Marketing

Part 1 An Overview of Marketing Management

Module 1  Marketing and the Marketing Management Process - Content Questions:

1.1             Define marketing.

Marketing is a social process involving the activities necessary to enable individuals and organizations to obtain what they need and want through exchanges with others and to develop on going exchange relationships.

1.2             What conditions are necessary for an exchange to take place?

 

1.      At least two parties

2.      Both parties must offer something of value (e.g. money, goods, services)

3.      Both parties aware of the existence of the other; capable of communication and delivery

4.      Both parties free to accept or reject the others offer

5.      Both parties must be willing and able to negotiate terms of exchange that they find acceptable.  Both parties must believe that the exchange creates benefits or value.

1.3             Distinguish between a need and a want

Needs Basic physical needs critical to our survival i.e. food, drink, warmth shelter sleep

- Social and emotional needs critical to our psychological well being, such as security, belonging love, esteem and self-fulfillment

 

Wants Person’s desires or preferences for specific ways of satisfying a basic need,

1.4             What is a market

Consists of

1.      Individual and organizes

2.      Interested and willing to buy a particular product to obtain a benefit that will satisfy a s specific need or want

3.      Have resources (time \, money) to engage in such a transaction.

1.5             What does strategic marketing involve

Strategic marketing involves a seller trying to determine the following points in an effort to define the target market:

1.      Which customer needs and wants are currently not being satisfied by competitive products offerings

2.      How desired benefits and choice criteria vary among potential customers and how to identify the resulting segments by demographic variables such as age, sex, lifestyle.

3.      Which segments to target, and which product offerings and marketing programmers appeal most to customers in those segments.

4.      How to position the product to differentiate it from competitors’ offerings and give the firm a sustainable competitive advantage.

1.6             What flows are necessary for an exchange to take place?

1.7             What functions/activities are necessary for exchange transactions and relationships to occur?

 

Flow

Functions / Activities

Information

Marketing communication – Advertisement, personal selling, sales promotion, publicity

Feedback

Marketing research, Environmental scan, Competitive intelligence

Title

Selling Identification of potential customers negotiation

Buying Identification and evaluation of suppliers, negotiation

Physical product

Transportation

Storage

Credit and Payment

Financing – credit policies, billing, collection

Service

Customer service – Installation, repair, training, alterations, complaint handling

1.8             What is the role of a marketing manger?

Responsible for:

1.9              Evaluating the needs, wants, and purchasing patterns of a customer segment

1.10          Developing an integrated plan to facilitate purchase transactions by that segment

1.11          Design marketing channel system to carry out those activities,

1.12          Coordinate and monitoring the effectiveness of those activities over time.

The above planning and co-ordination responsibilities, even though actual performance falls outside the scope of their authority.

1.9             Describe what is involved in marketing management

Marketing Management is the process of analyzing, planning, implementing, coordination and controlling programs involving the conception, pricing, promotion and distribution of products, services, and ideas designed to create and maintain beneficial exchanges with target markets for the purpose of achieving organizational objectives.

1.10        What is the difference between a corporate and a business strategy?

The corporate or business strategy is the direction for the company’s mission, the business it chooses to be in and its growth policies.

1.11        What are the three interrelated decisions needed to design an objective strategic marketing program?

1.      set specific objectives to be accomplished within the target market, such as sales volume,

2.      Decide on an overall marketing strategy to appeal to customers 0 and to gain a competitive advantage in the target market.   Consistent with firm’s capabilities, its corporate and business unit strategies and the product market objectives.

3.      Make decisions about each element of the tactical marketing program used to carry out the strategy.  Internally consistent and integrated across all elements of the marketing program.

1.12        What are the major recent developments affecting marketing management?

Globalization

International markets account for a large and growing portion of the sales of many organizations

Increased Importance of Service

Defined as any activity or benefit that one party can offer another that is essentially intangible and does not result in the ownership of anything.  Its production may or may not be tied to a physical product. 

Information Technology

Change the nature of marketing management in tow important ways

1)      New technologies are making it possible for firms to collect and analyze more detailed information about potential customers and their needs, preferences and buying habits.

2)      Impact has been to open new avenues for communication and transacting exchanges with a firm’s customers.

 

Module 2 The Strategic Role of Marketing  -Content Questions:

2.1 Define strategy.

A strategy is a fundamental pattern of present and planned objectives, resource deployments and interactions of an organization with markets, competitors, and other environmental factors.

Specifies

1)      what (objectives to be accomplished)

2)      where (on which industries and product markets to focus)

3)      how ( which resources and activities to allocate to each product market to meet environmental opportunities and threats and to gain a competitive advantage)

2.2 What are the five components of strategy?

 

Scope

Number and types of industries, product line market segments it competes in or plans to enter

Goals and objectives

Strategies should also detail desired levels of accomplishment on one or more dimensions or performances i.e. volume growth, profit contribution return on investment

Resource deployments

Deciding how resources are to be obtained and allocated, across businesses product markets functional departments and activities

Identification of a sustainable competitive advantage

How the organization will compete in each business and product market within its domain.  Position itself to develop and sustain a differential advantage over current and potential competitors.

Synergy

Business, product markets, resource deployments and competencies complement and reinforce one another,  total performance are greater than in it would be in parts.

 

2.3 How do the three levels of strategy differ in terms of the issues on which they focus?

 

Strategy components

Corporate strategy

Business strategy

Marketing strategy

Scope

Corporate domain: ‘ Which business should we in ?”

Corporate development strategy:

è      Conglomerate diversification (expansion into unrelated businesses)

è      Vertical integration

è      Acquisition and divestiture polices

Business domain: ‘ Which product markets should we be in within this business or industry?’

Business development strategy:

è      Concentric diversification (new products for existing customers or new customers for existing products)

è       

 

Target market definition Product-line depth and breadth

Branding policies

Product-market development plan

Line extension and product elimination plans

Goals and objectives

Overall corporate objectives aggregated across businesses:

è      Revenue growth

è      Profitability

è      ROI (return on investment)

è      Earnings per share

è      Contributions to other stakeholders

Constrained by corporate goals

Objectives aggregated across product-market entries in the business unit:

è      Sales growth

è      New product or market growth

è      Profitability

è      ROI

è      Cash flow

è      Strengthening bases of competitive advantage

Constrained by corporate and business goals

Objective for a specific product-market entry:

è      Sales

è      Market share

è      Contribution margin

è      Customer satisfaction

Resource deployments

Allocation among businesses in the corporate portfolio

Allocation across functions shared by multiple businesses

(Corporate R&D, MIS)

Allocation among product-market entries in the business unit

Allocation across functional departments within the business unit

 

Allocation across components of the marketing plan (elements of the marketing mix) for a specific product-market entry

 

Identification of a sustainable competitive advantage

Primarily through superior corporate financial or human resource; more corporate R&D; better organizational processes or synergies relative to competitors across all industries

Primarily through competitive strategy; business unit’s competencies relative to competitors in its industry

Primarily through effective product positioning; superiority on one or more components of the marketing mix relative to competitors within a specific product market

Synergy

Shared resources, technologies or functional competencies across businesses within the firm

Shared resources (including favorable customer image) or functional competencies across product market within an industry

Shared marketing resources competencies or activities across product-market entries

 

 

 

 

2.4 What questions should a company’s mission statement answer?

What is our business?

Who are our customers?

What kinds of value can we provide to these customers?

What should our business be in the future?

2.5 What criteria should be used in a corporate mission statement?

è     Physical terms, focusing on products or services or technology

è     The most useful mission statements focus on the customer need to be satisfied and the functions that must be performed to satisfy that need. 

è     They are specific as to customer groups and products or technologies on which to concentrate.


 

Characteristics of effective corporate mission statements

 

Broad

Specific

Functional

Based on customer needs

Transportation Business

Long-distance transportation for large-volume producers of low-value, low density products

PHYSICAL

Based on existing products or technology

Railroad business

Long-haul, coal-carrying railroad

 

2.6 What is the value to the corporation of ethical guidelines?

To reduce inconsistent behaviors among marketing reduce risk/damaging ongoing-term relationships with suppliers, channel partners and customers.  To reduce damaging the trust between a firm and its suppliers or customers, thereby not disrupting the development of long term exchange relationships and resulting in the likely loss of sales and profits over time.

2.7 Define strategic intent or vision.

A Motivator for staff, personable lending to employee commitment.

2.8 What are the four components of a corporate objective?

1)      A performance dimension or attribute sought

2)      A measure or index for evaluating progress

3)      A target or hurdle level to be achieved

4)      A time frame within which the target is to be accomplished.

2.9 What are the two major directions a corporation can go in seeking growth? What are the major options within each?

Two major directions -Diversification or Expansion


 

 

Current products

New Products

Current Markets

Market penetration strategies

·        Increase market share

·        Increase product usage

Increase frequency of use

Increase quantity used

New applications

Product development strategies

·        Product improvements

·        Product-line extensions

·        New products for same market

New Markets

Market development strategies

·        Expand markets for existing products

Geographic expansion

Target new segments

Diversification strategies

·        Vertical integration

Forward integration

Backward integration

·        Diversification into related businesses (concentric diversification)

·        Diversification into unrelated businesses

2.10 What is a portfolio model?

Enable managers to classify and review their current and prospective SBUs by viewing them as portfolios of investment opportunities and then evaluating each business's competitive strength and the attractiveness of the markets it serves.

Question Marks

 

High

 

Stars

 
2.11 What are the two dimensions in the BCG growth share matrix? What are the assumptions concerning each of these dimensions? Describe the type of business contained in each of the model’s four cells.

 


Market

10%

 

Dogs

 

Cash cows

 
Growth rate

(in constant

dollars)

Low

 
 

 


                                    10                                            1                                  0.1

Relative market share

Two Dimensions

Market Growth rate – maturity and attractiveness of an industry

Relative Market share – a proxy for its competitiveness strength within its industry

 

Business Types

Question Marks -  Business in high-growth industries with low relative market shares also known as problem children increase shares of a question mark business it becomes a star, If they fail it will turn into a dog.

Stars -  market leader in a high-growth industry, critical to the continued future success of the firm .  as industries mature they move into cash cows.

Cash Cows -  high relative hare of low-growth markets because they are the primary generators of profits and cash in a corporation.  Do not require additional capital markets are stable share leadership usually mean they enjoy economies of scale and relatively high profit margins.

Dogs – low share businesses in low-growth markets throw off some cash, typically generate low profits, or losses.

 

2.12 What are the major limitations of the BCG model?

·        Market growth rate is an inadequate descriptor of overall industry attractiveness

·        Relative market share is inadequate as a description of overall competitive strength

·        The outcomes of a growth share analysis are highly sensitive to variations in how growth and share are measured

·        While the matrix specifies appropriate investment strategies for each business, it provides little guidance on how best to implement those strategies

·        The model implicitly assumes that all business units are independent of one another except for the flow of cash.

2.13 What is value-based planning?

Is a resource allocation tool that attempts to assess the shareholder value a given strategy is likely to crease, it is a basis for comparing the economic returns to be gained from investing in different businesses pursuing different strategies from alternative strategies that might be adopted by a given business unit.

1)      Assess the economic value a strategy is lively to produce by examining the cash flows it will generate rather than relying on distorted accounting measures such as return on investment

2)      2) Estimate the shareholder value that strategy will p[reduce by discounting its forecasted cash flows by the business’s risk-adjustment cost of capital

3)      3) Evaluate strategies based on the likelihood that the investments required by a strategy will deliver returns greater tan the cost of capital .  The amount of return a strategy or operating program generates in excess of the cost of capital is commonly referred to as its economic value added or EVS.

2.14 What are its limitations?

Value based planning is not a substitute for strategic planning; it is a tool for evaluating strategy alternative identified and developed through mangers’ judgments.  It relies on forecast of many kinds to put a financial value on the hopes, fears, and expectations managers associate with each alterative.  I.e. forecasts of sales volumes, product mix, unit price and competitive action

2.15 Ideally, what characteristics should strategic business units have?

·        A homogenous set of markets to serve with a limited number of related technologies.

·        A unique set of products markets

·        Control over those factors necessary for successful performance

·        Responsibility for their own profitability

2.16 What are the objectives of a business unit?

Sub objectives vary across Strategic Business Units SBUs according to their industry attractiveness, strength of their competitive positions with those industries, and resource allocation decisions by corporate management.

2.17 What is the role of marketing in formulating and implementing strategies?

Marketing mangers bear the primary responsibility for formulating and implementing strategic marketing plans for individual product0market entries.  However freedom of action is designing such plans is often constrained by the firm’s corporate and business0level strategies.

2.18 What are the more important characteristics of a market-oriented company?

The marketing concept holds that the planning and co-ordination of all company activities around the primary goal of satisfying customer needs in the most effective means to attain and sustain a competitive advantage and achieve company objectives over time. 

They adopt a variety of organizational procedures and structures to improve the responsiveness of their decision making, including more detailed environmental scanning, continuous, real-time information systems; seeking frequent feedback form and coordinating plans with key customers and major suppliers; decentralization of strategic decisions, encouragement of entrepreneurial thinking among lower-level mangers an the use of inter functional management teams to analyze issues and initiate strategic actions outside the formal planning process.

Part 2 Market Opportunity Analysis

Module 3 Environmental Analysis - Content Questions:

3.1 What are the major problems in terms of the planet’s physical environment?

Depletion of many of the earth’s valuable resources, decline in the earth’s overall health – deserts are growing while forests are shrinking, lakes are dying, quality and quantity of groundwater are declining and rising temperatures.  Pollution problems, inadequate supply of municipal water.

3.2 What are green products?

Green products are those that are environmentally friendly ie phosphate-free detergents, recycled motor oil, tuna caught without netting dolphins, organic fertilizer, high-efficiency light bulbs, recycled paper.

3.3 What kinds of risk derive from a change in a country’s regulatory environment?

·        Confiscation (seizure without compensations)

·        Exportation (seizure with some compensations)

·        Domestication (transfer of ownership to the host country and local management and sourcing)

·        Change in exchange control,

·        local content laws,

·        import restriction

·        taxes and price controls

Designed to provide advantage to local industry.

