Segmentation

SWOT

Targeting -Product Life Cycle -Innovation Adoption Curve PESTL

Positioning 4 Differentiation ! "ange om#etitors ustomers om#any

4Ps: Product Price Place Promotion

Brand

om#etition -Porter s !ive !orces

Service

Selling -Personal Selling -Direct Marketing

E$#ansion Strategy -Ansoff s "#pansion $rid

Marketing Strategy -STP -Differentiation -4Ps -Selling -Brand -Service

Market Segmentation
%Dividing &arket into s&aller groups of 'uyers (it) distinct needs* c)aracteristics or 'e)aviors ()o &ig)t re+uire separate products or &arketing &i#es, %Pg -./, Segmenting o onsumer Markets

%eogra#"ic Segmentation %Dividing &arket into different geograp)ical units suc) as nations* states* regions* countries* cities or neig)'or)oods, Co&panies are locali0ing t)eir products* advertising* pro&otion and sales efforts to fit needs of individual geograp)ical units Co&panies are seeking to cultivate as-yet untapped geograp)ic territory 1etailers are developing ne( store concepts to give t)e& access to )ig)erdensity ur'an areas Demogra#"ic Segmentation %Dividing &arket into groups 'ased on de&ograp)ic varia'les suc) as age* se#* fa&ily si0e* fa&ily life cycle* inco&e* occupation* education* religion* race and nationality, Consu&er needs* (ants and usage rates often vary closely (it) de&ograp)ic varia'les De&ograp)ic varia'les are easier to &easure %e2g2 to assess si0e of target &arket, &ge ' Life( ycle Stage Age 3 Life-Cycle Seg&entation %Dividing &arket into different age and lifecycle groups, Marketers &ust guard against stereotypes Age is often a poor predictor of a person s life cycle* )ealt)* (ork or fa&ily status* needs and 'uying po(er %ender $ender Seg&entation %Dividing &arket into different groups 'ased on gender, Marketers )ave noticed opportunities for targeting (o&en )ncome Inco&e Seg&entation %Dividing &arket into different inco&e groups, Psyc"ogra#"ic Segmentation %Dividing &arket into different groups 'ased on social class* lifestyle or personality c)aracteristics, Be"avioral Segmentation %Dividing &arket into groups 'ased on consu&er kno(ledge* attitude* use or response to a product, Occasions 4ccasion Seg&entation %Dividing &arket into groups according to occasions ()en 'uyers get t)e idea to 'uy* actually &ake t)eir purc)ase or use t)e purc)ased ite&, Benefits Soug"t Benefit Seg&entation %Dividing &arket into groups according to different 'enefits t)at consu&ers seek fro& t)e product, !inding &a5or 'enefits people look for in t)e product class !inding kinds of people ()o look for eac) 'enefit !inding &a5or 'rands t)at deliver eac) 'enefit *ser Status Markets can 'e seg&ented into groups of nonusers* e#-users* potential users* first-ti&e users and regular users *sage +ate Markets can 'e seg&ented into lig)t* &ediu& and )eavy product users

o o

Marketers usually prefer to attract one )eavy user to t)eir product or service rat)er t)an several lig)t users Co&panies often target lig)t users (it) t)eir ads and pro&otions Loyalty Status Buyers can 'e divided into groups according to degree of loyalty By studying its less loyal 'uyers* co&pany can detect ()ic) 'rands are &ost co&petitive (it) its o(n *sing Multi#le Segmentation Bases Identify s&aller* 'etter-defined target groups P1I6M 78ou Are 9)ere 8ou Live: %4ne of t)e leading lifestyle seg&entation syste&s 'y Claritas, classifies everyone into one ;< uni+ue neig)'or)ood types or 7clusters: Segmenting Business Markets Business &arketers use varia'les* suc) as custo&er operating c)aracteristics* purc)asing approac)es* situational factors and personal c)aracteristics Segmenting )nternational Markets !e( co&panies )ave eit)er resources or (ill to operate in all* or even &ost* countries Different countries* even t)ose t)at are close toget)er* can vary greatly in econo&ic* cultural and political &akeup $eograp)ic Location Assu&ing nations close to one anot)er (ill )ave &any co&&on traits and 'e)aviors* 'ut t)ere are &any e#ceptions "cono&ic !actors Population inco&e levels or overall level of econo&ic develop&ent Political 3 Legal !actors Type and sta'ility of govern&ent* receptivity to foreign fir&s* &onetary regulations and a&ount of 'ureaucracy Cultural !actors Co&&on languages* religions* values and attitudes* custo&s and 'e)avioral patterns Inter&arket Seg&entation %!or&ing seg&ents of consu&ers )aving si&ilar needs and 'uying 'e)avior even t)oug) t)ey are located in different countries, +e,uirements for Effective Segmentation Measurable = Seg&entation varia'les s)ould 'e a'le to 'e &easured Accessible = Market seg&ents s)ould 'e a'le to 'e effectively reac)ed and served Substantial = Market seg&ents s)ould 'e large or profita'le enoug) to serve Differentiable = Seg&ents s)ould 'e conceptually distinguis)a'le and respond differently to different &arketing &i# ele&ents and progra&s Actionable = "ffective progra&s s)ould 'e designed for attracting and serving t)e seg&ents

o o o o

o o o o o o

Target Marketing %Process of evaluating eac) &arket seg&ent s attractiveness

and selecting one or &ore seg&ents to enter, %Pg ->?, Evaluating Market Segments o Seg&ent Si0e 3 $ro(t) 1ig)t si0e and gro(t) c)aracteristics Largest* fastest-gro(ing seg&ents are not al(ays &ost attractive to every co&pany o Seg&ent Structural Attractiveness Strong and aggressive co&petitors* actual or potential su'stitute products* po(erful 'uyers and po(erful suppliers can decrease seg&ent attractiveness Co&pany 4'5ectives 3 1esources Co&pany &ust consider its o(n o'5ectives and resources

o -

Selecting Target Market Segments o Target Market %A set of 'uyers s)aring co&&on needs or c)aracteristics t)at co&pany decides to serve, o *ndifferentiated %Mass, Marketing %Market-coverage strategy in ()ic) fir& decides to ignore &arket seg&ent differences and go after ()ole &arket (it) one offer, !ocuses on ()at is co&&on in needs of consu&ers rat)er t)an differences Differentiated %Seg&ented, Marketing %Market-coverage strategy in ()ic) fir& decides to target several &arket seg&ents and designs separate offers for eac), Creates &ore total sales t)an undifferentiated &arketing across all seg&ents Increases costs of doing 'usiness Co&pany &ust (eig) increased sales against increased costs oncentrated %@ic)e, Marketing %Market-coverage strategy in ()ic) fir& goes after a large s)are of one or a fe( seg&ents or nic)es, Appealing ()en co&pany resources are li&ited $reater kno(ledge of consu&er needs in nic)es co&pany serves Special reputation Co&pany can &arket &ore effectively and efficiently Involves )ig)er-t)an-nor&al risks = Co&pany (ill suffer greatly if seg&ent turns sour or if larger co&petitors decide to enter sa&e seg&ent (it) greater resources Micromarketing %Practice of tailoring products and &arketing progra&s to needs and (ants of specific individuals and local custo&er groups, Local Marketing %Tailoring 'rands and pro&otions to needs and (ants of local custo&er groups = cities* neig)'or)oods and even specific stores, Drive up &anufacturing and &arketing costs 'y reducing econo&ics of scale Create logistics pro'le&s Brand s overall i&age &ig)t 'e diluted Aelps co&pany to &arket &ore effectively in face of pronounced regional and local differences Meets needs of co&pany s first-line custo&ers = retailers )ndividual Marketing %Tailoring products and &arketing progra&s to needs and preferences of individual custo&ers = also la'eled 7&arkets-of-one &arketing:* 7custo&i0ed &arketing: and 7one-to-one &arketing:, Mass Custo&i0ation %Process t)oug) ()ic) fir&s interact one-to-one (it) &asses of custo&ers to design products and services tailor-&ade to individual needs, Co&panies need to involve custo&ers &ore in all p)ases of product develop&ent and 'uying process* increasing opportunities for 'uyers to

practice self-&arketing %individual custo&ers taking &ore responsi'ility to deter&ine ()ic) products and 'rands to 'uy,

"oosing a Target Marketing Strategy om#any +esources 9)en fir& s resources are li&ited* concentrated &arketing &akes &ore sense Degree of Product -aria.ility Bndifferentiated &arketing is &ore suited for unifor& products Products varying in design are &ore suited to differentiation or concentration Product/s Life( ycle Stage 9)en fir& introduces a ne( product* undifferentiated &arketing or concentrated &arketing &ay &ake &ore sense In &ature stage of product life cycle* differentiated &arketing &akes &ore sense Market -aria.ility If &ost 'uyers )ave sa&e tastes* 'uy sa&e a&ounts and react t)e sa&e to &arketing efforts* undifferentiated &arketing is appropriate om#etitor/s Marketing Strategies Differentiated or concentrated &arketing is &ore advantageous

Socially +es#onsi.le Target Marketing o Biggest issues usually involve targeting of vulnera'le or disadvantaged consu&ers (it) controversial or potentially )ar&ful products

T"e Product Life

products and industries2

ycle &odel can )elp to analy0e &aturity stages of

Any co&pany is constantly seeking (ays to gro( future cas) flo(s 'y &a#i&i0ing revenue fro& t)e sale of products and services2 Cas) !lo( allo(s a co&pany to &aintain its via'ility* invest in ne( product develop&ent and i&prove its (orkforce2 All t)is in an effort to ac+uire additional &arket s)are and 'eco&e a leader in its respective industry2 A constant and sustaina'le cas) flo( %revenue, strea& fro& product sales is key to any long-ter& invest&ent* and t)e 'est (ay to attain a sta'le revenue strea& is to )ave one or &ore Cas) Co(s2 Cas) Co(s are strong products t)at )ave ac)ieved a large &arket s)are in &ature &arkets2 Also* t)e &odern Product Life Cycle is 'eco&ing s)orter and s)orter2 Many products in &ature industries are revitali0ed 'y product differentiation and &arket seg&entation2 4rgani0ations increasingly reassess product life cycle costs and revenues* 'ecause t)e ti&e availa'le to sell a product and recover t)e invest&ent s)rinks2 Alt)oug) t)e product life cycle s)rinks* t)e operating life of &any products is lengt)ening2 !or e#a&ple* t)e operating life of so&e dura'le goods* suc) as auto&o'iles and appliances* )as increased su'stantially2 As a result* t)e co&panies t)at produce t)ese products &ust take t)eir &arket life and service life into account ()en t)ey are planning2 Increasingly* co&panies are atte&pting to opti&i0e revenue and profits over t)e entire life cycle2 T)ey do t)is t)roug) t)e consideration of product (arranties* spare parts* and t)e a'ility to upgrade e#isting products2 It is clear t)at t)e Product Life Cycle concept )as significant i&pact upon 'usiness strategy and corporate perfor&ance2 T)e Product Life Cycle &et)od identifies t)e distinct stages affecting sales of a product2 !ro& t)e productCs inception until its retire&ent2 T"e stages in t"e Product Life ycle

)ntroduction stage2 T)e product is introduced in t)e &arket t)roug) a focused and intense &arketing effort designed to esta'lis) a clear identity and pro&ote &a#i&u& a(areness2 Many trial or i&pulse purc)ases (ill occur at t)is stage2 %ro0t" stage2 Can 'e recogni0ed 'y increasing sales and t)e e&ergence of co&petitors2 At t)e vendorCs side* t)e $ro(t) stage is also c)aracteri0ed 'y sustained &arketing activities2 So&e custo&ers &ake repeat purc)ases2

