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Marketing module_1.pdf

  1. 1. Subject Code: 1.5 Subject Name: Marketing for Customer Value Faculty Name: Dr. Noor Firdoos Jahan Professor, Department of Marketing, RVIM
  2. 2. Module 1 ESSENTIALS OF MARKETING Importance of marketing, Core marketing concepts, Company orientation towards market place, Marketing management tasks, Marketing strategies and plans, SWOT analysis, Marketing environment, Competitive dynamics
  3. 3. What is Marketing? Promotion
  4. 4. What Is Marketing? A Philosophy An Attitude A Perspective A Management Orientation A Set of Activities, including: Products Pricing Promotion Distribution / Place
  5. 5. Definition Of Marketing AMA : Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Kotler : A social and managerial process whereby individuals and groups obtain what they need and want through creating and exchanging products and value with others. American Marketing Association Dr. Philip Kotler
  6. 6. Simply put Marketing is the delivery of customer satisfaction at a profit. Goals Attract new customers by promising superior value and keep and grow current customers by delivering satisfaction.
  7. 7. Core Marketing Concepts
  8. 8. What are Consumers’ Needs, Wants, and Demands? Needs - state of felt deprivation including physical, social, and individual needs i.e hunger Wants - form that a human need takes as shaped by culture and individual personality i.e. bread Demands - human wants backed by buying power i.e. money
  9. 9. Five types of need 1. Stated needs (the customer wants an inexpensive car). 2. Real needs (the customer wants a car, the operating cost of which, not initial price, is low). 3. Unstated needs (the customer expects good service from the dealer). 4. Delight needs (the customer would like the dealer to include an onboard navigation system). 5. Secret needs (the customer wants friends to see him as a savvy consumer).
  10. 10. PRODUCTS / OFFERS / SATISFIERS / RESOURCES • Anything that can be offered to someone to satisfy a need or want is a product . • Product refers to physical object • Services refer to intangible object
  11. 11. What is Marketed? • Goods • Services • Events • Experiences • Persons • Places • Properties • Organizations
  12. 12. Who Markets? • Marketers and Prospects A marketer is someone who seeks a response-a attention, a purchase, a vote, a donation from another party called prospect. If two parties are seeking to sell something to each other, we call them both marketers.
  13. 13. WHAT IS MARKET ? • A market consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want.
  14. 14. Key Customer Markets • Consumer Markets • Business Markets • Global Markets • Non Profit and Government Markets
  15. 15. Marketplaces, Marketspaces and Metamarkets
  16. 16. A SIMPLE MARKETING SYSTEM Industry Market Communication Information/Feedback Goods & Services Money
  17. 17. The Concept of Exchange • Lamb : The idea that people give up something to receive something they would rather have. • Kotler : The act of obtaining a desired object from someone by offering something in return. Necessary Conditions for Exchange At Least Two Parties Something of Value Communication and Delivery Freedom to Accept or Reject Desire to Deal With Other Party
  18. 18. Exchange may not take place even if conditions are met; An agreement must be reached; and Marketing occurs even if exchange does not take place.
  19. 19. VALUE AND SATISFACTION • Value is the customers’ estimate of the Product’s capacity to satisfy a set of goals • Value is the ratio between what the customer gets and what he gives (V=B/C) • Customer gets benefits & assume costs • WHEN :Customer Expectance=Performance (satisfied) • Customer Expectance>Performance (dis-satisfied) • Customer Expectance<Performance (Highly satisfied)
  20. 20. Customer Value Customer Value The ratio of benefits to the sacrifice necessary to obtain those benefits
  21. 21. Customer Value Requirements • Offer products that perform • Give consumers more than they expect • Avoid unrealistic pricing • Give the buyer facts • Offer organization-wide commitment in service and after-sales support
  22. 22. Customer Satisfaction The feeling that a product has met or exceeded the customer’s expectations. Customer Satisfaction
  23. 23. Maintaining Customer Satisfaction  Meet or exceed customer’s expectations  Focus on delighting customers  Provide solutions to customer’s problems  Cultivate relationships, NOT one-time transactions
  24. 24. Relationship Marketing Relationship Marketing The name of a strategy that entails forging long-term partnerships with customers, both individuals and firms.