3.4 What are some of the more important opportunities resulting from research in biology? Electronics?

Trends in biology especially in gene therapy.  I.e. research to discover faulty geneses is an example of what is hoped to be gained.

Trends in Electronics / Telecommunication relating to how goods and services as well as ideas are exchanged and how individuals learn and earn as well as interact with one another.

3.5 What are the major trends in the world’s population?

Ageing of the worlds population, caused primarily by declining mortality rates. 

Rapid shift in the populations of less-developed countries from rural to urban.

 

3.6 Describe the four major shifts taking place in the US population.

Family Structure

Closely structured family is less and less typical, households because of divorce, remarriage two wage earners etc

Ageing

Baby boomers 1949 – 1064 continue to dominate growth in the age groups they pass through en route to old age. 

Geographic Distribution

Immigrants account for nearly 1/3 of US annual growth and end up residing mostly in the large metropolitan areas of the South and West. 

Migration of jobs and people to suburban cities – further and further form central cities.

Ethnic Composition

Diverse ethnically 25% of population is composed of racial minorities. 

 

3.7 Define purchasing power parity. Further, explain why an unadjusted per capital GNP substantially understates the spending power of urban households in the underdeveloped countries.

Gross domestic product (GNP) measure economic performance of a country on a per capita basis after accounting for inflation, in order realistically to compare incomes across countries it is necessary to use a purchasing power parity (PPP) approach that takes into account the cost of a standard basket of products expressed in US dollars for each country. Thus, using a PPP analysis helps to compare the relative purchasing power of a given country for goods with what theses same goods would cost in the United States.   PPP typically lower GDP per capita income for wealthier countries and higher ones for the poorer nations.   Despite leveling from PPP the GDP gap is less inflation increased between rich and poor countries – mainly because of higher population growth.  PPP does not take into account the subsidies provided by many countries for such essentials as food, utilities, shelter, transportation, education and medical care, which account for about half of the average household expenditures in developed countries.

3.8 What are the major forces driving the competitive environment?

Known as the macro environments

Globalization of business

Takes more resources to be a major global player, the number of players become more and more limited.  Almost always results in a change in an industry’s structure, which makes it more difficult for entry as well as for competitors to survive

Technology

Rate and complexity has a strong impact on innovations in the production process and development of new and improved products. Vertical integration and mergers.

Changing channels of distribution

In retailing they have been numerous and far reaching include:

·        Fast growth of general merchandise discount stores operating cost lower than traditional retailers

·        Direct marketing via telemarketing, direct mail and Internet

·        Growth in vertical marketing systems that integrate producers, wholesaler and retailer into a unified system designed to achieve lower costs while increasing market power.  I.e. franchising examples of fast foods (McDonalds)

Regulation / Deregulation

In US Deregulation has had an impact on airlines, trucking banking bringing more competition.

And Regulation to Telephone markets, which had controlled of the seven ‘Baby Bells’ the new legislation, will open theses markets to competition and in exchange will permit the Baby Bells to compete in the long-distance market.  

Changing values, Attitudes and lifestyles

These are powerful engines of change as companies compete to take advantage of new trends.  I.e. increase concern about physical fitness has been responsible for athletics clubs exercise equipment ect..

 

3.9 Describe what an opportunity/threat matrix is and how it can be used to help management identify, evaluate and respond to environmental events.

An opportunity/threat matrix enables the examination of a large number of events in such a way that management can focus on the most important ones.  In any given period, many environmental events that could have an impact on the firm – either positively or negatively – may be detected. 

Example:

3.10 What are the ethical issues arising from the interaction of business and the environment?

·        Environmental Impact

·        Third world countries concerns for unhealthy working environments,

·        Third world countries use of child labour

·        High prices of third world countries for goods purchase pharmaceutical drugs. 

Module 4 Industry Dynamics and Strategic Change - Content Questions:

4.1 What are the various levels at which products can be defined?

Industry

Includes an array of non-competing products i.e. car industry

Product class

May serve diverse markets.  The more generic the definition the higher the aggregation level of products i.e. desserts versus pastries

Product type

Subsets of product class contain items that are technically the same

Brand level

Bottom of the aggregation hierarchy, inappropriate units of analysis.  Sales largely function of managements strategic decisions,

 

4.2 Describe market hierarchies.

Market Hierarchy is a complex one to define since there are numerous ways markets can be arrayed.  Levels targeted, the trend is towards greater specificity – that is towards targeting more precisely defined segments at the lower level in the hierarch e.g. Johnson & Johnson targeted children aged 2 – 6years with a special line of bath products featuring Winnie the Pooh.

4.3 Describe what is meant by the product life-cycle concept.

Sales history of a product and the sales change over time in a predictable way the product go through a series of five distinct stages: Each opportunities brings threats, thereby affecting the strategy as well as marketing programmes.

 

4.4 What are the characteristics and their implications of each of the product life-cycle stages?

4.5 What are the strategic implications of the product life cycle?

4.3 Stages

4.4 Characteristics and Implications

4.5 Strategic Implications

Introduction

Purchase of new product limited because members of the target market are insufficiently aware of its existence. And product availability. 

Communications task at the outset to build awareness of the new products uniqueness, expensive undertaking promotional expenditures product availability for trial

Both innovators and followers, accelerate overall market growth and product acceptance through awareness, trial and product availability.

Growth

As people learn about product and it becomes readily available, sales increase at a progressively faster rate.

Marketing mix changes, prices tend to decline , price differences between brands decrease,  Sellers build channel or a direct sales system provide maximum product availability and service at lowest cost.  This accomplished rivals at disadvantaged, 

Promotion costs concerned with building demand for a company’s brand  (selective demand) than demand for product class or type (primary demand) Firms strive to build favorable attitudes toward their brand on unique features,  promotion costs remain high, typically decline as a percentage of sales.

Increase competitive position

Shake-out / Competitive turbulence stage

Growth slows as the number of buyers nears maximum and repeat sales become increasingly more important than trial sales as number of buyers and purchases stabiles

Price cuts, weaker competitors leave the market, stronger firms gain shares.  Major changes in industry’s competitive structure occur.  Firms rationalize product line by eliminating weaker items, emphasis creative promotional pricing and strengthen its channel relationships.

Marketing mix changes

More direct price competition, firms make every effort to maintain and enhance their distribution system.  Reduce number of products carried weaker competitors  need to offer buying incentives to continue in the market.

 

Improve/solidify competitive position

Maturity

Sales plateau, typically lasts some time, Net adoption rate holds steady, adopters drop out and exceed new first time users,

Longer stage lasts the more likely changes occur.  If firm does not respond successfully to change its competitors do, then a change in industry structure of significant may occur

Marketing mix changes

Various brands mare similar, breakthroughs by R&D or engineering help to differentiate product.  Options is to add value to product that benefits customer., increase service distribution and in-store displays become increasingly important as does effective cost management.

Maintain position

Decline

sales rate declines and product is said to have reached its final stage this may be gradual or extremely fast. 

Sales decline, costs increase and radical efforts are needed to reduce costs and the asset base.  Exit barriers are low , many firms vacate the market so increasing the sales of remaining firms, there by delaying their exit.  Stronger firms may even prosper for a time. 

 

 

 

4.6 What are the major limitations of the product life-cycle concept?

Major limitations lies in its normative approach to prescribing strategies based on assumptions about the features or characteristics of each stage.  It fails to take into account that the product life cycle is in reality driven by market forces expressing the evolution of consumer preferences (the market), technology (the product) and competition (the supply side)

4.7 Describe the adoption process.

The adoption process involves the attitudinal changes experienced by individuals from time they first hear about a new product, serve or idea until they adopt it.  The five stages in the adoption process are:

Awareness

Person only aware of the existence of the new product insufficiently motivated to seek information about it

Interest

Individual becomes sufficiently interested in the new product, but is not yet involved.

Evaluation

Mental rehearsal stage, Individual is mentally applying the new product to his or her own use requirements and anticipating the results.

Trial

Individual actually uses the product, but, if possible, on a limited basis to minimize risk.  Only is the use experience is satisfactory with the product stand a chance of being adopted.

Adoption

Individual not only continues to use the new product but adopts it in lieu of substitutes.

 

4.8 What is the adoption rate a function of?

The time dimension is a function of the rate at which people in the target group move through the five stages in adoption process.  Depends on the following factors

1)      Risk (cost of product failure or dissatisfaction)

2)      Relative advantage over other products

3)      Relative simplicity of the new product

4)      Compatibility with previously adopted ideas

5)      Extent to which its trial can be accomplished on a small-scale basis

6)      Ease with which the central idea of the product can be communicated.

4.9 What are the various adopter categories?

Innovators

First 2.5% of all individuals who ultimately adopt a new product,  more venturesome more likely to be receptive to new ideas and tend to have high incomes which reduces the risk of a loss arising from an early adoption.

Early adopters

Next 13% –14 % who adopt.  Part of local scenes, often opinion leaders, serve as vital links to members of the early majority group, participate more in community organizations than do later adopters.

Early Majority

34% of those who adopt.  Display less leadership than early adopters, tend to be active in community display less leadership than early adopters, active in community affairs * thereby gain respect form their peers0.  do not like to take unnecessary risks and want to be sure new product will prove successful before they adopt it.

Late Majority

Another 34% Frequently those individuals adopt a new product because they are forced to do so for either economic or social reasons.  They participate in community activities less than the previous groups and only rarely assume a leadership role.

Laggards

Last 16% they are the most ‘local; .  participate less in community matters than any other groups and stubbornly resist change.  Adopt a product so late sometimes that it has already been replac3ed by another new product.

 

4.10 Describe the ways in which a product market’s characteristics change as the market evolves.

Product innovation diminishes over time.  Thus the sales of a new products those entering the market for the first time decline as percentage of total market volume form 10.2% during the growth stage of evolution to 5.4% during growth maturity, to 3.5% and 3.7% during stable maturity and declining maturity and to 2.8% in the decline stage.  This is know as PIM (profit impact of market strategy)

4.11 What questions need to be answered in making an industry analysis?

1)      How profitable is the industry likely to be in the short term?  Or in the longer term? 

2)      What are the more import industry characteristics?

3)      What are the industry driving forces?

a.       Changes in the market’s long-term growth rate which directly affect investment decisions and intensity of competition

b.      Changes in buyer segments, which affect demand and strategic marketing programmes

c.       Diffusion of proprietary knowledge, which controls both the rate at which products become ore alike and the entry of new firms

d.      Changes in cost and efficiency, derived from scale and learning effects which have the potential of making entry more difficulty

e.       Changes in government regulations, which can affect entry costs, bases on competition and profitability.

4)      What the essential determinants of success?

 

4.12 What are the major forces, which determine industry competition?

This is a part of industry analysis, five interactive competitive forces that collectively determine an industry’s long-term attractiveness present competitors, potential competitors, the bargaining power of suppliers and buyers and substitute products

.

 

Module 5 Consumer Marketing and Buying Behaviour- Content Questions:

5.1 Describe each of the four types of purchasing decision.

 

Extent of involvement

Extent of decision making

High

Low

Extended (information search; consideration of brand alternatives

Complex decision making

(cars, homes, vacations)

Limited decision making, including variety seeking and impulse purchasing (adult cereals and snack foods)

Habit /routine (little or no information search; focus on one brand)

Brand loyalty (athletic shoes, adult cereals, cologne, deodorant)

Inertia (frozen vegetables, paper towels)

 

5.2 Describe briefly the five steps consumers go through when purchasing high involvement products or services.

Problem identification

Triggered by unsatisfied needs or wants Perceive differences between in deal and actual states on some physical or sociopsychological dimension.  Seek products or services to help bring their current state more into balance with the idea

Information search

How much information will a consumer seek?

Source of Information - personal – commercial - public

Evaluation of alternatives

Product attributes and their relative importance i.e. Cost , Performance, Social attributes, Availability

Purchase

Choosing a source from which to buy the product involves essential the same mental process i.e. mail order, teleshopping, catalogue, retail store.

Post Purchase Evaluation

Aspiration or expectation level how well the product was expected to perform.

Post purchase dissonance consumer may doubt whether they made the best possible choices. Such doubts are called cognitive dissonance.

 

5.3 How do low-involvement purchase decisions differ from high-involvement ones?

They are not import to consumers, the search for information to evaluate alternative brands is minimal.  As a result, decisions to buy products such as cookies or cereal often are made within the store either impulsively on the basis of brand familiarity or as a result of comparisons of the brands on the shelf.

5.4 What are the marketing implications of low-involvement purchasing?

Implications

High Involvement

Low Involvement

Product design and positioning

Consumers evaluate alternative brands according to choice criteria that reflect the benefits they seek

Brand evaluation occurs after the product is purchased, consumers seek brands that are least likely to give them problems,

Focus on product features that minimize any problems in using the product.

Advertising and Promotion

Printed media are better for highly involved with the product and actively seeking information. 

Passive information gatherer, advertising should focus on a few main points to make it as easy as possible for them to gain familiarity and positive association with a brand.  Television is primary medium for advertising. – allows passive learning. Distinctive package design helps consumers recognize brands they have seen advertised.

Pricing

 

Bought often on price alone, special sales or coupon offers can be effective.  If no problems experienced in use of trial consumers may continue to repurchase the brand out of inertia until a competitor offers an attractive price promotion

Distribution

 

Extensive retail distribution important because consumers are unwilling to search for a particular brand.

Strategies to increase consumer involvement

 

Link product to some involving issue, i.e. bran cereals associated their product with a high fibre diet that may reduce the incidence of colon cancer.

 

5.5 Describe the Fishbein model by using an example.

Attitude A = Consumer’s overall attitude towards Brand A

Bi = Consumer’s belief concerning the extent to which attribute i is associated with Brand A

Ii = The importance of attribute i to the consumer when choosing a brand to buy.

k =  The total attributes considered by the consumer when evaluating alternative brands in the product category.

i = Any specific product attribute.

 

Cruise ship selection

Service attribute

Importance weight (0 –10)

Rating

A

Rating

B

Rating

C

Demographics – other passengers

10

8

8

8

Entertainment

10

8

10

9

Ports of Call

8

8

9

9

 

Cruise A = (10x8)+(10x8)+(8x8) = 224

Cruise B = (10x8)+(10x10)+(8x9) = 252

Cruise C = (10x8)+(10x9)+(8x9) = 242

Cruise B would be selected.