Maturity stage2 T)is p)ase can 'e recogni0ed ()en co&petitors 'eginning to leave t)e &arket2 Also* sales velocity is dra&atically reduced* and sales volu&e reac)es a steady level2 At t)is point in ti&e* typically loyal custo&ers purc)ase t)e product2 Decline stage2 T)e lingering effects of co&petition* unfavora'le econo&ic conditions* ne( trends* etc* often e#plain t)e decline in sales2

W"at is t"e )nnovation &do#tion

urve1

T)e innovation adoption curve classifies adopters of innovations into various categories2 It is 'ased on t)e idea t)at certain individuals are inevita'ly &ore open for adaptation t)an ot)ers2

*sage of )nnovation &do#tion

urve2 Practice

T)e adoption curve is useful to re&e&'er it is useless to try to ,uickly and massively convince t"e mass of a ne0 controversial idea2 It is 'etter to start first (it) convincing t)e innovators and t"e early ado#ters2 Also t)e categories and percentages can 'e used as a first draft to esti&ate target groups for co&&unication purposes2

T"e researc" focus of Diffusion "as 3ive elements:

-2 C)aracteristics of an innovation ()ic) &ay influence its adoptionD <2 Decision-&aking process t)at occurs ()en individuals consider to adopt a ne( idea* product or practiceD /2 C)aracteristics of individuals t)at &ake t)e& likely to adopt an innovationD 42 Conse+uences for individuals and society of adopting an innovationD and E2 Co&&unication c)annels used in t)e adoption process2

)nnovation &do#tion

urve categories

Innovators. Brave people, pulling the change. Innovators are very important communication mechanisms. Early Adopters. Respectable people, opinion leaders, try out new ideas, but in a careful way. Early Majority. Thoughtful people, careful but accept change more quickly than average people do. Late Majority. Skeptic people, will use new ideas or products only when the ma ority is using it. Laggards. Traditional people, love to stick to the !old ways!, are critical about new ideas and will only accept it if the new idea has become mainstream or even tradition.

Positioning for

om#etitive &dvantage %Arranging for product to

occupy a clear* distinctive and desira'le place relative to co&peting products in &inds of target consu&ers, %Pg <F4, Consu&ers position products (it) or (it)out t)e )elp of &arketers* 'ut &arketers do not (ant to leave t)eir products positions to c)ance Positioning Ma#s o Perceptual positioning &aps s)o( consu&er perceptions of co&pany s 'rands versus co&peting products on i&portant 'uying di&ensions "oosing a Positioning Strategy o )dentifying Possi.le om#etitive &dvantages %Advantage over co&petitors gained 'y offering consu&ers greater value* eit)er t)roug) lo(er prices or 'y providing &ore 'enefits t)at 5ustify )ig)er prices, Product Differentiation Products can 'e differentiated on features* perfor&ances or style and design Can differentiate products on attri'utes as consistency* dura'ility* relia'ility or repara'ility Services Differentiation Speedy* convenient or careful delivery 1epair Services Providing custo&er training service or consulting services C)annel Differentiation T)e (ay co&panies design its c)annel s coverage* e#pertise and perfor&ance People Differentiation Airing and training 'etter people t)an co&petitors do I&age Differentiation Co&pany or 'rand i&age s)ould convey product s distinctive 'enefits and positioning Sy&'ols* fa&ous c)aracters* colors and ot)er i&age ele&ents o "oosing t"e +ig"t om#etitive &dvantage 5o0 Many Differences to Promote1 Develop a uni+ue selling proposition %BSP, as 'uyers tend to re&e&'er nu&'er one 'etter* especially in an over co&&unicated society Position on &ore t)an one differentiator if t(o or &ore fir&s are clai&ing to 'e 'est on sa&e attri'ute As co&panies increase nu&'er of clai&s* t)ey risk dis'elief and loss of clear positioning W"ic" Differences to Promote1 I&portant = Difference delivers a )ig)ly valued 'enefit to target 'uyers Distinctive = Co&petitors do not offer t)e difference or co&pany can offer it &ore distinctively Superior = Difference is superior to ot)er (ays t)at custo&ers &ig)t o'tain t)e sa&e 'enefit Co&&unica'le = Difference is co&&unica'le and visi'le to 'uyers Pree&ptive = Co&petitors cannot easily copy t)e difference Afforda'le = Buyers can afford to pay for difference Profita'le = Co&pany can introduce difference profita'ly

D)33E+E4T)&T)O4

Selecting an Overall Positioning Strategy Galue Proposition %!ull positioning of 'rand = !ull &i# of 'enefits upon ()ic) it is positioned, More for More Providing &ost upscale product or service and c)arging a )ig)er price to cover t)e )ig)er costs 4ften invite i&itators ()o clai& t)e sa&e +uality 'ut at a lo(er price More for t"e Same Introducing a 'rand offering co&para'le +uality to &ore-for-&ore positioned co&petitors 'ut at a lo(er price T"e Same for Less 4ffering 'rands sa&e as depart&ent stores and specialty stores 'ut at deep discounts 'ased on superior purc)asing po(er and lo(er-cost operations Less for Muc" Less Products t)at offer less and t)erefore cost less Involves &eeting consu&ers lo(er perfor&ance or +uality re+uire&ents at a &uc) lo(er price More for Less In t)e s)ort run* so&e co&panies can actually ac)ieve suc) lofty positions In t)e long run* co&panies (ill find it very difficult to sustain suc) 'est-of'ot) positioning Co&panies t)at try to deliver 'ot) &ay lose out to &ore focused co&petitors

Develo#ing a Positioning Statement %State&ent t)at su&&ari0es co&pany or 'rand positioning = To %target seg&ent and need, our %'rand, is %concept, t)at %point-of-difference,, Placing a 'rand in a specific category suggests si&ilarities* 'ut 'rand s superiority is &ade on its points of difference So&eti&es* &arketers put a 'rand in a surprisingly different category 'efore indicating points of difference

ommunicating ' Delivering t"e "osen Position o All t)e co&pany s &arketing &i# %4 Ps, efforts &ust support t)e positioning strategy o Co&pany &ust take care to &aintain t)e desired position t)roug) consistent perfor&ance and co&&unication o Product s position s)ould evolve gradually as it adapts to ever-c)anging &arketing environ&ent

4P ! Product
W"at is a Product1 %Pg <-., Product %Anyt)ing t)at can 'e offered to &arket for attention* ac+uisition* use or consu&ption* satisfying (ant or need, includes &ore t)an 5ust tangi'le goods Service %Any activity or 'enefit one party can offer to anot)er t)at is essentially intangi'le and not resulting in o(ners)ip of anyt)ing, Products6 Services ' E$#eriences o 4ffer 'rings value to target custo&ers o To differentiate offers* 'eyond si&ply &aking products and delivering services* co&panies are staging* &arketing and delivering &e&ora'le custo&er e#periences Levels of Product ' Services o "ac) level adds &ore custo&er value o Level - = Core Benefit Core* pro'le&-solving 'enefits or services consu&ers seek o Level < = Actual Product H-I !eatures* H<I design* H/I +uality level* H4I 'rand na&e and HEI packaging o Level / = Aug&ented Product Additional consu&er services and 'enefits* e2g2 after-sales service* (arranty* installation and delivery and credit

Product ' Service o

lassifications

onsumer Products %Products 'oug)t 'y consu&er for personal consu&ption,

onvenience Product H-I !re+uent purc)ase* H<I little planning and s)opping effort* H/I little co&parison* H4I lo( custo&er involve&ent Lo( 9idespread* convenient locations S"o##ing Product S#ecialty Product *nsoug"t Product Little product a(areness* kno(ledge %If a(are* little or even negative interest, Garies

ustomer Buying Be"avior

H-I Less fre+uent H-I Strong 'rand purc)ase* H<I preference and &uc) planning and loyalty* H<I special s)opping effort* H/I purc)ase effort* H/I 'rand co&parison little 'rand on price* +uality* co&parison* H4I lo( style price sensitivity Aig)er Selective* fe(er outlets Aig) "#clusive* one or fe( outlets per &arket area More carefully targeted pro&otion 'y producer and resellers

Price Distri.uti on

Garies

Promotio n

Mass pro&otion 'y producer

Advertising and personal selling 'y producer and resellers

Aggressive advertising and personal selling 'y producer and resellers Life insurance* 1ed Cross 'lood donations

E$am#les

Toot)paste* &aga0ines* laundry detergent

Ma5or appliances* televisions* furniture* clot)ing

Lu#ury goods

)ndustrial Products %Products 'oug)t 'y individuals and organi0ations for furt)er processing or for use in conducting 'usiness Materials 3 Parts Include H-I ra( &aterials and H<I &anufactured &aterials and parts Price and service are &a5or &arketing factors Capital Ite&s Aid in 'uyer s production or operations Include H-I installations and H<I accessory e+uip&ent Supplies 3 Services Supplies include H-I operating supplies and H<I repair and &aintenance ite&s Supplies are convenience products Services include H-I &aintenance and repair services and H<I 'usiness advisory services Services are usually supplied under contract

Product ' Service Decisions %Pg <<E,

Level - = )ndividual Product ' Service Decisions o Product ' Service &ttri.utes Product 7uality %A'ility of product to perfor& its functions* includes overall dura'ility* relia'ility* precision* ease of operation and repair, Creates custo&er value and satisfaction Co&panies s)ould H-I c)oose perfor&ance +uality level &atc)ing target &arket needs and co&peting products and H<I strive for )ig) confor&ance +uality Product 3eatures Differentiates product fro& co&petitors Co&panies s)ould H-I drop features custo&ers value little in relation to costs and H<I add features custo&ers value )ig)ly in relation to costs Product Style ' Design Style descri'es product appearance* 'ut design contri'utes of product s usefulness as (ell as looks S)apes custo&ers product or service e#perience Product designers s)ould t)ink H-I less a'out product attri'utes and tec)nical specifications and H<I &ore a'out )o( custo&ers use and 'enefit fro& product o Branding Brand %@a&e* ter&* sign* sy&'ol* design or co&'ination to identify and differentiate goods or services, H-I Aelps consu&ers identify products t)at &ig)t 'enefit t)e& and H<I tells 'uyer a'out product +uality H-I Basis on ()ic) ()ole story can 'e 'uilt a'out product s special +ualities* H<I provides legal protection for uni+ue product features and H/I )elps seg&ent &arkets o Packaging %Activities of designing and producing container or (rapper for product, Includes H-I pri&ary container* H<I secondary package and H/I s)ipping package H-I Contains and protects product* H<I attracts attention* H/I descri'es product and H4I &akes sale Many co&panies H-I use )ard-to-open 7c)ildproof: and ta&per-resistant packages and H<I reduce packaging and use environ&entally responsi'le packaging &aterial o La.eling H-I Identifies product or 'rand* H<I descri'es 7()o:* 7()ere:* 7()en:* 7()at: and 7)o(: a'out product and H/I pro&otes product t)roug) attractive grap)ics o Product Su##ort Services Co&panies H-I survey custo&ers periodically to assess current services value and o'tain ideas for ne( ones* H<I assess cost of providing t)ese services and H/I develop package of services delig)ting custo&ers and yielding profits to co&pany

