week9_all merged pdf

76
Go To Market Strategies: Week 9 David Bell (@davidbnz) Xinmei Zhang and Yongge Dai Pr of essor  

Upload: aparnata

Post on 02-Jun-2018

219 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 1/76

Go To Market Strategies:Week 9

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

Page 2: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 2/76

2

o Motivation and Puzzleso Inputs to the Pricing Decision

 – The floor and ceiling bound the Economic Value to theCustomer (EVC) metric

 – Note, however, that the 5Cs affect the final location ofthe actual price between the floor and ceiling

o Getting Deeper into Customer Factors

 – Price sensitivity: Drivers and measurement – Psychological factors

o Takeaways

Overview

Page 3: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 3/76

Motivation and Puzzles

Page 4: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 4/76

4

The importance of this lever has driven a three-foldincrease in the number of pricing directors reportingto C-level officers in the last 10 years

Potential Impact on Operating Profit

3.3%

7.8%

11.1%

2.3%

Fixed

Cost

Volume Variable

Costs

Price

Source: McKinsey study of over 2,400 companies

Motivation

Page 5: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 5/76

5

o Trader Joe’s – Why does Trader Joe’s sell nationally-branded

water, e.g., Poland Spring, at very low prices?

o Catalog Company – Why are more shoes sold at $49 than at $44?

o Walmart

 – Why does Walmart sell Tide detergent for $4.73?

Pricing Puzzles

Page 6: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 6/76

Four Inputs to Pricing

Page 7: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 7/76

7

o Customers (most important, discussed last)

o Company

o Competitors

o Collaborators

o Context (not discussed)

5Cs and Pricing

Page 8: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 8/76

Page 9: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 9/76

9

o Competitor Aggressiveness – The ability of the competitor to sustain a price-based

response, i.e., whether competitor has “deep

pockets”; propensity for “irrational” behavior 

o Willingness to Respond on Price

 – Direct financial cost to the competitor 

o Competitor Position

 – Market leaders are more likely to initiate; followersare more likely to imitate

Competitor Issues

Page 10: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 10/76

10

o Collaborator Incentives – How hard will the collaborator work to “push” your

product; what kind of “pull” support do they expect?

 – What other functions will perform, how much influence

do they have? (see Distribution session) – Also, it’s not just about margins—Return on Assets

(ROA) also matters

ROA =  Assets

Profit

=Sales

Profitx

 Assets

Sales

= Margin x Rotation

Collaborator Issues

Page 11: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 11/76

Page 12: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 12/76

Go To Market Strategies:

Week 9  – Module 2

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

Page 13: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 13/76

2

o Ease of Comparison – Private label products, i.e., retailer brands used to be

placed in a separate section in the store; placing the

private label next to branded products increases the

ease of comparison and thereby increases pricesensitivity

o Expenditure

 –

Large volume users tend to be more price sensitive – Buyers tend to be more price sensitive when the focal

component is a large part of total costs

Price Sensitivity Affected By

Page 14: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 14/76

3

o Shared Expenses –  A separation of between the user, e.g., an employee

and the payer, e.g., an employer can lessen price

sensitivity

o Price / Quality inferences

 – When quality differences exist between, but the user

cannot distinguish them e.g., in the case of complex

legal services, price sensitivity will be lessened – This is especially true when the seller uses branding

and other methods to signal quality

Page 15: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 15/76

4

Conditions of Measurement

Variable

Measured

Natural Experimental

 Actual Purchase

Preferences/

Intentions

Sales data

Field experiments

Laboratory experiments

Surveys Trade-off analysis

(conjoint)

Measuring Price Sensitivity

Page 16: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 16/76

5

Everyday Price Level

70

80

90

100

110

120

-9% Control +9%

Change Index

(Post-Pre)

