MARKETING STRATEGY

MARKETING STRATEGY IS THE SOLUTION TO PROVIDE SUPERIOR

CUSTOMER VALUE TO THE TARGET MARKET

STRATEGY FORMULATION

STARTING POINT-----MARKET ANALYSIS

CONSUMER

COMPANYCOMPETITION

CONDITION

MARKET SEGMENTATION-THE 2ND STEP

THE THREE MAJOR SEGMENTS COULD BE

1. THE GEOGRAPHIC SEGMENT2. THE DEMOGRAPHIC SEGMENT3. THE PSYCHOGRAPHIC SEGMENT4. BEHAVIORAL SEGMENT

Cont..

MARKET ANALYSIS

COMPETITION:-Michael Porter’s Five Forces Analysis-Value Chain Analysis-SWOT Analysis

Michael Porter’s Five Forces Model

THREAT OF NEW ENTRANT DEPENDS UPON:-economies of scale-Capital /investment requirement-Customer switching costs-Access to distribution channel-Access to technology-Brand loyalty-Degree of retaliation from existing players-Government policies

THREAT OF SUBSTITUTES DEPENDS UPON:

-quality of the substitute-Buyer’s willingness to substitute-Relative price and performance of

substitutes-Switching costs to substitutes

BARGAINING POWERS OF SUPPLIERS DEPENDS UPON:

-concentration of suppliers Vs the buyers-branding of the supplier-suppliers threat to integrate forward-quality n service-switching cost of the suppliers

BARGAINING POWER OF BUYERS DEPENDS UPON:

-concentration of buyers VS the suppliers-products represents a significant amount of

buyer’s costs or purchases-differentiated/undifferentiated product-switching costs to the buyers-buyers threat of backward integration-information update of the buyers

INTENSITY OF RIVALRY DEPENDS UPON:

-structure of competition;numerous competitors vs clear cut market leader

-degree of product differentiation-structure of industry costs;high fixed costs

leading to price cutting-exit barriers; high leads to intense rivalry

VALUE CHAIN –MICHAEL PORTER

IDENTIFIES 9 WAYS TO CREATE MORE CUSTOMER VALUES THROUGH PRIMARY AND SECONDARY ACTIVITIES

PRIMARY ACTIVITIES:1. INBOUND LOGISTICS2. OPERATIONS3. OUTBOUND LOGISTICS4. MARKETING AND SALES5. SERVICE

Cont….

SECONDARY ACTIVITIES:6.FIRM INFRASTRUCTURE7.HUMAN RESOURCE MANAGEMENT8.TECHNOLOGICAL DEVELOPMENT9.PROCUREMENT

Framework for competitor analysis

Future goals current strategy

competitor’s response profile

Assumptions capabilities

FUTURE GOALS:Business Unit Goals-financial goals-values and beliefs-organisational structure-control and incentive system

Parent Company-current sales of the parent company-overall goals -strategic relevance of the business unit to the

parent company-diversification plansPORTFOLIO ANALYSIS-BCG-GE

ASSUMPTIONS• Competitor’s assumptions about itself• Competitor’s assumptions about the

industryCURRENT STRATEGY-competitor’s key

operating policies in each functional area of the business

CAPABILITIES-assessment of competitor’s strengths and

weakness in varied areas-core capabilities of the competitor’s in each

of the functional areas-Ability to grow-quick response capability-Staying power

COMPETITOR’S RESPONSE PROFILE-is the competitor satisfied with its current

position?-what likely moves or strategy shifts will the

competitor make?-where is the competitor vulnerable?-what will provoke the greatest and most

effective retaliation by the competitor?

