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Learning Levels
Cognitive Knowledge Application Diagnosis / Trouble-shooting Creating new knowledge / Theory
Course Objectives
y Determine the role of marketing in various organizations. y Analyze the marketing environment to identify opportunities and threats relevant to the design and implementation of the marketing effort. y Analyze the market, design market segments and target those segments which help to achieve corporate objectives and strategies. y Formulate marketing strategies and plans, including positioning and designing the marketing mix. y Develop implementation plans and evaluation systems for the firms marketing effort. 3
Marketers F.A.Q.s
1. 2. 3. 4. 5. 6. 7. 8. Which market (segment's) to serve? How can we differentiate our product / service? How can we compete against lower-price competitors? How far should we go in customizing our offering for each customer? How can we grow our business, profitably? How can we maximize the value from our customer relationship? How can we maximize the effectiveness of our marketing expenditures? How can we create / enhance customer orientation throughout the company?
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Course Outline
I. II. III. IV. V. VI. VII. VIII. IX. Introduction From corporate strategy to marketing strategy and plan Creating customer satisfaction and loyalty Buying behavior and the marketing information system Competitive analysis and competitive strategy Market segmentation and targeting Market positioning Branding Marketing mix decisions
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What are Mega trends? Are they threats and/or opportunities? Predicting relevant trends, managing our response to them.
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What is Marketed?
Goods Services Events Customer experiences Persons Places Properties Organizations Information Ideas
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Competitive Advantage
Competitive advantage/edge: A company's ability to perform in one or more ways that competitors cannot or will not match. Marketing focuses on advantages relevant to customers. How to create and sustain it? By fitting a companys core competencies and distinctive capabilities into operational systems for value exploration, creation and delivery in ways that are hard to imitate by competitors. Absolute sustainability is impossible in a competitive market; you need to continuously leverage and augment your present advantages 8
Core Competencies
A core competence is a combination of complementary skills and knowledge bases embedded in a group or team that results in the ability to execute one or more critical processes to a world-class standard.
2. Defining the business concept / big idea 3. Translating the concept into a specific line(s) of business 4. Creating a brand identity and positioning it.
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OPERATIONAL SKILLS
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Globalization Deregulation
Dis-intermediation Dis-
Do they represent opportunities and/or threats? How should 17 we face these trends?
Needs, wants, and demands Market segmentation, targeting, positioning. Offering, product, service and brands Customer delivered value, expectations, satisfaction
Distribution channels Competition Marketing environment Task (markets & competitors) Broad (PESTLE) Marketing planning and plans
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What is Strategy: examples. What is strategic management? Define strategic and operational plans. How are they related? What are the levels of strategic management? (Corporate, business unit, functional , product or market) What are the tools for strategic analysis? (e.g. portfolio models, Porters five forces model, growth models, SWOT analysis). How can we use them to formulate strategies? What are the steps for strategic marketing? How do we measure marketing performance?
5. 6.
In preparing for battle I have always found that plans are useless but planning is indispensable Dwight Eisenhower Why?
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Product Definition
We run a railroad We make copying equipment We sell gasoline We make movies We sell encyclopedias
Market Definition
We are a people-andpeople-andgoods mover We help improve office productivity We supply energy We market entertainment We distribute Information
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What is strategy
Long term choices to achieve long term objectives/goals Strategy is:
Company specific time/situation specific Value adding only after implementation
Strategy is not:
Business principles / best practices Static One optimum / best solution
Strong Strong
Weak
1. Thrive
2. Die slowly
Weak
3. Survive
4.Die quickly
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Planning Process
External Audit Vision & Mission SWOT Goals Strategies Operational Planning Feedback & Control
Internal Audit
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Planning as a process
Business Mission /Vision. E.g. Google mission: To organize the worlds information and make it universally accessible and useful; Accenture: Innovation delivered. Strategic Analysis (e.g. competitive forces analysis, portfolio analysis, SWOT analysis, Product/market growth modeling) Goal Formulation (SMART) Corporate strategy Formulation (e.g. cost leadership, differentiation, focus, strategic alliances, growth strategies). Marketing strategy formulation (segmentation, targeting and positioning, marketing mix) Program formulation / operational planning Implementation Feedback, Control and Corrective Action.