Level < = Product Line %$roup of products closely related 'ecause of si&ilar functions* sa&e custo&er groups* sa&e types of &arketing outlets or si&ilar price ranges, Decisions o Product line lengt) is influenced 'y H-I co&pany o'5ectives* e2g2 allo( for upselling* allo( cross-selling and protect against econo&ic s(ings* and H<I resources o Co&pany can perfor& line stretc)ing 'y lengt)ening product line 'eyond current range Stretc) do(n(ard to H-I plug &arket )ole* H<I respond to co&petitor s attack on upper end* H/I gro( faster in lo(-end Stretc) up(ard to H-I add prestige to current products* H<I gro( faster or earn )ig)er &argins at )ig)er end Co&panies at upper end can stretc) do(n(ard* &iddle range in 'ot) directions and lo(er end can stretc) up(ard o Co&pany can perfor& line filling 'y adding &ore ite&s (it)in present range To H-I reac) for e#tra profits* H<I satisfy dealers* H/I use e#cess capacity* H4I 'e leading full-line co&pany and HEI plug )oles to kept out co&petitors 4verdone if it results in canni'ali0ation and custo&er confusion Co&panies s)ould ensure ne( ite&s are noticea'ly different fro& e#isting ones Level / = Product Mi$ %Set of all product lines and ite&s, Decisions o Product &i# (idt) refers to nu&'er of different product lines o Product &i# lengt) refers to total nu&'er of ite&s o Product line dept) refers to nu&'er of versions offered of eac) product in line o Product &i# consistency refers to )o( closely related various product lines are in end use* production re+uire&ents* distri'ution c)annels or ot)er (ays

4e0(Product Develo#ment
!ir&s &ust H-I develop ne( products to replace aging ones and H<I adapt its &arketing strategies in face of c)anging tastes* tec)nologies and co&petition

4e0(Product Develo#ment Strategy %Pg <E., !ir&s can o'tain ne( products t)roug) H-I ac+uisition or H<I ne(-product develop&ent %Develop&ent of original products* product i&prove&ents* product &odifications and ne( 'rands t)roug) fir& s o(n 13D efforts, @e( products fail 'ecause H-I &arket si0e )as 'een overesti&ated* H<I actual product is not designed as (ell as it s)ould )ave 'een* H/I incorrectly positioned in &arket* priced too )ig) or advertised poorly* H4I pus)ed despite poor &arketing researc) findings* HEI costs of product develop&ent are )ig)er t)an e#pected or H;I co&petitors fig)t 'ack )arder t)an e#pected Step - = )dea %eneration %Syste&atic searc) for ne(-product ideas, o )nternal )dea Sources !or&al researc) and develop&ent Brains of e&ployees* e2g2 7intrapreneurial: progra&s Creative innovation approac)es* e2g2 "urekaJ 1anc) o E$ternal )dea Sources Custo&ers Co&pany can analy0e custo&er +uestions and co&plaints Co&pany can &eet (it) and (ork alongside custo&ers Co&pany can conduct surveys or focus groups Co&pany can put ne( products and uses created 'y consu&ers on &arket Co&pany can give custo&ers tools and resources to design products Co&petitors Co&pany can 'uy co&peting ne( products* take t)e& apart to see )o( t)ey (ork* analy0e t)eir sales and decide Distri'utors 3 Suppliers Co&pany can o'tain infor&ation a'out consu&er pro'le&s and ne(-product possi'ilities fro& resellers Co&pany can o'tain ne( concepts* tec)ni+ues and &aterials fro& suppliers Trade &aga0ines* s)o(s and se&inars* govern&ent agencies* ne(-product consultants* advertising agencies* &arketing researc) fir&s* university and co&&ercial la'oratories and inventors o Searc) for ideas s)ould 'e syste&atic* not )ap)a0ard* e2g2 idea &anage&ent syste& Step < = )dea Screening %Screening ne(-product ideas to spot good and drop poor ones, o Co&pany (ants to go a)ead only (it) profita'le product ideas 'ecause product develop&ent costs rise greatly in later stages Step / = once#t Develo#ment ' Testing o Product idea is idea for possi'le product t)at co&pany can see itself offering to &arket o Product concept is detailed version of idea stated in &eaningful consu&er ter&s o Product i&age is t)e (ay consu&ers perceive actual or potential product o once#t Develo#ment o once#t Testing %Testing ne(-product concepts (it) group of target consu&ers to find out consu&er appeal, 9ord or picture description &ay suffice* 'ut &ore concrete and p)ysical presentation of concept increases relia'ility of concept test Step 4 = Marketing Strategy Develo#ment %Designing initial &arketing strategy for ne( product 'ased on product concept, o !irst part descri'es H-I target &arket* H<I planned product positioning and H/I sales* &arket s)are and profit goals for first fe( years o Second part outlines H-I planned price* H<I distri'ution and H/I &arketing 'udget for first year

T)ird part descri'es H-I planned long-run sales* H<I profit goals and H/I &arketing &i# strategy Step E = Business &nalysis %1evie( of sales* costs and profit pro5ections to find out ()et)er t)ey satisfy co&pany s o'5ectives, o

Step ; = Product Develo#ment %Developing product concept into p)ysical product to ensure product idea can turn into (orka'le product, o 13D depart&ent (ill develop and test one or &ore p)ysical versions of product concept o Products undergo rigorous tests to ensure H-I safe and effective perfor&ance or H<I consu&ers find value in t)e& o @e(-product &ust H-I )ave re+uired functional features and H<I convey intended psyc)ological c)aracteristics Step ? = Test Marketing %Product and &arketing progra& are tested in &ore realistic &arket settings, o Test &arketing H-I costs can 'e )ig) and H<I takes ti&e t)at &ay allo( co&petitors to gain advantages o Ao(ever* test &arketing costs are often s&all co&pared to costs of &a5or &istake o 9)en H-I costs of developing and introducing product are lo( or H<I &anage&ent is already confident* co&pany &ay do little or no test &arketing o Approac) - = Standard Test Markets Co&pany H-I finds s&all nu&'er of representative test cities* H<I conducts full &arketing ca&paign in t)ese cities and H/I uses store audits* consu&er and distri'utor surveys and ot)er &easures to gauge product perfor&ance H-I Gery costly* H<I takes long ti&e* H/I co&petitors can &onitor test &arket results or even interfere and H4I co&petitors can look at ne( product (ell 'efore introducing nationally o Approac) < = ontrolled Test Markets 1esearc) fir&s keep controlled panels of store t)at )ave agreed to carry ne( products for a fee H-I Allo(s co&panies to evaluate specific &arketing efforts* H<I costs less and H/I co&pleted +uickly Ao(ever* H-I co&petitors can look at ne( product and H<I li&ited nu&'er of controlled test &arkets &ay not 'e representative of products &arkets or target consu&ers o Approac) / = Simulated Test Markets H-I Co&pany or researc) fir& s)o(s ads and pro&otions for variety of products* including ne( product 'eing tested* to sa&ple of consu&ers* H<I gives t)e& &oney and H/I invites t)e& to real or la'oratory store ()ere t)ey &ay keep or use &oney to 'uy ite&s H-I Provides &easure of trial and co&&ercial s effectiveness against co&peting co&&ercials* H<I costs &uc) less* H/I co&pleted &ore +uickly and H4I keep ne( product out of co&petitors vie( Ao(ever* s&all sa&ples and si&ulated s)opping environ&ent &ay not 'e accurate or relia'le Step . = ommerciali8ation %Introducing ne( product into &arket, o Co&pany &ust decide H-I introduction ti&ing and H<I ()ere to launc) ne( product o Can develop H-I planned &arket rollout over ti&e or H<I glo'al rollouts Organi8ing for 4e0(Product Develo#ment o Se+uential product develop&ent %4ne co&pany depart&ent (orks to co&plete its stage 'efore passing ne( product to ne#t depart&ent and stage, H-I 'rings control to co&ple# and risky pro5ects* 'ut H-I can 'e dangerously slo( o Si&ultaneousKTea&-'ased product develop&ent %Garious co&pany depart&ents (ork closely toget)er* overlapping steps in product-develop&ent process, H-I saves ti&e and H<I increases effectiveness* 'ut H-I can 'e riskier* H<I &ore costly* H/I increases organi0ational tension and confusion and H4I affect product s +uality adversely

Product Life( ycle Strategies%Pg <?4,

Product Life Cycle %PLC, %Course of product s sales and profits over its lifeti&e, @ot all products follo( typical product life cycle Product classes )ave longest life cycles and stay in &ature stage for long ti&e Product for&s tend to )ave standard PLC s)ape Specific 'rand s life cycle can c)ange +uickly 'ecause of c)anging co&petitive attacks and responses Style %Basic and distinctive &ode of e#pression, lasts for generations and s)o(s periods of rene(ed interest !as)ion %Currently accepted or popular style, gro(s slo(ly* re&ains popular for a ()ile and declines slo(ly !ad %Te&porary period of unusually )ig) sales driven 'y consu&er ent)usias& and i&&ediate product or 'rand popularity, &ay 'e part or &ay co&prise entire life cycle May 'e )ard to H-I identify ()ic) stage of PLC product is in* H<I pinpoint ()en product &oves into ne#t stage* H/I deter&ine factors affecting product s &ove&ent t)roug) stages and H4I use PLC concept to develop &arketing strategy 'ecause strategy is 'ot) cause and result of PLC Stages Stage - = Product Develop&ent o Sales are 0ero and invest&ent costs &ount Stage < = )ntroduction Stage o Profits are negative or lo( 'ecause of lo( sales and )ig) distri'ution and pro&otion e#penses o Co&pany* especially &arket pioneer* &ust c)oose launc) strategy consistent (it) intended product positioning Stage / = %ro0t" Stage o To sustain rapid &arket gro(t)* fir& can H-I i&prove product +uality and add ne( features and &odels* H<I enter ne( &arket seg&ents and distri'ution c)annels* H/I s)ift advertising fro& 'uilding product a(areness to product conviction and purc)ase and H4I lo(er prices at rig)t ti&e Stage 4 = Maturity Stage o Slo(do(n in sales gro(t) 'ecause product )as ac)ieved acceptance 'y &ost potential 'uyers o Profits level off or decline 'ecause of increased &arketing outlays to defend co&petition o 9eaker co&petitors start dropping out and eventually* only (ell-esta'lis)ed co&petitors re&ain o To &odify &arket* co&pany can H-I look for ne( users and &arket seg&ents* H<I reposition 'rand to appeal to larger or faster-gro(ing seg&ent* H/I increase usage a&ong present custo&ers and H4I find ne( uses o To &odify product* co&pany can H-I i&prove product s +uality and perfor&ance and H<I product s styling and attractiveness o To &odify &arketing &i#* co&pany can H-I cut prices and H<I launc) 'etter advertising ca&paign or use aggressive sales pro&otion Stage E = Decline Stage o Manage&ent can H-I &aintain 'rand (it)out c)ange* H<I reposition or refor&ulate 'rand* H/I )arvest product or H4I drop product fro& line

)ntroduction Sales Lo( sales Aig) cost per custo&er @egative

%ro0t" 1apidly rising sales Average cost per custo&er 1ising profits

Maturity Peak sales Lo( cost per custo&er Aig) profits Middle &a5ority Sta'le nu&'er 'eginning to decline Ma#i&i0e profit ()ile defending &arket s)are Diversify 'rand and &odels Price to &atc) or 'eat co&petitors Build &ore intensive distri'ution

Decline Declining sales Lo( cost per custo&er Declining profits Laggards

Costs

"aracteris tics

Profits Custo&er s

Innovators

"arly adopters

Co&petito rs

!e(

$ro(ing nu&'er

Declining nu&'er

Marketing O.9ectives

Create product a(areness and trial

Ma#i&i0e &arket s)are

1educe e#penditures and &ilk t)e 'rand

Product

4ffer 'asic product

4ffer product e#tensions* service* (arranty Price to penetrate &arket

P)ase out (eak ite&s

Price

Bse cost-plus

Cut price

Distri'utio n Strategies

Build selective distri'ution

Build intensive distri'ution

$o selective* p)ase out unprofita'le outlets 1educe to level needed to retain )ardcore loyals