CONDITION

MACRO ENVIRONMENT

DEMOGRAPHIC ENVIRONMENTSOCIO-CULTURAL ENVIRONMENTECONOMIC ENVIRONMENTPOLITICAL ENVIRONMENTNATURAL ENVIRONMENTTECHNOLOGICAL ENVIRONMENT LEGAL ENVIRONMENT

COMPANY

Internal Appraisal-BCG -GE McKinsey-SWOTStrategies in terms of 4 Ps:-Product-Price-Place-Promotion

PRODUCT

AN OFFERING THAT SATISFIES THE NEEDS OF THE CUSTOMER

Major tasks in Product Management

I. MANAGING THE PLC :--

STAGES:-INTRODUCTIONGROWTHMATURITYDECLINE

NEW PRODUCT DECISIONS

SIGNIFICANCE OF NEW PRODUCT:• MEETING CHANGES IN CONSUMER

DEMAND• MAKING NEW PROFITS• COMBATING ENVIRONMENTAL THREATSNEW PRODUCTS CAN BE:• NEW ARISING OUT OF TECHNOLOGICAL

INNOVATION• NEW DUE TO MARKET-ORIENTED

MODIFICATIONS

STAGES IN NEW PRODUCT DEVELOPMENT

• IDEA GENERATION• IDEA SCREENING• CONCEPT TESTING• MARKETING STRATEGY• BUSINESS/MARKET ANALYSIS• PRODUCT DEVELOPMENT• MARKET TESTING• COMMERCIALISATION

STRATEGIES AT VARIOUS STAGES

INTRODUCTION:-strategies to be aimed at• Attracting customers by raising awareness of,

and interest in the product through advertising, public relations and publicity efforts that stress key product features and benefits.

• Inducing customers to try and buy the product through the use of various sales tools and pricing activities.

• Strengthening and expanding channel and supply chain relationships to gain sufficient product distribution to make the accessible to target market.

• Setting pricing objectives that will balance the firm’s need to recoup the investment with the competitive realities of the marketplace

GROWTH –strategies to be aimed at• Improving product quality,adding new product

features and style• Entering new market segments• Increasing distribution coverage• Shift from product awareness advertising to

product preference advertising

• Finding an ideal balance between price and demand as the price elasticity becomes more important as product moves towards the maturity stage

MATURITY strategies to be aimed at• Generating cash flow• Holding market share• Stealing market share• Increasing share of customers

DECLINE –options available are• Postpone the decline• Accept its decline

II. APPRAISAL OF THE PRODUCTLINE

• ALTERING THE LENGTH OF THE LINE THROUGH:– STRETCHING THE LINE -UP or DOWN– LINE FILLING– LINE PRUNNING

III. MANAGING BRAND EQUITY

• BRAND EQUITY- TOTAL WEIGHTAGE THE CUSTOMER GIVES TO THE BRAND

• BRAND =BASIC PRODUCT+NAME+LOGO+MARKETING STRATEGY

STAGES OF BRANDING:1.BRAND AWARENESS2.BRAND ACCEPTANCE3.BRAND PRIORITY4.BRAND LOYALTY

NAMING THE BRAND• INDIVIDUAL BRAND NAMES

ex: Breeze, Camay• FAMILY/UMBRELLA BRAND

ex: Lakme, Ponds• COMPANY NAME AS BRAND NAME

ex: Godrej, Tata , BPL• MIDDLEMEN’S/STORE BRAND/PRIVATE

LABELex: Shopper’s Stop, Pantaloons

NEED FOR BRANDING• MARKET IDENTITY• LEGAL PROTECTION• CUSTOMER LOYALTY• PROFIT MARGINS • SEGMENTATION• BARGAINING CAPACITY• CORPORATE IMAGE

PRICING

MONETARY VALUE IN RETURN OF PRODUCT/SERVICE

OCCASIONS OF PRICING:-1. SETTING A PRICE OF A NEW PRODUCT2. INTRODUCTION OF EXISTING PRODUCT IN

A NEW MARKET3. RESETTING /ADJUSTING THE CURRENT

PRICE

THE PROCESS…..