Unit Volume

Dollar Profit

Field Experiment

Page 17: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 17/76

o 9 endings [e.g., $3.99, etc.] Some experimentssuggest that charging odd prices results in asubstantial effect

o Experiment: Effect of advertised price endings onsales of margarine:

• Regular price $0.83; Sales = 2817

• Discount price $0.63;• Discount price $0.59;

6

(+406%)(+194%)

Psychological Factors

Page 18: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 18/76

Go To Market Strategies:

Week 9 – Module 3

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

Page 19: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 19/76

o Mr. A was given tickets to lotteries involving theWorld Series. He won $50 in one lottery and $25 in

the other.

o Mr. B was given a ticket to a single, larger World

Series lottery. He won $75.

o A: 56 B: 16 No difference: 15

2

Mental Accounting: Who’s Happier?

Page 20: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 20/76

o Mr. A received a letter from the IRS saying that hemade a minor error on his tax return and owed $100.

He received a similar letter the same day from his state

income tax authority saying he owed $50. There were

no other repercussions from either mistake.

o Mr. B received a letter from the IRS saying that he

made a minor error on his tax return and owed $150.

There were no other repercussions from his mistake.

o A: 66 B: 14 No difference: 7

3

Mental Accounting: Who’s Unhappier?

Page 21: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 21/76

o

Four Inputs to Pricing Process marginal cost,willingness to pay, competitive pressures, distributormargins

o Customer Price Sensitivity is a major input into pricing

decisions; it can be assessed through:• EVC to measure customer willingness to pay

• Various statistical and marketing research methods, e.g.,regression and conjoint analysis

Remember to Consider Human Psychology

4

Summary

Page 22: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 22/76

Go To Market Strategies:

Distribution Strategies

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

Page 23: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 23/76

Page 24: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 24/76

o Often the least appreciated element of the 4Ps

o Managers often underestimate its importance as a

• Source of sustainable competitive advantage

• Provider of increasing returns to scale

• Source of customer value

• Very costly element

Place: “Final Frontier”

Page 25: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 25/76

Page 26: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 26/76

o Erecting barriers to entry

o Quality of direct market feedback

o Bundling with high-margin products/services

“Strategic” Advantages of Direct

Page 27: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 27/76

Channel Flows / Functions

Page 28: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 28/76

Breaking bulk

Assorting

Assuring availability

(inventory holding or

BTO)

Customization

Delivery

Installation

Maintenance & repair 

Identifying needs / solutions

Identifying customers / suppliers

Matching needs and solutions

Matching customers and

suppliers

Customization

Assessing / certifying quality

Negotiation / closing the deal Ordering

Market feedback

Physical flows Information flows

* The set of activities that must be performed to deliver the value proposition to the customer 

Channel Flows / Functions

Page 29: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 29/76

o Posilac is a controversial genetically engineered bovinegrowth hormone (BGH) introduced in the US in 1994.

Injected into dairy cattle, it can increase milk production by

10-20%.

o Marketing challenges included:- Educating farmers and overcoming resistance

- Assuring quality control (temperature)

- Handling used syringes

- Monitoring farmers’

usage rate

Question: So, who should do what?

Hybrid Grid (Example)

Page 30: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 30/76

Hybrid Grid (Example)

Page 31: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 31/76

Go To Market Strategies:

Distribution Strategies

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

Page 32: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 32/76

How many outlets to have in a given market?

Number of Retailers

Exclusive  Intensive

Selective

Channel Design: Channel Intensity

Page 33: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 33/76

Selective vs. Intensive

(Number of Intermediaries)

