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Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control
Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control
Product strategies
Introduction 1. At the heart of every organization lies one or more products that define what the organization does and why it exists. 2. Products are not created and sold as individual elements; rather, products are developed and sold as offerings. An organizations product offering is typically composed of many different elementsusually some combination of tangible goods, services, ideas, or even people. 3. The best way to discuss products as offerings is to think about products as bundles of physical (tangible), service (intangible), and symbolic (perceptual) attributes designed to satisfy customers' needs and wants. 4. Given the state of commoditization in many markets, the core product (the elements that satisfies the basic customer need) typically becomes incapable of differentiating the product offering. 5. Product offerings in and of themselves have little value. Rather, an offerings real value comes from its ability to deliver benefits that enhance a customer's situation or solve a customer's problems.
Prof. Vikram Parekh on Marketing Strategy @ 2009
Product strategies
The Product Portfolio 1. Products fall into two general types: consumer products (used for personal use and enjoyment) and business products (purchased for resale, to make other products, or for use in a firms operations). 2. A product line consists of a group of closely related product items. A product mix or portfolio is the total group of products offered by a company. A. The number of product lines to offer (the width or variety of the product mix) is an important strategic decision. B. The depth of each product line (the assortment) is an important marketing tool. Firms attract a wide range of customers and market segments by offering a deep assortment of products in a specific line. C. Benefits of offering a large portfolio of products: a. Economies of Scale in production, bulk buying, and promotion. b. Package Uniformity all packages in a product line have the same look and feel. c. Standardization product lines can use the same component parts. d. Sales and Distribution Efficiency sales personnel can offer a full range of choices and options to customers. e. Equivalent Quality Beliefs - customers expect and believe that all products in a line are equal in terms of quality and performance.
Prof. Vikram Parekh on Marketing Strategy @ 2009
Product strategies
New Product Development 1. The development and commercialization of new products is a vital part of a firm's efforts to sustain growth and profits. 2. Though many firms base new product introductions on key themes such as product or technological superiority, others simply tweak their current products. 3. Six strategic options related to the newness of products: a. New-to-the-World Products (Discontinuous Innovations) These products involve a pioneering effort by a firm that eventually leads to the creation of an entirely new market. b. New Product Lines These products represent new offerings by the firm, but the firm introduces them into established markets. c. Product Line Extensions These products supplement an existing product line with new styles, models, features, or flavors. d. Improvements or Revisions of Existing Products These products offer customers improved performance or greater perceived value. e. Repositioning This strategy involves targeting existing products at new markets or segments. f. Cost Reductions This strategy involves modifying products to offer performance similar to competing products at a lower price.
Prof. Vikram Parekh on Marketing Strategy @ 2009
Product strategies
Branding Strategy 1. A brand is a combination of name, symbol, term, or design that identifies a specific product. Brands have two parts: a. Brand name the part of a brand that can be spoken, including words, letters, and numbers. b. Brand mark symbols, figures, or a design that cannot be spoken. 2. To be truly effective, a brand should succinctly capture the product offering in a way that answers a question in the customers mind. 3. Strategic Issues in Branding Strategy 4. Manufacturer versus Private-Label Brands 1. Private-label brands or store brands are owned by the merchants that sell them. 2. Strategically, the choices to sell, carry, or distribute manufacturer brands or privatelabel brands are not an either-or decision as both types of brands of key advantages. 3. Manufacturer brands are important in driving customer traffic.They also give customers confidence that they are buying a widely known brand from a respected company. Brand Alliances Cobranding is the use of two or more brands on one product to leverage the equity of multiple brands to create distinctive products with distinctive differentiation. Brand licensing involves a contractual agreement where a company permits an organization to use its brand on non-competing products in exchange for a licensing fee.
Prof. Vikram Parekh on Marketing Strategy @ 2009
Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control
Pricing strategies
Introduction 1. There is no other component of the marketing program that firms become more infatuated with than pricing. There are at least four reasons for this attention:
1. 2. 3. There are only two ways for a firm to grow revenue: increase prices or increase the volume of product sold. Pricing is the easiest of all marketing variables to change. Firms take considerable pains to discover and anticipate the pricing strategies and tactics of other firms.
2. 3.