• SELECTING THE PRICING OBJECTIVES• DETERMINING THE DEMAND• ESTIMATING COST• ANALYSING COMPETITOR’S

COSTS,PRICES AND OFFERS• SELECT A PRICING METHOD• SELECTING THE FINAL PRICE

SELECTING THE PRICING OBJECTIVES

THE COMPANY FIRST DECIDES WHERE IT WANTS TO POSITION ITS MARKET OFFERING. THE CLEARER A FIRM’S OBJECTIVES, THE EASIER IT IS TO SET PRICE.

• Survival.• Maximum current profit.• Maximum market share.• Maximum market skimming.• Product-quality leadership

Demand estimationFactors contributing to Price sensitivity:• Unique Value effect• Substitute Awareness effect• Difficult Comparison effect• Total expenditure effect• End-Benefit effect• Shared Cost effect• Sunk Investment Effect• Price Quality effect• Inventory effect

Measuring demand curves:-controlled experimentation-Direct probing-Statistical analysis of past dataDemand is likely to be less elastic under the

following conditions:• There are few or no substitutes or competitors.• Buyers do not readily notice a higher price.• Buyers are slow to change their buying habits.• Buyers think the higher prices are justified.

• Costs set the floor to the price.• Competitors’ prices and the price of substitutes

provide an orienting point.• Customers’ assessment of unique features

establish the price ceiling.

• There are five price-setting methods:• Markup pricing.• Target-return pricing.• Perceived-value pricing.• Value pricing.• Going-rate pricing.

Other price adaptationsa) Price discrimination

customer segment pricingTrade discriminationLocation pricingTime pricing

b) Discounts Cash discountQuantity discountTrade discountSeasonal discount

c) Promotional pricingLoss Leader pricingSpecial event pricingLonger payment termsLow interest financingWarranties and service contracts

d) Product mix pricingProduct line pricingCaptive product pricingTwo part pricingProduct bundling pricing

DISTRIBUTION NETWORK

• Know what work marketing channels perform

• Know how channels should be designed• Know what decisions companies face in

managing their channels• Know how companies should integrate

channels and manage channel conflict

NEED FOR A DISTRIBUTION SYSTEM

GENERAL DISCREPANCY EXISTING :• SPATIAL DISCREPANCY• TEMPORAL DISCREPANCY• NEED TO BREAK THE BULK• NEED TO PROVIDE ASSORTMENT• INFORMATION GAP

ENTITIES

1)PHYSICAL DISTRIBUTION

2) MARKETING CHANNELS

PHYSICAL DISTRIBUTION

1.TRANSPORTATION-MODE:air,rail,road,water,pipeline

-ROUTING

-COST

….cont.

2. WAREHOUSINGa. Critical storage points

nos. Location

b. Inventory control-costs

ordering carrying stockout

MARKETING CHANNELS

MOST PRODUCERS DO NOT SELL THEIR GOODS DIRECTLY TO THE FINAL USERS; BETWEEN THEM STANDS A SET OF INTERMEDIARIES PERFORMING A VARIETY OF FUNCTIONS

These intermediaries constitute a marketing channel

SET OF INDEPENDENT ORGANISATIONS INVOLVED IN THE PROCESS OF MAKING A PRODUCT OR SERVICE AVAILABLE FOR USE/CONSUMPTION.

INTERMEDIARIES:

TYPES OF MARKETING INTERMEDIARIES

• CFAs• Distributor/wholesaler• Retailerexclusive:owned or franchiseshop in shop• commission agents

FUNCTIONS

a)Information-Potential & current customers-Competitors -Forces in the mktg. environment

b)Promotionc)Negotiationd)Risk taking(financial,credit

terms,storage,pilferage)e)Transactional efficiency

financing to the manufacturerservice providerpresalepost saleassist in introducing new product

LEVELS OF CHANNEL• ZERO LEVEL

manufactureconsumereg: EUREKA forbes

• ONE LEVELPresence of one intermediaryManufactures----retailer agents distributor ---consumer Eg. Automobiles

• TWO LEVELSManufacturewholesaler-retailer-consumerEg. FMCG products

• THREE LEVELSManufactureagentswholesaler-retailer-consumer

Eg. agricultural products

CHANNEL DESIGN DECISIONS

1. ESTABLISH CHANNEL OBJECTIVE -market coverage-control objectives-ensuring minimum effort exerted by the consumer in procuring the product

-quality objective

…cont.