5.6 What is the difference between a compensatory and a non-compensatory model?

In a compensatory model a poor evaluation of one attribute can be offset by a strong evaluation on another. 

In a non compensatory model brands are evaluated one attribute at a time. Until one is superior

 

5.7 How do demographics and lifestyle have an impact on buying behaviour?

Demographics influence:

1)      The nature of consumers needs and wants

2)      Their ability to buy products or services to satisfy those needs

3)      The perceived importance of various attributes or choice criteria used to evaluate alterative brands

4)      Consumers’ attitudes toward and preferences for different products and brands.

 

Lifestyles

            People live their lives in different ways i.e. different opinions, interests and activities, i.e. buying and using brands in different ways for different purposed.

5.8 Identify the major social influences on consumers’ decision-making processes.

Social

Culture – set of beliefs, attitudes and behaviour patterns relatively stable over time.

            Sub Culture – share common geographic, ethnic, racial or religious backgrounds,  They continue to hold some values, attitudes and behaviour pattern that are uniquely their own.

Social Class - status groups largely based on similarities in income, education and occupation.

            Reference Groups –groups that affect consumer behaviour through normative compliance, value-expressed influence and informational influence.

            The Family – it serves as the primary socialization agent, helping members acquire the skills, knowledge and attitudes to function as consumers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Module 6 Organisational Markets and Buying Behaviour - Content Questions:

6.1 What are the major differences between organisational and consumer markets?

Organisational markets are about twice as large as consumer markets.

Organisational buyers purchase goods and services for further production, for use in operations or for resale to other consumers, In contrast to individual and households who buy for their own use and consumption.

 

Differences between organisational and consumer markets

Demand characteristics

The demand for industrial goods and services is:

1 Derived from the demand for consumer goods and services.

2 Relatively inelastic – price changes in the short run are not likely to affect

demand drastically.

3 More erratic because small increases in consumer demand can, over time,

strongly affect the demand for manufacturing plants and equipment.

4 More cyclical.

Market demographics

Organisational buyers, when compared with buyers of consumer goods, are:

1 Fewer in number.

2 Larger.

3 Geographically concentrated.

4 More apt to buy on specifications.

Buyer–seller relationships

Organisational markets are characterised by the following when compared with

the markets for consumer goods:

1 The use of professional buying specialists following prescribed procedures.

2 Closer buyer–seller relationships.

3 The presence of multiple buying influences.

 

6.2 Who are the major types of organisational customers?

Resellers

All retailers, wholesalers – buy large quantities of goods for resale to other organisation or household consumers

Goods Producers

Producers of raw materials (such as farm and forest products firms and mines), building contractors and manufacturers. 

Service Producers

Banks, Hotels (lodgings), Financial, Insurance, entertainment, Education

Government

Large buyers of goods and services

 

6.3 What groups of people are the participants in the buying process?

It involves people from various departments, and can be:

Users

People who must use or work with the product or service

Influencers

Provide information for evaluating alternative products and services, usually technical experts from various departments.  Help determine specifications and criteria to use in making the purchase decision.

Gatekeepers

Control the flow of information to other people in the purchasing process, primarily purchasing agents and suppliers salespeople control information that reaches other decision makers.  

Buyers

Purchasing agent or purchasing manager buyers have authority to contact suppliers and negotiate the purchase transaction. 

Deciders

Person who has the authority to make a final purchase decision.

 

6.4 What factors determine the buying task faced by an organisation?

1)      The newness of the problem and the relevant buying experience of decision makers in the buying center.

2)      The information needs of the people in the buying center.

3)      The number of new alternative products and/or suppliers to consider in making the purchase decision.

 

Three kinds of buying task or situations;

1)      Straight rebuy purchasing common product or service the organisation has bought many times before.  Routine

2)      Modified rebuy – organization’s needs remain unchanged, but buying center members are not satisfied with the product or the supplier they have been using.

3)      New-task buying  organisation faces a new and unique need or problem 0 one in which buying center members have little or no experience in buying and thus must expend a great deal of effort to define purchasing specifications.

6.5 Describe briefly the organisational purchase decision-making process.

Recognition of a problem or need

·        Derived demand

·        Requirements planning

·        Determining product specification

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


6.6 What are the marketing implications of the following categories of industrial goods and services?

Category

Description

Characteristics

Marketing Implication

Raw materials.

Relatively unprocessed goods that become apportion of a final product

Limited supply, few producers; distribution is a key function; price is a critical competitive variable. 

Little promotional activity except for co-operative advertising campaigns funded by trade groups to stimulate primary demand for a product. 

Component materials and parts.

Processed goods that become a portion of a final product.

High volume purchases, long-term contracts; fierce competition among suppliers, requires good service and nurturing of relationships with buyers.

 

Manufacturers buy most components materials and parts in large quantities, usually sold direct, without use of middlemen.  Wholesale distributors sell to smaller manufactures in some lines of trade.  To avoid disrupting production runs, sellers must ensure a steady reliable supply of materials and parts, JIT

Accessory equipment.

Finished goods that facilitate production of a final product

Enduring but less os than installations, more standardized, more frequently purchased and less costly than capital equipment; less complex buying intermediaries may be involved.

Wide range of specific items, it is hard to genralise about the most common or appropriate marketing strategies for accessory equipment. , producers sell accessory equipment directly.  Presale and post sale service requirements are substantial, but the monetary value of the average sale is high enough to justify direct distribution.  Personal selling either by the producers or a distributor sales force is the most important promotional method used in selling accessory equipment.  Products standarsied and not technically complex and thus advertising and brand name promotion are also important.

 

Installations.

Major capital goods used to produce a final product, but not part of the final product.

Long-lasting; involved in production of many units of the final product over several years; involve large monetary outlays; capital budgeting committee involved in purchase decision; sold directly from manufacturer.

Presents real chanllege because there are few potential coustomers at any one time, average sale is very large.  Many installations are custom0made to fit a partcular customers needs, therefore sellers must provide enginerring and design services before making a sale.  Often long perod of negotiation prior to fina transaction.  Firms sell installatin must usually provid emany post sale services, ie installation, training, maintenance repair and sometimes financing.  Small number of buyers large monetary volue of each sale and custom engineering involved, distriution usually dirct from producer to customer.  Some wholesale distributors provide replacement parts and repair services for equipment already in operation.  For similar reasons promotional emphasis is usually on personal selling rather than advertising, High-caliber, well-trained salespeople are critically important in the marking of installations.

Operating supplies.

Finished goods that facilitate repair, maintenance and ongoing operations.

Analogous to consumer convenience goods, frequently purchased and consumed in a short time; standardized; broad market; heavy used of channel intermediaries.

Purchased in small quantities by a great many different organizations, wholesale middlemen typically used to distribute.  Price is usually critical variable in marketing operating supplies.  Competing products are quite standardized and there is little brand loyalty.  Personal selling by agents and distributors is also important.

Business services.

Provide special expertise to facilitate ongoing operations

Long-term relationships with customers; supplier’s qualifications, experience and reputation critical to success; purchase decision often made by top executives.

Services are intangible purchased prior to evaluation by buyer, Suppliers qualifications, past performance and reputation become critical determinants of the success of the marketing effort.  Price is less important in selling business services because a lawyer or consultant with an outstanding reputation can often charge much more for a given service than one who is less well know,  Even so, rice often serves as an indicator of quality, especially when there are no other quality cues.

Module 7 Marketing Information and Marketing Research - Content Questions

7.1 Describe market database systems and how they can be used.

Point of Sale (POS) database are used for direct marketing and prospecting programmes for companies that sell directly to end users.  Collecting demographic data and tracking purchases.

Geodemographic database provide 4 types of data demographics, geographics, psychographics and consumer behaviour. 

 

7.2 Define what is meant by the term ‘marketing research’.

The function which links the consumer, customer and public to the marketer through information – information  used to identify and define marketing opportunities and problems; generate, refine and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process.

 

7.3 What are the six steps in the marketing research process?

Steps

Potential error

1. Problem formulation

Management identifies the wrong problem or defines it poorly

2. Determining information needs and data source

Management fails to identify the specific information needed for decision-making or the researcher uses the wrong source.

3. Research design, including questionnaire

Ambiguous questions or poor experimental designs result in invalid responses.

4. Sample design and size

Sample procedures result in the selection of a biased sample.

5.  Data collection

Errors are caused by non-response, by poor selection of respondents, by the interviewer, or by

6. Tabulation and analysis

Errors occur while transforming raw data from questionnaires into research findings.

7.4 What is the difference between primary and secondary data sources?

Primary

Are collected specifically for the problem at hand and require the firm to undertake the steps in the research process or hire an outside agency to do so

Secondary

Data collected by other organizations and are not usually tied directly to the firms’ problems.  They have the advantage of saving time and money, but the data must be compatible with the needs of the specific study.

 

7.5 How can secondary source data be evaluated?

Researchers must answer the question ‘How good are the data?’ if the source specifies the data-collection method used, it can serve as the basis for the evaluation.  If not the researchers are forced to judge the quality on the basis of other factors.  I.e. research sponsors may be federal government or a trade association.  And how data was collected i.e. by mail or personal interview.

7.6 What is the difference between exploratory and conclusive research?

Exploratory

·        Uses secondary data (case studies and interview with knowledgeable people)

·        Used to learn more about the nature and scope of the problem

·        Preliminary step to be followed by conclusive research that tests the relevant findings

·        Flexibility is key to the investigation

Conclusive

Comprises descriptive and experimental studies

Conclusive research to test alternative solutions to a problem

studies  .

 

7.7 What is the difference between descriptive and experimental research?

Descriptive

often referred to as survey research more commonly used design

Experimental

advantage of permitting the researcher to show cause-and – effect relationships between the variables 0 something that can only be inferred from descriptive studies. 

Some serious disadvantages that limit its usefulness in marketing

1)      most experiments can measure only immediate results

2)      Expensive

3)      Use small samples that may not be representative of the national market

4)      Difficulty holding all variables constant

5)      Pose severe administrative problems can be audited by competitors

 

7.8 What are the major differences between probability and non-probability sampling?

Probability

Ensures that every unit in the ‘universe’ has a known probability of being selected.  This is the only method that enables the researcher to measure the reliability of the sample data

 Possible problems 0 minorities  or poor are under-represented in phone or mail survey

Non Probability

Does not provide every unit in the universe with a known probability of being included in the sample.  Thus, the results cannot be generalize with any degree of certainty to a larger population

Is not objective unit included because the researcher thinks it should be

 

 

7.9 Why is interviewing one of the major sources of error in a typical research project?

Telephone and personal interviews, an interviewer often selects the person to interview, asks questions and records the answer and errors can occur at each step. 

Respondents refuse to cooperate

Unable to remember information wanted

Biased by the interviewing process

Not want to report things that reflect poorly on their intelligence or social position.

Does question mean the same to everyone

Interviewing respondents it the one major source of error in the typical research project,

7.10 Under what conditions would you use each of the various data collection methods?

Questioning

Most common way -  almost any problem can be attacked using it, problems involving attitudes, knowledge and buying intentions can be approached only by using this method. 

Observation

Recognizes and notes people, objects and actions, rather than asking for information.  Less popular than interviewing respondents

 

7.11 What are the major kinds of data you would want to collect about a competitor?

Examining data on their characteristics, objectives, strategies, performance to date and their strengths and weaknesses in order to gain insights into their future behaviour. 

7.12 What two kinds of measures need to be merged to develop a meaningful measure of customer satisfaction?

The first has to do with understanding of the criteria used by customers to evaluate the quality of the firm’s relationship with them.  Knowing the product/service attributes that constitute the customers choice.  Criteria as well as the relative importance of each should facilitate this task.  Once these attributes are identified they serve as the basis for developing expectation measures

The second type of measurement is concerned with how well the firm is meeting the customer’s expectations on an individual attribute as well as an overall basis, Thus, if the choice criteria of a cruise line’s target market included such attributes as food, exercise facilities and entertainment, then a performance measure would be developed for each .

7.13 Define the term ‘marketing potential’.

Market measurements are critical in determining, which markets to target, what resources to allocate to each and whether the firm’s sales performance is each is satisfactory.

7.14 How can one measure market potential?

Via Single factor index – researchers use it most successfully when the two items have a derived or complementary demand.

Multiple-factor indexes  - use a combination of two or more factors to estimate relative market potentials,  multifactor index

7.15 What is a marketing-decision support system?

Marketing-Decision support systems (MDSS) deals with the use of computer technology to enhance a marketer’s ability to identify and solve problem on a continuous day-in day-out basis using a marketing-decision support system.  -  It co-ordinates collection of data, systems, tools, and techniques with supporting software and hardware by which organisation gathers and interprets relevant information from business and its environment and turns into a basis for marketing action. 

Highly flexible and action oriented

7.16 What is the future of MDSS?

Many have not progressed further in developing more sophisticated system.  Major reason risk involve din making large investments, given the difficulty of estimating the return.  Al closely related problem is that the success of such system depends heavily on the decision making capabilities of the user. 

Companies will adopt during the next decade.  Increasingly empowering mangers throughout the organisation to make bigger, more complex decisions more quickly because of increased environmental dynamics.  Becoming a critically needed resource

7.17 What are the major ethical issues in marketing research?

Potential to harm individuals when such information is used worth their knowledge or/or consent, leading them to be excluded from or included in activities in such a way that they are harmed economically, psychologically or physically

Stem in large part from the interaction between the researcher and respondents, clients and the general public.  Fir instance, respondent should not be pressured to participate, should have the right to remain anonymous and should not be deceived by fake sponsorship.  .

Module 8 Market Segmentation and Market Targeting- Content Questions

8.1 Define market segmentation.

Involves subdividing the market place into distinct subsets of customers having similar needs and wants, each of which can be reached with a different marketing mix. lead them to respond in similar ways to a particular product offering and strategic marketing Programme. 