Advertisin g

Build product a(areness a&ong early adopters and dealers

Build a(areness and interest in &ass &arket 1educe to take advantage of )eavy consu&er de&and

Stress 'rand differences and 'enefits

Bse )eavy sales Sales pro&otion to Pro&otion entice trial

Increase to encourage 'rand s(itc)ing

1educe to &ini&al level

4P ( Price
Co&panies s)ould sell value* not price* i2e2 )ig)er price for co&pany s 'rand is 5ustified 'y greater value it delivers

W"at is a Price1 %Pg <.>, Price %H-I A&ount of &oney c)arged for product or service or H<I su& of values consu&ers e#c)ange for 'enefits of )aving or using product or service, Today/s 4e0 Pricing Environment o Dyna&ic Pricing %C)arging different prices depending on individual custo&ers and situations, o Advantages for &arketers include a'ility to H-I price tailored products accordingly and H<I c)ange prices on t)e fly o Advantages for 'uyers include a'ility to H-I co&pare product and price instantly on (e'sites and H<I negotiate lo(er prices Pricing: &n )m#ortant .ut Difficult Decision o In &arketing &i#* price is H-I only ele&ent producing revenue and H<I one of &ost fle#i'le ele&ent o Mistakes include H-I reducing prices too +uickly to get sale rat)er t)an convincing product s (ort)* H<I pricing t)at is too cost oriented rat)er t)an custo&er-value oriented and H/I price t)at does not take rest of &arketing &i# into account onsider 0"en Setting Prices %Pg <>-,

3actors to -

)nternal 3actors &ffecting Pricing Decisions o Marketing O.9ectives Pricing strategy is largely deter&ined 'y &arket positioning and also 'y general o'5ectives* e2g2 H-I survival* H<I current profit &a#i&i0ation* H/I &arket s)are leaders)ip and H4I product +uality leaders)ip Pricing strategy for not-for-profit and pu'lic organi0ations depends on o'5ectives* e2g2 H-I partial cost recovery or H<I full cost recovery o Marketing Mi$ Strategy Many fir&s support target costing %Pricing t)at starts (it) ideal selling price* t)en targets costs t)at (ill ensure price is &et, 4t)er fir&s create nonprice positions* i2e2 not c)arging lo(est price* 'ut differentiating &arketing offer to &ake product (ort) )ig)er price So&e fir&s even feature )ig) prices as part of positioning o osts Co&pany (ants price to H-I cover all costs and H<I deliver fair rate of return for effort and risk Ty#es of osts !i#ed Costs %Costs not varying (it) production or sales level, Garia'le Costs %Costs varying directly (it) level of production, Total Costs %Su& of fi#ed and varia'le costs for any level of production, If costs are &ore t)an co&petitors * co&pany )ave to H-I c)arge )ig)er price or H<I &ake less profit* putting it at co&petitive disadvantage osts at Different Levels of Production To price (isely* &anage&ent needs to kno( )o( costs vary (it) different level of production and c)oose opti&al level osts as a 3unction of Production E$#erience "#perienceKLearning Curve %Drop in average per-unit production cost t)at co&es (it) accu&ulated production e#perience, !or do(n(ard-sloping e#perience curve* co&pany &ust get large &arket s)are early in product s life cycle 'y follo(ing strategy* i2e2 lo( initial price sales increase costs (ill decrease lo(er prices furt)er Ao(ever* H-I it &ay give product a c)eap i&age* H<I co&petitors &ay fig)t it out to &eet price cuts and H/I co&petitors &ay find lo(er-cost tec)nology t)at allo(s starting at lo(er prices t)an &arket leader s o Organi8ational onsiderations Manage&ent &ust decide ()o (it)in organi0ation s)ould set prices

E$ternal 3actors &ffecting Pricing Decisions o T"e Market ' Demand Costs set lo(er li&it of prices ()ile &arket and de&and set upper li&it Pricing in Different Ty#es of Markets Pure Co&petition o Seller cannot c)arge &ore and (ill not c)arge less t)an &arket price Monopolistic Co&petition o Sellers differentiate 'y price* 'randing* advertising and personal selling 4ligopolistic Co&petition o "ac) seller is alert and responds to co&petitors strategies and &oves Pure Monopoly o In regulated &onopoly* t)e seller set rates per&itted 'y govern&ent o In nonregulated &onopoly* t)e seller prices at ()at &arket (ill 'ear onsumer Perce#tions of Price ' -alue Co&panies &ust H-I understand )o( &uc) value consu&ers place on 'enefits received fro& product and H<I set price t)at fits t)is value &naly8ing t"e Price(Demand +elations"i# H-I De&and curve %Curve s)o(ing nu&'er of units &arket (ill 'uy at different prices, slopes do(n(ards nor&ally* 'ut H<I so&eti&es up(ards for prestige goods 'ecause consu&ers t)ink )ig)er prices &ean &ore +uality 9)en &easuring de&and curves 'y esti&ating de&and at different prices* co&panies &ust not allo( ot)er factors affecting de&and to vary Price Elasticity %Sensitivity of de&and to price c)ange, of Demand Buyers are less price sensitive ()en H-I product is uni+ue or )ig) in +uality* prestige or e#clusiveness* H<I su'stitute is )ard to find or su'stitute s +uality is )ard to co&pare (it)* H/I total e#penditure is lo( relative to inco&e or is s)ared If de&and is elastic* sellers can increase revenue 'y H-I lo(ering prices as long as e#tra costs do not e#ceed e#tra revenue* 'ut &ust avoid pricing t)at turns products into co&&odities* or H<I differentiate t)eir offerings o om#etitors/ osts6 Prices ' Offers Co&pany &ust consider H-I co&petitors costs and prices* H<I possi'le co&petitor reactions and H/I nature of co&petition affected 'y pricing strategy o Ot"er E$ternal 3actors Co&pany &ust consider H-I econo&ic conditions* H<I prices i&pact on ot)er parties in its environ&ent* e2g2 resellers* H/I govern&ent and H4I social concerns

%eneral Pricing &##roac"es %Pg /F<, ost(Based Pricing o Cost-Plus Pricing %Adding standard &arkup to product cost, Bnlikely to lead to 'est price 'ecause it ignores de&and and co&petitor prices 9orks only if assigned price 'rings in e#pected sales level Popular 'ecause H-I pricing is si&plified as sellers are &ore certain a'out costs t)an de&and* H<I ()en all fir&s in industry use t)is pricing &et)od* prices tend to 'e si&ilar and price co&petition is &ini&i0ed and H/I fairer to 'ot) 'uyers and sellers o Break(Even &nalysis ' Target Profit Pricing Break-"venKTarget Profit Pricing %Setting price to H-I 'reak even on costs of &aking and &arketing product or H<I &ake target profit, ost(Based Pricing Produ Co Pric Galu Custo& ct st e e ers

Cost-'ased pricing is product driven Co&pany designs ()at it considers to 'e good product Co&pany totals costs of &aking product Co&pany sets price covering costs plus target profit Co&pany convinces 'uyers value at t)at price 5ustifies purc)ase

-alue(Based Pricing %Setting price 'ased on 'uyers perceptions of value rat)er t)an on seller s cost, -alue(Based Pricing Custo& Galu Pric Co Produ ers e e st ct

Galue-'ased pricing is custo&er driven Co&pany sets target price 'ased on custo&er perceptions of product value Targeted value and price drive decisions a'out product design and ()at costs can 'e incurred -alue Pricing %4ffering 5ust rig)t co&'ination of +uality and good service at fair price, Involves H-I introducing less versions of esta'lis)ed* 'rand na&e products or H<I redesigning e#isting 'rands to offer &ore +uality for given price or sa&e +uality for less "veryday lo( pricing %"DLP, involves c)arging constant* everyday lo( price* 'ut fe( or no te&porary price discounts Aig)-lo( pricing involves )ig)er prices on everyday 'asis* 'ut fre+uent pro&otions to lo(er prices te&porarily on selected ite&s -alue(&dded Marketing 1at)er t)an cutting prices to &atc) co&petitors* co&panies attac) value-added services to differentiate offers and t)us* support )ig)er &argins

om#etition(Based Pricing %Setting price 'ased on prices t)at co&petitors c)arge for si&ilar products, o $oing-rate pricing involves 'asing price largely on co&petitors prices* (it) less attention paid to o(n costs or de&and

Popular 'ecause H-I ()en de&and elasticity is )ard to &easure* going price represents collective (isdo& of industry concerning price t)at (ill yield fair return and H<I it prevents )ar&ful price (ars Sealed-'id pricing ()en fir&s 'id for 5o's

- 4e0(Product Pricing Strategies %Pg /-/, Pricing strategies usually c)ange as product passes t)roug) its life cycle Market(Skimming Pricing %Setting )ig) price for ne( product to ski& &a#i&u& revenues layer 'y layer fro& seg&ents (illing to pay )ig) price, o Co&pany &akes fe(er* 'ut &ore profita'le sales o H-I Product s +uality and i&age &ust support )ig)er price and enoug) 'uyers &ust (ant product at t)at price* H<I costs of producing s&aller volu&e cannot 'e so )ig) t)at advantage of c)arging &ore is cancelled and H/I co&petitors s)ould not 'e a'le to enter &arket easily and undercut )ig) price Market(Penetration Pricing %Setting lo( price for ne( product to attract large nu&'er of 'uyers and large &arket s)are, o Aig) sales volu&e results in falling costs* allo(ing co&pany to cut price even furt)er o H-I Market &ust 'e )ig)ly price sensitive so t)at lo( price produces &ore &arket gro(t)* H<I production and distri'ution costs &ust fall as sales volu&e increases and H/I lo( price &ust )elp keep out co&petition and lo( price position &ust 'e &aintained

( Product Mi$ Pricing Strategies %Pg /-/, !ir& looks for set of prices t)at &a#i&i0es profits on total product &i# Product Line Pricing %Setting price steps 'et(een various products in product line 'ased on H-I cost differences 'et(een products* H<I custo&er evaluations of different features and H/I co&petitors prices, o Seller s task is to esta'lis) perceived +uality differences t)at support price differences O#tional(Product Pricing %Pricing of optional or accessory products along (it) &ain product, o Seller )ave to decide ()ic) ite&s to include in 'ase price and ()ic) to offer as options a#tive(Product Pricing %Setting price for products t)at &ust 'e used along (it) &ain product, o Producers often price &ain product lo( and set )ig) &arkups on supplies o T(o-part pricing* i2e2 fi#ed fee plus varia'le usage rate* in t)e case of services By(Product Pricing %Setting price for 'y-products to &ake &ain product s price &ore co&petitive, o Manufacturer seek &arket for 'y-products and s)ould accept any price covering &ore t)an cost of storing and delivering t)e&

Product Bundle Pricing %Co&'ining several products and offering 'undle at reduced price, Price 'undling can pro&ote sales of products consu&ers &ig)t not ot)er(ise 'uy* 'ut co&'ined price &ust 'e lo( enoug) to get t)e& to 'uy 'undle2 -

4P ( Place
Place strategies 1efers to )o( an organisation (ill distri'ute t)e product or service t)ey are offering to t)e end user2 T)e organisation &ust distri'ute t)e product to t)e user at t)e rig)t place at t)e rig)t ti&e2 "fficient and effective distri'ution is i&portant if t)e organisation is to &eet its overall &arketing o'5ectives2 If organisation underesti&ate de&and and custo&ers cannot purc)ase products 'ecause of it profita'ility (ill 'e affected2

"annel of distri.ution T(o types of c)annel of distri'ution &et)ods are availa'le2 )ndirect distri.ution involves distri'uting your product 'y t)e use of an inter&ediary2 Direct distri.ution involves distri'uting direct fro& a &anufacturer to t)e consu&er e2g2 !or e#a&ple Dell Co&puters2 Clearly direct distri'ution gives a &anufacturer co&plete control over t)eir product2

)ndirect Distri.ution

Direct Distri.ution

Distri.ution Strategies 1. Intensive distributionL Bsed co&&only to distri'ute lo( priced or i&pulse purc)ase products eg c)ocolates* soft drinks2 2. E clusive distribution! Involves li&iting distri'ution to a single outlet2 T)e product is usually )ig)ly priced* and re+uires t)e inter&ediary to place &uc) detail in its sell2 An e#a&ple of (ould 'e t)e sale of ve)icles t)roug) e#clusive dealers2 ". Selective Distribution! A s&all nu&'er of retail outlets are c)osen to distri'ute t)e product2 Selective distri'ution is co&&on (it) products suc) as co&puters* televisions )ouse)old appliances* ()ere consu&ers are (illing to s)op around and ()ere &anufacturers (ant a large geograp)ical spread2

4P ( Promotion
Advertising: Is any non personal paid form of communication using any form of mass media. Public relations: Involves developing positive relationships with the organisation media public. The art of good public relations is not only to obtain favorable publicity within the media, but it is also involves being able to handle successfully negative attention.