2. DETERMINING THE TYPES OF CHANNELS TO BE USED.

- Largely depends on the channel objectives of the firm.

3. IDENTIFY CHANNEL ALTERNATIVES

i)Intensity of distribution• Exclusive( one area, one shop ) • Selective ( products available in few shops)• Intensive ( every retail shop has the product )

ii) Proximity to end users.iii) Existing distribution practices (by competitive

analysis).

4. EVALUATE THE ALTERNATIVES.– Economic criteria

cost Vs value– time period taken by a channel to deliver– control criteria– channel availability

5. SELECTING THE FINAL CHANNEL MEMBER

– they should stick to your terms and conditions.

– Motivate them – Train them– Resolve channel conflicts.

CHANNEL CONFLICTS

TYPES OF CONFLICT AND COMPETITION• Vertical channel conflict means conflict

between different levels within the same channel.

• Horizontal channel conflict involves conflict between members at the same level within the channel.

• Multi-channel conflict exists when the manufacturer has established two or more channels that sell to the same market.

CAUSES

• Goal incompatibility.• Unclear roles and rights. • Improper communication.• Lack of autonomy

CONFLICT MANAGEMENT METHOD

1. INSTITUTIONAL APPROACHESJOINT MEMBERSHIP OF ASSOCIATIONEXCHANGE OF EXECUTIVESCOOPTATION

2. THIRD PARTY MECHANISMMEDIATIONARBITRATION

Integration of channels

VMSHMSMULTI-CHANNEL MARKETING

COMMUNICATION MIX

PRODUCT-FEATURES,SIZE,SHAPE,FINISH,PACKAGING,LABE-LLING,BRAND NAME,COMPANY NAME.PRICE- QUALITY EQUATION

PRICE-STATUS EQUATIONPLACE- STORE IMAGE,STORE- LEVEL

MERCHANDISING

PROMOTION:-• PERSONAL SELLING• PUBILC RELATIONS• ADVERTISING• SALES PROMOTION

PERSONAL SELLING- PAID PERSONAL COMMUNICATIONTHAT ATTEMPTS TO INFORM CUSTOMERS ABOUT PRODUCTS AND PERSUADE THEM TO PURCHASE THOSE PRODUCTS.

FACE TO FACE TRANSACTION BETWEEN A SALESMAN AND A PROSPECTIVE CUSTOMER

FACTORS SUPPORTING PROMOTION• KNOWLEDGE& EXPERTISE• BETTER OUTLOOK & PERSONALITY• EFFECTIVE COMMUNICATION SKILLS• A CONVINCING MESSAGE

PUBLIC RELATIONS- TRACKS PUBLIC ATTITUDES, IDENTIFIES ISSUES THAT MAY ELICIT PUBLIC CONCERN, AND DEVELOPS PROGRAMMES TO CREATE AND MAINTAIN POSITIVE RELATIONSHIP BETWEEN A FIRM AND ITS STAKEHOLDERS.

CAN WIN IN YOUR FAVOUR THROUGH• SPONSORSHIP• NEWS(PRESS RELEASE)• FEATURE ARTICLE• PRESS CONFERENCE• EVENT MANAGEMENT• SOCIAL CAUSE

ADVERTISING—TELLING & SELLING

ANY PAID FORM OF NON-PEROSNAL COMMUNICATION OR PROMOTION BY AN IDENTIFIED SPONSOR.