 

 4 Classifications

Characteristics of the person

Nature of the situation in which the product or Service any be purchased

Geography

Culture and Subculture adopted by the consumer

8.2 Why is there a strong interdependency between market segmentation, market targeting and positioning?

Determination of which segment target.  To do so would require evaluating the relative attractiveness of each segment (size, revenue potential and growth rate), the benefits sought and the firm’s relative business strengths.  This is called target marketing, Finally product positioning – that is, designing product offerings and developing strategic marketing programmes that collectively create an enduring competitive advantage in the target market – would need to be undertaken. 

All must be well considered and implemented if the firm is to be successful in managing a well considered and implemented if the firm is to successful .

8.3 What is the rationale for market segmentation?

Find an appropriate segmentation scheme that will facilitate market targeting, product positioning and the formulation of successful marketing strategies and programmes. 

8.4 What are the benefits of market segmentation?

1)      Identifies opportunities for new-product development

2)      Segmentation helps in the design of marketing programmes that are most effective for reaching homogenous groups of customers

3)      It improves the strategic allocation of marketing resources. 

8.5 Why is market segmentation of growing importance?

1)      Population growth has slowed

2)      More product markets are maturing in turn sparks more intense competition as firms seek growth via gains in market share.

3)      Social and economic forces as expanding disposable incomes, higher education level and more awareness of the world

4)      Important rend toward micro segmentation.  Accelerated by new technology

5)      Implementation of specialized marketing programmes by broadening and segmenting their own services. 

8.6 What is the objective of the market segmentation process?

Divide the market into groups of prospective buyers of a product or service who are relatively homogenous with regard to their demands.   Ideally the variances within individual groups would be relatively small. 

8.7 What are the different types of descriptors used to segment consumer goods? Industrial goods?

Consumer and Industrial Macro & Micro

·        Physical

·        General behavioral

·        Product- relatedness Behaviour

·        Customer Needs

8.8 Describe the two-step process used to segment industrial markets.

Macro segmentation

Divides the market according to the characteristics of the buying organisation using such descriptors a geography, location, company size and industry affiliation. (SIC) International counterpart of SIC is the trade-category code

Micro segmentation

Groups customers by the characteristics of the individuals who influent the purchasing decision for instance, age, sex and position within the organisation

 

8.9 What is geodemographic segmentation? Why is it becoming increasingly important?

It attempts to predict consumer behaviour by making demographic, psychographics and consumer information available at the bloc and zip code levels. 

8.10 What are the requirements for effective segmentation?

1)      Adequate size

2)      Measurability

3)      Accessibility

4)      Different response.

8.11 What are the two emerging inter-country global segments?

Identify consumers with similar needs and wants reflected in their behaviour in the marketplace across a range of countries.   Identifies consumer homogenous groups of consumers across country segments.

8.12 Why, for many products, are international markets becoming more homogeneous?

Similar segments have emerged in different countries at the same time because of technological developments affecting communications, transportation and travel,  developing Global segments. 

8.13 What are the steps in constructing a market-attractiveness/business-position matrix for evaluating potential target markets?

1)                  Choose criteria to measure attractiveness and competitive position

2)                  Weight attractiveness and competitive position factors to reflect their relative importance

3)                  Assess the current position of each potential target market on each factor

4)                  Project the future position of each market based on expected environmental, customer and competitive trends

5)                  Evaluate implications of possible future changes for business strategies and resources requirements

8.14 What are the three most common types of targeting strategy? Discuss each.

Mass Market

1)      Ignore any segment differences and design a single product and marketing program that will appeal to the larges number of consumers.  Capture sufficient volume to gain economies of scale and a cost advantage. 

2)      Design separate products and marketing programmes for the differing segments.  Differentiated marketing. 

Niche Market

Involves serving one or more segments that, while not the largest consist of substantial numbers of customer seeking somewhat specialized benefits from a product or service.   Designed to avoid direct competition with larger firms pursing bigger segments.

Growth Market

Target one or more fast-growth segments even though they may not currently be very large.  Favored by smaller competitors to avoid direct confrontation with larger firms while building volume and share for the future

 

8.15 Discuss the major inclusion and exclusion ethical issues involved in market targeting.

Inclusion

Undesirable stereotypes. Include sex role, race or age stereotypes ie women a sex objects.

Exclusion

Certain groups are deprived of the products or services but also that they may pay more for those they do receive.

 

Module 9 Positioning Decisions - Content Questions

9.1 What is meant by positioning?

Differentiation – the perceived fit between a particular product and the needs of the target market.  Defined relative to competitive offerings and consumer needs. 

9.2 What are the differences between physical and perceptual positioning?

A business position its offering so that customers in the target market perceive it as providing the desired benefits, thereby giving it an advantage over current and potential customers.

Physical position offerings are based on comparison on some set of objective physical characteristics

9.3 What are the limitations of physical positioning?

A simple comparison of only the physical dimensions of alterative offerings usually does not provide a complete picture of relative positions because positioning ultimately takes place in customer’s minds. 

9.4 What are the steps in the positioning process?

1)                  Identify relevant set of competitive products

2)                  Identify the set of determinant attributes that define the ‘product space’ in which the positions of current offerings are located.

3)                  Collect information from a sample of customers and potential customers about perceptions of each product on the determinant attributes

4)                  Analyze intensity of a product’s current position in customers’ minds.

5)                  Determine product’s current location in the product space (product positioning)

6)                  Determine customers’ most preferred combination of determinant attributes

7)                  Examination the fit between preferences of market segments and the current positions of product (market positioning).

8)                  Select positioning or repositioning strategy.

9.5 What are some of the more common types of bases used to distinguish one product or service from another?

1)      Features – physical product position and industrial products

2)      Benefits – directly related to a product

3)      Usage including end use , demographic, psychographics or behavioral and popularity.

4)      Parentage – who makes it,

5)      Manufacturing process – the subject of a firm’s positioning efforts.

6)      Ingredients - positioning concept illustrated by ie pure cotton

7)      Endorsements two types those by experts ie medical professionals and those via emulation Michael Jordan using Nike shoes.

8)      Comparison with a competitor’s product is commonplace

9)      Pro-environment – positioning seeks to portray a company as a good citizen

10)  Product Class – new different product type

11)  Price/quality

12)  Country or geographic area

9.6 What constraints are imposed on a brand with an intense position?

Developing a strong relationship between a brand and a limited number of attributes.

9.7 What are the limitations of a product positioning analysis?

It indicates how alterative products or brands are positioned relative to one another in costumers; minds.  Does not tell the marketer which positions are most appealing to customers. 

9.8 In choosing a given position for a given brand, what factors should one consider?

Market targeting analysis and the results of a market positioning analysis. 

Position should match the preferences of a particular market segment and should take into account the current positions of competing brands.  Also reflect the current and future attractiveness of the target market and the relative strengths and weaknesses of the competitors. 

9.9 What is a product intent share?

Product intent share represents the percentage of consumers who intend to buy a specific brand before actually searching for it.  Integrates all factors that influence the perceived qualities of a product.

9.10 How can the purchase intent share that a brand might acquire in a given segment be estimated?

Based on the positions of existing brands and the preferences of consumers in the segments.  In a perceptual map obtained via multidimensional scaling,   based on the distance between a brands position and the ideal points. 

9.11 What market dynamics should be considered in evaluating the sales potential of alternative positions?

1)      Growth of market segments

2)      Evolution of segments ideal pints

3)      Changes in position intensity

4)      Evolution of existing brands positions

5)      Emerging attributes

6)      Development of new segments

7)      Introduction of new brands.

9.12 Describe each of the various market positioning strategies.

Monosegment positioning

Developing a product and marketing Programme tailored to the preferences of a single market segment. 

Multisegment positioning

Position a product so as to attract consumers from different segments. Provides higher economies of scale, requires smaller investments and avoids dispersion of managerial attention

 Standby positioning

Not in best economic interest of a firm to switch from multisegmeent position to monosegment (assumes use several brands, each positioned to serve the needs of only one segment) only implement monosegment when forced to do so.

Imitative positioning

Head-on strategy where a new brand targets a position similar to that of an existing successful brand.

Anticipatory positioning

Position anew brand in anticipation of the evolution of a segment’s needs. This is particularly appropriate when the new brand is not expected to have a fast acceptance and market share will build as the needs of consumers become more and more aligned with the benefits being offered. 

Adaptive Positioning

Periodically repositioning a brand to follow the evolution of the segment’s needs.

Defensive positioning.

When a firm occupies a strong position in a market segment with a single brand, it is vulnerable to imitative positioning strategies.  Pre-empt competitive strategies by introducing similar poison for the same segment. 

 

Part 3 Developing Strategic Marketing Programmes

Module 10 Business Strategies and Marketing Programme Decisions - Content Questions

10.1 What are the basic/generic competitive strategies? Describe each briefly.

1)      Overall cost leadership

2)      Differentiation – building customer perceptions of superior product quality, design or service

3)      Focus in which the business avoids direct confrontation with its major competitors by concentration on narrowly defied market niches.

10.2 What are the characteristics of Miles and Snow’s four business strategies?

Prospector

·        Operates within a broad product-market domain that undergoes periodic redefinition

·        Values being a ‘first mover’ in new product and market areas, even if not all of these efforts prove to be highly profitable.

·        Responds rapidly to early signals concerning areas of opportunity, and these responses often lead to new rounds of competitive actions.

·        Competes primarily by stimulating and meeting new market opportunities but may not maintain strength over time in all markets it enters.

Defender

·        Attempts to locate and maintain a secure position in relatively stable product or service areas.

·        Offers relatively limited rage of products or services compared to competitors

·        Tries to protect its domain by offering lower price, higher quality or better service than competitors.

·        Usually not at the fore front technological / new product development in its industry; tends to ignore industry changes not directly related to its area of operation.

Analyser

·        An intermediate type; makes fewer and slower product-market changes than prospectors, but is less committed to stability and efficency than defenders

·        Attempts to maintain a stable, limited line of products or services, but carefully follows a selected set of promising new developments in its industry.

·        Seldom a first mover, but often a second or third entrant in product markets related to its existing market base – often with a lower-cost or higher-quality product or service offering.

Reactor

·        Lacks any well-defined competitive strategy

·        Does not have as consistent a product market orientation as its competitors

·        Not as will to assume the risks of new-product or market development as its competitors

·        Not as aggressive in marketing established products as some competitors

·        Responds primarily when it is forced to by environmental pressures..

10.3 How do low-cost defender, differentiated defender, prospector and analyzer differ with respect to their scope, cash needs and synergy?

Dimensions

Low Cost Defender

Differentiated Defender

Prospector

Analyzer

Scope

Mature/stable/well defined domain; mature technology and customer segments

Mature / stable 0 well defined domain; mature technology and customer segment

Broad/ dynamic domains; technology and customer segments not well established.

Mixture of defender and prospect strategies. 

Resources

Generate excess cash (cash cow)

Generate excess cash (cash cow)

Need cash for product development (question marks or stars)

Need cash for product development but less so tan do prospectors

Synergy

Need to seek operating synergies to achieve efficiencies

Need to seek operating synergies to achieve efficiencies

Danger is sharing operating facilities and programmes – better to share technology/ marketing skills.

Danger in sharing operating facilities and programmes better to share technology / marketing skills

10.4 What are the appropriate external environment conditions for a prospector strategy? A defender strategy?

External factors

Prospector

Defender

Market characteristics

Industry in introductory or early growth stage of life cycle, many potential customer segments as yet unidentified and/or undeveloped.

Industry in maturity or decline stage of life cycle; current offerings targeted at all major segments; sales primarily due to repeat purchases/ replacement demand.

Technology

Newly emerging technology; many applications as yet undeveloped.

Basic technology fully developed and stable; few major modifications or improvements likely.

Competition

Few established competitors; industry structure still emerging; single competitor holds commanding share of major market segments.

Small to moderate number of well- established competitors; industry structure stable, though acquisitions and consolidation possible; maturity of market means relative shares of competitors tend to be reasonably stable over time.

Business's relative strengths

SBU (or parent) has strong R&D, product engineering and marketing research and marketing capabilities.

SBU (or parent) has superior sources of supply and/or process engineering and production capabilities that enable it to be low-cost producer; R&D, product engineering, marketing, sales or service capabilities may not be as strong as those of some competitors.

 

10.5 What are the marketing implications for each of the different business strategies with respect to:

 

 

 

Strategy

 


 

Marketing policies and programme components

Prospector

Differentiated defender

Low-cost defender


 

Product policies

 

 

 

Product-line breadth relative to competitors

+

+

-

Technical sophistication of products relative to competitors

+

+

+

Product quality relative to competitors

?

+

-

Service quality relative to competitors

?

+

-

Price policies

 

 

 

Price levels relative to competitors

+

+

-

Distribution policies

 

 

 

Degree of forward vertical integration relative to competitors

-

+

?

Trade promotion expenses as percentage of sales relative to competitors

+

-

-

Promotion policies

 

 

 

Advertising expenses as percentage of sales relative to competitors

+

?

-

Sales promotion expenses as percentage of sales relative to competitors

+

?

-

Salesforce expenses as percentage of sales relative to competitors

?

+

-

Key:

Plus sign (+) = greater than the average competitor.

Minus sign (-) = smaller than the average competitor.

Question mark (?) = uncertain relationship between strategy and marketing policy or programme component.

 

10.6 Do service businesses require different strategies? Why? Why not?

Services can be thought of as intangibles and goods as tangibles.  Service can rarely be experienced in advance of the sale while goods can be experienced even tested before purchase.

Many organizations are concerned with producing and marketing a service as their primary offering rather than as an adjunct to a physical product. 

Have the same implications as those for goods producers. 

Module 11  Product and Services Decisions - Content Questions

11.1 What is a product? Describe its various components.

A product can be defined as anything that satisfies a want or need through use, consumption or acquisition.  It included subjects, services, places, people activities, and ideas.

11.2 Describe the four subgroups of consumer goods.

11.3 What are the marketing strategy implications of this classification?

 

Examples

Strategy elements stressed

Convenience goods

 – toothpaste, soap

– Maximum distribution, consumer advertising

Shopping goods

– Colour TV, cars

– Available in limited number of stores, personal selling important, limited to extensive advertising, seller often offer financing, warranties and post purchase service

Specialty goods

 – Musical instruments, stereo equipment

– Limited distribution high price strong advertising to promote brand uniqueness and where available locally

Unsought Goods

– Certain medical services, insurance,

 - Strong promotion, including personal selling.