  25. 25. Relationship Marketing Requirements for Building Relationships Who are your customers What do customers value How do they prefer to interact What do they want to buy
  26. 26. Building Long-Term Relationships  Customer-oriented personnel  Effective training programs  Empowered employees  Teamwork
  27. 27. IMPORTANCE OF MARKETING - Society 1. Marketing helps to achieve, maintain and raise the standards of living - Marketing is means through which production and purchasing power are converted into consumption. - Better marketing  Mass production - Mass production  Low cost - Low cost  More buying power  Higher standard of living
  28. 28. 2. Marketing Increases employment opportunities - Marketing involves various functions / sub- functions (Buying, Selling, Transport, Warehousing, Financing, Risk management etc) - These functions create need for different specializations - About 30-40% population depends directly or indirectly on marketing
  29. 29. 3. Marketing increases national income - More purchasing power  increase in national income 4. Helps maintain economic stability & development - By maintaining demand supply balance
  30. 30. 5. Link between producer & consumer 6. Removes imbalance of supply & demand by transferring surpluses 7. Helps create utilities of time, place & possession
  31. 31. IMPORTANCE OF MARKETING – Business Firms 1. Marketing Generates Revenue, by generating sales & thereby profits 2. Marketing helps decision making process (what, when & how much to produce, store or transport) 3. Helps change management & innovations
  32. 32. The Scope of Marketing To prepare to be a marketer, you need to understand: • what marketing is • how it works • what is marketed, and • who does the marketing. Copyright © 2012 Pearson Education 1-32
  33. 33. Copyright © 2012 Pearson Education 1-33 Marketing in Practice Box 1.1: Improving CMO Success 1. Make the mission and responsibilities clear. 2. Fit the role to the marketing culture and structure. 3. Ensure the CMO is compatible with the CEO. 4. Remember that showpeople don’t succeed. 5. Match the personality with the CMO type. 6. Make line managers marketing heroes. 7. Infiltrate the line organization. 8. Require right-brain and left-brain skills
  34. 34. The New Marketing Realities Major societal forces • Network information technology • Globalization • Deregulation • Privatization • Heightened competition • Industry convergence • Consumer resistance • Retail transformation • Disintermediation Copyright © 2012 Pearson Education 1-34
  35. 35. The New Marketing Realities New Consumer Capabilities • A substantial increase in buying power • A greater variety of available goods and services • A great amount of information about practically anything • Greater ease of interacting, placing and receiving orders • An ability to compare notes on products and services • An amplified voice to influence public opinion Copyright © 2012 Pearson Education 1-35
  36. 36. The New Marketing Realities New Company Capabilities • Internet • Marketing research • Internal communication • External communication • Personalization of messages • Rewards and promotions • Mobile marketing • Personalization of products • Savings from using the internet • Online training products Copyright © 2012 Pearson Education 1-36 More companies can produce individually differentiated goods
  37. 37. Company Orientation Toward the Marketplace • Given these marketing realities, what philosophy should guide a company’s marketing efforts? • Increasingly, marketers operate consistent with a holistic marketing concept, Let’s review the evolution of earlier marketing ideas.
  38. 38. WHAT IS MARKETING MANAGEMENT ? • Marketing Management is the analysis, planning, implementation and control of programs designed to create, build and maintain beneficial exchanges and relationships with target markets for the purpose of achieving Organisational objectives. • There are FIVE competing concepts under which organizations conduct their marketing activities. They are:
  39. 39. Marketing Management Philosophies Production Concept Selling Concept Marketing Concept Societal Marketing Concept Focus on internal capabilities of the firm. Focus on satisfying customer needs and wants while meeting objectives Focus on satisfying customer needs and wants while enhancing individual and societal well-being Product Concept Focus on aggressive sales techniques and believe that high sales result in high profits Focus on Quality of the products of the firm. There are FIVE competing concepts under which organizations conduct their marketing activities:
  40. 40. (1) THE PRODUCTION CONCEPT Produce Sell Consumers Company Produce more & more Practically sells itself
  41. 41. THE PRODUCTION CONCEPT • Consumers will favour those products that are widely available and low in cost. • Therefore increase production and cut down costs. • And build profit through volume.
  42. 42. (2) THE PRODUCT CONCEPT Produce Quality Products Sell Consumers Practically sells itself,if it gives most quality for money Buyers admire well-made products and can appraise product quality and performance.