5 Ms OF ADVERTISING

MISSION –ADVERTISING OBJECTIVES

AREAS WHERE OBJECTIVES CAN BE SET:• INTRODUCTION OF NEW PRODUCTS• MARKET EXPANSION• REMINDING TO CUSTOMERS• BUILDING UP CORPORATE & BRAND

IMAGE• AIDING THE TOTAL SELLING FUNCTION• STIMULATING IMPULSE BUYING

MONEY—ADVERTISING BUDGET

DIFFERENT METHODS:• COMPETITIVE PARITY METHOD• AFFORDABILITY• PERCENTAGE OF SALES/TURNOVER• OBJECTIVE- TASK METHOD• PAST SALES –ADVERTISING

EXPENDITURE

MESSAGE

SHOULD BE • SIMPLE• CREATE A BANDWAGON EFFECT

MEDIA

REACH FREQUENCY EXPOSURETYPES:-

PRINT• NEWSPAPER• MAGAZINES• TRADE JOURNALS• DIRECT MAILS

AUDIO/VISUAL/ELECTRONIC• RADIO• TV• INTERNET• CINEMA• CASSETTES –AUDIO/VISUAL

OUTDOOR• HOARDINGS• POSTERS• NEON LIGHTS• FAIRS & EXHIBITIONS• TRANSIT ADVERTISING• BALLOONS• LOUDSPEAKER ANNOUNCEMENTS

MEASUREMENT:

• DAR TEST-DAY AFTER RECALL• TEST MARKET METHOD

SALES PROMOTION:-DIRECT AND IMMEDIATE INDUCEMENT.MARKETING NEEDS SERVED BY SALESPROMOTION:-• NEW PRODUCT INTRODUCTION• UNLOADING ACCUMULATED INVENTORY• GETTING NEW ACCOUNTS• GETTING BACK LOST ACCOUNT• PERSUADING DEALERS TO BUY MORE

TOOLS AND TECHNIQUES OFSALES PROMOTION:-• DEMONSTRATIONS• TRADE FAIRS AND EXHIBITIONS• COUPONS AND FREE SAMPLES• CONTESTS• MERCHANDISING /DISPLAY• SALES PROMOTION ON INTERNET

STDP

STDP-SEGMENTINGTARGETINGDIFFERENTIATINGPOSITIONING

SEGMENTATION

MASS MARKETINGThe process in which the seller engages

in the mass production, mass distribution, and mass promotion of one product for all buyers.

SEGMENT MARKETINGServing to a group of customers who

share a similar set of needs and wants.

Basis of identifying segments

1. Geographic Segmentation2. Demographic Segmentation3. Psychographic Segmentation4. Behavioral Segmentation

GEOGRAPHIC SEGMENTATIONIt calls for dividing the market into different

geographical units.Geographic variables • region of the world or country, East, West, South,

North, Central, coastal, hilly, etc. • country size/country size : Metropolitan Cities, small

cities, towns. • Urban, Semi-urban, Rural. • climate Hot, Cold, Humid, Rainy.

DEMOGRAPHIC SEGMENTATIONDemographic variables • age• gender Male and Female • family size • family life cycle • education Primary, High School, Secondary, College,

Universities. • income• occupation• socioeconomic status • religion• nationality• language

PSYCHOGRAPHIC SEGMENTATIONThe buyers are divided into different

groups on the basis of lifestyle or personality or values

Psychographic variables • personality• lifestyle• value• attitude

BEHAVIORAL SEGMENTATION

Behavioral variables • benefit sought • product usage rate• User status• brand loyalty • readiness to buy stage

REQUIREMENTS OF A SEGMENT

D A M A SDifferentiableActionableMeasurableAccessibleSubstantial

Effective Targeting Requires…

• Identify and profile distinct groups of buyers who differ in their needs and preferences.

• Select one or more market segments to enter.

• Establish and communicate the distinctive benefits of the market offering.

PATTERNS OF SELECTING THE TARGET MARKET

Single-segment concentration. Selective specialization. Product specialization.Market Specialization.Full market coverage.