 

11.4 How do the earlier decisions concerning targeting and positioning affect the composition of the product line as well as the attributes of individual products?

Earlier steps in the marketing management process constrain a business unit’s product strategy – especially market targeting and market positioning which have an impact on the composition of the product line and the attributes of individual products. 

11.5 How do the various stages in the product life cycle constrain product strategy?

As times change the environment in which the business unit competes, the result is likely to be a change in its product strategy, constrained by the product’s life cycle.

11.6 What are the characteristics of a high-share global strategy?

1)      A drive for a strong international market-share position

2)      Products with a high degree of international standardization

3)      A marketing Programme – especially price, product line and advertising – geared to the mass market.

4)      Large expenditures on design and R&D relative to the industry’s norm.  Because of the large volume of sales, these costs on a unit basis are low.

5)      The use of regional production facilities or a rationalized global network designed to reduce logistics costs.

11.7 Under what conditions should a firm adopt a localization strategy?

The premise that products and programmes must be adapted to the needs and wants of individual countries because of environmental differences especially cultural ones,.   Often occurs because of mandatory adaptation * that is, the foreign market requires it). 

11.8 Discuss briefly the effect of each positioning strategy on product decisions.

Single (mono) product line is typically shorten than if it undertakes a multisegment positioning strategy, In a defensive positioning strategy a firm with a successful brand introduces a second similar brand to pre-empt a competitors initiative strategy,  similar to a flanker or fighting brand, which counters the moves made by competitors by offering retailers certain price and advertising concessions. 

11.9 How does each of the three major types of business strategy constrain a firm’s product strategy?

Prospector Strategies

Center on new-product development, which encourages broad and technically advanced lines

Analyzers

Concerned with defending their established business, either by using a low cost approach or by differentiating their product offering on the basis of quality and service.  Some attention to new-product development.

Defender

Similar to Analyzers except the defenders devote fewer resources to the development of new products, have smaller product lines (on average) and wherever possible differentiate themselves from competitors via service. 

Three major types of business strategies constrain a firm’s product strategy with respect to its breadth, technical sophistication, quality and service.

11.10 What are the eight dimensions of quality? How do these affect a firm’s quality strategies?

Performance

Has to do with a product’s basic operating characteristics,

Features

Secondary product characteristics that are designed to enhance the products basic functions.

Reliability

Is the probability that a product will perform satisfactorily over a given period. 

Conformance

The extent to which a product’s operating characteristics meet certain specifications.

Durability

Measure of the life of a product, technical (replacement) and economic (repair cost)

Serviceability

Concerned with the speed and ease of obtaining competent repair.

Aesthetics

How product looks, feels, sounds, tastes, and smells

Perceived quality

Results from the use of indirect measures since the consumer may lack or not understand information about a product’s attributes.

 

11.11 How does branding benefit consumers? Sellers?

Consumers

Simplifies shopping, facilitates the processing of information concerned with purchase options, provides confidence that the consumer made the right decision.

Seller

Enhances effectiveness of their marketing Programme promotion

Brand loyalty which in turn leads to greater profitability

Opportunities for successfully launching brand extensions

Prices and margins resulting from a competitive advantage

Channel relationships.

11.12 Under what conditions is branding particularly effective?

When it is difficult for the consumer to measure the products quality objectively.  Status, large enough market to warrant the cost of branding, differentiate product.

11.13 Why in America have high quality store brands gained considerable share as against national brands?

In the 80’s the national brands regularly increased their prices along with making massive distributions of coupons, thereby training consumers to shop on price.  Large number of line extensions and in general, focused less on brand equity.  Taking advantage of the price vulnerability of many national brands.  Strong in the soft goods trade. 

11.14 Discuss briefly the various branding strategy options.

Individual Branding

Each product has a distinctive name.  I.e. Proctor and Gamble (Tide, Luvs, Crest, Pringles)

Family Branding

Same brand name to cover a group of products i.e. Campbell’s soups Sears Kenmore appliances

No brand brand Name

Examples include generic, no-frills, unbranded, 

Multipe Brands strategy

Company deliberately competes against itself i.e. General Motors (Buick versus Oldsmobile versus Pontiac)

 

11.15 Define each of the following:

Line filling.

Lengthens the product line by adding items within the present range , objective to satisfy more customers, increase sales and profits

Line stretching.

 Involves lengthening the product line beyond its current range of variables, such as size and price. 

Line extensions.

Introduction of new products that differ significantly form those in the existing line certainly by more than just size and price.  - Greater costs

and financial risks than product line filling or stretching strategies

. 

11.16 How does the fact that services are ‘intangible’ affect marketing management?

Differentiates service from a good.  The degree to which a service is intangible affects the getting and keeping of customers.  Consumers are forced to buy the promise of a service.  They are intangible; hence marketers need to make them tangible to prospective buyers.  

11.17 Discuss briefly the five criteria consumers use to evaluate service quality.

Tangibles

Appearance of physical characteristics

Reliability

Dependable performance

Responsiveness

Promptness and helpfulness

Assurance

Competence, courtesy and credibility

Empathy

Good communication and customer understanding

Module 12  Developing and Testing New Products and Services- Content Questions

12.1 How can the variation in new-product failure-rate estimates be explained?

Some studies examine the proportion of new-product concepts or ideas that fail to achieve commercial success, while others focus only on products that fail after being introduced into the market. 

12.2 Why is it becoming increasingly difficult to introduce new products successfully?

Maturity of many basic technologies, shorter product life cycles, increasing competition, government regulations and the increased costs of new-product development process. 

12.3 Why are more and more firms using teams to introduce new products?

One of the advantages of using teams is their ability to reduce the time of the new product development process by fostering closer relations between various functional areas.   Reduces time to gain approval from one area.

12.4 What are the major steps of the new-product development process?

1)      New product objective and strategy

2)      Opportunity identification, idea generation and screening

3)      Product development

a.       Key benefits

b.      Product features

c.       Product positioning

d.      Sales potential

e.       Business plan

4)      Product Design

a.       Engineering

b.      Use tests

c.       Simulated test marketing

d.      Field test Marketing

5)      Commercialization

12.5 What are the more important reactive strategies for new-product development?

Defensive strategy adjusts a firms existing products so they can better compete against a recently introduced competitive product

Imitative strategy quickly copies a new product

Second-but-better strategy improves on a competitor’s new product

Responsive strategy reacts to consumer request for a new or improved product.

12.6 How can proactive strategies be implemented?

R&D strategy strives to develop superior technical products

Marketing Strategy based on finding a consumer need and then developing a product to fill it.

Entrepreneurial foster development of new improved products.

Acquisition strategy whereby a firm buys new products to bring to market.

12.7 What are the more important sources of new product ideas?

·        Customers

·        Company personnel

·        Channels of distribution

·        Competitors

·        Government Agencies

·        Old products (brands)

·        Miscellaneous sources

12.8 What are the various ways new product ideas can be tested?

Screening process  depends on constraints set forth in the firm’s new product strategy.

 

Scoring models early stages of new product development process  use limited number of review criteria to more sophisticated ones. Easy to use and low in cost.  When only rough distinctions are required among projects. 

 

12.9 Describe a core benefit proposition.

CBP  states what is being offered to consumers, what they will derive from it and why this is important all in terms of consumer benefits. 

12.10 How can new products be tested?

Laboratory Tests – can often accurately measure the performance of certain types of products and a variety of conditions

Consumer tests –informal in-house use test a sample of consumers as asked to use the product and then fill out a questionnaire. Highly structured blind-paired comparison tests.  Consumer does not know the brands involved.  Ie taste test panels. To elaborate computer analyses.

12.11 Describe a laboratory test market and how it operates.

Mostly applicable to packaged consumer products, mainly food, household and some personal care items.  The procedure measures the process by which a consumer adopts a new product.  The process consists of three major steps:  awareness, trial and repeat buying.

12.12 Describe electronic mini-test markets.

A.C. Nielsen and Information Resources Behaviour Scan. . The latter pioneered the technology that monitors the purchasing and viewing behaviour of a sample of household in eight or so small cities across the United States.  Panel member show their id card at the supermarket checkout, a scanner records their purchases and the data are sent directly to a central computer. 

12.13 Under what conditions would a firm be well advised to forgo a full-scale test market?

If The company’s market share total sales and repeat buying measurements clearly exceed expectations there is no reason not to proceed with national distribution.

12.14 Describe briefly the various commercialization strategies.

Forego market testing and move directly to a roll-out region by region or nationally from the outset. 

Extension of the full-scale test market, which was designed to test a national introductory plan.

Roll-out test rather than an elaborate market test

Test area where the company has strong resources in order to lead from strength to get things moving.

Multiple channels roll out 

Based on the trade-offs between risk and the need to plan the cash flow for the introduction and the speed with which competitors are likely to react. 

12.15 What problems are involved in applying the new-product development process to services?

Testing a new service can pose problems since the presence of the consumer in the service system makes it difficult to develop a service that is uniform or consistent.  Service companies try to get around this problem in a variety of ways they use machines (automatic bank tellers) . 

12.16 What are the major ethical issues involved in the development of new products?

 

Business is critics for excessive production of ‘me-too’ products, leads to waste in the economic system. 

Reverse that business fails to produce products that are needed such as products for people with unusual physical attributes.

Safety into products

Impact of Product and Packaging on the environment.

Module 13  Pricing  Decisions - Content Questions

13.1 Why has price become a more important part of a firm’s marketing strategy in recent years?

Slower growth, the maturing of many basic industries, improved productivity, the growing power of retailers and their private labels and the increased aggressiveness of low-cost global competitors have made domestic markets more price competitive. Resulting in pricing and price competition becoming number one priority in the 1990s.

13.2 Why is price an area in which managers feel the most pressure to perform yet the least certain they are doing a good job?

For the most part, managers believe that they don’t have control over price.  The market dictates it yet anything closer to the “right” price can have a tremendous impact. 

13.3 What are the steps in the price-setting decision process?

Influences and Constraints

·        SBU and marketing strategies

·        Target market characteristics

·        Product characteristics

·        Competitor characteristics

·        Company strengths and weaknesses

·        Environmental influences

o       Economic trends

o       Legal restrictions

o        

The price-setting decision process

1)      Set strategic pricing objective

2)      Estimate demand and price elasticity of demand

3)      Determine cost and their relationship to volume

4)      Examine competitors’ prices and costs

5)      Select a method for calculating prince

6)      Set a price level

7)      Adapt price structure to meet variations in demand and cost across geographic territories, market segments, etc.

8)       

13.4 Under what conditions is penetration pricing appropriate?

When in addition to a large market:

1)                  Target customers are relatively sensitive to price

2)                  The firm’s costs are low compared to those of competitors and the SBU is pursing a low-cost strategy

3)                  Production and distribution costs per unit are likely to fall substantially with increasing volume.

4)                  Low prices may discourage potential competitors from entering the market. 

13.5 Describe a skimming price policy.

Setting the price very high and appealing to only the least price-sensitive segment of potential customers.  This can also be accomplished over time, as in ‘periodic discounting’, when the seller prices high at the beginning of each period and low at the end.    Used normally in pioneer development of a new product market.  Maximize short-run profits.

13.6 Describe a harvesting price strategy.

Maximize short-term profits before demand for the product disappears.  Typically involves cutting marketing, production and operating costs of the product while setting a relatively high price to maintain margins and maximize profits. 

13.7 What are the major factors affecting a customer’s sensitivity to price?

1)      Buyers’ willingness to pay a given price for a product is influenced by their perception and preferences: their needs, desires, awareness of and attitude towards the item in question

2)      The price, availability and attractiveness of alternative brands and substitutes products affect buyers’ willingness to buy the product.

3)      Size of their incomes relative to the price influences customers’ ability to pay for a product or service.

Taken together, these factors determine the perceived value a potential customer will associate with a given product-market entry and price he or she will pay.

13.8 Define the term ‘elasticity of demand’.

The larger the proportion of price-sensitive customers in a product’s market the more sensitive overall demand is to a change in the product’s price.  The degree of responsiveness of demand to a price change is referred to as the price elasticity of demand.

 

13.9 What is the formula for calculating the price elasticity of demand for a product or service?

 

Price elasticity of demand (E) = %change in quantity demanded / % change in price

13.10 What are the major problems in using this formula?

·        Failure to consider the response of competitors to the company’s change in price

·        The demand may be inelastic for a given price change, but elastic for a larger amount

·        That elasticity is measure din terms of sales revenues not profit margins (one reason being that it does not take into account scale effects)

·        A lowering of price may affect the sales of others in the company’s product line

·        It ignores any societal benefits that may be accorded to the company for benefiting low-income segments via a price reduction

13.11 What are the more common ways of estimating a product’s demand curve?

1)      approach is to survey a sample of consumers, or bring them into a laboratory setting, and ask them how much of the product they would buy at different possible prices. -Validity is questionable,

2)      estimating the price-quantity relationship via the regression analysis of historical sales using consumer panel data,

3)      in-store experiments where a product’s price is systematically varied, or

4)      multiple test markets.   This is expensive.

13.12 How can competitors’ costs and prices be estimated?

Track the price, cost and relative quality of each competitor’s offer.

Competitors costs are harder to measure than their price.  Reverse engineering can be used to take apart competing products and examinee the cost of their components, packing and production process. 

13.13 Describe (using an example) cost-plus or mark-up pricing, rate-of-return or target return pricing and break-even pricing.

Cost plus or mark up pricing is simply to add a standard mark-up to the cost of the product.

rate-of-return or target return this uses the same method as markup price but adds the cost of capital tied up in producing and distributing the product.

break-even pricing   This is the variable cost per unit and fixed costs the volume necessary to just cover total costs. 

13.14 Describe the various competition-oriented pricing methods.

Going – rate or competitive parity  - where all try to maintain prices equal to those of one or more major competitors.  Used when little product differentiation and a few large competitors. 

Discount or premium price policies – base its pricing on what its competitors are charging, but try to hold its price either below or above the competition.

Sealed bidding buyers request a formal bid with no later opportunity for change.

13.15 Describe the various customer-oriented pricing methods.

Perceived Value

– potential customers usually have some idea of what constitutes a good or bad price. 