Intensive distribution Selling support not considered vital

Minimizes customers’ cost of obtaining offering

Selective distribution

Tradeoff between selling support and the costs customers face

to obtain the offering

Both are considered important

Exclusive distribution Firm seeks strongest selling support

Customers’ cost of obtaining offering not considered vital

Page 34: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 34/76

Distribution and the PLC

Introduction Growth Maturity Decline

Sales

Home Video Specialist

Circuit City Walmart

Ebay

Logistics NeedsInformation Needs

Intensity

Page 35: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 35/76

o Functions or activities required to succeed depend on thenature of your offering

o You can eliminate intermediaries, but you cannot eliminatefunctions (necessary activities to succeed)!o When intermediaries are eliminated, their functions are merely

shifted…

o FORWARD E.g., IKEA spun off delivery and installation

o BACKWARDS Apple stores to assure consultative selling

o SIDEWAYS Amazon uses FedEx for delivery

o Channel margin = compensation for performing functions

o Functions can vary …o  Across customer segments Different channels?

o Over time, customers need less handholding Channel migration

Implications of Functional View

Page 36: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 36/76

6

Channel Coordination

Page 37: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 37/76

Who wants the dogs?

We have told you many

times - we need exclusive

territories. We do not keep any such

records! (Not a chance ..

they'll start selling direct)

Need more trade promotionsand discounts

Your prices are too high!

Manufacturers Distributors

Carry our full line.. no cherry

picking.

We need active involvement

in selling new products.We need to know more about

(y)our customers so that we

can make better products.

You need to improve saleseffort!

Your channel margins are

too high!

Conflict

Page 38: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 38/76

Manufacturer

Retailer A Retailer B Retailer C   V   e   r   t   i   c   a    l

   C   o   n    f    l   i   c   t   s

Horizontal Conflicts

Types of Conflict

Page 39: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 39/76

Vertical Channel Conflict

Vertical conflict: Conflict between different levels of the

channel

Page 40: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 40/76

o

Integrate, i.e., consider “make” versus “buy”

o Increase “legitimate” power of the downstream player,perhaps through franchising

o Build explicit relationships, e.g., P&G and Walmart

o Monitor downstream partners, e.g., mystery shoppers,surprise visits, etc.

o  Alter incentives via trade promotion policies, e.g., rationing of“hot selling” products, etc.

Managing Vertical Conflict

l fl d

Page 41: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 41/76

Problems between retailers

Low-service, low-price retailers hurt high-service,

high price retailers If possible, consumers can go to high-service

store, get educated, get product information and

then go to low-service store to buy the product

Horizontal Conflict: Free Riding

Page 42: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 42/76

Go To Market Strategies:

Distribution Strategies

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

Page 43: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 43/76

Free Riding: Show-Rooming

Page 44: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 44/76

Free Riding: Show-Rooming

Page 45: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 45/76

More Strategies for

Page 46: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 46/76

More Strategies for

Managing Horizontal Conflict

Establish boundaries between channels

Demarcation by customer or territory

Delineation by product classification

Segmentation by size-of-order

Set appropriate level of distribution intensity

As distribution becomes more selective, reseller support and

merchandising efforts increase

Introduce multiple brands Different brands for different channels

Private brands

More Strategies for

Page 47: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 47/76

o Length of the Channel: how many intermediaries between us and the

customer

• Short, medium, long

o Autonomy

• Owned, franchised, independent

o Density

• Single, Dual, Multiple

6

More Strategies for

Managing Horizontal Conflict

Page 48: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 48/76

       C     o     n        f       l       i     c      t

       C     o     n

        f       l       i     c      t

       C     o     n        f       l       i     c      t

Length

Autonomy

Density

Determinants of Conflict

Page 49: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 49/76

Food For Thought

Identify a firm that has really innovated in the

area of distribution. What did they do, exactly?

How did they minimize conflict?