  43. 43. THE PRODUCT CONCEPT • Consumers will favour those products that offer the most quality, performance, or innovative features. • Therefore, improve quality, performance and features. • This would lead to increased sales and profits.
  44. 44. (3) SELLING CONCEPT • Consumers have normal tendency to resist. Produce Sell it Consumers Aggressive selling & promotion efforts Making sales becomes primary function and consumer satisfaction secondary .
  45. 45. THE SELLING CONCEPT • Consumers , if left alone , will not buy enough of company’s products. • Therefore, promote sales aggressively. • And,build profit through quick turnover.
  46. 46. (4) MARKETING CONCEPT • “ LOVE THE CUSTOMER , NOT THE PRODUCT ” Consumers Produce it Market it Learn what they want(MR) Sell what they want(Satisfy needs of customers)
  47. 47. THE MARKETING CONCEPT • The key to achieving organizational goals consist in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors. • And build profit through customer satisfaction and loyalty.
  48. 48. (5) THE SOCIETAL MARKETING CONCEPT • It is Marketing Concept (+) Society’s well being. • Balancing of following three considerations while setting marketing policies : -Customer’s want satisfaction -Society’s well being -Company’s profits  Less toxic products  More durable products  Products with reusable or recyclable materials
  49. 49. Review: Marketing Management Philosophies Production Sales Marketing Societal What can we make or do best? How can we sell more aggressively? What do customers want and need? What do customers want and need, and how can we benefit society? Orientation Focus
  50. 50. Sales vs Market Orientation Sales Orientation Market Orientation (1) Organization Focus Inward –fulfill organization’s needs. Outward – fulfill wants and preferences of customers. (2) What type of business organization is in? Selling goods and services. Satisfying customers needs and wants and delivering superior value. (3) To whom the product is directed? Everybody. Specific groups of people. (4) Firm’s primary goal Achieve profit through maximum sales volume. Achieve profit through customer satisfaction. (5) Ways to achieve the goal Through intensive promotion. Through coordinated marketing and inter- functional activities.
  51. 51. The Holistic Marketing Concept The Holistic Marketing Concept recognizes that ‘everything matters’ in marketing, and that a broad, integrated perspective is often necessary. Copyright © 2012 Pearson Education 1-51
  52. 52. • The Holistic Marketing Concept Copyright © 2012 Pearson Education 1-52
  53. 53. • Relationship Marketing building mutually satisfying long-term relationships with key parties, in order to earn and retain their business. Copyright © 2012 Pearson Education 1-53 Relationship Marketing
  54. 54. Integrated Marketing • Integrated Marketing Four Ps • Product • Price • Place • Promotion These represent the seller’s view of marketing tools. SIVA • Solution: how can I solve my problem? • Information: where can I learn more about it? • Value: what is my total sacrifice to get this solution? • Access: where can I find it? Customer questions, corresponding to the 4Ps Copyright © 2012 Pearson Education 1-54
  55. 55. Integrated Marketing Copyright © 2012 Pearson Education 1-55
  56. 56. Internal Marketing Internal Marketing ensuring that everyone in the organization embraces appropriate marketing principles, especially senior management Copyright © 2012 Pearson Education 1-56
  57. 57. Performance Marketing • Performance Marketing Financial Accountability Social Responsibility Marketing • Social Initiatives • Corporate social marketing • Cause marketing • Corporate philanthropy • Corporate community involvement • Socially responsible business practices Copyright © 2012 Pearson Education 1-57
  58. 58. Marketing Management Tasks • Developing market strategies and plans • Capturing marketing insights • Connecting with customers • Building strong brands • Shaping market offerings • Delivering value • Communicating value • Creating long-term growth Copyright © 2012 Pearson Education 1-58
  59. 59. Copyright © 2012 Pearson Education 1-59 Functions of CMOs • Strengthening the brands • Measuring marketing effectiveness • Driving new product development based on customer needs • Gathering meaningful customer insights • Utilizing new marketing technology
  60. 60. STATE OF DEMAND AND MARKETING TASK • State of demand • Negative Demand • No Demand • Latent Demand • Falling Demand • Irregular Demand • Full Demand • Overfull Demand • Un-wholesome Demand • • Marketing task • Conversional Mktg. • Stimulational Mktg. • Developmental Mktg. • Remarketing • Synchro-marketing • Maintenance Mktg. • Demarketing • Counter-marketing
  61. 61. Marketing Management Tasks 1. Conversional Marketing - Used during negative demand - Customer dislikes the product - May even pay to avoid the product - It is a rare condition - e.g. Waste Water