Customary Prices

-  consumers expect a single customary price for products i.e. Candy bars at a customary price of 10 cents when cost put pressure on manufactures margins, they reduced size of bar rather than upset customers expectation by raising the price.

Price Lining

Selling all products in a category at one of several predetermined ‘price points or levels.  Each price line represent a different level of quality. 

Psychological pricing

users use price as an indication of quality.

Promotional pricing

most common type is sale: the offer of a reduced price on a product for a limited time.

 

13.16 Define the following terms:

FOB origin pricing.

The manufacturer places the goods ‘free on board’ a transportation carrier.  At this point the title and responsibility pass to the customer, who pays the freight form the factory to the destination.

freight absorption pricing.

The seller picks up all or part of the freight charges.  New competitors trying to penetrate new markets and smaller competitors in maturing industries trying to increase their share

zone pricing.

Is another compromise approach that falls between FOB and uniform delivered pricing.  Here the company divides the country into two or more pricing zones.  IT charges all customers within the same zone the same delivered price, but a higher price is set for distant zones than for those closer to the plant.

13.17 Describe the various forms counter trade can take.

Barter

Direct  exchange of goods with no money and no third party involved.

Compensation deals

Seller agrees to take some % of the payment in cash and the rest in goods.

Buyback arrangements

Seller offers a plant, equipment, or technical exercise to a customer and agrees to accept a partial payment products manufactured with the equipment or training supplied.

Offsets

Seller compensated in cash but agrees to spend a substantial amount of that cash with e customer or its government over a stated time period.

 

13.18 Define trade or functional discounts, quantity discounts, co-operative advertising allowances and rebates.

Trade or functional discounts

A discount from the suggested retail list price.  This discount is given to the wholesaler and / or retailer.

Quantity discounts

Discount increases as order size increases.

Cooperative advertising

A temporary reduction in the product’s price.  I.e. Pepsi’s offer of 15 cans of soda for the price of a 12-pack.

 Allowance

Similar to discounts In they inducements to encourage channel members or final customers to engage in specific behaviors in support of the product.  I.e. car is a trade-in allowance.  

Rebates

Rebates reduce the price of the product through a money-refund offer.  Example mail in rebate.

13.19 What conditions allow for price discrimination?

Not always possible or wise to set different prices for essential the same product. 

1)      Must be obviously be identifiable customer segments with different price sensitivities

2)      Either the customer segments must be physically separated from one another or

 the firm must institute control procedures to ensure that the segment paying the lower price cannot resell the product o customers paying the higher price.

3)      The cost to the manufacturer of segmenting and monitoring the market should not exceed the extra revenue generated by the discriminatory pricing.

4)      The firm should be confident that resentment among customer asked to pay the higher price, or competitive conditions in the market, will not leave it vulnerable to competitive attacks in the high price segments.

5)      The firm should pay careful attention to the legal restrictions involved in price discrimination.

 

 

 

Module 14  Distribution Decisions - Content Questions

14.1 Define a marketing channel.

The set of interdependent organizations involved in the process of making a product or service available for consumption or use by consumers or industrial users.

14.2 Define each of the institutions found in marketing channels.

Merchant wholesalers

Take title to the goods they handle; sell primarily to other resellers industrial and commercial customers rather than to individual customers.

Agent middlemen

Includes manufacturer’s representatives and brokers.  Also sell to other resellers and industrial or commercial customers, but do not take title to the goods.  Usually specialize in the selling function and represent client manufacturers on a commission basis.

Retailers

Sell goods and services directly to ultimately consumer s for their personal, non-business use.  Usually take title to goods they handle; are compensated by the margin between the price they pay for those goods and the price they receive from their customers.

Facilitating agencies

Include advertising agencies, marketing research firms, collection agencies, trucking firms and railways; specialize din one or more marketing functions, work on a fee-f0r-service basis to help clients perform those functions more effectively and efficiently.

 

14.3 Define the following:

Rack jobber

one unique form of full-service wholesaler.  In recent years supermarkets and drugstores have added non-traditional product lines such a magazines, housewares, and health and beauty aids about which they have little knowledge.  Rack jobbers have prospered by not only performing a full range of wholesaling activities by also taking over some retain functions such as providing display racks, promotional materials, stocking and selling on consignment.

Manufacturer’s agent.

Work for several manufactures, carry non-competitive, complementary merchandise in n exclusive territory and concentrate only on the selling function.  Important where a manufactures sales are not sufficient to support a company salesperson in a particular territory.

Broker.

Independent firms whose purpose is to bring buyers and sellers together for an exchange.  Brokers usually have no continuing relationship with a particular buyer or seller. 

14.4 What are the major trends in wholesaling?

·        One wholesaler to acquire / merge with another wholesaler that has favorably located branches and one or more new product lines

·        Increase the number of value-added services offered, such as financing arrangements, engineering consultants, just-in time inventory control, overnight deliveries and store layouts.

·        Large wholesalers are also implementing a combination of strategies to improve low margins. Cutting operating costs by using their resources more efficiently.

14.5 What are the major types of retailer?

General merchandise discount chains

 (Wal-Mart) carry a broad assortment of goods

Wholesale clubs

(Sam;s) cash-any carry wholesalers selling to small businesses and individual consumers

Supermarkets

(Safeway) full lien self-service store selling food and related products.

Single-line mass-merchandiser stores

(Toys’R’Us )offering in-depth assortment within a limited number of lines at low prices. 

14.6 What are the major types of non-store retailing?

Direct selling

1% all retail sales ie Avon – house to house

Catalogue sales

5% all retail sales general merchandise and specialty

Television home shopping

20% all retail sales home shopping channel

Vending

Food snacks, beverages, cigarettes

The World Wide Web

Great potential for selling goods and services to consumers around the world.

14.7 What are the major trends in retailing?

·        The demographic changes ie two wage earner households, aging baby boomers

·        Consumer attitudes more health care concerns

·        Retailers carrying more diverse me4rchandise lines

·        Slowing of retail sales, little new shopping center construction greater emphasis on price, greater competition and more and more consolidation through mergers

·        Retailers investing heavily in sate of the art technology to maximize operating efficiencies.

14.8 Describe each of the four alternative consumer goods channels.

Channel A

Involves direct distribution from producer to the consumer

Channel B

Producers that sell direct to retailers who in turn cell to consumers

Channel C

Wholesalers and retailers and is most common for low-cost frequently purchased items

Channel D

Agent sells to wholesalers who in turn sell to retailers, is used when the manufacture is too small or its product line too narrow to justify a company sales force.

 

 

 

A

 

B

 

C

 

D

 

Producer

 

Producer

 

Producer

 

Producer

 

 

 

 

 

 

 

 

 

Wholesaler

 

Wholesaler

 

 

 

 

 

 

 

 

 

 

 

 

 

Agent

 

 

 

 

 

 

 

 

 

 

Retailer

 

Retailer

 

Retailer

 

 

 

 

 

 

Consumer

 

Consumer

 

Consumer

·                     

Consumer

 

 

 

 

 

 

 

 

14.9 Describe each of the four alternative industrial goods channels.

A

 

B

 

C

 

D

Producer

 

Producer

 

Producer

 

Producer

 

 

 

 

 

 

 

Agent

 

Agent

 

 

 

 

 

 

 

Wholesaler

 

 

 

Wholesaler

 

 

 

 

 

Industrial Buyer

 

Industrial Buyer

 

Industrial Buyer

·        

Industrial Buyer

 

14.10 The design of a distribution channel involves a series of interrelated decisions. What are they?

 

 

 

Influencing factors

·         SBU and marketing strategies

·         Target market characteristics

·         Product characteristics

·         Competitor characteristics

·         Company strengths and weaknesses

·        Environmental factors

Specify objectives to be achieved by distribution channels

 

Determine desired number of retail outlets (for consumer goods and services only)

 

Determine appropriate number of wholesale distribution points

 

Select types of institution to be used at each channel level

 

14.11 Firms design channels to accomplish one or more objectives? What are they?

1)                  Making the product available

2)                  Ensuring adequate promotional effort

3)                  Providing high-level customer service

4)                  Obtaining market information

5)                  Providing cost effectiveness

14.12 Describe the three basic strategies of retail coverage.

 

Retail Coverage

Major strength

Major Weakness

Product appropriate for

Intensive

Maximum

Maximizes product availability

Lack of retailer support

Low involvement consumer

Exclusive

Single

Matches retailer clientele with target market; facilitates close co-operation with retailer.

Risk of relying on single retailer.

High-involvement specialty or shopping goods.

Selective

Limited

Provides adequate coverage but not at expense of manufacturer retailer co-operation

Difficult to implement given inter store competition, especially where discounts may occur

Infrequently purchased shopping goods.

 

14.13 Describe the various types of vertical marketing system.

Corporate VMS

Involves a vertically integrated system

Contractual VMS

Formulates agreements spelling out a coordinated set of rights and obligations for members of the system

Administered VMS

Co-operation between two or more channel partners is based on norms of mutual trust and the expectation that co-operation will increase the total systems success thereby make all members better off in the long term

 

14.14 What are the major sources of channel power?

Economic power

Members perceive that a firm can mediate economic rewards for them if they follow its directives

Coercive power

Perception that one channel member will punish another for failure to co-operate.  Inverse of economic power. Punishments usually take the form of a reduction in or with holding of economic rewards

Expert power

Perception one channel member has special knowledge or expertise that can benefit other members of the system

Referent power

Beliefs that the benefits generated are likely to continue. 

Legitimate power

Belief that one channel member has the right to make certain decisions or demands and to expect compliance from other members, result of ownership or contractual agreements but in some instances it is based on moral authority or common beliefs.

 

Module 15  Promotion Decisions - Content Questions

15.1 Define each of the promotion mix components.

Advertising

Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.

Personal selling

A process of helping and persuading one or more prospects to purchase a good or service or to act on any idea through the use of an oral presentation (person-to-person communication)

Sales promotion

Incentives designed to stimulate the purchase or sale of a product – usually in the short term.

Public relations

Non-paid, non-personal stimulation of demand for a product, service or business unit by planting significant news about it or a favorable presentation of it in the media.

15.2 In recent years substantial changes have occurred in the way firms market their goods – all of which have affected the firm’s promotion decisions. What are they?

·        Targeting of smaller and smaller segments including individual consumers. 

·        Growth in no-traditional media resulted in increase in direct marketing.  Ie Internet.

·        Increase competition that forced firms to become more price conscious.

·        Shift in power from manufacturers to retailers that have resulted from growth of large discount general merchandise and ‘killer category’ chains.

15.3 Describe the communication process.

Source

The communicator

Message

a set of symbols

Medium

The communication channel

Received

The target audience

Response

A set of reactions

Feedback

 

 

 

Intended

Message

 

Sent

Message

 

Medium

(channel)

 

Intended

Message

 

Sent

Message

 

Feedback

 

Receiver

 

Source (sender)

 

 

 

 

 

 

 

 

15.4 Consumers engage in practices designed to protect themselves from receiving unwanted messages. Describe these practices.

Selective exposure

Expose themselves to messages and media that are compatible with their existing attitudes,  Avoid messages not compatible with their attitudes or that they find irritating or boring.

Selective perception

People distort or misinterpret the intended meaning of a message when it differs from their attitudes.  The greater the attitude change required to make respondents accept the position advocated in the message, the more likely the message is to be distorted or rejected.

Selective retention

People the to forget more quickly communications that are substantially at variance with their attitudes.  People remember for a longer time messages that reinforce their attitudes.

15.5 What are the steps needed to develop a promotion programme?

·        Type of product or service involved

·        Characteristics of the targeted audient

·        Company’s positional strategy

·        Promotional strategies

·        Promotional programmes used by major competitors

·        Buyers purchase decision process

·        The channels of distribution

·        The stages of the product life cycle

·        Merits of the individual promotion elements.

o       Advertising

o       Personal selling

o       Sales Promotion

o       Public Relations

15.6 What subjects is advertising decision making concerned with?

·        Setting objectives

·        Deciding what the message should be and

·        How to present it

·        Media types and vehicles to use

·        What frequency and

·        Analyzing the effectiveness of the advertising programme.

15.7 What are the major types of advertising?

Cobranding

Enables a brand to be leveraged by entering another product call as a braded ingredient, which has less risk than a brand extension or combining two brands

Selective demand

Most brand advertising focus on stimulating selective demand for a particular product.

Primary Demand

Seeks to expand the market for a product type

Co-operative Advertising

Joint effort by manufacturers and retainers to sell a particular product. 

Corporate (institutional) Advertising

Differs from product advertising in that its purpose to benefit the corporation by building favorable attitudes toward the overall firm. 

Issue advertising

Support a given social or economic issue in which the firm has a strong interest.

Investor relations

Designed to generate awareness and understanding of a company’s financial performance.

15.8 What is the hierarchy-of-effect model?

Move prospective buyers through a series of steps – awareness, comprehension, conviction, action – to the ultimate goal of purchasing the product or service.

15.9 Describe Ray’s three-order hierarchy models

Learning Hierarchy

The mental stages people go through when deciding to purchase relatively high-involvement consumer or industrial products. 

Dissonance-attribution Hierarchy

Consists of action followed by attitude change and learning; do, feel, learn, 

Low Involvement Hierarchy

Consisting of a general awareness followed by action and then attitude change and learning: do, feel

 

15.10 What are the contents of a copy platform?

·        Basic issue or problem advertising must address

·        Advertising objective

·        Target audience

·        Major selling idea – or key benefits

·        Creative strategy statement (campaign theme, appeal and execution technique)

·        Support information

15.11 What have researchers concluded regarding what message structures are most effective?

Success of any message depends not only on its content, but also on its structure. 

Two-sided presentations           generally more effective with those members of the audience who are well educated or opposed to the communicator’s position.  Prepare people for counterarguments. 

Drawing conclusions     the best thing to do, although advertisability of doing so depends on the intelligence of the audient, the complexity of the subject matter presented and the extend to which the audience is involved.

Optimum size    of a message is difficult to ascertain because of the interactions of message size, the power of the message itself and effect of repletion on consumer learning.  Strongly liked to the degree of consumer interest in the product.  Low interest require high or large unit message i.e. full page advertisement 30 second television spot.

Message is of great interest to the target audience a smaller unit may suffice.

