MSCA Session 2

Dr.R.Satish Kumar

Session Objectives

PEST Analysis To show the value of an integrated marketing plan To discuss the elements of a well-integrated marketing plan To present five types of marketing plan analysis: benchmarking, customer satisfaction research, marketing cost analysis, sales analysis, and the marketing audit To see the merit of anticipating and planning for the future

PEST analysi
Political factors Economic factors Socio-cultural factors Technological fact

Political/ Legal
Monopolies legislation Environmental protection laws Taxation policy Employment laws Government policy Legislation

Economic Factors
Inflation Employment Disposable income Business cycles Energy availability and cost

Sociocultural factors
Demographics Distribution of income Social mobility Lifestyle changes Consumerism Levels of education

Technological
New discoveries and innovations Speed of technology transfer Rates of obsolescence Internet Information technology

Definitions of Strategy and Tactics

Strategy: An explicit statement of the firm s vision of its future, objectives, and purpose Provides long-term direction for decisions Includes corporate policies, resource allocations, customer markets, and competitive environment

Definitions of Strategy and Tactics (cont d)

Tactics: Serve as guidelines for implementing the intent of the strategic plan Are the basis for day-to-day operating decisions (including the marketing mix) Have a shorter-term planning horizon than strategic planning

Dimensions That Define Strategy

The product market in which the business will compete The level of investment in a strategic business unit The functional area strategies required for competing in the chosen market The underlying strategic assets and skills (core competencies) that give the firm a sustainable competitive advantage

Marketing, Strategic Planning, and Organizational Levels

Insert table 3.1

The Strategic Planning Process

Mission Set Performance Objectives Environmental and Self Analyses Strategic Objectives & Strategy Definition Implementation and Tactics Execution Evaluation and Control

Feedback

Strategic Perspectives
Strategic readiness
Ability to take advantage of unexpected market opportunities by having a long-term strategic plan and vision in place

Strategic vision
Longer-term, futuristic perspective, requires patience and determination

Strategic opportunism
Focus on present, and seizing market opportunities in a dynamic, uncertain environment

External Environmental Analysis

Customers
Who are most desirable? Should the market be segmented? What are their characteristics, preferences, and behaviors?

Competitor Assessment
Who are our present and potential competitors? How well matched are their strategies and strengths to the market s key success factors? What are their weaknesses? How much of a threat are they?

Assael s Four types of Buying Behaviour

1 Habitual buying behaviour (e.g. instant coffee) 2 Variety seeking Behaviour (e.g. chocolate bars, And breakfast cereal)

3 Dissonance reducing behaviour (e.g. furniture) 4 Complex buying behaviour (e.g. computers)

A sequential model of buying behaviour

Recognition of a problem

The search for Information

Evaluation of the alternative

The purchase decision

Post purchase behaviour

Obviously
Individual customers & organisational customers buy goods & services They are stimulated & prompted to buy Marketers
are interested in their decision behaviour try to stimulate & influence this behaviour to get better responses from the customer

Buyer Behaviour Model

Needs - wants, stimuli Product, price, place, promotion etc

Buyer responses

Environmental (PEST) factors

buyers black box

Choices of product brand dealer timing price Buy more, less, stay loyal etc
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How we buy (a rational view)

functional emotional ? current vs desired situation relative importance need inhibitors Need recognition, problem-awareness Information search Evaluate alternatives are they aware of need ? can we mediate need inhibitors? can we stimulate awareness & action Buy

internal search (memory) external search (personal sources, commercial sources third party reports (e.g. Which) personal observation/testing

Window-shop simmering interests Shape desire, want Information search

Evoked set

Evaluate alternatives (against evoked set) Buy Post-purchase evaluation

Post-purchase evaluation

Five Roles in the buying decision process

after Blackwell/Miniard/Engel, 2007 Consumer Behaviour, 10th Ed, Thomson

Each role can be acted by parent, children or other members of the buying centre. Who is  initiator  influencer  decider  buyer  user
Each actor may display multiple roles when buying a toy purchase a house a washing machine an armoured vehicle a sound system computer software Influencing Strategies 1. expert influencing 2. subtle (incl. use of rewards 3. emotional 4. combination

Infants, teenagers, working women, husbands?