Price is considered to be the only real means of differentiation in mature markets plagued by commoditization. Having a solid understanding of pricing issues is important because far too many firms and their managers use a seat-of-the-pants approach to pricing by guessing the best price for their goods and services
Pricing strategies
The Role of Pricing in Marketing Strategy The Seller's Perspective on Pricing The Buyer's Perspective on Pricing
Pricing strategies
The Role of Pricing in Marketing Strategy The Seller's Perspective on Pricing 1. Sellers have a tendency to inflate prices because they want to receive as much as possible in an exchange with a buyer. 2. Price is often more about what the seller will accept in exchange for a product, rather than market reality. 3. From the seller's perspective, four key issues become important in pricing:
1. Costs A firm that fails to cover both its direct and indirect costs will not make a profit. 2. Demand Firms must know what customers will pay for a product before offering it for sale. To fully understand the relationship between price and demand, firms must have a good knowledge of the price elasticity associated with their product offering. 3. Customer value The bottom-line impact or value delivered to the customer is often more important than the selling firms costs. 4. Competitors prices A selling organization should be very much aware of what its competitors charge for the same or comparable products.
Prof. Vikram Parekh on Marketing Strategy @ 2009
Pricing strategies
The Role of Pricing in Marketing Strategy The Buyer's Perspective on Pricing 1. Buyers often see prices as being lower than market reality. 2. For buyers, price is about what the buyer will give up in exchange for a product. The key for the selling firm, is to determine just how much the buyer will give up. 3. From the buyer's perspective, two key issues determine pricing strategy:
1. Perceived value What buyers will give up in exchange for a product depends on their perceived value of the product. 2. Price sensitivity Buyers experience unique and varying buying situations that cause them to be more or less sensitive to price.
4. Value can be defined as a customers subjective evaluation of benefits relative to costs to determine the worth of a firms product offering relative to other product offerings. A simple formula for value: Perceived Value = Customer Benefits Customer Costs
Prof. Vikram Parekh on Marketing Strategy @ 2009
Pricing strategies
Pricing Strategies Base Pricing Strategies Adjusting Prices in Consumer Markets Adjusting Prices in Business Markets
Pricing strategies
Pricing Strategies Base Pricing Strategies 1. A firm's base pricing strategy establishes the initial price and sets the range of possible price movements throughout the product's life cycle. 2. Base pricing approaches: A. Market Introduction Pricing used when products are first launched into the market
a. b. Pricing skimming occurs when a firm intentionally sets ahigh price relative to the competition. Penetration pricing occurs when a firm sets a relatively lowinitial price to maximize sales, gain widespread market acceptance, and capture a large market share quickly.
B. Prestige Pricing setting prices at the top end of all competing products in a category to promote an image of exclusivity and superior quality. C. Value-based Pricing setting reasonably low prices, but still offering high quality products and adequate customer services. The practice is commonly called EDLP in retail markets. D. Competitive Matching focuses on matching competitors' prices and price changes. E. Non-price Strategies building a marketing program around factors other than price. Non-price strategies are most effective when 1) the product can be successfully differentiated, 2) customers see the differentiating characteristics as being important, 3) competitors cannot emulate the differentiating characteristics, and 4) the market is generally not sensitive to price.
Prof. Vikram Parekh on Marketing Strategy @ 2009
Pricing strategies
Pricing Strategies Adjusting Prices in Consumer Markets 1. Promotional Discounting using sales or other special promotions to attract customers and create excitement. 2. Reference Pricing comparing the actual selling price to an internal or external reference price. a. All customers use internal reference prices, or the internal expectation for what a product should cost. b. External reference prices are typically provided by the manufacturer or retailer. 3. Odd-Even Pricing prices are rarely set at whole, round numbers. 4. Price Bundling bringing together two or more complementary products for a single price. Prof. Vikram Parekh on Marketing Strategy @ 2009
Pricing strategies
Pricing Strategies Adjusting Prices in Business Markets 1. Trade Discounts Manufacturers will reduce prices for certain intermediaries based on the functions that the intermediary performs. 2. Discounts and Allowances Business buyers can take advantage of sales and other price breaks including discounts for cash, quantity or bulk discounts, seasonal discounts, or trade allowances for participation in advertising or sales support programs. 3. Geographic Pricing Selling firms often quote prices in terms of reductions or increases based on transportation costs or the actual physical distance between the seller and the buyer. 4. Transfer Pricing Transfer pricing occurs when one unit in an organization sells products to another unit. 5. Barter and Countertrade In business exchanges across national boundaries, companies use products, rather than cash, for payments.