15.12 What problems arise from using reach and frequency measures?

  1. Defining the target audience and correlating ti with audiences reached by the various media vehicles.
  2. Defining exposure – is it an opportunity to be exposed to a given message or is it an actual reading of a print advertisement, the actual watching of a television commercial or the actual listening to an advertisement on radio?  Difficult task to measure exposure, no matter how it is defined.
  3. Not all who are exposed are of equal value to the advertiser 0 some may not even be prospects
  4. How should successive exposures be weighted?  Is a second exposure worth more than third? How much? And how much time should else between exposures.

15.13 What are the advantages and limitations of each of the four types of mass media?

Television

best at communicating images and symbols because it can demonstrate product usage and consumer reactions.  Enormous reach almost all US households have a TV set. 

Radio

less involving than television, but offers economy and the opportunity to target specific audiences- Hispanics, blacks, teenagers, senior citizens. 

Inexpensive compared with TV

reaches people mostly when they are doing something else-working, driving or walking.   Often used to reinforce TV advertising

Printed media

more involving than broadcast media, Readers select what advertising they want to read and take as much time as they wish to read it.  Effective in communicating specific information about a product.  Particular important for most industrial products and high-involvement consumer goods. (three major types of magazines, consumer, farm and business), Newspapers advertise consists mainly of retail and classified.

Out of home, exhibition and supplementary media

cover wide variety of media typed Out-of home – Billboards are most prominent  Exhibition – in-store display materials

Supplementary Directories and yellow pages

 

Event sponsorship

become increasingly popular high visibility in terms of media coverage,

15.14 Why have retailers had difficulty in using the Web?

It requires subscribing to an Internet access service as well as the hardware and software to facilitate accessing the site and exploring the company information fields,  Technical support needed to maintain the system, including its update and security.  Advertising costs associated with maximizing site traffic and guiding visitors through the files.

15.15 How are print medium audiences typically measured?

Researches conduct interviews however when to conduct the interview is also a problem

15.16 What are the major problems in measuring television audiences?

Researchers can measure the number of sets tuned to a given programme, how long they are tuned to a given programme but do not know the demographics of the individual viewing , the number of actual views, does not record who is looking at the television especially during commercials.

15.17 Describe the various ways to pre-test message effectiveness.

Recall test

Print advertisement are inserted into a simulated magazine and respondents are told to read whatever interest them  After doing so, they are asked to ‘ply back’ advertisements they remember.

Television Commercials

Tested by exposing them in one or more cities and following up with several hundred phone interview to find out how many remember the message

Project tests

Give respondents an advertisement and using a variety of projective techniques to elicit responses. 

Physiological test

Use special machines to measure physiological responses to advertising.

Pupil Dilation

When person is viewing or listening to interesting pleasant message the pupil dilates.

Sales test

Administered by commercial research firms measure the effects of television commercials through the use of consumer panels located in a number of small cities.

Theatre tests

Similar to the above except the audience’s reaction to commercials is measured electronically during the showing via buttons the audience pushes to indicate liking / disliking.

On Air testing

Using VHF or cable television channel to air a given program in which the advertisement will appear.

15.18 Describe the various ways to measure the effects of an advertising message after it has run.

Recognition test

Most popular post-exposure testing.  Field workers interview people who say they have read a given issue of a magazine.  Respondent goes through the issue pointing out what was seen and read.  Interviewer asks which parts were read. Interviewer starts each interview at a random point within the issue, so that ratings are not affected by respondent fatigue.

Recall tests

Measure the effectiveness of an advertising message –especially a television commercial after it has been run.  Respondents are typically aided In their recall.  Interviews show them a list of the advertisers and brands presented and ask which ones they have seen recently.  Interviewers proceed to obtain play backs of these advertisement from the respondents.

15.19 Discuss the use of a globalised advertising strategy as compared with a localized one.

The benefit of globalize is in the form of economies of scale, which relate primarily to production costs and to a lesser extent to the use international media.

Okay for product component of the marketing mix especially for industrial goods and consumer durables. 

Difficulties encountered by differences in local cultures, translation, how consumer respond to humorous appeals, sexual appeals reactions,  Start with standard / globalize and expand to local as required.

15.20 Define the term ‘sales promotion’.

Those marketing activities, other than personal selling, advertising and publicity, that stimulate consumer purchasing and dealer effectiveness

15.21 What are the most commonly used sales promotion techniques?

·        Price off promotions,

·        premiums,

·        sampling,

·        rebates,

·        contests

·        sweepstakes

·        trade promotions. 

15.22 Define the term ‘public relations’.

A promotional function that uses two-way communication to mesh the needs and interest of an institution or persons with the needs and interests of the various publics with which that intuition or person must communicate.

15.23 Define the term ‘integrated communications plan’.

The process of building and reinforcing mutually profitable relationships with employees, customers, other stakeholders and the general public by developing and coordinating a strategic communications programme that enables them to make constructive contact with the company brand through a variety of media.

15.24 Discuss the problems in regulating and controlling deception in advertising.

It is difficult to detect in many cases because of the subtle ways in which it can work.   Enforcement is hindered by the fact that advertisers can legally employ ‘puffery’ which uses subjective claims the ‘best’ or ‘greatest’ to promote a product. 

 

Module 16  Personal Selling Decisions - Content Questions

16.1 What are the advantages of using personal selling as a promotion tool?

·        Involves face-to-face communication with a potential customer

·        More persuasive than advertising or publicity in the mass media

·        Communicates with only one potential customer at a time and tailors the message to that customer's unique needs and interests

·        feedback is immediate

·        knows when a particular sales approach is not working and can switch to a different tack

·        transmit more complex and larger amounts of information than with other promotional tools

representative can devote a great deal of time to educating that customer about the advantages and features of a product or service 

16.2 What are the strategic circumstances where personal selling is likely to play a major role in a firm’s promotion mix?

16.3 Discuss personal selling objectives.

 

Objective

Activities involved

Winning acceptance for new products

Sales reps build awareness and stimulate demand for new products or services among existing or potential customers.

Developing new customers

Sales reps find and cultivate new customers and/or expanded distribution for business's products or services.

Maintaining customer loyalty

Sales reps work to increase value delivered to customers by providing advice or training on product use, expediting orders and facilitating product service.

Technical service to facilitate sales

Sales reps work to increase value to customers by helping integrate product or service with customer's other equipment or operations and by providing design, installation and/or training.

Communicating product information

Sales reps work to increase understanding of product's features and applications as basis for possible future sales and to educate people who may influence final purchase.

Gathering information

Sales reps provide reports on competitors' actions, customers' requests or problems and other market conditions, and conduct marketing research or intelligence activities.

16.4 Discuss each of the four types of sales job.

Trade selling

·         gain and maintain support for the firm's products within the distribution channel by

·         providing merchandising and promotional services to the channel members.

·         gaining distribution support for new products by making effective sales presentations to wholesale or retail buyers.

Missionary selling

·         build and maintain volume from current customers

·         perhaps to facilitate new-product introductions – by giving purchase decision makers product information and service assistance.

·         Missionary salespeople often do not make sales to customers directly but persuade them to buy the firm's products from wholesalers or retail suppliers.

Technical selling

·         provide the technical product information and technical design and engineering services needed to facilitate sales.

New business selling

·         identify, establish relationships with and obtain business from new customers

 

16.5 What are the six stages in the personal selling process?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


16.6 What are the ethical and legal constraints in the presentation of the sales message?

·        information communicated should be as accurate as possible

·        Salespeople sometimes engage in puffery by making glowing claims about their product or company (`Our service is the best in the business´).

·        claim of a factual nature regarding a product's or service's inherent capabilities – such as how it will perform or what it will do for the customer – the law treats those claims as statements of fact and implied warranties

·        If a customer relies on such statements, makes a purchase and then finds that the product does not perform as promised, the supplier can be sued for misrepresentation or breach of warranty

16.7 What are the various types of salesforce organisation?

·         geographic area,

·         product type,

·         customer

·         selling function

16.8 What problems do firms face when they expand their sales efforts into other countries?

·        how to organise their selling efforts across national boundaries

·        should the firm rely on independent agents to represent its interests in a foreign market or hire its own company salespeople?

·        appropriate horizontal structure for that salesforce- geographically, by product line, by type of customer or some other way

16.9 What are the steps involved in using the workload approach to establish the size of the salesforce?

1.            Using the account classification scheme specified in the firm's account-management policies, determine how many potential customers are in each category.

2.            Multiply the number of potential customers in each category by the desired call frequency specified by the firm's account-management policies (number of calls per year for each type of customer). Add the totals across all customer categories to arrive at a total workload for the salesforce stated in total calls to be made in a year.

3.            Estimate the average number of calls a salesperson can make in a year.

4.            Determine the number of salespeople needed by dividing the total number of calls that need to be made by the average number of calls a salesperson can make in a year.

16.10 What personal characteristics are important in trade selling? Missionary selling? Technical selling? New business selling?

Trade selling

Age, maturity, empathy, knowledge of customers and business methods.

Missionary selling

Youth, high energy and stamina, verbal skill, persuasiveness.

Technical selling

Education, product and customer knowledge – usually gained through training, intelligence.

New business selling

Experience, age and maturity, aggressiveness, persuasiveness, persistence.

16.11 What are the major types of compensation plan? What are the pros and cons of each?

Compensation method

Especially useful

Advantages

Disadvantages

Straight salary (12%)

When compensating new sales reps; when firm moves into new sales territories that require developmental work; when sales reps must perform many non-selling activities.

Provides sales rep with maximum amount of security; gives sales manager large amount of control over sales reps; easy to administer; yields more predictable selling expenses.

Provides no incentive; necessitates closer supervision of sales reps' activities; during sales declines, selling expenses remain at same level.

Straight commission (5%)

When highly aggressive selling is required; when non-selling tasks are minimized; when company cannot closely control salesforce activities.

Provides maximum amount of incentive; by increasing commission rate, sales managers can encourage reps to sell certain items; selling expenses relate directly to sales resources.

Sales reps have little financial security; sales manager has minimum control over salesforce; may cause reps to provide inadequate service to smaller accounts; selling costs less predictable.

Combination (83%)

When sales territories have relatively similar sales potentials; when firm wishes to provide incentive but still control salesforce activities.

Provides certain level of financial security; provides some incentive; selling expenses fluctuate with sales revenue; sales manager has some control over reps' non-selling activities.

Selling expenses less predictable; may be difficult to administer.

 

16.12 How has technology helped to control sales costs?

Better follow-up of clients and potential customers, improved tracking of leads and better time management were the most frequently cited reasons for the positive impact of computers on sales productivity

Part 4 Strategic Marketing Programmes for Selected Situations

Module 17 Strategies for New and Growing Markets - Content Questions

17.1 Describe the subcategories of new products based on their degree of newness.

New-to-the-world product

True innovations new to the firm and create an entirely new market 10%

New product lines

Product category that is new for the company introducing it, but not new to customers in the target market competitive brands exist 20%

Additions to existing product lines

New items that supplement a firm’s established product line 26%

Improvements in or revisions of existing product

Provide improved performance or greater perceived value brought out to replace existing product 26%

Repositioning

Existing products that are targeted at new applications and new market segments 7%

Cost reductions

Product modifications proving similar performance at lower cost 11%

 

17.2 What are the potential sources of competitive advantages available to a pioneer?

·        Economies of scales and experience

·        High switching costs for early adopters

·        Pioneer defines the rules of the game

·        Distribution advantage

·        Influence on consumer choice criteria and attitudes

·        Possibility of pre-empting scarce resources

17.3 What are the possible advantages of adopting a follower strategy?

1)                  Ability to take advantage of pioneer’s positioning mistakes

2)                  Ability to take advantage of pioneer’s product mistakes

3)                  Ability to take advantage of pioneer’s marketing mistakes

4)                  Ability to take advantage of pioneer’s limited resource

17.4 What are the determinants of success for a pioneer strategy?

1.      New product market is insulated form the entry of competitors, at least for awhile, by strong patent protection, proprietary technology or substantial investment requirements

2.      The firm has sufficient size, resources, and competencies to take full advantage of its pioneering position and preserve it in the face of late competitive entries. 

 

·        Large entry scale

·        Broad product line

·        High quality product

·        Heavy promotional expenditures.

17.5 Discuss each of the three types of pioneer strategy.

Mass Market Penetration

Capture and maintain a commanding share of the total market for the new product. – Most successful with entry barriers inhibit or delay appearance of competitors

Niche penetration

Focus on a single market segment. Lets smaller pioneer gain the biggest bang for its limited bucks and avoid direct confrontation with bigger competitors.

Skimming or early withdrawal

Competition is usually inevitable, and prices and margins tend to drop dramatically after followers enter the market,  skimming strategy while planning an early withdrawal involves setting a high profits and recover the products development cost quickly, high prices and limited advertising and portion to maximize unit profits. 

 

17.6 What marketing activities should a firm engage in to increase customers’ awareness and willingness to buy? And to increase the customers’ ability to buy?

Increase Customers awareness and willingness to buy

1)      Aggressively building product awareness and motivation to buy

2)      Make it as easy as possible for those customers to try the new product

Increase Customers ability to buy

1)                  pursuing mass-marketing penetration to keep prices low and offer liberal financing arrangement

2)                  easy credit terms during the introductory period

3)      lack of product availability

17.7 What marketing programme components are important for a skimming strategy?

Relatively high price

Introductory promotional programmes best focus on customer groups who are least sensitive to price early adopters of new products

Focus on up market customers

17.8 Discuss the marketing actions and strategies to achieve the share maintenance objectives of a market leader.

  1. Retain its current customers – they remain brand loyal making repeat or replacement purchases
    1. Maintaining/improving satisfaction and loyalty
    2. Encourage/simplify repeat purchase
    3. Reduce attractiveness of switching

 

  1. Stimulate selective demand among later adopters to capture a large share of the continuing growth in industry sales
    1. Head-to head positioning against more competitive offering or potential offerings
    2. Differentiated positioning against competitive offerings or potential offerings

17.9 What marketing activities and strategies are needed for a challenger to achieve share growth?

Capture repeat/replacement purchases form current customers of the leader or other target competitor by:

a)      Head to head positioning against competitor’s offering in primary target market

b)      Technological differentiation from target competitor’s offering in its primary target market.