  62. 62. 2. Stimulational Marketing - Used during No demand - Customer is indifferent to the product - Task of converting no-demand into positive demand - Connect the product with existing need - Create environment where need is felt - e.g. Mushrooms
  63. 63. 3. Developmental Marketing - Used during Latent demand - Consumers share need for something which does not exist - Opportunity for Marketer to develop a product - e.g. Electronic cigarette
  64. 64. 4. Remarketing - Used during fading demand - Consumers find either no use for the product or better alternatives in the market - Marketers recreate the demand - e.g. Cinema halls
  65. 65. 5. Synchro Marketing - Used during irregular demand - Seasonal products - Results in wasteful underutilization of production capacity - Marketers attempt to streamline the demand to meet supply capacity - e.g. Hotels at hill stations, flight tickets during peak season
  66. 66. 6. Maintenance Marketing - Used during robust demand - Established products - Does not need efforts to push supplies - Keep a watch on competition - Keep sharpening the saw
  67. 67. 7. Demarketing - Used during overfull demand - Or when you want to exit certain business - Supply falls short of demand - Marketers discourage customers in choosing certain products
  68. 68. 8. Counter Marketing - Used when demand is considered unwholesome - Like alcohol, drugs - Marketers try to destroy demand
  69. 69. Trends in Marketing
  70. 70. Developing Marketing Strategies and Plans
  71. 71. Marketing and Customer Value • Marketing involves satisfying customer’s needs and wants. The task of any business is to deliver customer value at a profit while being socially responsible. • In a hypercompetitive economy with increasingly rational buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing and communicating superior value.
  72. 72. 3 Vs approach to Marketing • London Business School’s Nirmalya Kumar has put forth a 3 Vs approach to Marketing.
  73. 73. What is the Value Chain? The value chain is a tool used for identifying and to create more customer value because every firm is a synthesis of primary and support activities performed to design, produce, market, deliver, and support its product.
  74. 74. Value Chain Analysis
  75. 75. Holistic Marketing Orientation and Customer value Key management questions are: • Value exploration —How a company identifies new value opportunities? • Value creation —How a company efficiently creates more promising new value offerings? • Value delivery —How a company uses its capabilities and infrastructure to deliver the new value offerings more efficiently? Holistic Marketing sees itself as integrating the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co-prosperity among key stakeholders.
  76. 76. What is Strategic Planning? • It is the managerial process that helps to develop a strategic and viable fit between the firm’s objectives, skills, resources with the market opportunities available. It helps the firm deliver its targeted profits and growth through its businesses and products.
  77. 77. Corporate and Division Strategic Planning • Some corporations give their business units a lot of freedom to set their own sales and profit goals and strategies. • Others set goals for their business units but let them develop their own strategies. Still others set the goals and participate in developing business unit strategies.
  78. 78. Process of Strategic Planning at corporate headquarters All corporate headquarters undertake four planning activities: • Define the corporate mission • Establish strategic business units (SBUs) • Assign resources to each SBU • Assess growth opportunities
  79. 79. Corporate Mission • This seeks to embody the entire goals of the organization and the objective of its existence. • It seeks to provide a sense of purpose, direction and opportunity • For e.g. e-bay’s mission: “to provide a global trading platform where practically anyone can trade practically anything”.
  80. 80. Good Mission Statements • Focus on a limited number of goals • Stress major policies and values • Define major competitive spheres • Take a long-term view • Short, memorable, meaningful
  81. 81. Major Competitive Spheres • Industry • Products • Competence • Market segment • Vertical channels • Geographic
  82. 82. Motorola “The purpose of Motorola is to honorably serve the needs of the community by providing products and services of superior quality at a fair price to our customers; to do this so as to earn an adequate profit which is required for the total enterprise to grow; and by doing so, provide the opportunity for our employees and shareholders to achieve their personal objectives.”
  83. 83. eBay “We help people trade anything on earth. We will continue to enhance the online trading experiences of all—collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.”