What is the Relative Influence of Husbands vs. Wives in Decision Making?

How is this changing?

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Influences on Consumer Behaviour

Cultural
broadest & deepest influence cultures & subculture social classes

Personal
      

Social
Family Social roles and status (multiple) Reference groups
Membership - primary vs. secondary Aspirational vs. dissociative

Age Life cycle stage Occupation Economic circumstances Lifestyle Personality SelfSelf-concept Motivation Perception Learning Beliefs Attitudes
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Psychological
    

Consumer thinks, feels, is involved & acts

Behaviour, action drive

achieve

construes

Needs, desires, wants

Goals
satisfy

A simple need-satisfaction Motivation Model

Social & psychological construction after Abraham Maslow
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Evaluate Harley-Davidson Consumer Behaviour

Hells Angels ? Burly, leathers, bikers, rebels New breed:
older more affluent better educated rubbies (rich urbans)
Customer types from HD research
adventure-loving traditionalists sensitive pragmatists stylish status seekers laid-back campers classy capitalists cool-headed loners cocky misfits

Showrooms + sales approaches

all loved their Harleys because

independence, freedom, power more than a machine part of self-expression classic look, throaty sound American legend

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Scope of B2B Market

Agriculture Mining Construction Manufacturing Transport Wholesale & retail Finance, insurance, property Government Non-profit & voluntary organisations


different needs & buying patterns e.g. medical from rubber gloves vs body scanner buy raw materials/inputs to make other goods/services e.g. sugar & flavouring as inputs for Pepsi sell on to other business users or consumers e.g. Argos use purchases to conduct business e.g. stationery, legal services, IT/systems consultancy, marketing services

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Purchasing decisions in B2B Markets

Buying is less frequent. new task buy
buying decision not been made before

modified rebuy
bought before but this time change spec. or new supplier

straight rebuy
routine purchase made many times before

One-off, a batch or steady flow (JIT) Long, complex negotiation Service & consistency of quality & supply are vital

Buying centre  Buying often a group process. Who is in the buying group? Users  use the product e.g. trucks Influencers (direct or indirect)  Tech know-how, budget etc knowDeciders  Make the actual decision: purchasing officer, manager, product/service user Gatekeepers  Control flow of information Buyers  Select suppliers & negotiate terms
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Choice criteria

Organisational buying

Need recognition, problem-awareness Performance feedback & evaluation

quantity continuity quality price financing life cycle costs prody maintenance residual values risks politics personal

Determine specification & quantity

Integrate partner systems

Finalise contract & order routines

competition legal steps financing JIT logistics conflict outsourcing

Evaluate, negotiate, select

Search for sources, research & approve

Receive proposals & analyse

Eight stages model of organization Buying Process

 Problem recognition Determine product dimensions and quantity Precise description of product characteristics Search and qualification of potential sources Acquisition and analysis of proposals Evaluation of proposals and supplier selection Selection of an order routine  Performance feedback and evaluation

New Task-Firm has no experience in purchasing the product; requires extensive problem solving Strong predispositions toward suppliers do not exist Two distinct buying decision approaches are employed Judgmental new task: when unfamiliar with parts, technology, etc. Strategic new task: when decision is extremely important to the firm

Straight rebuy A recurring requirement; buyers have substantial experience with the purchase
      Information needs are low; little need to Evaluate alternative solutions Routinized response behavior; selection of Vendor from a list of acceptable vendors Choice criteria are well developed Strong predisposition to certain suppliers