Sales promotion: Commonly used to obtain an increase in sales short term. Could involve using money off coupons or special offers. Personal selling: Selling a product service one to one. Direct Mail: Is the sending of publicity material to a named person within an organisation.

Branding Strategy: Building Strong Brands %Pg </E,

Brand E,uity %Positive differential effect t)at kno(ing t)e 'rand na&e )as on custo&er response to product or service, o A &easure of 'rand s e+uity is e#tent to ()ic) custo&ers are (illing to pay &ore for 'rand o Po(erful 'rand H-I en5oys )ig) level of consu&er 'rand a(areness and loyalty* H<I )as &ore leverage in 'argaining (it) resellers* H/I can &ore easily launc) line and 'rand e#tensions* H4I offers co&pany defense against fierce price co&petition and HEI &ost i&portantly* 'uilds strong and profita'le custo&er relations)ips* i2e2 custo&er e+uity Building Strong Brands o Brand Positioning At lo(est level* position 'rand on product attri'utes* 'ut H-I attri'utes can 'e easily copied and H<I custo&ers are not interested in attri'utes as suc)* 'ut ()at t)ey can do for t)e& At )ig)er level* position 'rand on product 'enefits At )ig)est level* position 'rand on strong 'eliefs and values 9)en positioning* &arketer s)ould esta'lis) &ission for 'rand and vision of ()at 'rand &ust 'e and do o Brand 4ame Selection Brand na&e s)ould H-I suggest a'out product s 'enefits and +ualities* H<I easy to pronounce* recogni0e and re&e&'er* H/I distinctive* H4I e#tenda'le* HEI translate easily into foreign languages and H;I capa'le of registration and legal protection !ir&s protect and try to 'uild 'rand na&e t)at (ill eventually 'eco&e identified (it) product category* 'ut risk 'rand na&e 'eco&ing generic na&e any seller can use o Brand S#onsors"i# Manufacturer/s Brands versus Private Brands Manufacturers 'rands )ave long do&inated retail scene* 'ut &ore retailers and ()olesalers )ave created t)eir o(n privateKstore 'rands 1etailers can H-I control ()at products to stock* H<I ()ere products go on s)elf* H/I ()at prices to c)arge* H4I ()ic) products to feature in local circulars and HEI c)arge &anufacturers slotting fees Private 'rands H-I yield )ig)er profit &argins for reseller* H<I give resellers e#clusive products t)at cannot 'e 'oug)t fro& co&petitors and H/I greater store traffic and loyalty Ao(ever* private 'rands are H-I )ard to esta'lis) and H<I costly to stock and pro&ote Leading 'rand &arketers )ave to H-I invest in 13D* H<I design strong advertising progra&s and H/I 7partner: (it) &a5or distri'utors Licensing Provides instant and proven 'rand na&e Includes na&e* c)aracter and corporate 'rand licensing o(Branding %Bsing esta'lis)ed 'rand na&es of t(o different co&panies on sa&e product, Co&'ined 'rands H-I create 'roader consu&er appeal and greater 'rand e+uity* H<I allo( e#pansion of e#isting 'rand into category t)at is difficult to enter alone Ao(ever* co-'randing involves H-I co&ple# legal contracts and licenses* H<I careful coordination of advertising* sales pro&otion and ot)er &arketing efforts and H/I trust 'et(een partners

Brand Develo#ment

E$isting Product ategory E$isting Brand 4ame 4e0 Brand 4ame Line "#tension

4e0 Product ategory Brand "#tension

Multi'rands

@e( Brands

Line E$tensions H-I Lo(-cost* lo(-risk (ay to introduce ne( products* H<I &eet consu&er desires for variety* H/I use e#cess capacity and H4I co&&ands &ore s)elf space fro& resellers Ao(ever* overe#tended 'rand na&e &ay H-I lose specific &eaning* H<I cause consu&er confusion or frustration and H/I 7canni'ali0e: co&pany s ot)er ite&s Brand E$tensions H-I $ives ne( product instant recognition and faster acceptance and H<I saves )ig) advertising costs Ao(ever* e#tension &ay H-I confuse i&age of &ain 'rand* H<I )ar& consu&er attitudes to(ard ot)er products carrying sa&e 'rand na&e if 'rand e#tension fails and H/I not 'e appropriate to ne( product Multi.rands H-I "sta'lis)es different features and appeal to different 'uying &otives and H<I locks up &ore reseller s)elf space Ao(ever* eac) 'rand &ay H-I o'tain only s&all &arket s)are and H<I not 'e very profita'le 4e0 Brands H-I Po(er of e#isting 'rand na&e is (aning and H<I none of current 'rand na&es is appropriate Ao(ever* offering too &any 'rands &ay H-I result in spreading resources too t)in and H<I too fe( differences 'et(een 'rands Managing Brands o Brand s positioning &ust 'e continuously co&&unicated to consu&ers o "veryone in co&pany &ust live t)e 'rand o Co&panies need to periodically audit 'rands strengt)s and (eaknesses* i2e2 'rand audit

Services Marketing
-

%Pg <4/,

4ature ' "aracteristics of a Service o Service Intangi'ility %Cannot 'e seen* tasted* felt* )eard or s&elled 'efore t)ey are 'oug)t, Service provider s)ould H-I &ake service tangi'le in one or &ore (ays and H<I send rig)t signals a'out +uality o Service Insepara'ility %Produced and consu&ed at sa&e ti&e and cannot 'e separated fro& providers, o Service Garia'ility %Muality &ay vary greatly* depending on ()o provides t)e&* ()en* ()ere and )o(, o Service Peris)a'ility %Cannot 'e stored for later sale or use, Service fir&s s)ould design strategies for producing 'etter &atc) 'et(een de&and and supply Marketing Strategies for Service 3irms o Service providers &ust interact effectively (it) custo&ers to create superior value during service encounters o T"e Service(Profit "ain %C)ain linking service fir& profits (it) e&ployee and custo&er satisfaction, Internal service +uality Satisfied and productive service e&ployees $reater service value Satisfied and loyal custo&ers Aealt)y service profits and gro(t)

Co&pany )nterna l Marketi ng "&ploye es )nteractive Marketing E$tern al Marketi ng Custo& ers

Internal Marketing %Marketing to train and effectively &otivate custo&er-contact e&ployees and all supporting service people to (ork as tea& to provide custo&er satisfaction, Interactive Marketing %Marketing t)at recogni0es perceived service +uality depends )eavily on +uality of 'uyer-seller interaction, Calls* clicks and visits Managing Service Differentiation Can differentiate service offer 'y including innovative features Can differentiate service delivery 'y H-I &ore a'le and relia'le custo&er-contact people* H<I superior p)ysical environ&ent or H/I superior delivery process Can differentiate service i&age 'y H-I sy&'ols and H<I 'randing Managing Service 7uality S)ould not only provide good service every ti&e* 'ut also recover fro& service &istakes* i2e2 service recovery* 'y e&po(ering front-line service e&ployees Managing Service Productivity To increase service productivity* H-I train current e&ployees 'etter or )ire ne( ones* H<I increase +uantity of service 'y giving up so&e +uality* H/I 7industriali0e service: 'y adding e+uip&ent and standardi0ing production and H4I )arness po(er of tec)nology

 Ao(ever* &ay reduce longer-run a'ility to H-I innovate* H<I &aintain service +uality or H/I respond to consu&er needs and desires

&dditional Product -

onsiderations %Pg <EF,

Product Decisions ' Social +es#onsi.ility o Co&panies adding products t)roug) ac+uisitions &ay 'e prevented 'y govern&ent if effect t)reatens to lessen co&petition o Co&panies dropping products )ave legal o'ligations to suppliers* dealers and custo&ers ()o )ave stake in dropped products o Co&panies developing ne( products &ust o'ey B2S2 patent la(s o Manufacturers &ust co&ply (it) la(s regarding product +uality and safety )nternational Product ' Services Marketing o Standardi0ation H-I )elps develop consistent (orld(ide i&age* H<I lo(ers &anufacturing costs and H/I eli&inates duplication of researc) and develop&ent* advertising and product design efforts o Ao(ever* H-I consu&ers differ in cultures* attitudes and 'uying 'e)aviors* H<I &arkets vary in econo&ic conditions* co&petition* legal re+uire&ents and p)ysical environ&ents and H/I packaging issues* i2e2 na&es* la'els and colors &ay not translate easily fro& one country to anot)er o T)us* co&panies &ust adapt t)eir product offerings o Service providers face &ore su'tle 'arriers due to H-I )ost country s traditions or H<I )ost country protecting o(n fledgling service industries

Personal Selling %Pg 4E?,

T"e 4ature of Personal Selling o Salesperson &ay 'e order taker* e2g2 standing 'e)ind counter* or order getter* e2g2 positions de&and creative selling and relations)ip 'uilding T"e +ole of t"e Sales 3orce o Personal selling is interpersonal ar& of pro&otion &i#* involving t(o-(ay %personal co&&unication 'et(een salespeople and individual custo&ers, o Advertising is one-(ay %nonpersonal co&&unication (it) target consu&er groups, o Personal selling can 'e &ore effective 'ecause salespeople can pro'e to learn a'out custo&ers pro'le&s and ad5ust &arketing offer and presentation to fit eac) needs o Sales force represent H-I co&pany to custo&ers and H<I custo&ers to co&pany

