs• Distributor/wholesaler• Retailerexclusive:owned or franchiseshop in shop• commission agents
FUNCTIONS
a)Information-Potential & current customers-Competitors -Forces in the mktg. environment
b)Promotionc)Negotiationd)Risk taking(financial,credit
terms,storage,pilferage)e)Transactional efficiency
financing to the manufacturerservice providerpresalepost saleassist in introducing new product
LEVELS OF CHANNEL• ZERO LEVEL
manufactureconsumereg: EUREKA forbes
• ONE LEVELPresence of one intermediaryManufactures----retailer agents distributor ---consumer Eg. Automobiles
• TWO LEVELSManufacturewholesaler-retailer-consumerEg. FMCG products
• THREE LEVELSManufactureagentswholesaler-retailer-consumer
Eg. agricultural products
CHANNEL DESIGN DECISIONS
1. ESTABLISH CHANNEL OBJECTIVE -market coverage-control objectives-ensuring minimum effort exerted by the consumer in procuring the product
-quality objective
…cont.
2. DETERMINING THE TYPES OF CHANNELS TO BE USED.
- Largely depends on the channel objectives of the firm.
3. IDENTIFY CHANNEL ALTERNATIVES
i)Intensity of distribution• Exclusive( one area, one shop ) • Selective ( products available in few shops)• Intensive ( every retail shop has the product )
ii) Proximity to end users.iii) Existing distribution practices (by competitive
analysis).
4. EVALUATE THE ALTERNATIVES.– Economic criteria
cost Vs value– time period taken by a channel to deliver– control criteria– channel availability
5. SELECTING THE FINAL CHANNEL MEMBER
– they should stick to your terms and conditions.
– Motivate them – Train them– Resolve channel conflicts.
CHANNEL CONFLICTS
TYPES OF CONFLICT AND COMPETITION• Vertical channel conflict means conflict
between different levels within the same channel.
• Horizontal channel conflict involves conflict between members at the same level within the channel.
• Multi-channel conflict exists when the manufacturer has established two or more channels that sell to the same market.
CAUSES
• Goal incompatibility.• Unclear roles and rights. • Improper communication.• Lack of autonomy
CONFLICT MANAGEMENT METHOD
1. INSTITUTIONAL APPROACHESJOINT MEMBERSHIP OF ASSOCIATIONEXCHANGE OF EXECUTIVESCOOPTATION
2. THIRD PARTY MECHANISMMEDIATIONARBITRATION
Integration of channels
VMSHMSMULTI-CHANNEL MARKETING
COMMUNICATION MIX
PRODUCT-FEATURES,SIZE,SHAPE,FINISH,PACKAGING,LABE-LLING,BRAND NAME,COMPANY NAME.PRICE- QUALITY EQUATION
PRICE-STATUS EQUATIONPLACE- STORE IMAGE,STORE- LEVEL
MERCHANDISING
PROMOTION:-• PERSONAL SELLING• PUBILC RELATIONS• ADVERTISING• SALES PROMOTION
PERSONAL SELLING- PAID PERSONAL COMMUNICATIONTHAT ATTEMPTS TO INFORM CUSTOMERS ABOUT PRODUCTS AND PERSUADE THEM TO PURCHASE THOSE PRODUCTS.
FACE TO FACE TRANSACTION BETWEEN A SALESMAN AND A PROSPECTIVE CUSTOMER
FACTORS SUPPORTING PROMOTION• KNOWLEDGE& EXPERTISE• BETTER OUTLOOK & PERSONALITY• EFFECTIVE COMMUNICATION SKILLS• A CONVINCING MESSAGE
PUBLIC RELATIONS- TRACKS PUBLIC ATTITUDES, IDENTIFIES ISSUES THAT MAY ELICIT PUBLIC CONCERN, AND DEVELOPS PROGRAMMES TO CREATE AND MAINTAIN POSITIVE RELATIONSHIP BETWEEN A FIRM AND ITS STAKEHOLDERS.