Modified rebuy Buyer perceives benefits from a reevaluation of alternatives

LIMITED PROBLEM SOLVING
THERE ARE TWO TYPES

SIMPLE COMPLEX
Complex: involves a large set of choice alternatives

IN VS OUT SUPPLIER

Conceptual Framework

Buyer

User

UNDERSTANDING CUSTOMER BEHAVIOR

Payer Relationship-Based Buying

Model of Relationship-Based Buying Relationship Buying and Selling in Business Markets Art of Nurturing Suppliers Supplier-Customer Partnering Customer Relationship Management on the Web

A Model of Relationship-Based Buying

Cost-Benefit Factors
Search costs Risk reduction Switching costs Value-added benefits

RelationshipBased Buying Trust Commitment

Socio-Cultural Factors
Early socialization Reciprocity Keiretsu Friendships

Supplier loyalty Increased buying Willingness to pay more Proactive word-of-mouth Goodwill (customer equity)

Antecedents (Motivators)

Relationships

Outcomes

Cost Benefit Factors

The cost-benefit factors that drive decisions about relationship-based buying include:
The search costs The potential for risk reduction The switching costs The value-added benefits of the relationship

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Combinations of Perceived Risk and Switching Costs

High High Switching Costs Low Transactional exchange Constrained in relationship

Low Relational buying

Vulnerable relationship

Value-Added Benefits
Differentiation
These added benefits serve as a motivation for customers to engage in relationship-based buying

Sociocultural Factors
The sociocultural factors that influence the formation of a customer relationship include:
Socialization Reciprocity Networks Friendships

The Supplier-Customer Relationship

Trust
A willingness to rely on the ability, integrity, and motivation of the other party to act to serve my needs and interests as agreed upon implicitly or explicitly

Commitment
An enduring desire to continue the relationship and to work to ensure its continuance

Outcomes of Relationship-Based Buying

Supplier loyalty Increased buying Willingness to pay more Proactive word-of-mouth Goodwill (customer equity)

Process of Relationship Buying in Business Markets

IMP Model
A model that describes the processes or steps in the development of relationships in a series of interactions Industrial Marketing and Purchasing (IMP) group established that long-term patronage is quite common in business buying

Characteristics of Relational Buying

The IMP model has identified three key factors that characterize all relational buying by business customers:
Transaction-specific investments/adaptations Power dependence Role formalness

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Steps in Relationship Development

The IMP group identified the steps that companies go through in building a relationship
Needs complementarity Interactions Outcomes and satisfaction Investments Commitment

Reasons for Relationship Development in Business Buying

Businesses may need a long-term exchange contract to assure long-term supply Business customers also want to reduce the cost of buying transactions Buyers and sellers may also have quality and cost goals that require collaboration

Copyright 1999 by Thomas Southwestern. All rights reserved.

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Determinants of Trust and Commitment in Business Relationships

Determinants for the Customer

Switching costs Partner-specific investments Mutually shared goals Communication and product support Supplier avoidance of opportunistic behavior

Determinants for the Supplier

Supplier-specific investments Customer avoidance of opportunistic behavior Single-source policy Data sharing and nurturance

Relationship Based Buying: The Art of Nurturing Suppliers

The art of nurturing suppliers is clearly needed when the existing suppliers cannot meet the required quality, quantity, price, service, and delivery objectives Rather than select from the slate of existing suppliers, the purchaser task is then to create suppliers

Reasons For Nurturing Suppliers

Meeting future needs Government policy compliance Good citizenship Promoting environmental policies Quality assurance Cost reduction

Supplier-Customer Partnering
Supplier-customer partnering is establishing a partnership-like relationship with one s supplier or with one s customer The supplier and customer firm would not merge ownership

Copyright 1999 by Thomas Southwestern. All rights reserved.

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Vendor Relations in Japan and the United States

Traditional U.S. Model Department or firm focus, optimize firm efficiency. Emphasis on unit cost/price (minimum quality standards). Manufacturer defines needs; specifications of activities; sequential planning. Communication is sporadic, problem driven; little sharing of information or assistance. General investments; uniform approach.