Managing t"e Sales 3orce %Pg 4E., Sales !orce Manage&ent %Analysis* planning* i&ple&entation and control of sales force activities* includes H-I setting and designing sales force strategy and H<I recruiting* selecting* training* supervising* co&pensating and evaluating fir& s salespeople, Step - - Designing Sales 3orce Strategy ' Structure o Sales 3orce Structure Territorial Sales 3orce Structure %Assigns eac) salesperson to e#clusive geograp)ic territory selling co&pany s full line, Defines eac) salesperson s 5o' and fi#es accounta'ility I&proves selling effectiveness due to desire to 'uild local 'usiness relations)ips Travel e#penses are s&all Product Sales 3orce Structure %Salespeople speciali0e in selling only portion of co&pany s products or lines, Salespeople (ill kno( t)eir products ustomer Sales 3orce Structure %Salespeople speciali0e in selling only to certain custo&ers or industries, Build closer relations)ips (it) i&portant custo&ers om#le$ Sales 3orce Structures %Co&'ines several types of sales force structures, o Sales 3orce Si8e 9orkload Approac) = $rouping of accounts into different classes related to a&ount of effort re+uired to &aintain and t)en deter&ining nu&'er of salespeople needed o Ot"er Sales 3orce Strategy ' Structure )ssues Outside ' )nside Sales 3orces 4utsideK!ield Sales !orce %Salespeople calling on custo&ers, Inside Sales !orce %Salespeople conducting 'usiness fro& offices via telep)ones or visits fro& prospective 'uyers, Inside sales force frees outside salespeople to spend &ore ti&e selling to &a5or accounts and finding &a5or ne( prospects Inside salespeople perfor& fro& direct selling and account service to custo&er analysis and acting as liaisons 'et(een outside salespeople and custo&ers (it) 'roader range of tools Team Selling %Tea&s of people fro& sales* &arketing* engineering* finance* tec)nical support and even upper &anage&ent servicing large* co&ple# accounts, Serves co&plete needs of eac) i&portant custo&er Pro'le&s for custo&ers and salespeople used to one-salesperson concept Sticky co&pensation issues due to difficulties in evaluating individual contri'utions Step < = +ecruiting ' Selecting Sales#eo#le o Careful selection increases overall sales force perfor&ance and avoids costly turnover

o o

Salespeople s)ould 'e H-I &otivated fro& (it)in* H<I disciplined in (ork style* H/I persistent and H4I custo&er pro'le& solvers and relations)ip 'uilders Co&panies s)ould analy0e sales 5o' itself and c)aracteristics of its &ost successful salespeople to identify traits needed

Step / = Training Sales#eo#le o Training progra&s H-I descri'e co&pany s o'5ectives* organi0ation* financial structure* facilities and c)ief products and &arkets* H<I teac) a'out co&petitors strategies and different types of custo&ers and t)eir needs* 'uying &otives and 'uying )a'its and H/I 'asics of selling process o Today* co&panies add in (e'-'ased training Step 4 = om#ensating Sales#eo#le o !i#ed A&ount = Salary gives sta'le inco&e o Garia'le A&ount = Co&&issions or 'onuses re(ards for greater effort and success o "#pense Allo(ances = 1epaying for 5o'-related e#penses allo(s undertaking of needed and desira'le selling efforts

!ringe Benefits = Paid vacations* sickness or accident 'enefits* pensions and life insurance provide 5o' security and satisfaction
To %ain Market S"are +a#idly To Solidify Market Leaders"i# - Co&petitive Pro'le& Solver To Ma$imi8e Profita.ility - Tea& Player - 1elations)ip Manager

)deal Sales#erson

- Independent selfstarter - Deal Making

Sales 3ocus

- Sustained Aig) "ffort

- Consultative Selling

- Account Penetration

- To capture om#ensatio accounts n +ole - To re(ard )ig) perfor&ance

- To &anage product &i# - To re(ard ne( and e#isting account sales - To encourage tea& selling - To re(ard account &anage&ent

o -

Co&panies s)ould re(ard for 'uilding custo&er relations)ips and gro(ing long-run value of eac) custo&er instead of driving salespeople to &ake s)ort-ter& gra's

Step E = Su#ervising Sales#eo#le o Co&panies can )elp to identify custo&er targets and set call nor&s o Co&panies can )elp to set ti&e &anage&ent priorities* e2g2 annual call plan and ti&e-and-duty analysis o Co&panies can adopt sales force auto&ation syste&s o Salespeople &ust 'e &otivated 'y sales &anagers and t)roug) organi0ational cli&ate* sales +uotas and positive incentives Step ; = Evaluating Sales#eo#le o By H-I sales reports* H<I call reports* H/I e#pense reports* H4I personal o'servation* HEI custo&er surveys and H;I talks (it) ot)er salespeople

T"e Personal Selling Process %Pg 4?F, Ste#s in t"e Selling Process %Steps salesperson follo(s ()en selling, o Step - = Pros#ecting ' 7ualifying Identify +ualified potential custo&ers Identify good leads and screen out poor ones o Step < = Prea##roac" Learn as &uc) as possi'le a'out organi0ation of prospect and its 'uyers o Step / = &##roac" Nno( )o( to &eet and greet 'uyer o Step 4 = Presentation ' Demonstration Tell product 7story: to 'uyer* presenting custo&er 'enefits and s)o(ing )o( product solves custo&er pro'le&s o Step E = 5andling O.9ections Seek out )idden o'5ections* clarify o'5ections* take o'5ections as opportunities to provide &ore infor&ation and turn o'5ections into reasons for 'uying o Step ; = losing 1ecogni0e closing signals fro& 'uyer and close sale o Step ? = 3ollo0(*# !ollo( up to ensure custo&er satisfaction and repeat 'usiness Personal Selling ' ustomer +elations"i# Management o Co&pany (ants profita'le custo&er relations)ips* not si&ply transaction-oriented personal selling

Direct Marketing %Pg 4?/,

T"e 4e0 Direct(Marketing %Direct co&&unications (it) carefully targeted individual consu&ers using telep)one* &ail* fa#* e-&ail* internet and ot)er tools, Model o C)anging fro& 'eing supple&entary c)annel or &ediu& to 'eing t)e only approac) Benefits ' %ro0t" of Direct Marketing o !or 'uyers* it is H-I convenient* easy to use and private* H<I ready access to (ealt) of products and infor&ation and H/I i&&ediate and interactive o !or sellers* it H-I targets s&all groups or individual consu&ers* H<I tailors offers to individual needs* H/I pro&otes t)roug) personali0ed co&&unications* H4I reac)es prospects at rig)t &o&ents* HEI gives access to 'uyers unreac)a'le t)roug) ot)er c)annels and H;I is lo(-cost and efficient alternative ustomer Data.ases %4rgani0ed collection of co&pre)ensive data a'out individual custo&ers or prospects, ' Direct Marketing o Data'ase can )elp to H-I identify prospects and generate sales leads* H<I deepen custo&er loyalty* H/I profile custo&ers 'ased on previous purc)asing and H4I decide ()ic) custo&ers s)ould receive particular offers 3orms of Direct Marketing o Tele#"one Marketing H-I Purc)ase convenience and H<I increased product and service infor&ation Ao(ever* unsolicited telep)one &arketing annoys consu&ers o Direct(Mail Marketing Paper 'ased* fa# &ail* e-&ail and voice &ail H-I Direct* one-to-one co&&unication* H<I per&its )ig) target-&arket selectivity* H/I can 'e personali0ed* H4I fle#i'le* HEI allo(s easy &easure&ent of results and H;I people reac)ed are 'etter prospects Ao(ever* H-I cost is )ig)er and H<I &ay 'e resented as 75unk &ail: o atalog Marketing Printed and (e'-'ased 9e'-'ased catalogues H-I save on production* printing and &ailing costs* H<I offer al&ost unli&ited a&ount of &erc)andise* H/I allo( real-ti&e &erc)andising and H4I can 'e spiced up (it) interactive entertain&ent and pro&otional features Ao(ever* (e'-'ased catalogues are passive and &ust 'e &arketed o Direct(+es#onse Television Marketing Direct response advertising and )o&e s)opping c)annels Direct response TG co&&ercials are H-I c)eaper to &ake* H<I &edia purc)ase is less costly and H/I results are easily &easured o :iosk Marketing )ntegrated Direct Marketing o Bsing carefully coordinated &ultiple-&edia* &ultiple-stage ca&paigns o I&prove response rates and profits Pu.lic Policy ' Et"ical )ssues in Direct Marketing o )rritation6 *nfairness6 Dece#tion ' 3raud So&e H-I annoy or offend consu&ers* H<I take unfair advantage of i&pulsive or less sop)isticated 'uyers* H/I &islead 'uyers and H4I pretend to 'e conducting researc) surveys o )nvasion of Privacy "#tensive use of data'ases intrudes on consu&er privacy To address et)ics and pu'lic policy issues* co&panies &ust H-I notify custo&ers ()en personal infor&ation is rented* sold or e#c)anged* H<I )onor consu&er re+uests to 7opt out: of receiving furt)er solicitations or )aving contact infor&ation transferred and H/I re&ove na&es of consu&ers ()o (is) not to receive &ail* telep)one or e-&ail offers

ustomer +elations"i# Management ;

+M<

C1M is a 'usiness strategy and is &ore t)an a functional strategy2 It touc)es t)e organi0ation as a ()oleL &arketing* sales* IT* logistics* finance* production* 13D* A1* &anage&ent* etcetera2 If (e t)us define C1M* it is i&&ediately clear t)at i&ple&enting fullsi0e C1M is a daunting c)allenge2 Creating profita'le and very efficient %client-facing, processes is not enoug)2 !or true Custo&er 1elations)ip Manage&ent a custo&er inti&acy strategy* a relation &arketing p)ilosop)y rat)er t)an a transaction &arketing p)ilosop)y* as (ell as a client-orientation of t)e ()ole organi0ation are re+uired2

*sage of

ustomer +elations"i# Management2 &##lications

Co&panies t)at (ant to reali0e a custo&er inti&acy strategy2 Co&panies t)at (ant to acco&plis) a custo&er friendly i&age2 ustomer +elations"i# Management2 Process

Ste#s in

T)e follo(ing t)ings &ake up t)e &ain ele&ents to create a custo&er relation oriented organi0ationL

-2 Strong custo&er-oriented leaders)ip2 <2 T)e &ission to 'e a relation-oriented organi0ation ai&ed at long-ter& interaction2 /2 T)e corporate purpose is ai&ed at t)e custo&er2
42 T)e &ain strategy is to (in 'y custo&er inti&acy2 E2 Co&pany values and e&ployee values focus on caring for custo&ers2

;2 Be)avioral standards reflect custo&er e&pat)y and t)e (is) to 'uild long-ter&
relations)ips and co&&it&ent2

?2 A relation-oriented organi0ational culture2 .2 An organi0ation t)at is putting custo&er contacts in t)e center2 Co&pareL CoCreation* Business Process 1eengineering2

>2 PeopleL e&pat)ic co&&unication skills* caring for custo&ers2

-F2 Syste&s t)at can )elp to connect and &anage )ard values (it) soft values* suc) as t)e Galue Profit C)ain and t)e Balanced Scorecard2 Strengt"s of ustomer +elations"i# Management2 Benefits

Strong relations (it) clients offer a degree of protection against actions of co&petitors2 Loyal custo&ers can 'e &ore profita'le2 9inning ne( custo&ers is e#pensive* satisfied custo&ers &ay 'uy &ore* )appy custo&ers can 'ring additional custo&ers* etc2 ustomer +elations"i# Management2 Disadvantages

Limitations of

I&ple&enting C1M in a )olistic (ay is no sinecure2 Making large C1M invest&ents profita'le is difficult2 Ac)ieving a Sustaina'le Co&petitive Advantage (it) C1M is even &ore difficult2

&ssum#tions of

ustomer +elations"i# Management2

onditions

If (e are good to custo&ers* t)ey (ill 'e good to us2 C)anging fro& t)e current strategic discipline to(ards a custo&er inti&ate discipline is possi'le2