Page 50: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 50/76

Go To Market Strategies:Targeting and Messaging

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

Page 51: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 51/76

Overview

Trends and Data

“Classic” Campaign (Milk)

7M Framework

Mission and MessageRational Appeals

Emotional Appeals

Page 52: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 52/76

Page 53: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 53/76

Page 54: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 54/76

Page 55: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 55/76

Classic Campaign

C f

Page 56: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 56/76

24.2

24.4

24.6

24.8

25

25.2

25.4

25.6

25.8

26

1987 1988 1989 1990 1991 1992

   G   a    l    l   o   n   s   c   o   n   s   u   m   p   t

   i   o   n   p   e   r   c   a   p   i   t   a

Milk in California

Milk i C lif i

Page 57: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 57/76

o

Milk advertising in 1992:o Adults: Milk is healthy

o Teens: Milk makes you strong and beautiful

o Kids: Milk is cool and fun

o Beliefs about milk in 1992:o “I like the taste of milk”: 80% agree

o “Milk is a healthy drink”: 89% agree

o

Solutiono Increase mindshare: create memorable advertising

campaign

o Manage “rationing”: encourage buyers to bring

more milk home

Milk in California

H

Page 58: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 58/76

Heaven …

G t Milk

Page 59: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 59/76

o

Market (target audience)o People who currently drink

milk

o Message content

o Make sure you have enough

milk (it complements manyother meals)

o Mission

o Increase milk consumption byone glass per week within a

yearo Message design (creative

solution)

o Got Milk? “deprivation”campaign

o

Media strategyo TV, print

o Money

o ??

o Measurement

o 60% aided recall in 3months

o 2.67% ($30M)increase in annualsales

Got Milk

Page 60: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 60/76

7Ms

Th 7M F k

Page 61: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 61/76

o Markets (Who should I talk to? TargetSegment)

o Message Content (What should I tellthem? Key Benefit/Positioning)

o Mission (What do we intend to achieve? Awareness, Knowledge, Interest, Trial)

o Message Design (How should I say it?Creative Strategy)

o Media Strategy (How do I reach them?)

o Money (How much do I need to spend?)

o Measurement (Was it worth it?)

Targeting &Positioning

 Advertising

decisions

The 7M Framework

Page 62: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 62/76

Go To Market Strategies:

Targeting and Messaging

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

D t ti

Page 63: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 63/76

Demonstration

S k

Page 64: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 64/76

Spokesperson

Testimonial

Page 65: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 65/76

Testimonial

Comparison

Page 66: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 66/76

Comparison

Comparison (and Framing)

Page 67: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 67/76

Burger King survey

o How do you prefer your hamburgers? – Fried 25%

 – Flame-broiled 75%

Another survey

o

How do you prefer your hamburgers? – Cooked on a hot stainless steel grill 53%

 – Cooked by passing raw meet through an open flame 47%

Comparison (and Framing)

Page 68: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 68/76

Go To Market Strategies:

Targeting and Messaging

David Bell (@davidbnz)

Xinmei Zhang and Yongge Dai Professor 

Page 69: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 69/76

Emotional Appeals

Fear

Page 70: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 70/76

o Used by … financial services, public

interest, high-tech organizations, amongothers.

o “Inverted-U” relationship for effectiveness

Fear 

Fear (and Humor)

Page 71: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 71/76

Fear (and Humor)

Page 72: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 72/76

Positive Emotions

Page 73: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 73/76

Positive Emotions

Page 74: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 74/76

Appendix: Money andMeasurement

Money

Page 75: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 75/76

o

Methods of setting advertising budgets

• Percentage of sales

• Match (or better) competition

• Objectives and tasks methods

− Harder, because it forces you to justify

− Still, some easy tools available

Money

Money

Page 76: Week9_All Merged PDF

8/11/2019 Week9_All Merged PDF

http://slidepdf.com/reader/full/week9all-merged-pdf 76/76

o

Simplified Parfitt-Collins model

 – Say that a break-even market share required is 6%. Basedon market research I conclude that 30% of those who areaware try the product. Furthermore, only 40% of those who

try become repeat buyers. How much awareness do Ineed?

 – [%aware]*[%try]*[%repeat] = market share

 – [%A]*[.30=%try]*[.40=%repeat] = .06 – [%A]*.12 = .06

 – Implies that 50% must become aware!

Money