Need for continuous scanning of key environmental variables and maintaining flexibility in strategic planning.
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II. Analyze the situation: 1. Product/portfolio analysis 2. Competitive analysis 3. Sources of growth 4. SWOT analysis III. Segmentation, targeting and positioning IV. Marketing mix formulation
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V.
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Question Marks
4 5
Cash Cow
2 1
Dogs
High
>1
<1
Low
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STRATEGIC ALTERNATIVES
Build :
Here the objective is to increase the SBU's market share, even foregoing short-term earnings to achieve this objective. "Building" is appropriate for question marks whose shares have to grow if they are to become stars.
Hold :
Here the objective is to preserve the SBU's market share. This objective is appropriate for strong cash cows if they are to continue to yield a large positive cash flow.
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Harvest :
Here the objective is to increase the SBU's short-term cash flow regardless of the long-term effect. This strategy is appropriate for weak cash cows whose future is dim and from whom more cash flow is needed. Harvesting can also be used with question marks and dogs.
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Existing markets
New markets
2. Market development
4. Diversification
B) Other Strategies for growth: Integrative growth (vertical, horizontal) Diversification growth
SWOT analysis
External Analysis
Opportunities Threats
Internal Analysis
Strengths Weaknesses Use check-lists (e.g. PESTLE analysis: political, economic, social, technological, legal, ecological; Management audits). Look for interactions among internal and external factors.
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Opportunity Matrix
Success Probability
High Low
Attractiveness
High
Low
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Threat Matrix
Probability of Occurrence
High Low
Seriousness
High
Low
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Marketing and customer equity Finance Manufacturing / operations Organization Focus on those S&Ws that: are critical to achieving company vision / long term goals have the greatest interaction with O&T. Describe those 40 interactions.
OPPORTUNITIES O1 .. O2 ..
W/O ACTION STRATEGIES ACTION STRATEGIES to overcome weaknesses to to use strengths to exploit enable the organization to exploit opportunities (e.g. opportunities (e.g. S1/O2) W2/O1) S/T W/T STRATEGIES to overcome weaknesses to enable the organization to 42 deal with threats
THREATS T1 . T2 .
Prioritizing Strategies
Attractiveness (1-5) Strategies/Strategic Initiatives Cost Implement Revenue ability potential Market share Total score
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Objectives
Marketing Strategy (segmentation, targeting, Positioning, 4 PS) Operational plan and budget Projected Profit-and-loss
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Controls
Goal setting
What do we want to achieve?
Performance measurement
What is happening?
Performance diagnosis
Why is it happening?
Corrective action
What should we do about it?
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Define customer satisfaction and customer loyalty. What are the drivers of customer satisfaction and loyalty? How do we measure and track customer satisfaction? How do we use the data? How do we use value delivery networks to achieve customer satisfaction and compete effectively? How should we manage relationships with different types of customers for maximum customer equity and marketing productivity? What are the dangers and challenges facing CRM implementation?
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Psychological cost
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Loyalty is a deeply held commitment to re-buy or re-patronize a preferred brand in the future despite situational influences that may cause switching behavior. One o the strongest indicators of brand loyalty is the readiness to pay a premium price.
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The link between customer satisfaction and customer loyalty is not proportional (straight line). Xerox found out that its completely satisfied customers were six times more likely to re-purchase Xerox products than its very satisfied customers. Can the marketer influence perceived performance?
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Satisfied Customers
Are loyal longer. Buy more (new products & upgrades). Spread favorable word-of-mouth. Are more brand loyal (less price sensitive). Offer feedback. Reduce transaction costs.
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Complaint and suggestion system Mystery shoppers Lost customer analysis and recovery effort. Monitoring competitors customer satisfaction
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Customer Development
Potentials
Prospects
First-time customers
Repeat customers
Clients
Advocates
Partners
Disqualified prospects
Inactive or ex-customers
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Building relationships with valued customers to maximize their long term value and profitability (customer differentiation?)
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P r o d u c t s
P1 P2 P3 P4
+ + +
High profit customers
WHAT SHOULD WE DO WITH UNPROFITABLE CUSTOMRS? ( RAISE FEES, CHANGE SERVICE, SUPPORT TO REDUCE COST, ELIMINATE?)