  84. 84. Dimensions that Define a Business • Customer groups • Customer needs • Technology
  85. 85. Establishing Strategic Business Unit SBU: • It is a company within a company • The business is differentiated from the rest of the company • It has its own set of competitors • It is a separate profit centre
  86. 86. Characteristics of SBUs Large companies normally manage quite different businesses, each requiring its own strategy. GE has classified its business into 89 strategic business units, SBU has three characteristics: • It is a single business or collection of related businesses • It has its own set of competitors • It has a manager responsible for strategic planning and profitability
  87. 87. Assigning Resources to Each SBU Several investment planning models provide ways to make investment decisions as follows: • The GE/McKinsey Matrix classifies each SBU by the extent of its competitive advantage and the attractiveness of its industry. Management can decide to grow, “harvest” or draw cash from, or hold on to the business. • Another model, BCG’s Growth-Share Matrix, uses relative market share and annual rate of market growth as criteria to make investment decisions, classifying SBUs as dogs, cash cows, question marks, and stars.
  88. 88. GE Model Usage • The 9 cells of the matrix are grouped into 3 broad categories: • The favorable category (1,2,3) – The organisation should build and grow these businesses • The medium investment allocation priorities (A,B,C) – These should simply be maintained – no expansion and no divesting • Businesses that are not doing well (i,ii,iii) – These should be harvested and divested
  89. 89. Industry/ market attractivene ss Competitive Strengths High Low The GE model Strong Average 1 2 C 3 B Ii A i iii Medium Weak
  90. 90. SBU strategies • Build • Hold • Harvest • Divest
  91. 91. Assessing Growth Opportunities: Ansoff’s Product-Market Expansion Grid • Market penetration strategy • Market development strategy • Product development strategy • Diversification strategy
  93. 93. Business Mission • Each business unit needs to define its specific within the broader company mission. Thus, a television-studio-lighting-equipment company might define its mission as, “To target major television studios and become their vendor of choice for lighting technologies that represent the most advanced and reliable studio lighting arrangements.
  94. 94. SWOT Analysis • Strengths • Weaknesses • Opportunities • Threats SWOT analysis is a strategic planning technique that analyzes a company’s internal STRENGTHS and WEAKNESSES, and studies OPPORTUNITIES and THREATS in the external sales environment.
  95. 95. Goal Formulation Once the company has performed a SWOT analysis, it can proceed to goal formulation, developing specific goals for the planning period. Goals are objectives that are specific with respect to magnitude and time. Most business units pursue a mix of objectives, including profitability, sales growth, market share improvement, risk containment, innovation, and reputation. The business unit sets these objectives and then manages by objectives (MBO). For an MBO system to work, the unit’s objectives must meet four criteria: • Unit’s objectives must be hierarchical • Objectives should be quantitative • Goals should be realistic • Objectives must be consistent
  96. 96. Strategic Formulation: Michael Porter has proposed three Generic Strategies that provide a good starting point for strategic thinking: 1. Overall cost leadership. Firms work to achieve the lowest production and distribution costs so they can underprice competitors and win market share. 2. Differentiation. The business concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market. 3. Focus. The business focuses on one or more narrow market segments,gets to know them intimately, and pursues either cost leadership or differentiation within the target segment.
  97. 97. Marketing Alliances • Product or service alliances —One company licenses another to produce its product, or two companies jointly market their complementary products or a new product. • Promotional alliances —One company agrees to carry a promotion for another company’s product or service • Logistics alliances —One company offers logistical services for another company’s product. • Pricing collaborations —One or more companies join in a special pricing collaboration.
  98. 98. Programme Formulation and Implementation • Once the business unit has developed its principal strategies, it must work out detailed support programs. • A great marketing strategy can be sabotaged by poor implementation. If the unit has decided to attain technological leadership, it must plan programs to strengthen its R&D department, gather technological intelligence, develop leading-edge products, train the technical sales force, and develop ads to communicate its technological leadership. • Once the marketing programs are formulated, the marketing people must estimate their costs.
  99. 99. Feedback and Control • As it implements its strategy, a firm needs to track the results and monitor new developments. • Some environments are fairly stable from year to year. Other environments evolve slowly in a fairly predictable way. • Still other environments change rapidly in major and unpredictable ways. • Nonetheless, a company can count on one thing: The marketplace will change; and when it does, the company will need to review and revise its implementation, programs, strategies, or even objectives.