CAN WIN IN YOUR FAVOUR THROUGH• SPONSORSHIP• NEWS(PRESS RELEASE)• FEATURE ARTICLE• PRESS CONFERENCE• EVENT MANAGEMENT• SOCIAL CAUSE
ADVERTISING—TELLING & SELLING
ANY PAID FORM OF NON-PEROSNAL COMMUNICATION OR PROMOTION BY AN IDENTIFIED SPONSOR.
5 Ms OF ADVERTISING
MISSION –ADVERTISING OBJECTIVES
AREAS WHERE OBJECTIVES CAN BE SET:• INTRODUCTION OF NEW PRODUCTS• MARKET EXPANSION• REMINDING TO CUSTOMERS• BUILDING UP CORPORATE & BRAND
IMAGE• AIDING THE TOTAL SELLING FUNCTION• STIMULATING IMPULSE BUYING
MONEY—ADVERTISING BUDGET
DIFFERENT METHODS:• COMPETITIVE PARITY METHOD• AFFORDABILITY• PERCENTAGE OF SALES/TURNOVER• OBJECTIVE- TASK METHOD• PAST SALES –ADVERTISING
EXPENDITURE
MESSAGE
SHOULD BE • SIMPLE• CREATE A BANDWAGON EFFECT
MEDIA
REACH FREQUENCY EXPOSURETYPES:-
PRINT• NEWSPAPER• MAGAZINES• TRADE JOURNALS• DIRECT MAILS
AUDIO/VISUAL/ELECTRONIC• RADIO• TV• INTERNET• CINEMA• CASSETTES –AUDIO/VISUAL
OUTDOOR• HOARDINGS• POSTERS• NEON LIGHTS• FAIRS & EXHIBITIONS• TRANSIT ADVERTISING• BALLOONS• LOUDSPEAKER ANNOUNCEMENTS
MEASUREMENT:
• DAR TEST-DAY AFTER RECALL• TEST MARKET METHOD
SALES PROMOTION:-DIRECT AND IMMEDIATE INDUCEMENT.MARKETING NEEDS SERVED BY SALESPROMOTION:-• NEW PRODUCT INTRODUCTION• UNLOADING ACCUMULATED INVENTORY• GETTING NEW ACCOUNTS• GETTING BACK LOST ACCOUNT• PERSUADING DEALERS TO BUY MORE
TOOLS AND TECHNIQUES OFSALES PROMOTION:-• DEMONSTRATIONS• TRADE FAIRS AND EXHIBITIONS• COUPONS AND FREE SAMPLES• CONTESTS• MERCHANDISING /DISPLAY• SALES PROMOTION ON INTERNET
STDP
STDP-SEGMENTINGTARGETINGDIFFERENTIATINGPOSITIONING
SEGMENTATION
MASS MARKETINGThe process in which the seller engages
in the mass production, mass distribution, and mass promotion of one product for all buyers.
SEGMENT MARKETINGServing to a group of customers who
share a similar set of needs and wants.
Basis of identifying segments
1. Geographic Segmentation2. Demographic Segmentation3. Psychographic Segmentation4. Behavioral Segmentation
GEOGRAPHIC SEGMENTATIONIt calls for dividing the market into different
geographical units.Geographic variables • region of the world or country, East, West, South,
North, Central, coastal, hilly, etc. • country size/country size : Metropolitan Cities, small
cities, towns. • Urban, Semi-urban, Rural. • climate Hot, Cold, Humid, Rainy.
DEMOGRAPHIC SEGMENTATIONDemographic variables • age• gender Male and Female • family size • family life cycle • education Primary, High School, Secondary, College,
Universities. • income• occupation• socioeconomic status • religion• nationality• language
PSYCHOGRAPHIC SEGMENTATIONThe buyers are divided into different
groups on the basis of lifestyle or personality or values
Psychographic variables • personality• lifestyle• value• attitude
BEHAVIORAL SEGMENTATION
Behavioral variables • benefit sought • product usage rate• User status• brand loyalty • readiness to buy stage
REQUIREMENTS OF A SEGMENT
D A M A SDifferentiableActionableMeasurableAccessibleSubstantial
Effective Targeting Requires…
• Identify and profile distinct groups of buyers who differ in their needs and preferences.