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AN ONGOING PROCESS
Customer Relationship Management is a ongoing, dynamic learning process for an organization No organization has perfect information on its customers. Knowledge of customers is continuously enhanced through the CRM dynamics. Make sure that your customers dont feel a threat to their privacy.
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What are the different roles played during the buying process? What are the managerial implications?
Complex
(criteria, beliefs, attitudes, choice)
Habitual
What is the strategy of the market leader and market challenge in each case?
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Total sets
IBM Apple Dell HewlettPackard Toshiba Compaq NEC Tandy -
Awareness set
IBM Apple Dell Hewlett-Packard Toshiba Compaq
Consideration set
Decision
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Evaluation of alternatives
Which attributes (criteria) are important? Beliefs about brand attributes (brand image) Attitudes / preferences toward brands (formed partly through the evaluation of brand attributes) How can the marketer influence these processes to his companys benefit? Does the purchase decision influence the buyers attitude towards the product ?
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Post-purchase behavior
Need to understand the customers total experience with the product (buying, using, maintaining, disposing). Satisfaction or dissonance is a function of the gap between buyer expectation and perceived performance Post-purchase actions. How to influence them to your favor?
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MIS Components
A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.
Components: Internal records Marketing intelligence system Marketing research system Marketing decision support system
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Internal Records
y Sales Information Systems (on-line reporting and classification of sales by product, channel, regionetc help monitor the effectiveness of marketing actions) y Order To Payment Cycle (measuring cycle time, monitoring the efficiency and effectiveness of the supply chain) y Data bases, data warehousing and data-mining to enable focused marketing action. 74
MARKETING DECISION SUPPORT SYSTEM / MODELS Building models of marketing sub-systems. Simulation / What if analysis. Which parts of the marketing system are more suitable for modeling?
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Problem Formulation
Decision Problem What should the decision maker do? do?
GENERAL SPECIFIC
Research Problems
1. Evaluate effectiveness of alternative package design 2. Measure readers interests in these topics. 3. Measure current store image & store choice
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DEVELOPING THE RESEARCH PLAN (Data sources, research methods, instruments, sampling plan, contact method)
1)Data sources Secondary Primary 2)Research approaches: Observation Focus groups Survey Behavioral data Experimental research
3)Research instruments: Questionnaires Qualitative techniques (focus groups, depth interviews, projective techniques(e.g. word associations) Technological devices (e.g. Audiometer, Eye camera, Neurological research)
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5)Contact methods
Mail
Sample size
Personal interview
On-line interviewing
Company Demand/ potential Company sales/forecast Market Demand/ potential Industry sales/ forecast
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Market Potential
Maximum demand for a particular marketing environment (e.g. level of economic growth) Total Market Potential: no. of potential buyers x av. purchase chain ratio method Area Market Potential market build-up for business markets multiple-factor index for consumer markets
Sales
Industry Sales (actual) Market Share (%)
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V. COMPETITIVE STRATEGY
1. Wide vs. narrow definition of competition; industry vs. market definition. What are the sources of competitive threats? Porter s five forces model 2. What do you need to know about your key competitors? Why? How do you build a competitive intelligence system? 3. Should you attack, defend or follow and how? 4. Why is it important to balance customer and competitor orientation?
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Threat of Substitutes
Buyer propensity to substitute Relative price performance of substitutes
Price Sensitivity: Product cost vs. total cost Buyer Bargaining Power Product differentiation Competition between buyers
Bargaining Power No./ size / concentration of buyers & suppliers 87 Switching costs Ability to integrate backward
Analyzing Competitors
Identify competitors (present & potential; direct & indirect; industry & market) and investigate their: Objectives Strategies (similar vs. different strategies) Strengths & Weaknesses (share of market, mind, heart) Reaction Patterns (laid-back, selective, tiger),
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Scores are out of ten Can you calculate a summary figure for each competitor?