  100. 100. Product Planning: the Nature and Contents of a Marketing Plan
  101. 101. Marketing Plan • A marketing Plan is a written document that summarises what the marketer has learned about the market place and indicates how the firm plans to reach its marketing objectives. • It contains tactical guidelines for the marketing programmes and financial allocations over the planning period.
  102. 102. Marketing Plan • Marketing plans are becoming more customer and competitor oriented. • They draw more realistic from all the functions and are team developed. • Planning is becoming a continuous process to respond to rapidly changing market conditions. • Most MPs cover one year in 5 to 50 pages.
  103. 103. Contents of Marketing Plan • Executive summary and table of contents. • Situational analysis – This contains relevant background data on the sales, costs, the market, competitors, and the various forces in the micro environment. – How do we define the market, how big is it , and how fast is it growing? – What are relevant trends? – What is the pdt offering, and what critical isuues do we face? – SWOT analysis.
  104. 104. Contents of Marketing Plan • Marketing Strategy. • Financial projections. • Implementation controls – Monitoring and adjusting implementation of the plan. – Goals and budget of each month or quarter – Periodical review and corrective action – Contingency plan
  105. 105. The Marketing Environment
  106. 106. • Challenges • Shifting consumer lifestyles • Low ratings of food and service quality • Atmosphere not upscale • Image of being unclassy, uncultured and uncool to younger target markets Case Study McDonald’s – Challenges and Reactions • Marketing Initiatives • Focus on core competency of consistent products and reliable service • Upscale alternative including McCafe and Bistro Gourmet • Healthier food options with elimination of “supersize” and introduction of Go Active! Adult Happy Meal
  107. 107. The Marketing Environment • Marketing Environment: • The actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers • Microenvironment • Includes the actors close to the company • Macroenvironment • Involves larger societal forces
  108. 108. 3 - 119 – Marketing must consider other parts of the organization including finance, R&D, purchasing, operations and accounting – Marketing decisions must relate to broader company goals and strategies Microenvironment Actors 1. The company 2. Suppliers 3. Marketing intermediaries 4. Customers 5. Competitors 6. Publics
  109. 109. 3 - 120 – Marketers must watch supply availability and pricing – Effective partnership relationship management with suppliers is essential Microenvironment Actors 1. The company 2. Suppliers 3. Marketing intermediaries 4. Customers 5. Competitors 6. Publics
  110. 110. 3 - 121 – Help to promote, sell and distribute goods to final buyers – Include resellers, physical distribution firms, marketing services agencies and financial intermediaries – Effective partner relationship management is essential Microenvironment Actors 1. The company 2. Suppliers 3. Marketing intermediaries 4. Customers 5. Competitors 6. Publics
  111. 111. 3 - 122 – The five types of customer markets • Consumer • Business • Reseller • Government • International Microenvironment Actors 1. The company 2. Suppliers 3. Marketing intermediaries 4. Customers 5. Competitors 6. Publics
  112. 112. 3 - 123 – Conducting competitor analysis is critical for success of the firm – A marketer must monitor its competitors’ offerings to create strategic advantage Microenvironment Actors 1. The company 2. Suppliers 3. Marketing intermediaries 4. Customers 5. Competitors 6. Publics
  113. 113. 3 - 124 – A group that has an actual or potential interest in or impact on an organization – Seven publics include: • Financial • Media • Government • Citizen-action • Local • General • Internal Microenvironment Actors 1. The company 2. Suppliers 3. Marketing intermediaries 4. Customers 5. Competitors 6. Publics
  114. 114. 3 - 125 Macroenvironmental Forces The Macroenvironment • Demographic • Economic • Natural • Technological • Political • Cultural
  115. 115. 3 - 126 Demographic Environment • Demographic Environment: – The study of human populations in terms of size, density, location, age, gender, race, occupation and other statistics
  116. 116. 3 - 127 • Changing age structure of the U.S. population is the single most important demographic trend • Baby boomers, Generation X, and Generation Y are the key groups Demographic Environment
