Study Guide for Lecture 6 Target Marketing 2 Positioning

Definition Developing a specific marketing mix to influence potential customers overall perception of a brand, product line, or organization in general. According to Ries and Trout Consumers organize products into categories in their mind. The goal of positioning is to be the first thing that comes to mind in the category. Two approaches Head to head positioning Direct competition Same attributes Differentiation positioning Different attributes than the market leader According to Bruce It is better to be first place in a small category than second place in a larger category America loves a winner Who was the second person to set foot on the moon Who was the first woman in space Seven up is the largest selling caffeine-free clear soft drink Ridiculous sports statistics How to you become the category leader? The easy way

Be there first First name in computers? First name in copiers?

The hard way Use the marketing mix to create a marketing position Expensive Remember about commercial information Hard to do

Three step process Figure out who you are Figure out where you want to be Design a plan to get from here to there

Figure out who you are According to Bruce: Many companies dont know how their customers actually perceive them Three usual sources of information Sales Feedback from people who make a living from you Self knowledge

Three good sources of information Complaints Critics Market research Internal marketing audit SWOT analysis The goal is to develop an honest and balanced understanding of who you are to your customers Identify the important attributes for a product class

Statistical tools Conjoint analysis What is important to the customer Multidimensional scaling Who is doing what Judgment

Perceptual map Graphic representation position Plot products graphically Identify gaps

Three Circles Positioning Framework

Design a plan to get there

What will it take to succeed in the new position Changes to the product Features Organizational resources To support the change To defend the position once the change is successful Anticipate competitive response Two basic approaches Create a new category

In the consumers mind The key is that you must be first in this category Swiffer product Leggs distribution

Repositioning Against the competition Create a new category relative to something familiar The Uncola Against yourself Miller Lite Prell

Forecasting

What is a forecast? Estimated sales of a product for a defined future period Bruce: A guess The effort you put into the guess depends on: How much is at stake The amount of uncertainty How the forecast will be used Terminology Market size Dollars Units You need both to understand market dynamics Market potential (Industry potential) Upper limit for the market If everybody who needed one bought one Sales potential Upper limit for you If everything went right, who much could you sell? Market share

The portion of a market captured by a single entity Usually expressed as a percent Market factor Exists in a market Is measurable Related to demand

Sales Forecast An actionable sales estimate based on: Sales potential Marketing plan Known mitigating factors Unknown mitigating factors Tennessee windage Over optimism

Methods

Market factor analysis

Correlation between demand and known market factors Advantages Relatively easy Reliable Disadvantages Requires known market factor Less useful for fashion and other volatile products

Works well in industrial markets OEM

If you are making tires, each new car starts out with 4 tires and a spare New car production schedules are market factors Aftermarket Sparkplug example

Survey knowledgeable people

Buyers intentions Ask your customers what they plan on purchasing in the next period Formal methods Survey Informal methods Canvassing i.e, working the crowd at conventions Works best in business markets Relatively few buyers Buyers know what they need

Advantage The customer is forecasting demand Disadvantage Can be used as a negotiating tactic Overestimate demand in order to get concession Assumes loyal customers

Salesforce survey Similar to buyer intentions Ask salespeople to estimate customer purchases Advantages Easier to get cooperation Front-line information

Disadvantages Fear of quotas Salespeople are optimistic by nature

Statistical methods

Trend analysis Future sales are projected based on previous results Time series analysis Cyclical adjustments Widely used in industries with relatively stable demand Best for short-term predictions

Advantage Very easy to use Disadvantages Straight line projection fallacy Ignores foreseeable environmental factors Henry Sibley High School

Test marketing Introduce product on a limited scale May be a full-blown introduction Complete marketing mix test May be used to test components of the marketing mix Product Promotion Most useful for new or unpredictable products Advantages Reliable information if done right Ability to fix things before going into large scale production Disadvantages

Expensive Time-consuming Give competitors a chance to copy you and be first to market

Judgment Direct forecast Senior executives estimate demand Best used in early stages of strategic projects Lost horse method Start with what you know about a historical fact Make assumptions about what has happened since

Advantage Timely Inexpensive You have some very smart people Disadvantage You are asking for opinions Biases

Chain ratio method

According to Bruce Combines the best of the other techniques Integrates forecasting into strategic management Conceptually Start with market potential Reduce the potential with a series of facts/assumptions that are critical to the strategic plan You end up with an actionable estimate that takes into account everything you know about the market Example Selling coffee in class Market potential 1400 (market factor)

x 10% attendance 140 (trend analysis) x coffee drinkers 70 (research) x havent already bought 18 (Judgment) x $1.00/cup - $18 Baseline forecast - $18 Now we play the what if games

How to use a sales forecast Recognize it is a guess Develop multiple scenarios Best case Worst case If you cant live with the worst case scenario, dont do it. Most likely Develop contingency plans What do you do if it works How to maximize profit What do you do if it doesnt Diagnose problems Minimize losses