Japanese Partnering Model Business system focus (includes supplier/customer economics), optimize value chain efficiency. Emphasis on full value chain (systems) costs as well as on improving quality. Joint efforts to define needs and problem solve; highly integrated operations and planning. Communication is frequent and planned; continuous sharing of information and assistance. Customized investments to meet unique customer or supplier needs (e.g., in information systems, people, manufacturing equipment). Flexible contracts that adjust to spilt economic gains fully as market conditions change.

Precise contracts that split economic benefits beforehand.

Factors for the Growth of Supplier Partnering

Competitive intensity Pressure on market prices Concern with quality Enabling technology

Customer Relationship Management and the Three Customer Roles

CONCEPT General concept of relationship marketing A model of relationshipbased buying Motivation Search costs Risk reduction Switching costs

USER Marketer refocuses on the user after the sale.

PAYER

BUYER

Search entails time and effort of the buyer role. Performance risk to user is reduced. Usage learning of product from new supplier. Add-on benefits for the user. Retooling costs. Effort to learn to deal with the new supplier.

Value-added benefits

Better financing plan may benefit the payer.

Customer Relationship Management and the Three Customer Roles (cont d)

CONCEPT Early socialization Reciprocity

USER User socialization.

PAYER

BUYER Buyer socialization. Source availability assured. Easier to do business.

Payment through reciprocal exchange assured. Firms in network are accommodating in financial exigencies. Suppliers in network more trustworthy with product/service quality. Better performance Friendly supplier value. assures quality Better performance product/service. value; data sharing; joint planning helpful to user.

Networks

Friendships

Friendly vendors give friendly service. Lower costs over the long run. Total cost reduction. Buying function becomes more efficient.

Reverse marketing Supplier partnering

The Marketing Audit

A marketing audit is a systematic, critical, impartial review and appraisal of the basic goals and policies of the marketing function, and of the organization, methods, procedures, and personnel employed to implement the policies and achieve the goals.

The Marketing Audit Process (1)

2. Determining When and How Often Audit Is Conducted 1. Determining Who Does the Audit 6. Presenting the Results to Management 3. Determining the Areas to Be Audited 4. Developing Audit Forms

5. Implementing the Audit

The Marketing Audit Process (2)

1. The audit is conducted by company specialists, company division or department managers, or outside specialists. 2. It may be done at the end of a calendar year, the of the annual reporting year, or when doing a physical inventory. 3. A horizontal audit studies the overall performance of a firm, emphasizing the interrelationship of variables. A vertical audit is an in-depth analysis of one aspect of a firm s marketing strategy. 4. Audit forms list the topics to be examined and the exact information required to evaluate each topic. 5. Implementation decisions include: the timing and duration, employee awareness, when and how audit is performed, and how the audit report will be prepared. 6. Findings and recommendations are given to management.

DEFINING THE MARKETING AUDIT Is a comprehensive ,systematic, independent, and periodic examination of a company s or business unit s marketing environment, objectives, strategies & activities.

PURPOSE MARKETING AUDIT View to assessing problems areas or weaknesses, opportunities & recommending a strategic plan for action to improve the company s marketing performance

4 CHARACTERISTICS OF MARKETING AUDIT

1. COMPREHENSIVE - covers ALL aspects of the business. So not just trouble areas.
Unlike the Functional audit which would only cover the sales force or pricing etc. More effective in locating the real source of the problem.

4 CHARACTERISTICS OF MARKETING AUDIT

2. SYSTEMATIC the marketing audit is an orderly examination of macro marketing environment and micro marketing environments. Marketing objectives & strategies, marketing systems and specific activities.

Cont.
Indicates the most need improvements these are incorporated into a corrective action plan include both short and long term steps for improving all round effectiveness.