DIFFERENTIATION

THE PROCESS OF ADDING A SET OF MEANINGFUL AND VALUED DIFFERENCES TO DISTINGUISH THE COMPANY’S OFFERINGS FROM COMPETITOR’S OFFERINGS

Differentiation Strategies

• Product• Channel• Image• Price

Product Differentiation

• Product form• Features• Performance• Conformance• Durability• Reliability• Reparability

• Style• Ordering ease• Delivery• Customer training• Maintenance

POSITIONING

Act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market

CRITERIA FOR SUCCESSFUL POSITIONING

1. CLARITY2. CONSISTENCY3. CREDIBILITY4. COMPETITIVENESS

CORPORATE STRATEGY

1. STABILITY-THE FIRM STRIVES TO MAINTAIN ITS STATUS QUO.

2. EXPANSION-THROUGH INTENSIFICATION,INTEGRATION AND DIVERSIFICATION

3. DIVESTMENT- SELL OFF OR LIQUIDATE THE NON-DESIROUS BUSINESS

4. COMBINATION- TWO OR THREE STRATEGY AT A TIME

Stability strategy

• Firm stays with the same businesss,same market-product posture

• Does not involve redefinition of the of the business of the corporation

• Does not warrant much of fresh investment

• Risk is lessConditions under which firms adopt this

strategy:

Cont…

• When the firm feels it enjoys a comfortable position in its current business

• When the firm’s growth ambitions are modest• When the industry concerned is mature and the

firm enjoys a profitable position• This is often adopt this strategy after rapid

growth or diversifiation to consolidate its position.

• Business that have just come through turmoil.

Expansion strategy

Conditions under which the strategy is adopted:• Corporate ambitions are high• When enormous new opportunities are coming

up in the environment.• For fighting competition in the growing business.• When the firm has strong resource base• To counter the vulnerability of a single business

position or the position on the PLC.

Routes to expansion:• Intensification

-firm tries to grow in the related areas.best described by Ansoff product-market grid

• Integrationforwardbackwardhorizontal

Cont….

• Diversification

Concentric— R.P. D.C. Horizontal— D.P. S.C. Conglomerate—D.P. D.C.

Divestment strategyConditions under which the strategy is adopted:• When the firm finds that some of its businesses

have become unattractive, unprofitable and unviable

• Obsolesence• Firms unable to compete in the competitive

market• When the business is in the decline stage of

PLC.

Generic Strategies

Differentiation

Low-cost leadership

Focus

PORTER’S GENERIC STRATEGIES

1. Cost Leadership

2. Differentiation

3 A. Cost Focus 3 B. Differentiation FocusNarrow

Target

Broad Target

DifferentiationLower Cost

Competitive Advantage

Competitive Scope

Cost leadership- achieving leadership in the industry by providing the product at the most reasonable cost.

Differentiation:Basis of differentiation-• Product itself• Delivery system• Credit facilities• Service factor

REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES

Generic Commodity RequiredStrategy Skills and ResourcesOverall cost • Sustained capital investment and access to capital

leadership

• Process engineering skills

• Intense supervision of labour

• Products designed for ease

in manufacture

• Low-cost distribution system

Differentiation • Strong marketing abilities

•Product engineering

• Creative flare

REQUIREMENTS FOR GENERIC COMPETITIVE STRATEGIES

CONTD…

• Strong capability in basic research

• Corporate reputation for quality or technological

leadership

• Strong cooperation from channelFocus

• Combination of the above policies directed at the

particular strategic target

•

Risks associated with each of the generic strategies

Cost leadership:• Competitor’s imitation• Technological changes• Threat of differentiation• Inability to see changes in the market due

to over attention paid to cost • inflation

Cont…

Differentiation :• Competitor’s imitations• Change in customer’s needsFocus:• Competitors find submarket within the

target.• The segment becomes unprofitable.