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Mind Share
Year 1 Year 2 Year 3
Heart Share
Year 1 Year 2 Year 3
Competitor A
50
47
44
60
58
54
45
42
39
Competitor B
30
34
37
30
31
35
44
47
53
Competitor C
20
19
19
10
11
11
11
11
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Market leader
challenger
Follower
Nicher
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II. Flank defense III. Preemptive defense IV. Counteroffensive defense V. Mobile defense (Market broadening & market diversification) VI. Contraction defense
II. Flank attack on a weakness area (e.g., human guided search algorithms as a substitute for Google search) III. Encirclement blitz attack on many fronts IV. Bypass attack (diversification into unrelated products, geographies, technologies) V. Guerilla warfare
Market-Nicher Strategies
End-use specialist Specific-customer specialist Product or product-line specialist Job-shop specialist Are all market nichers small companies? Can you jump from a niche strategy to overtake the leader in the core market? Do market nichers usually achieve a higher return on investment? Multiple niching strategies
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Uses of Segmentation
Appraising competitive strengths, Planning product / product line, Determining advertising and selling strategy, Channel design strategy Setting precise marketing objectives
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Targeting
3. Evaluate attractiveness of each segment 4. Select the target segment(s)
Positioning
5. Identify possible Positioning/ differentiation concepts for each target Segment 6. Select, develop, and communicate the chosen positioning concept
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Use situation
Purchase behavior
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Students
Corporate Users
Entrepreneurs
Medical Users
y Organize contracts, access contracts, and schedule details y Update, access, and exchange medical records
High self High involvemen autonomy, t value oriented Colgate Aquafresh Private label
What is bought,
Product Examples
Signal Mentadent P
Macleans Ultrabrite
Benefits sought
Taste 15%
Functionali ty 5%
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16% of buyers
27% of buyers
Homebodies
Price Shoppers
EXAMPLE: Watches
Segmentation by Value Concept: 1. People who want to pay the lowest possible price for any that works well. (23%) 2. People who value watches for their long life and willing to pay for the product qualities. (46%) 3. People who look for useful product features and meaningful emotional qualities. (31%)
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EXAMPLE: Automobiles
1.Value segmentation: a) People who buy car for economy. b) People who want to buy the best product they can find for their money. c) People interested in personal enhancement.
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EXAMPLE: Automobiles
2. Susceptibility to change brands: People whose brand loyalty is so solidly entrenched that no competitor can get to them. They are closed off to change. The open-minded and unprejudiced buyers Between them, people who are predisposed to a particular brand to a greater or lesser degree.
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EXAMPLE: Computers
Degree of self confidence 20% believed they knew how to evaluate a computer. 80% did not have confidence in their own ability to evaluate a computer
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Effective Segmentation
Measurable Substantial Accessible Differential Actionable
Size, purchasing power, profiles of segments can be measured. Segments must be large or profitable enough to serve. Segments can be effectively reached and served.
Segments must respond differently to different marketing mix elements & actions.
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VII. POSITIONING
perceptual mapping
2. Alternative positioning strategies 3. Differentiation as a tool for positioning 4. Product life cycle: marketing strategy
implications
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Positioning Strategy
Positioning: is the act of designing the companys offering and image to occupy a distinctive place in the target markets mind within a certain competitive frame of reference. Successful positioning strategy involves the total marketing mix. Result of positioning: a customer focused value proposition.
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Communicating a Position
Format of a positioning statement To: target group and need Our brand is: concept That: point of difference Example: To busy professionals who need to stay organized Palm Pilot is an electronic organizer that allows you to back up files on your pc more easily and reliably than competitive products. Once you have a clear position communicate and reinforce it through all possible means. 124
Points-of-parity (POPs)
Associations that are not
Distinctiveness
Communicability
Believability
Sustainability
Your competitors will often challenge both your claims for PODs and POPs
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Choice should be based upon: Customer priorities Cost to the company Potential competitor response
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Expensive
Brand E
Brand B
Brand A
High Quality
Low Quality
Brand D
Inexpensive
Brand C
Identify one's self as a member of an exclusive club. Is positioning a question of communication only? Is there an ideal position ?
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Under-positioning (lack of clarity). Over positioning (narrow positioning). Confused positioning (inconsistent or multiple images). Doubtful positioning (non-credible claims).
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1.Product Differentiation
Form
Features
Performance quality
Conformance Quality
Durability
Reliability
Ease of repair
2.Services Differentiation
Ordering Ease Customer Consulting
Installation
Miscellaneous Services
Delivery
Customer Training
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3. Personnel differentiation: Unique personnel that add value (competence, responsiveness, communication)
4. Channel differentiation: Unique Channels that add value (coverage, expertise, performance)
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Symbols
Events
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Important Profitable
Distinctive
Hard to copy
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Product Life Cycle: implications for mktg strategy Sales & profits ($)
Introduction Growth
Maturity
Decline
Time
Why this pattern? Any other possible patterns? Why? How do you know the stage you are in?; Can you influence the PLC?; Curves for fashions, fads? What are the 138 marketing implications?