Stimulate selective demand among later adopters by:

a)                  Head to head positioning against target competitor’s offering in established market segments

b)                  Differentiated positioning focused on untapped or underdeveloped segments

Module 18  Strategies for Mature and Declining Markets - Content Questions

18.1 What strategic issues are involved with mature markets? Declining markets?

·        Hold existing customers – to sustain a meaningful competitive advantage

·        Success depends heavily on firm’s ability to achieve and sustain a lower delivered cost or some perceived product-quality or customer-service superiority.

·        Passively defend mature products while using the bulk of revenue to develop aggressively market new product with more growth potential

18.2 Success in mature markets requires two sets of strategic actions. What are they?

1)      Development of a well-implemented business strategy to sustain a competitive advantage

2)      Flexible and creative marketing programmes geared to purse growth or profit opportunities as conditions change in specific product markets.

18.3 What strategy options are available to both analyzers and defenders in their attempt to sustain a competitive advantage in mature markets?

Differentiation of their product offering (on the basis of either superior quality or service, or customer intimacy)

Maintaining a low-cost position. 

18.4 What dimensions do customers use to perceive underlying differences across products in a given category?

Performance

How well does it work?

Durability

How long will it last?

Conformance with specifications

What is the incidence of product defects?

Features

Does an airline flight offer a movie and dinner?

Reliability

Will each visit to a restaurant result in consistent quality?

Serviceability

Is the product easy to service?

Fit and finish

Does the product look and feel like a quality product?

Brand name

Is this a name that customers associate with quality?

18.5 What dimensions do customers use to judge the quality of the services they receive?

Tangibles

Appearance of physical facilities, equipment personnel and communications materials

Reliability

Ability to perform the promised service dependably and accurately

Responsiveness

Willingness to help customers and provide prompt service

Assurance

Knowledge and courtesy of employees and their ability to convey trust and confidence

Empathy

Caring, individualized attention the firm provides its customers.

18.6 What are the more important ways in which a company can improve customer perceptions of service quality?

Gap between

 

customer’s expectations and the marketer’s perception

Determine what service attributes customers consider important

management perceptions and service quality specifications

Ensure employees know what the company’s service policies are and believe that management is seriously committed to those standards; their performance is likely to fall short of desired levels.

service-quality specifications and service delivery

Employees must be provided with training, equipment and time necessary to deliver good service.  Service performance must be measured and evaluated.  Good performance must be rewarded

service delivery and external communications

Good service performance may disappoint some customers if the firms marketing communications cause them to have unrealistically high expectations.

perceived service and expected service

Management fails to close one or more of the above 4 gaps.

18.7 Discuss briefly the various ways a firm can maintain a low-cost position.

·        Produce a no-frills product

·        Creating an innovative product design

·        Finding cheaper raw materials

·        Automation production

·        Developing low-cost distribution channels

·        Reducing overhead

18.8 What should a firm strive to achieve during the early years of market maturity?

Maximize the flow of profits over the remaining life of the product market.

Maintain and protect the business’s market share. 

Continue strengthen their position through a fortress defense.

18.9 Discuss the strategies that can be used to extend the volume growth of products.

Strategy

 

Increased-penetration

Increase the proportion of users by converting current no-users in one or more major market segments

Extended use

Increase the amount of product used by the average customer by increasing frequency of use or developing new and more varied ways to use the product

Market expansion

Expand the number of potential customers by targeting underdeveloped geographic areas or applications segments.

 

18.10 Discuss briefly how a firm can use sequential strategies to expand a global market.

Develop home market and then expand, firms can enter foreign markets in a variety of ways,

·        Simply relying on import agents to

·        Developing joint ventures to

·        Establishing wholly owned subsidiaries. 

18.11 What are the three sets of factors that help determine the strategic attractiveness of declining product markets?

Conditions of demand

Including the rate and certainty of future declines in volume

Exit barriers

The ease with which weaker competitors can leave the market

Intensity of future competitive rivalry

Intense price competition and maintain reasonable margins

18.12 Discuss briefly the strategic options possible in declining markets.

Harvesting

Maximize short term cash flow; maintain or increase margins even at the expense of a slow decline in market share

Maintenance

Maintain share in short term as market declines, even if margins must be sacrificed.

Profitable Survivor

Increase share of the declining market with an eye to future profits; encourage weaker competitors to leave.

Niche

Focus on strengthening position in one or a few relatively substantial segments with potential for future profits.

 

Part 5 Implementing & Controlling Strategic Marketing Programmes

Module 19  Implementing Business and Marketing Strategies - Content Questions

19.1 What are the three aspects of the relationship between corporate headquarters and the business unit that determine the SBU’s success in implementing a particular competitive strategy?

 

1 The degree of autonomy provided to each business unit manager.

2 The degree to which the business unit shares functional programmes and facilities with other units.

3 The manner in which the corporation evaluates and rewards the performance of its SBU managers.

19.2 Successful implementation of a given strategy is more likely under what conditions?

When the business has the functional competencies demanded by its strategy and supports them with substantial resources relative to those of competitors, is organized suitably for its technical, market and competitive environment and has developed appropriate mechanisms for co-ordinating efforts and resolving conflicts across functional departments.

19.3 What additional functional-area competencies are needed for success for service organisations – especially those involving high customer contact?

service organisations – and manufacturers that provide high levels of customer service as part of their product offering – often need some additional functional competencies because of the unique problems involved in delivering quality service.

close co-ordination between operations, sales and marketing is crucial. Also, because many different employees may be involved in producing and delivering the service – production planning and standardisation are needed to reduce variations in quality from one transaction to the next. Similarly, detailed policies and procedures for dealing with customers are necessary to reduce variability in customer treatment across employees. All of this suggests that personnel management – particularly the activities of employee selection, training, motivation and evaluation – is an important adjunct to the production and marketing efforts of high-contact service organisations.

19.4 Organisational adaptiveness and innovativeness are enhanced under what conditions?

1)      decision-making authority is decentralised;

2)      managerial discretion and informal co-ordination mechanisms replace rigid rules and policies; and

3)      more specialists are present. Thus, prospector business units and their marketing departments are likely to perform better when they are decentralised, have little formalisation and are highly specialised

19.5 Under what conditions is a functional type of organisation best to use? And a product-management type?

Functional type

companies operating in stable and slow-growth industries where the environments are predictable. Thus, the form is appropriate for low-cost defender SBUs attempting to maximise their efficiency and profitability in mature or declining industries.

Product management type

When an SBU has many product-market entries, this form adds an additional layer of managers to the marketing department, usually called product managers, brand managers or marketing managers, each of whom has the responsibility to plan and manage the marketing programmes and to co-ordinate the activities of other functional departments for a specific product or product line.

19.6 Discuss briefly the recent organisational design developments.

Managing of business processes in contrast to functional areas.  Every business has about six basic or core processes, such as, for example, new-product development and materials flow. The former would be staffed by individuals from marketing, R&D, manufacturing and finance. The latter would contain people with expertise in purchasing, manufacturing, order delivery and billing.

 

Managing processes will make the organisation essentially horizontal – flat (few layers) and lean – in contrast to a vertical or hierarchical model. Thus, executive positions will no longer be defined in terms of managing a group of functionally oriented people; instead, executives will be concerned with a process that strongly emphasises the importance of customer satisfaction.  Process management is quite different from the management of a function because,

1)      It uses external objectives – for example, customer satisfaction rather than simple revenues.

2)      People with different skills are grouped to undertake a complete piece of work; their work is done simultaneously, not in sequence.

3)      Information flows directly to where it is used. Thus, if you have an upstream problem, you deal with the people involved directly rather than via your boss.

19.7 What are the more common international organisational structures?

Functional type

 Would have vice presidents (worldwide) for such areas as manufacturing, marketing and finance – all reporting to the president.

Products based

giving SBUs worldwide control over their product lines. The main advantages of this type of structure are the economies derived from centralising manufacturing activities and the ability to respond quickly to product-related problems originating in overseas markets. Marketing is localised at the country or regional level.

Area structure

when there is considerable variance across markets regarding product acceptance and marketing activities. Firms typically organise on a regional basis (North America, Latin America, Far East, Middle East and Africa) using a central staff that co-ordinates worldwide planning and control activities.

Hybrid organisation

combination of the functional, product or area types of structure. The global matrix is one such attempt. It has individual business managers reporting to both area and functional groups, or area managers reporting to business and functional groups, thereby enabling the company to balance the need for centralised efficiency and its responsiveness to local needs. But the dual reporting sets up conflicts and slows the management process to such an extent that many companies, have returned to more traditional organisational designs

19.8 What are the major components of an annual marketing plan for a given product?

 

I

Executive summary

  Presents a short overview of the issues, objectives, strategy and actions incorporated in the plan and their expected outcomes for quick management review.

II

Current situation

Summarises relevant background information on the market, competition, past performance of the product and the various elements of its marketing programme (e.g. distribution, promotion, etc.) and trends in the macroenvironment.

III

Key issues 

Identifies the main opportunities and threats to the product that the plan must deal with in the coming year and the relative strengths and weaknesses of the product and business unit that must be taken into account in facing those issues.

IV

Objectives 

Specifies the goals to be accomplished in terms of sales volume, market share and profit.

V

Marketing strategy 

Summarises the overall strategic approach that will be used to meet the plan's objectives.

VI

 Action plans 

This is the most critical section of the annual plan for helping to ensure effective implementation and co-ordination of activities across functional departments. It specifies:

·        What specific actions are to be taken

·        Who is responsible for each action.

·        When the action will be engaged in.

·        How much will be budgeted

VII

Projected profit-and-loss statement

Presents the expected financial payoff from the plan.

VIII

Controls

Discusses how the plan's progress will be monitored; may present contingency plans to be used if performance falls below expectations or the situation changes.

 

19.9 What subject areas should be discussed under the analysis of the current situation section of the annual marketing plan?

Market Situation

Data relating to the present target market. I.e. market size growth trends, variations across geographic regions or other market segments.  Market research information re customer perceptions and buying behaviour trends

Competitive Situation

Identifies and describes the product’s major competitors in terms of their size, market share, product quality, marketing strategies and other relevant factions.  Likelihood that other potential competitors will enter the market in near future and possible impact of such entry.

Macro environmental Situation

Broad environmental occurrences or trends that my have a bearing on the product’s future.  Relevant economic, technological, political/ legal or social/cultural changes.

Past Product Performance

Products performance on sales volume, margins, marketing expenditures, and profit contribution for several recent years.  Usually presented in form of a table

19.10 Describe what should be included in the discussion of a company’s action plan for a given product.

Specific actions necessary to implement the strategy for the product are listed, together with a clear statement of who is responsible for each action, when it will be done and how much is to spent o each activity.


 

Module 20  Controlling Marketing Strategies and Programmes - Content Questions

20.1 What are the major steps in the control process?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


20.2 Why are more and more firms using non-financial control measures in addition to the traditional financial-based measures? What are some of the more commonly used non-financial measures?

 

Companies are turning to measure they feel better reflect how their mangers think about what decision areas drive the firm’s success – such as

            Customer satisfaction

            Product quality

            Market share

            New-product development

20.3 How have some of the new types of organisational structure posed difficult control problems?

·        Many objectives can best be measured in no-financial terms

·        Profits is a short- term ensure and can be manipulated by taking actions that may prove dysfunction in the longer term

·        Profits can be affected factors over which management has no control

·        Setting milestones that are achievable.  Such systems can cause actions to be taken that in the short term may help attain the desired goals, but in the longer term may be detrimental to the firm.

20.4 Describe the use of benchmarking as a performance type of measure.

The firm’s performance in a given area is compared against the performance other companies.  The comparison does not however have to be with companies in the same industry. 

20.5 What are the advantages of using the marginal contribution method to determine a product’s profitability?

A product or market may make a contribution to profits even though it shows a loss, because is absorbing overhead costs, indicates what is gained by adding or propping a product or a customer. 

20.6 What does strategic control hope to accomplish?

Monitoring and evaluating a firm’s SBU level strategies. Strategic control must provide some way of changing the firm’s thrust if new information about the environment and/ or the firm’s performance so dictate.

20.7 What is the major benefit of a variance decomposition analysis?

Variance decomposition attempts to isolate the causes for deviation from a plan.  It analysis the areas where problems may exist.  However determining the factors that caused the favorable or unfavorable variances requires additional information coupled with the skills of an experienced manager.

20.8 What are the major determinants of a consumer product’s sales and market share?

Effective distribution

Relative price

Attitude maintenance

Change towards one or more salient product characteristic relative to competition and shelf facings.

20.9 What are the factors that determine the extent of control exercised over an overseas subsidiary?

Largely a function of its size

Differences in the environment

Extent to which the company employs a standardized rather than localized strategy

Larger company’s international operation greater the likelihood that staff personnel specializing in control activities will be on site

Small overseas operations tend to involve fewer specialist and less intensive control system

20.10 What are the various types of marketing audit?

Marketing Environment audit

Analysis of the firms present and future environment with respect to its demographic /economic, technological, political, social and competitive components. The intention is to identify the more significant trends to see how they affect the firms customers, competitors, channel intermediaries and suppliers

Objectives and strategy area audit

How appropriate these internal factors are, given current major environmental trends and any changes in the firm’s resources

Planning and control system area audit

Evaluates the adequacy of the systems that develop the firm’s product-market entry action plans and the control and reappraisal process.  Evaluates the firms new-product development procedures.

Market productivity area audit

Firms overall structure (can it meet changing needs of the marketplace) how the marketing department is organized.  The extent of synergy between the various marketing units.

Marketing functions area audit

In depth how adequately the firm handles each of the marketing –mix elements.  Questions relating to product concern the attainability of the present product-line objectives, the extent which individual products fit the needs of the target markets, and whether the product line should be expanded or contracted.  Price and distribution questions

Ethical Audit

Evaluates the extent to which the company engages in ethical and socially responsible marketing. 

Product manger audit

Especially in consumer goods companies – seeks to determine whether product managers are channeling their efforts in the best ways possible.  What they are doing compared with what they ought to be doing. 

 


20.11 What are the major steps in the contingency planning process?