Prof. Vikram Parekh on Marketing Strategy @ 2009
Pricing strategies
Pricing Strategies Legal and Ethical Issues in Pricing Price Discrimination 1. Price discrimination occurs when firms charge different prices to different customers. 2. In general, price discrimination is illegal, unless the price differential has a basis in actual cost differences in selling products to one customer relative to another. 3. There are two ways to defend price discrimination: a. Base the difference on the lower costs of doing business with one customer compared to another. b. One customer receives a lower price offer in order to meet the price of a competitor. Price Fixing 1. Price fixing occurs when competitors collaborate in setting prices. 2. The U.S. Department of Justice has determined that, while following a competitor's lead in an upward or downward trend is acceptable, there can be no signaling of prices for particular products in this process. Predatory Pricing 1. Predatory pricing occurs when a firm charges very low prices for a product with the intent of driving competition out of business or out of aspecific market. 2. Predatory pricing is illegal; however, it is extremely difficult to prove in court. The challenge in predatory pricing cases is to prove that the predatory firm had the willful intent to ruin the competition. Deceptive Pricing 1. Deceptive pricing occurs when firms intentionally mislead customers with price promotions. 2. Superficial discounting occurs when a firm advertises a sale price as a reduction below the normal price when it is not the case. Prof. Vikram Parekh on Marketing Strategy @ 2009
Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control
Promotion strategies
Introduction 1. Marketing communications includes conveying and sharing meaning between buyers and sellers, either as individuals, firms, or between individuals and firms. 2. Integrated marketing communications (IMC) refers to the strategic, coordinated use of promotion to create one consistent message across multiple channels to ensure maximum persuasive impact on the firm's current and potential customers. 3. IMC takes a 360-degree view of the customer that considers each and every contact that a customer or potential customer may have in their relationship with the firm. 4. Integrated marketing communications has grown in importance: a. IMC allows a firm to foster long-term relationships with customers. b. Firms using IMC enjoy reduced costs and more efficient use of promotional resources. c. Many firms have moved to IMC because mass media advertising has become more expensive and less predictable than in the past. d. Advancing technology now allows firms to target customers directly via direct mail, e-mail, or online promotion.
Prof. Vikram Parekh on Marketing Strategy @ 2009
Promotion strategies
Strategic Issues in Integrated Marketing Communications 1. When selecting promotional elements to include in the IMC program, it is important to take a holistic perspective. 2. The classic model for outlining promotional goals is the AIDA model:
1. Attention the first major goal of any promotional campaign is to attract the attention of potential customers. 2. Interest the firm must spark interest in the product by demonstrating its features, uses, and benefits. 3. Desire good promotion will stimulate desire by convincing potential customers of the product's superiority and its ability to satisfy needs. 4. Action promotion must push customers toward the actual purchase.
3. The role and importance of specific promotional elements varies across the steps in the AIDA model.
1. Mass communication elements, such as advertising and public relations, are used to stimulate awareness and interest. 2. Sales promotion activities, such as product samples or demonstrations, are vital to stimulating interest in the product. 3. The enhanced communication effectiveness of personal selling makes it ideal for moving potential customers through desire and into action. 4. Other sales promotion activities, such as product displays, coupons, and trial size packaging, are well suited to pushing customers toward the final act of making a purchase.
Promotion strategies
Strategic Issues in Integrated Marketing Communications 4. The firm must also consider its promotional goals with respect to the supply chain. In essence, the firm must decide whether it will use a pull strategy, a push strategy, or some combination of the two.
a. Firms use a pull strategy when they focus their promotional efforts toward stimulating demand among final customers, who then exert pressure on the supply chain to carry the product. Firms use a push strategy when they focus their promotional efforts on members of the supply chain to motivate them to spend extra time and effort on selling the product.
b.
5. The role and importance of specific promotional elements varies depending on the nature of the product and its stage in the product life cycle
Prof. Vikram Parekh on Marketing Strategy @ 2009
Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control
Sales channels
Sales channels through which direct marketing takes place include: Mail orders or Catalogs Tele-marketing Teleshopping Direct response through media
Tele-marketing makes use of the telephone to contact customers Teleshopping is a kind of direct marketing for exhibiting a product on television Direct response through media is akin to mail order marketing. It makes use of various media like TV, radio, newspaper, etc. to inform customers about a product
Authority flows down from top level to bottom level in a hierarchical manner and decision-making is highly centralized. Suited for small organizations or departments Staff specialist in various areas like marketing research, advertising, etc. they advise to the sales managers, sales staff. Suited for large sales personnel organization or organization with large products and large customer base
The specialist for each activity like sales promotion or advertising will have line authority over the salespersons Self-managing teams for various functions like sales, new product development, etc Firms which offers diverse products like banking, insurance, services, and so on, salesperson who are specialized in selling each of these products will be required