4 CHARACTERISTICS OF MARKETING AUDIT 3. INDEPENDENT - ,FREE FROM CONTROL BY

OTHERS. The best AUDITS come from outside consultants objective , board experience in various industries or specific or some industry knowledge. Plus the time and attention to give to the audit.

cont
1. 2. 3. 4. 5. 6. Audits come in 6 types Self audit Audit from across Audit from above Company auditing office Company task force audit Outsider audit

4 CHARACTERISTICS OF MARKETING AUDIT

4. PERIODIC - Typically audit are after, a down turn in sales or

profits, sales force morale has fallen, and other problems occur A periodic marketing audit can benefit companies in good health as bad corporate health Generally companies wait till when they are in crisis to conduct an audit

Marketing audit
Starts with:-

1. Meetings between the company s officers and the auditors to work out the audit s
Objectives Coverage Depth Data Report format Time frame

6 COMPONENTS OF MARKETING AUDIT

1. 2. 3. 4. 5. 6. Marketing Marketing Marketing Marketing Marketing Marketing environment audit strategy audit organisation audit systems audit productivity audit functions audits

PROGRAMME FORMULATION & IMPLEMENTATION

The resulting profile exposes weakness and strengths highlighting problems or opportunities, with a view to the company becoming an outstanding player in the marketplace.

FEEDBACK & CONTROL

As strategies are implemented a company need to detail and record results then monitor new developments or new opportunities

Micro/competitive environment
Market entrants Barriers to entry Bargaining Suppliers Bargaining Competitive rivalry power Buyers

power

Substitute goods

Macro environment
Political/legal Economic/competitive Socio/cultural Technological

Environmental types - The Miles Framework

1. What degree of complexity exists in the environment? 2. How standardised or routine are the organisation s interactions with its environment? 3. What interconnections exist between the various dimensions of the environment?

Types of Environment
Simple/static Dynamic Complex

Environmental Analysis
Audit the environment Assess its nature Examine specific factors Identify own position Assess how environment will affect organisation Decide future strategic position

Types of environmental information

Market Tidings
structure, industry competitors, customers

Broad issues
general conditions and trends

Acquisition leads
leads for mergers, JVs and acquisitions

Other tidings
suppliers, resources

Technical tidings
licenses, patents, processes etc.

Strategic Groups
Organisations within the same industry that are pursuing equivalent strategies. Organisations targeting groups of consumers with similar products. Provides basis for competitor analysis by focusing on most relevant competitors.

Attributes identifying Strategic Groups

Size Assets and skills Scope of operations Breadth of product range Choice of distribution channel Brand image Relative product quality

Strategic groups in the airline industry

KLM British Airways Air France Brittania Air 2000 Monarch Easyjet Ryanair etc. Regional Scope Global

Price

Competitor analysis
Goals Motivation Current strategy & performance

Response to challenge Vulnerable areas Likely directional shifts What provokes them

Assumptions How realistic?

Strengths and weaknesses

Thoughts of Chairman Porter

Competition in an industry is rooted in its underlying economic and competitive forces that go well beyond the established competence in a particular industry.

Vulnerability
Financial factors Market factors Product factors Organisational factors

The Innovation Audit

Means of measuring organisation s capabilities & skills in the area of innovation Involves coming to terms with the organisation s past & projected innovation performance

Conclusion
DEFINING THE MARKETING AUDIT PURPOSE OF THE MARKETING AUDIT 4 CHARACTERISTICS OF THE AUDIT GOAL FORMULATION STRATEGIC FORMULATION PROGRAMME FORMULATION & IMPLEMENTATION FEEDBACK & CONTROL

Conclusion
This session shows the value of an integrated marketing plan. It discusses the elements of a well-integrated marketing plan. It presents five types of marketing plan analysis: benchmarking, customer satisfaction research, marketing cost analysis, sales analysis, and the marketing audit. It shows the merit of anticipating and planning for the future.