SWOT analysis
A S94T analysis is a tool* used in &anage&ent and strategy for&ulation2 It can )elp to identify t)e Strengt)s* 9eaknesses* 4pportunities and T)reats of a particular co&pany2 Strengt)s and (eaknesses are internal factors t)at create value or destroy value2 T)ey can include assets* skills* or resources t)at a co&pany )as at its disposal* co&pared to its co&petitors2 T)ey can 'e &easured using internal assess&ents or e#ternal 'enc)&arking2 4pportunities and t)reats are e$ternal factors t)at create value or destroy value2 A co&pany cannot control t)e&2 But t)ey e&erge fro& eit)er t)e co&petitive dyna&ics of t)e industryK&arket or fro& de&ograp)ic* econo&ic* political* tec)nical* social* legal or cultural factors %P"ST,2 Any organi0ation &ust try to create a fit (it) its e#ternal environ&ent2 T)e S94T diagra& is a very good tool for analy0ing t)e %internal, strengt)s and (eaknesses of a corporation and t)e %e#ternal, opportunities and t)reats2 Ao(ever* t)is analysis is 5ust t)e first step2 To really create t)e fit (it) t)e e#ternal environ&ent is often t)e &ost difficult (ork2

Strengt#s Specialist &arketing e#pertise "#clusive access to natural resources

Patents @e(* innovative product or service Location of your 'usiness Cost advantage t)roug) proprietary kno(-)o( Muality processes and procedures Strong 'rand or reputation

$ea%nesses Lack of &arketing e#pertise Bndifferentiated products and service %i2e2 in relation to your co&petitors, Location of your co&pany Co&petitors )ave superior access to distri'ution c)annels Poor +uality of goods or services Da&aged reputation

&pportunities Developing &arket %C)ina* t)e Internet, Mergers* 5oint ventures or strategic alliances

'#reats A ne( co&petitor in your )o&e &arket Price (ar Co&petitor )as a ne(* innovative su'stitute product or service @e( regulations Increased trade 'arriers A potential ne( ta#ation on your product or service

Moving into ne( attractive &arket seg&ents A ne( international &arket Loosening of regulations 1e&oval of international trade 'arriers A &arket t)at is led 'y a (eak co&petitor

PEST analysis
Bsed to scan t"e e$ternal macro(environment in ()ic) a fir& operates

Political "cono&ic Social Tec)nological

P"ST factors play an i&portant role in t)e value creation opportunities of a strategy2 Ao(ever t)ey are usually outside t"e control of t"e cor#oration and must normally .e considered as eit"er t"reats or o##ortunities2 1e&e&'er &acro-econo&ical factors can differ per continent* country or even region* so nor&ally a P"ST analysis s)ould 'e #erformed #er country2 In t)e ta'le 'elo( you find e#a&ples of eac) of t)ese factors2

Political (incl. Legal)

Econo*ic

Social

'ec#nological

"nviron&ental regulations and protection Ta# policies

"cono&ic gro(t)

Inco&e distri'ution

$overn&ent researc) spending

De&ograp)ics* Interest rates 3 Industry focus on Population gro(t) &onetary tec)nological rates* Age policies effort distri'ution

International trade $overn&ent La'or K social @e( inventions regulations and spending &o'ility and develop&ent restrictions Contract Bne&ploy&ent 1ate of tec)nology enforce&ent la( Lifestyle c)anges policy transfer Consu&er protection 9orkKcareer and Life cycle and leisure attitudes speed of "&ploy&ent la(s Ta#ation "ntrepreneurial tec)nological spirit o'solescence $overn&ent "nergy use and organi0ation K "#c)ange rates "ducation costs attitude %C)anges in, Co&petition Inflation rates !as)ion* )ypes Infor&ation regulation Tec)nology Aealt) Stage of t)e consciousness 3 %C)anges in, 'usiness cycle (elfare* feelings Internet Political Sta'ility on safety Safety regulations Consu&er confidence Living conditions %C)anges in, Mo'ile Tec)nology

om#etitive &dvantage ; om#etition<

%Advantage over co&petitors 'y offering consu&ers greater value t)roug) lo(ering prices or providing &ore 'enefits t)at 5ustify )ig)er prices, - Step - = Co&petitor Analysis %H-I Identify key co&petitors* H<I assess t)eir o'5ectives* strategies* strengt)s* (eaknesses and reaction patterns and H/I select ()ic) co&petitors to attack or avoid, - Step < = Co&petitive Marketing Strategies %Strongly position co&pany against co&petitors and give co&pany strongest possi'le strategic advantage, om#etitor &nalysis %Pg 4>E, Step - = )dentifying om#etitors o At narro(est level of definition* co&petitors offer si&ilar products and services at si&ilar prices o @e#t* co&petitors &ake sa&e product or class of products o @e#t* co&petitors &ake products t)at supply sa&e service o At (idest level of definition* co&petitors co&pete for sa&e consu&er dollars o Co&panies &ust avoid 7co&petitor &yopia: and identify current as (ell as latentKfuture co&petitors o Co&panies can identify co&petitors fro& H-I industry or H<I &arket point of vie( Step < = &ssessing om#etitors o Determining om#etitors/ O.9ectives Co&petitor s &i# of o'5ectives reveals H-I ()et)er co&petitor is satisfied (it) current situation and H<I )o( it &ay react to different co&petitive actions Co&petitor s o'5ectives for various seg&ents reveal H-I opportunity if co&petitor discovers ne( seg&ent or H<I (arning if co&petitor plans ne( &oves into seg&ents no( served 'y co&pany o )dentifying om#etitors/ Strategies Strategic $roup %!ir&s in industry follo(ing sa&e or si&ilar strategy, Co&petition is &ost intense (it)in strategic group* 'ut also a&ong groups 'ecause H-I so&e strategic groups appeal to overlapping custo&er seg&ents* H<I custo&ers &ay not see difference and H/I co&panies &ay e#pand into ne( strategic seg&ents o &ssessing om#etitors/ Strengt"s ' Weaknesses Co&panies learn a'out co&petitors strengt)s and (eakness t)roug) H-I secondary data* H<I personal e#perience* H/I (ord of &out) and H4I conducting &arketing researc) Benc)&arking %Co&paring products and processes to find (ays to i&prove +uality and perfor&ance, o Estimating om#etitors/ +eactions $ives clues on )o( to H-I attack co&petitors or H<I defend co&pany s current positions Step / = Selecting om#etitors to &ttack ' &void o Strong or Weak om#etitors Co&peting against (eak co&petitors re+uires less resources and ti&e* 'ut &ay gain little Co&peting (it) strong co&petitors s)arpens a'ilities and provides greater returns o lose or Distant om#etitors Co&panies co&pete (it) close rat)er t)an distant co&petitors Co&panies s)ould avoid 7destroying: close co&petitors 'ecause t)is &ay force (eak co&petitors to sell out to larger fir&s* resulting in larger co&petitors o =%ood> or =Bad om#etitors $ood co&petitors H-I )elp increase total de&and* H<I s)are &arket and product develop&ent costs* H/I )elp legiti&i0e ne( tec)nology* H4I serve less-attractive seg&ents or lead to &ore product differentiation* HEI lo(er antitrust risk and H;I i&prove 'argaining po(er versus la'or or regulators Bad co&petitors s)ake up industry 'y H-I 'uying s)are rat)er t)an earning it and H<I taking large risks Designing a om#etitive )ntelligence System

Syste& s)ould 'e cost-effective as cost in &oney and ti&e of gat)ering co&petitive intelligence is )ig)

om#etitive Strategies %Pg EF-, &##roac"es to Marketing Strategy o Stage - = "ntrepreneurial Marketing Gisuali0e opportunity* construct fle#i'le strategies and knock on every door to gain attention o Stage < = !or&ulated Marketing Develop for&al &arketing strategies and ad)ere to t)e& closely o Stage / = Intrepreneurial Marketing 1eesta'lis) (it)in co&pany entrepreneurial spirit and actions t)at &ade t)e& successful in t)e first place Basic om#etitive Strategies o Co&panies s)ould pursue a clear strategy and not to 'e &iddle-of-t)e-roaders 4verall Cost Leaders)ip Lo( production and distri'ution costs allo( lo(er price and (in large &arket s)are Differentiation Aig)ly differentiated product line and &arketing progra& &akes co&pany class leader in industry !ocus !ocus on serving fe( &arket seg&ents (ell o Co&panies can pursue one or &ore value disciplines to deliver superior custo&er value 4perational "#cellence 1educe costs and create lean and efficient value-delivery syste& to provide relia'le* good-+uality products or services Custo&er Inti&acy Tailor products or services to &atc) needs of target custo&ers e#actly Product Leaders)ip 4ffer continuous strea& of leading-edge products or services om#etitive Positions o Market Leader %!ir& (it) largest &arket s)are, o Market C)allenger %1unner-up fir& fig)ting )ard to increase &arket s)are, o Market !ollo(er %1unner-up fir& (anting to )old its s)are (it)out rocking t)e 'oat, o Market @ic)er %!ir& serving s&all seg&ents overlooked or ignored 'y ot)er fir&s, o Classifications do not apply to ()ole co&pany* 'ut only to position in specific industry Market Leader Strategies o E$#anding t"e Total Demand Develop H-I ne( users* e2g2 in current &arkets* ne( de&ograp)ic seg&ents or ne( geograp)ic seg&ents* H<I ne( uses and H/I &ore usage of its products* e2g2 use product &ore often or &ore per occasion o Protecting Market S"are Prevent or fi# (eaknesses t)at provide opportunities for co&petitors Al(ays fulfill value pro&ise Prices &ust re&ain consistent (it) value custo&ers see in 'rand Neep strong relations)ips (it) valued custo&ers 7Plug )oles: so co&petitors do not 5u&p in Continuous innovation o E$#anding Market S"are Profita'ility rises (it) increasing &arket s)are only ()en H-I unit costs fall (it) increased &arket s)are or H<I pre&iu& price is c)arged for superior-+uality product t)at &ore t)an covers cost of offering )ig)er +uality

Market "allenger Strategies o C)allenger defines ()ic) co&petitors to c)allenge and its strategic o'5ective o C)allenger can attack &arket leader to take over &arket leaders)ip or to (rest &ore &arket s)are o C)allenger can attack si&ilar or s&aller local and regional fir&s to put t)e& out of 'usiness o !ull !rontal Attack Attacks co&petitor s strengt)s 9)en co&pany )as &ore resources t)an co&petitor Largely depends on ()o )as greater strengt) and endurance o Indirect Attack Attacks co&petitor s (eaknesses or on gaps in co&petitor s &arket coverage 9)en co&pany )as fe(er resources t)an co&petitor Market 3ollo0er Strategies o Advantages are H-I avoiding )uge e#penses of developing ne( products and &arkets* e#panding distri'ution and educating &arket* H<I learning fro& leader s e#perience and H/I copying or i&proving leader s products and progra&s (it) less invest&ent o !ollo( Closely To (in custo&ers fro& &arket leader o !ollo( at a Distance To avoid retaliation o !ollo(er &ust keep &anufacturing costs lo( and product +uality and services )ig) Market 4ic"er Strategies o Advantages are H-I kno(ing target custo&er group so (ell t)at needs are &et 'etter and so H<I can c)arge su'stantial &arkup over costs o Speciali0ation Custo&er* &arket* +uality-price and service o Multiple @ic)ing Increases c)ances for survival ustomer ' om#etitor Orientations %Pg E-<,