For organization that adopts geographic specialization, the sales force will be grouped on the basis of geographical regions Salesperson sells a range of products that are suitable for a particular market or a customer group
Personal selling
In 2006, 5.4crore people in the world were engaged in personal selling Worldwide sales worth $99 bn were made through personal selling in 2006 Selling that involves a face-toface interaction with the customer Personal selling is one of the components of promotion, the other being advertising, sales promotion, and publicity Personal selling involves higher costs than advertisements Amway, Tupperware, Avon
Personal selling
Personal selling objectives
Qualitative objectives The effectiveness of personal selling depends upon the overall corporate objectives and the various elements in the promotion mix Quantitative objectives Achievement of the sales volume or sales targets fixed for the sales force
Prof. Vikram Parekh on Marketing Strategy @ 2009
Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control
Distribution strategy
Strategic issues in distribution Types of distribution channels Considerations in distribution channels Distribution intensity Conflict and control in distribution channels Managing the channel International channels
Distribution strategy
In August 2005, HCL Infosystems launched low cost PC @ Rs.9,990 In 2005, HCL market share was 13.7% in PCs & notebook market Traditionally, HCL had distribution network consisted of fair mix of retail outlets and distributors HCL new distribution strategy
To strengthen its distribution network To sell its products through internet portals
Loyalty issues
One level
Manufacturing Automobile dealer Retailer Consumer
Two level
Manufacturing Wholesaler Retailer Consumer FMCGs, consumer electronics. HUL, P&G, Sony & Toshiba
Three level
M Agent Wholesaler Reverse Channel of Distribution Flexible distribution channels Prof. Vikram Parekh on Marketing Strategy @ 2009 Retailer Consumer
To ensure that middlemen have certain characteristics which make them suitable for the job A major consideration in choosing a distribution channel is the ability of the channel to reach customers in the most effective manner Nature of the product should be considered . IKEA (page 430)
The organization may have decided on the price at which it intends to sell its products. This decision will impact its decision to choose the distributor In setting up a distribution channel involves deciding on the various functions to be performed by the channel
Distribution intensity
Distribution intensity is the level of availability intensive, selective, or exclusive - selected for a particular product by the marketer Exclusive coverage Selective coverage Intensive coverage Distribution intensity will be the lowest Distribution intensity will be greater than in the case of exclusive coverage Distribution intensity is high
Distribution intensity
Determinants of distribution intensity Brand strategy of manufacturer Channel practices of manufacturer Retailer requirements Control variables
Brand strategy focuses on brand positioning on the basis of quality as well as target focus Channel practices focus on the coordination efforts and support programs of the manufacturers Contractual limitations as well as investments made by the retailers Three control variables the use of distributors, use of multiple channels, and the sales volume of the brand
Prof. Vikram Parekh on Marketing Strategy @ 2009
High
Possibility of a dangerous channel conflict
Low
Allow the aggrieved channel to decline Do not act
High Low
Mutually beneficial manufacturer-distributor relationship Flexibility in manufacturerdistributor relationship Maximum control over the distribution network Adequate incentives for distributors
International channels
Considerations in setting up global distribution channels Problems with local channel partners Guidelines in order to fend off the likely problems that may arise in international distribution: Select distributors carefully Select distributors with a long-term focus Build long-term relationships with the distributors Provide adequate support for the local distributors Control over the localized marketing strategy Ensure adequate information flow
Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control
CEO
Marketing Manager
CEO
Marketing Manager
CEO
Marketing Manager
Marketing Manager
Products
Advertising
Sales
Marketing Research
Territory B
Territory C
Types of global organization structure Domestic organization Volume expansion International division
Functional structure Product line structure Geographic structure Matrix structure
Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control
Marketing plan
Marketing planning is a logical sequence of activities that involves the setting of marketing objectiv3s and the formulation of a marketing plan to achieve those objectives. It is the process of identifying what and to whom the sales are to be made in the long term, in order to achieve the sales target and to generate revenues. Results of formalized marketing planning process are: Improved communication Enhances coordination Anticipation of developments Reducing conflicts Prof. Vikram Parekh on Marketing Strategy @ 2009 Some of the strategic issues faced with regard to the marketing plans are: Lack of adequate support from top management Lack of support from line management Isolating marketing planning from corporate planning Perceived as once-a-year activity
Barriers to the implementation of marketing strategy Marketing functions Marketing programs Marketing systems Marketing policies
Performance assessment
Sales analysis Marketing cost analysis
Marketing control
Marketing control involves activity control and personnel control Activity Control Process of ensuring that the marketing activities produce a desire results Personnel Control Attempts of the management and other stakeholders within the organization to influence the behavior and activities of the marketing personnel to achieve the desired results
Prof. Vikram Parekh on Marketing Strategy @ 2009
Marketing plan Marketing strategy implementation Strategic evaluation and control Marketing control
Marketing Strategy
1. 2. 3. 4. 5. 6. 7. Product strategies Pricing strategies Promotion strategies Sales force strategies Distribution strategies Designing an effective marketing organization Marketing strategy implementation and control