  117. 117. 3 - 128 • Born between 1946 and 1964 • Represent 28% of the population; earn 50% of personal income • Many mini-segments exist within the boomer group • Entering peak earning years as they mature Baby Boomers Generation X Generation Y Key Generations Demographic Environment
  118. 118. 3 - 129 • Born between 1965 and 1976 • First latchkey children • Maintain a cautious economic outlook • Respond to socially responsible companies • Will be primary buyers of most goods by 2010 Baby Boomers Generation X Generation Y Key Generations Demographic Environment
  119. 119. 3 - 130 • Born between 1977 and 1994 • 72 million strong; almost as large a group as their baby boomer parents • New products, services, and media cater to GenY • Challenging target for marketers Baby Boomers Generation X Generation Y Key Generations Demographic Environment
  120. 120. 3 - 131 Natural Environment • Natural Environment: – Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities • Trends – Shortages of raw materials – Increased pollution – Increased government intervention
  121. 121. 3 - 132 Technological Environment – The most dramatic force shaping our destiny – Rapidly changing force which creates many new marketing opportunities but also turns many existing products extinct
  122. 122. 3 - 133 Political Environment • Consists of laws, government agencies and pressure groups that influence or limit various organizations and individuals in a given society – Legislation affecting businesses worldwide has increased – Laws protect companies, consumers and the interests of society – Increased emphasis on socially responsible actions
  123. 123. 3 - 134 Cause-Related Marketing • Marketers create link between brand and charitable organization • Demonstrates social responsibility • Helps build positive brand image • Examples include General Mill’s Box Tops for Education, Tang and Mothers Against Drunk Driving, Eddie Bauer and local schools
  124. 124. 3 - 135 Cultural Environment • Made up of institutions and other forces that affect a society’s basic values, perceptions, preferences and behaviors.
  125. 125. 3 - 136 Marketing Management Themselves  Identify with brands for self- expression Others  Recent shift from “me” to “we” society Organizations  Trend of decline in trust and loyalty to companies Society  Patriotism on the rise Nature  “lifestyles of health and sustainability” (LOHAS) consumer segment Universe  Includes religion and spirituality Cultural Environment Includes people’s views of…
  126. 126. 3 - 137 Responding to the Marketing Environment • • “There are three kinds of companies: those who make things happen, those who watch things happen, and those who wonder what’s happened.”
  128. 128. Competitive Strategies/ Strategies to compete • Having a competitive advantage is necessary for a firm to compete in the market • But what is more important is whether the competitive advantage is sustainable • A firm must identify its position relative to the competition in the market • By knowing if it is a leader, challenger, follower or nicher, it can adopt appropriate strategies to compete
  129. 129. Figure 11.1 Hypothetical Market Structure 10% Mark et Nich ers 20% Mark et Follo wer 30% Market Challe nger 40% Mark et Lead er
  130. 130. Strategies for Market Leaders Market Leader’s objectives: • Expand the total market by – Finding new users – Creating new uses, and – Encouraging more usage • Protect its current market share by – Adopting defense strategies (see following slides) • Increase its market share – Note the relationship between market share and profitability
  131. 131. Which strategy to use? Depends on your answer to the following: • Is it worth fighting? • Are you strong enough to fight? • How strong is your defense? • Do you have any choice but to fight?
  132. 132. Defense Strategy • A market leader should generally adopt a defense strategy • Six commonly used defense strategies – Position Defense – Mobile Defense – Flanking Defense – Contraction Defense – Pre-emptive Defense – Counter-Offensive Defense
  133. 133. Figure 11.6 Six Types of Defense Strategies
  134. 134. Defense Strategy (cont’d) Position Defense • Least successful of the defense strategies • “A company attempting a fortress defense will find itself retreating from line after line of fortification into shrinking product markets.” Saunders (1987) • e.g. Mercedes was using a position defense strategy until Toyota launched a frontal attack with its Lexus.