Balancing -

Co&petitor-Centered Co&pany %Moves &ainly 'ased on co&petitors actions and reactions, o Develops fig)ter orientation* 'ut 'eco&es too reactive o May end up si&ply &atc)ing or e#tending industry practices rat)er t)an seeking innovative ne( (ays to create &ore value for custo&ers Custo&er-Centered Co&pany %!ocuses on custo&er develop&ents in designing &arketing strategies and on delivering superior value to target custo&ers, o Better position to identify ne( opportunities and set long-run strategies Market-Centered Co&pany %Pays 'alanced attention to 'ot) custo&ers and co&petitors in designing &arketing strategies,

4ot

ustomer( entered

ustomer( entered Stage < - Custo&er 4rientation Stage 4 %Today, - Market 4rientation

4ot

om#etitor( entered

Stage - - Product 4rientation Stage / - Co&petitor 4rientation

om#etitor( entered

Porter/s 3ive 3orces

T)e !ive !orces &odel of Porter is an Outside(in .usiness unit strategy tool t)at is used to &ake an analysis of t)e attractiveness %value, of an industry structure2 T)e Co&petitive !orces analysis is &ade 'y t)e identification of E funda&ental co&petitive forcesL -2 Entry of com#etitors2 Ao( easy or difficult is it for ne( entrants to start co&peting* ()ic) 'arriers do e#ist2 <2 T"reat of su.stitutes2 Ao( easy can a product or service 'e su'stituted* especially &ade c)eaper2 /2 Bargaining #o0er of .uyers2 Ao( strong is t)e position of 'uyers2 Can t)ey (ork toget)er in ordering large volu&es2 42 Bargaining #o0er of su##liers2 Ao( strong is t)e position of sellers2 Do &any potential suppliers e#ist or only fe( potential suppliers* &onopolyO E2 +ivalry among t"e e$isting #layers2 Does a strong co&petition 'et(een t)e e#isting players e#istO Is one player very do&inant or are all e+ual in strengt) and si0e2 T"reat of 4e0 Entrants de#ends on: "cono&ies of scale2 Capital K invest&ent re+uire&ents2 Custo&er s(itc)ing costs2 Access to industry distri'ution c)annels2 Access to tec)nology2 Brand loyalty2 Are custo&ers loyalO T)e likeli)ood of retaliation fro& e#isting industry players2 Bargaining Po0er of Su##liers de#ends on: Concentration of suppliers2 Are t)ere &any 'uyers and fe( do&inant suppliersO Branding2 Is t)e 'rand of t)e supplier strongO Profita'ility of suppliers2 Are suppliers forced to raise pricesO Suppliers t)reaten to integrate for(ard into t)e industry %for e#a&pleL 'rand &anufacturers t)reatening to set up t)eir o(n retail outlets,2 Buyers do not t)reaten to integrate 'ack(ards into supply2 1ole of +uality and service2 T)e industry is not a key custo&er group to t)e suppliers2

$overn&ent regulations2 Can ne( entrants get su'sidiesO T"reat of Su.stitutes de#ends on: Muality2 Is a su'stitute 'etterO BuyersC (illingness to su'stitute2 T)e relative price and perfor&ance of su'stitutes2

S(itc)ing costs2 Is it easy for suppliers to find ne( custo&ersO )ntensity of +ivalry de#ends on: T)e structure of co&petition2 1ivalry (ill 'e &ore intense if t)ere are lots of s&all or e+ually si0ed co&petitorsD rivalry (ill 'e less if an industry )as a clear &arket leader2 T)e structure of industry costs2 Industries (it) )ig) fi#ed costs encourage co&petitors to &anufacture at full capacity 'y cutting prices if needed2 Degree of product differentiation2 Industries ()ere products are co&&odities %e2g2 steel* coal, typically )ave greater rivalry2 S(itc)ing costs2 1ivalry is reduced ()en 'uyers )ave )ig) s(itc)ing costs2 Strategic o'5ectives2 If co&petitors pursue aggressive gro(t) strategies* rivalry (ill 'e

T)e costs of s(itc)ing to su'stitutes2 Is it easy to c)ange to anot)er productO Bargaining Po0er of Buyers de#ends on: Concentration of 'uyers2 Are t)ere a fe( do&inant 'uyers and &any sellers in t)e industryO Differentiation2 Are products standardi0edO Profita'ility of 'uyers2 Are 'uyers forced to 'e toug)O 1ole of +uality and service2 T)reat of 'ack(ard and for(ard integration

into t)e industry2 S(itc)ing costs2 Is it easy for 'uyers to s(itc) t)eir supplierO

&ore intense2 If co&petitors are &erely P&ilkingP profits in a &ature industry* t)e degree of rivalry is typically lo(2 "#it 'arriers2 9)en 'arriers to leaving an industry are )ig)* co&petitors tend to e#)i'it greater rivalry2

Strengt"s of t"e 3ive om#etitive 3orces Model2 Benefits T)e &odel is a strong tool for co&petitive analysis at industry level2 Co&pareL P"ST Analysis It provides useful input for perfor&ing a S94T Analysis2

#/s E$#ansion %rid

Deter&ine gro0t" o##ortunities2 T)e ProductKMarket $rid )as t(o di&ensionsL products and &arkets2 4ver t)ese < di&ensions* four gro(t) strategies can 'e for&ed2 3our gro0t" strategies in t"e Product?Market %rid -2 Market Penetration2 Sell &ore of t)e sa&e products or services in current &arkets2 T)ese strategies nor&ally try to c)ange incidental clients to regular clients* and regular client into )eavy clients2 Typical syste&s are volu&e discounts* 'onus cards and Custo&er 1elations)ip Manage&ent2 Strategy is often to ac)ieve econo&ies of scale t)roug) &ore efficient &anufacturing* &ore efficient distri'ution* &ore purc)asing po(er* over)ead s)aring2 <2 Market Develo#ment2 Sell &ore of t)e sa&e products or services in ne( &arkets2 T)ese strategies often try to lure clients a(ay fro& co&petitors or introduce e#isting products in foreign &arkets or introduce ne( 'rand na&es in a &arket2 @e( &arkets can 'e geograp)ic or functional* suc) as ()en (e sell t)e sa&e product for anot)er purpose2 S&all &odifications &ay 'e necessary2 Be(are of cultural differences2 /2 Product Develo#ment2 Sell ne( products or services in current &arkets2 T)ese strategies often try to sell ot)er products to %regular, clients2 T)ese can 'e accessories* add-ons* or co&pletely ne( products2 Cross-selling2 4ften* e#isting co&&unication c)annels are used2 42 Diversification2 Sell ne( products or services in ne( &arkets2 T)ese strategies are t)e &ost risky type of strategies2 4ften t)ere is a credi'ility focus in t)e co&&unication to e#plain ()y t)e co&pany enters ne( &arkets (it) ne( products2 4n t)e ot)er )and diversification strategies also can decrease risk* 'ecause a large corporation can spread certain risks if it operates on &ore t)an one &arket2 Diversification can 'e done in four (aysL o +ori,ontal diversification2 T)is occurs ()en t)e co&pany ac+uires or develops ne( products t)at could appeal to its current custo&er groups even t)oug) t)ose ne( products &ay 'e tec)nologically unrelated to t)e e#isting product lines2 -ertical diversification2 T)e co&pany &oves into t)e 'usiness of its suppliers or into t)e 'usiness of its custo&ers2 .oncentric diversification2 T)is results in ne( product lines or services t)at )ave tec)nological andKor &arketing synergies (it) e#isting product lines* even t)oug) t)e products &ay appeal to a ne( custo&er group2 .onglo*erate diversification2 T)is occurs ()en t)ere is neit)er tec)nological nor &arketing synergy and t)is re+uires reac)ing ne( custo&er groups2 So&eti&es used 'y large co&panies seeking (ays to 'alance a cyclical portfolio (it) a non-cyclical one2

o o

T)e BC$ Matri# &et)od is t)e &ost

(ell-kno(n #ortfolio management tool2 T)e BC$ Matri# can 'e used to deter&ine ()at priorities s)ould 'e given in t)e product portfolio of a 'usiness unit2 To ensure long-ter& value creation* a co&pany s)ould )ave a portfolio of products t)at contains 'ot) )ig)-gro(t) products in need of cas) inputs and lo(-gro(t) products t)at generate a lot of cas)2 T)e Boston Consulting $roup Matri# )as < di&ensionsL market s"are and market gro0t"2 T"e .asic idea .e"ind it is: if a #roduct "as a .igger market s"are6 or if t"e #roduct@s market gro0s faster6 it is .etter for t"e com#any2 T"e four segments of t"e B % Matri$ Placing products in t)e BC$ &atri# provides 4 categories in a portfolio of a co&panyL Stars %)ig) gro(t)* )ig) &arket s)are, o Stars are using large a&ounts of cas)2 Stars are leaders in t)e 'usiness2 T)erefore t)ey s)ould also generate large a&ounts of cas)2 o Stars are fre+uently roug)ly in 'alance on net cas) flo(2 Ao(ever if needed any atte&pt s)ould 'e &ade to )old your &arket s)are in Stars* 'ecause t)e re(ards (ill 'e Cas) Co(s if &arket s)are is kept2 o0s %lo( gro(t)* )ig) &arket s)are,

as" o o

Profits and cas) generation s)ould 'e )ig)2 Because of t)e lo( gro(t)* invest&ents ()ic) are needed s)ould 'e lo(2 Cas) Co(s are often t)e stars of yesterday and t)ey are t)e foundation of a co&pany2

Dogs %lo( gro(t)* lo( &arket s)are, o o o Avoid and &ini&i0e t)e nu&'er of Dogs in a co&pany2 9atc) out for e#pensive Qrescue plans 2 Dogs &ust deliver cas)* ot)er(ise t)ey &ust 'e li+uidated2

7uestion Marks %)ig) gro(t)* lo( &arket s)are, o o o Muestion Marks )ave t)e (orst cas) c)aracteristics of all* 'ecause t)ey )ave )ig) cas) de&ands and generate lo( returns* 'ecause of t)eir lo( &arket s)are2 If t)e &arket s)are re&ains unc)anged* Muestion Marks (ill si&ply a'sor' great a&ounts of cas)2 "it)er invest )eavily* or sell off* or invest not)ing and generate any cas) t)at you can2 Increase &arket s)are or deliver cas)2

T"e B % Matri$ and one si8e fits all strategies T)e BC$ Matri# &et)od can )elp to understand a fre+uently &ade strategy &istakeL )aving a one si0e fits all strategy approac)* suc) as a generic gro(t) target %> percent per year, or

a generic return on capital of say >*ER for an entire corporation2

In suc) a scenarioL as" o0s Business *nits (ill reac) t)eir profit target easily2 T)eir &anage&ent )ave an easy 5o'2 T)e e#ecutives are often praised any)o(2 "ven (orse* t)ey are often allo(ed to reinvest su'stantial cas) a&ounts in t)eir &ature 'usinesses2 Dogs Business *nits are fig)ting an i&possi'le 'attle and* even (orse* no( and t)en invest&ents are &ade2 T)ese are )opeless atte&pts to Pturn t)e 'usiness aroundP2 As a result all 7uestion Marks and Stars receive only &ediocre invest&ent funds2 In t)is (ay t)ey can never 'eco&e Cas) Co(s2 T)ese inade+uate invested su&s of &oney are a (aste of &oney2 "it)er t)ese SBBs s)ould receive enoug) invest&ent funds to ena'le t)e& to ac)ieve a real &arket do&inance and 'eco&e Cas) Co(s %or Stars,* or ot)er(ise co&panies are advised to disinvest2 T)ey can t)en try to get any possi'le cas) fro& t)e Muestion Marks t)at (ere not selected2