Promotion
Low
Price
Low
What are the factors that govern the choice of a particular strategy? Your resources, expected competitive moves, etc.
Introduction Stage
1. Rapid skimming: Products of which the market is not aware yet. Possibility to build brand preference, potential competition expected. 2. Slow skimming: For a limited market. Market is aware of the product. Potential competition is not imminent 3. Rapid penetration: For a large market, unaware of the product with price-sensitive buyers and strong potential competition. 4. Slow penetration: For a large market, highly aware of the product, price-sensitive buyers, with limited potential competition.
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VIII. BRANDING
1. Definition of Brands, Branding
a) Brand Equity
2. Brand naming, Brand extension and brand portfolio 3. Role of Branding in Competitive Strategy
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Slogans
Just do it Imagination at work Innovation delivered We try harder
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1 2 3 4 5 6 7 8 9 10
70,452 ($m) 64,727 ($m) 60,895 ($m) 43,557 ($m) 42,808 ($m) 33,578 ($m) 32,015 ($m) 29,495 ($m) 28,731 ($m) 26,867 ($m)
II. The product, services and supporting marketing activities (contacts/touch points). III. Inducing meaning transference.
Favorable associations with people, places, things, other brands
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Brand revitalization
Harley Davidson, Mountain Dew
Brand Naming
Individual names (lower risk, high cost). Blanket family name (economy). Separate family names (for different categories). Corporate name / individual name combo.
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Brand Extension
80 90% of new products are brand extensions 90% Line extension vs. category extension ADVANTAGE New product success (Parent brand leverage, reduced cost, less risk of failure) Strengthening parent brand
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Brand Portfolio
A brand Portfolio is the set of all brands a particular firm offers in a particular category.
WHY MULTIPLE BRANDS? To maximize brand equity by: Increasing shelf space Cover different market segments Attracting customers seeking variety Enhancing competition within the firm Criteria: Maximum market coverage AND minimum overlap
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IX. MAJOR MARKETING MIX DECISIONS: PRODUCT, PRICE, PLACE, PROMOTION (4 Ps)
1. How is every element of the marketing mix tailored to the target market and strategic positioning? 2. What are the interdependencies among the elements of the marketing mix? 3. Strategic product mix decisions 4. Strategic price mix decisions 5. Strategic channel decisions 6. Strategic marketing communication decisions
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PRODUCT MIX
Dont forget: Sense &Sensibility!!
Line A Line B Etc
Width : number of different product lines Length: number of products within each line Depth : number of versions of each product
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Quality
Marriott Marquis (Top executives)
Marriott
Price
(Middle managers)
Average
Courtyard (Salespeople)
In a study covering 2400 companies, McKinsey concluded that a 1 percent improvement in price created an improvement in operating profits of 11.1 percent.
Price sensitivity
Variable Costs
Costs that do vary directly with the level of production. e.g. Raw materials
Total Costs
Sum of the Fixed and Variable Costs for a Given Level of Production
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Perceived Value Pricing (standard plus premium values) * UNIT COST= V.C.+ F.C./SALES VOLUME
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Check impact of price on other parties. Make sure that you know the real price you receive , net of discounts, rebates, concessions etc.
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Order
Du Pont (Fibers) Milliken (Fabric)
Order
Levis (Apparel)
Order
Sears (Retail)
Order
Customer
Delivery
Delivery
Delivery
Delivery
Competition is among networks, not separate companies. networks, The winner is the better network. Relationship among network members is a strategic alliance that needs careful design, monitoring and management
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Corporate Common Ownership at Different Levels of the Channel Administered Leadership is Assumed by One or a Few Dominant Members
PROMOTION: Communication: Dialogue Not Monologue Maximize opportunities for interactive dialogue with customers before, during and after purchase.
SENDER
Encoding
Media
Decoding
RECEIVER
NOISE
Feedback
Response
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Message Problems
Affordable
% Of Sales
Competitive Parity