• Select one or more market segments to enter.
• Establish and communicate the distinctive benefits of the market offering.
PATTERNS OF SELECTING THE TARGET MARKET
Single-segment concentration. Selective specialization. Product specialization.Market Specialization.Full market coverage.
DIFFERENTIATION
THE PROCESS OF ADDING A SET OF MEANINGFUL AND VALUED DIFFERENCES TO DISTINGUISH THE COMPANY’S OFFERINGS FROM COMPETITOR’S OFFERINGS
Differentiation Strategies
• Product• Channel• Image• Price
Product Differentiation
• Product form• Features• Performance• Conformance• Durability• Reliability• Reparability
• Style• Ordering ease• Delivery• Customer training• Maintenance
POSITIONING
Act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market
CRITERIA FOR SUCCESSFUL POSITIONING
1. CLARITY2. CONSISTENCY3. CREDIBILITY4. COMPETITIVENESS
CORPORATE STRATEGY
1. STABILITY-THE FIRM STRIVES TO MAINTAIN ITS STATUS QUO.
2. EXPANSION-THROUGH INTENSIFICATION,INTEGRATION AND DIVERSIFICATION
3. DIVESTMENT- SELL OFF OR LIQUIDATE THE NON-DESIROUS BUSINESS
4. COMBINATION- TWO OR THREE STRATEGY AT A TIME
Stability strategy
• Firm stays with the same businesss,same market-product posture
• Does not involve redefinition of the of the business of the corporation
• Does not warrant much of fresh investment
• Risk is lessConditions under which firms adopt this
strategy:
Cont…
• When the firm feels it enjoys a comfortable position in its current business
• When the firm’s growth ambitions are modest• When the industry concerned is mature and the
firm enjoys a profitable position• This is often adopt this strategy after rapid
growth or diversifiation to consolidate its position.
• Business that have just come through turmoil.
Expansion strategy
Conditions under which the strategy is adopted:• Corporate ambitions are high• When enormous new opportunities are coming
up in the environment.• For fighting competition in the growing business.• When the firm has strong resource base• To counter the vulnerability of a single business
position or the position on the PLC.
Routes to expansion:• Intensification
-firm tries to grow in the related areas.best described by Ansoff product-market grid
• Integrationforwardbackwardhorizontal
Cont….
• Diversification
Concentric— R.P. D.C. Horizontal— D.P. S.C. Conglomerate—D.P. D.C.
Divestment strategyConditions under which the strategy is adopted:• When the firm finds that some of its businesses
have become unattractive, unprofitable and unviable
• Obsolesence• Firms unable to compete in the competitive
market• When the business is in the decline stage of
PLC.
Generic Strategies
Differentiation
Low-cost leadership
Focus
PORTER’S GENERIC STRATEGIES
1. Cost Leadership
2. Differentiation
3 A. Cost Focus 3 B. Differentiation FocusNarrow
Target
Broad Target
DifferentiationLower Cost
Competitive Advantage
Competitive Scope
Cost leadership- achieving leadership in the industry by providing the product at the most reasonable cost.
Differentiation:Basis of differentiation-• Product itself• Delivery system• Credit facilities• Service factor
REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES
Generic Commodity RequiredStrategy Skills and ResourcesOverall cost • Sustained capital investment and access to capital
leadership
• Process engineering skills
• Intense supervision of labour
• Products designed for ease
in manufacture
• Low-cost distribution system
Differentiation • Strong marketing abilities
•Product engineering
• Creative flare
REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES
CONTD…
• Strong capability in basic research
• Corporate reputation for quality or technological
leadership
• Strong cooperation from channelFocus
• Combination of the above policies directed at the
particular strategic target
•
Risks associated with each of the generic strategies
Cost leadership:• Competitor’s imitation• Technological changes• Threat of differentiation• Inability to see changes in the market due
to over attention paid to cost • inflation
Cont…
Differentiation :• Competitor’s imitations• Change in customer’s needsFocus:• Competitors find submarket within the
target.• The segment becomes unprofitable.