  135. 135. Defense Strategy (cont’d) Mobile Defense • By market broadening and diversification • For marketing broadening, there is a need to – Redefine the business (principle of objective), and – Focus efforts on the competition (the principle of mass) • e.g. Legend Holdings, the top China PC maker Legend has announced a joint venture with AOL to broaden its business to provide Internet services in the mainland
  136. 136. Defense Strategy (cont’d) Flanking Defense: • Secondary markets (flanks) are the weaker areas and prone to being attacked • Pay attention to the flanks • e.g. San Miguel introduced a flanking brand in the Philippines, Gold Eagle, as a defense against APB’s Beerhausen
  137. 137. Defense Strategy (cont’d) Contraction Defense • Withdraw from the most vulnerable segments and redirect resources to those that are more defendable • By planned contraction or strategic withdrawal • e.g. India’s TATA Group sold its soaps and detergents business units to Unilever in 1993
  138. 138. Defense Strategy (cont’d) Pre-emptive Defense • Detect potential attacks and attack the enemies first • Let it be known how it will retaliate • Product or brand proliferation is a form of pre-emptive defense e.g. Seiko has over 2,000 models
  139. 139. Defense Strategy (cont’d) Counter-Offensive Defense • Responding to competitors’ head-on attack by identifying the attacker’s weakness and then launch a counter attack • e.g. Toyota launched the Lexus to respond to Mercedes attack
  140. 140. Market Challenger Strategies The market challengers’ strategic objective is to gain market share and to become the leader eventually How? • By attacking the market leader • By attacking other firms of the same size • By attacking smaller firms
  141. 141. Market Challenger Strategies (cont’d) Types of Attack Strategies • Frontal attack • Flank attack • Encirclement attack • Bypass attack • Guerrilla attack
  142. 142. Frontal Attack • Seldom work unless – The challenger has sufficient fire-power (a 3:1 advantage) and staying power, and – The challenger has clear distinctive advantage(s) • e.g. Japanese and Korean firms launched frontal attacks in various ASPAC countries through quality, price and low cost
  143. 143. Flank attack • Attack the enemy at its weak points or blind spots i.e. its flanks • Ideal for challenger who does not have sufficient resources • e.g. In the 1990s, Yaohan attacked Mitsukoshi and Seibu’s flanks by opening numerous stores in overseas markets
  144. 144. Encirclement attack • Attack the enemy at many fronts at the same time • Ideal for challenger having superior resources • e.g. Seiko attacked on fashion, features, user preferences and anything that might interest the consumer
  145. 145. Bypass attack • By diversifying into unrelated products or markets neglected by the leader • Could overtake the leader by using new technologies • e.g. Pepsi use a bypass attack strategy against Coke in China by locating its bottling plants in the interior provinces
  146. 146. Guerrilla attack • By launching small, intermittent hit-and- run attacks to harass and destabilize the leader • Usually use to precede a stronger attack • e.g. airlines use short promotions to attack the national carriers especially when passenger loads in certain routes are low
  147. 147. Which Attack Strategy should a Challenger Choose? Use a combination of several strategies to improve market share over time
  148. 148. Market-Follower Strategies • Theodore Levitt in his article, “Innovative Imitation” argued that a product imitation strategy might be just as profitable as a product innovation strategy e.g. Product innovation--Sony Product-imitation--Panasonic
  149. 149. Market-Follower Strategies (cont’d) • Each follower tries to bring distinctive advantages to its target market- -location, services, financing • Four broad follower strategies: – Counterfeiter: The best example of counterfeiting is selling the originals via piracy. Where cloning involves manufacturing of slightly altered products, counterfeiting involves thieving and is a black market follower strategy (which is illegal) – Cloner: Cloning makes advantage of the top brands and makes same to same products. e.g. the IBM PC clones – Imitator e.g. car manufacturers imitate the style of one another – Adapter e.g. many Japanese firms are excellent adapters initially before developing into challengers and eventually leaders
  150. 150. Market-Nicher Strategies • Smaller firms can avoid larger firms by targeting smaller markets or niches that are of little or no interest to the larger firms e.g. Logitech--mice Microbrewers--special beers
  151. 151. Market-Nicher Strategies (cont’d) • Nichers must create niches, expand the niches and protect them – e.g. Nike constantly created new niches-- cycling, walking, hiking, cheerleading, etc • What is the major risk faced by nichers? – Market niche may be attacked by larger firms once they notice the niches are successful
  152. 152. Multiple Niching “[A] firm should `stick to its niching’ but not necessarily to its niche. That is why multiple niching is preferable to single niching. By developing strength in two or more niches the company increases its chances for survival.” Philip Kotler
  153. 153. Example of Nicher: Challenger Superstore • Challenger Superstore is a discount retailer of computers and accessories • It opened its first overseas store in Bangkok at a cost of 90 million baht (S$3.7 million) • In October 2000, it closed its Bangkok store “after failing to pay rent amounting to about 6 million baht” Discussion: Why do you think Challenger failed in Thailand?
  154. 154. T.H.A.N.K Y.O.U F.O.R U.N.D.E.R.S.T.A.N.D.I.NG