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Industrial marketing
Ch1.nature of IM What is industrial or institutional or B2B marketing? How do industrial mrkts differ from consumer mrkts? Why is demand for industrial goods is called derived demand?
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Industrial vs Consumer-- 4.Buyer behaviourInvolvement of various functional areas in both buyer and supplier firms Purchase decisions are mainly made on rational/performance basis Technical expertise Stable interpersonal relationship bet buyers/sellers Involvement of family members
Purchase decisions are mostly made on physiological/social/psych ological needs Less technical expertise Non-personal relationship
Industrial vs consumer-- Channels-more direct Fewer intermediates/ Middlemen Indirect Multiple layers
Ind vs cons --- 6Promotional characteristics emphsis on personal selling 7.Price characteristicscompetitive bidding and negotiated prices Emphasis on advertising
Sss co -- With the campaign well under way,he expected a healthy growth in sales.When the growth didnt materialise,Jones hired a mrktng consultantto investigate and find out what was going wrong. One of the largest members of the target group was Infinity manufacturing Inc..The consultant visited Infinity as well as several other significant a/cs to survey customer attitudes. He discovered that SSSs competitors called on these A/cs atleast once a month, using a substantial direct sales force for this effort.
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Sss co-- The salesmen did considerable amount of customer entertaining and had large travel expenses to prove it. Jones and his President couldnt understand this extravagance and objected that if SSS adopted the tactic,it would greatly increase selling costs,thus perhaps leading to price increases to maitain satisfactory prifit margins.
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Qs for discussion-SSS case-- 1What is the problem? 2.Is SSS cos strategy wrong? 3.How do competitors sell despite higher selling costs? What is the moral?
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Industrial demand
D for ind goods/services doesnt exist by itself. It is derived from ultimate demand for consumer goods/services.Ind d is therefore called derived d.D for precision steel tubes depends on prodn of cycles,motorcycles,scooters and furniture that are consumed by consumers.D for precision steel tubes is derived from forecast of D for consumer D for bicycles.MCs,Scooters and furniture. D for capital goods /Equipment (M/C tools,Textile/Leather M/c) depends on D for other goods and purchases are made not only for current consumption but also in anticipation of profits from future usage. If business suspects recession in near future,their purchases will be drastically curtailed.But if the attitude is favorable,(upswing in business)Investment in capital goods and ind products increase. Sometimes the demand for ind goods is called joint D ,when the D for a product depends uponits use alongwith existence of other product/products.
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Joint demand
JD occurs when one ind product is useful if other products also exist.Ex.A pump set wd not be useful for pumping water if electric motor or diesel engine is not available.DOT that requires a complete kit of 12 items for joining underground telecom cables can not buy only somne of the items from a supplier as it doesnt complete the kit. Thus some ind products dont have individual D but are demanded only if other products are available.
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Cross elasticity of D
Elasticity is change in D from a change in price.%s are used to measure the relative changes.D is inelastic if % change in Q demanded is less than % change in price.D is unitary if the % changes are matched.D is elastic if % change in Q demanded is more than % change in price. This concept is useful to understand relationship bet price and D as shown in Fig.
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Cross elasticity of D
It is the responsiveness of the sales of one product to a price change in another product. This concept prevails in both cons and Ind mrktng but has a far more iompact on ind mrktng strategy.Eg.The D for aluminium is related to prices of wood and steel for doors and window frames as they are close substitutes. Other ex.prices of steel impact use of plastics as alt packing materials in ind mrkts. Purchase decisions in construction of houses,commercial offices,factories,hotels,hospitals,etc.get influenced by cost comparison of Al with steel and wooden door and window frames,alongwith other advs of Al. So,Al extrusion Cos regularly keep following costs of steel & wood & advertise benefits of Al use in lower maintenance cost,elegant looks,environ friendliness etc.Therefore imp of cross elasticity
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Purchasing objectives
Purchase/matla mgmnt objective is buying the right items in the right quantity,at the right price,for delivery at the right time and place.What is right is to be decided by the buyer. Objectives 1,delivery/availability-reliability in delivery very critical 2.product quality-consistent with specification and use of product. It reduces cost of inspection,interruptions in production process due to rejectionsand arranging replacement of rejected materials 3.Lowest price consistent with quality and availability 4,Services-Includes prompt and accurate info,application or technical assistance,spare parts availability.repairs and maintenance capabilityand training if required. 5.Supplier relationship
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Buying situation case--- A, The agent needs to purchase a customdesigned machine to manufacture steering columns for vehicles B.The agent is purchasing brake systems from a regular supplier.The buyer has bought brake systems from this supplier before. C.The agent is purchasing improved and updated mother boards for PCs from a recognised and well-respected supplier. However this supplier did not supply the current mother boards.
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Buyer-seller interactions-- It is a dyadic (two persons) interaction consisting of interaction bet buyer and seller. The transaction oriented buyer-seller interaction focuses on pre-sales activities and during sales activities and not on post-sales activities,The personal and organizational needs of both become the starting point of their interaction. Transaction based buyer-seller interactions help in creating new customers. Relationship marketing helps in retaining customers which is very important today.
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2.negotiation-a process to maximise the benefit to both buyer and seller with a long term relationship
How to negotiate with ind buyers? PURPOSE collect relevant info build an environment of trust and confidence before. styles of negotiation- win-win, win- lose, losewin, and lose-lose.are 4 styles.
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Tough Take up equally demands/ridiculous offers tough/strong position and present a clear but No authority to make unemotional opposition to concessions their demand Raise voices/emotional Seek info on why they outbursts hold their position,explain Dont reciprocate why u hold ur position concessions/stingy Ignore deadlines/act as if Stress the consequences of failure to resolve the time is of no significance issue to them.
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Win-win style for long term healthy relations & mutual satisfaction
Build trust & confidence,Be humble& polite Identify problem initially rather than solution, Agree on general statement of problem. Emphasise on end-results or needs rather than means Work together, pool resources, ideas and share info to solve the problem stated earlier.
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Win-win--- Regular frequency of concessions (and not the size of concessions) that is conducive to this style. Avoid defensive posture. Be amenable (that is responsive to correction). If possible avoid legalistic or contractual approach.
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3-profiling for segmentation-- Each segment is now profiled or outlined by its specific characteristics such as application of the product,volume of requirement(large,medium or low),location,type of industry,purchasing policies,major purchasing attributes,buyers personal characteristics,and buying behaviour. Do STP periodically once in 2-3 yrs since customer needs and evnviron both change with time.
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Target market strategy-select out of 3 broad strategies 1focussed or concentrated marketing-all mrktng efforts on a single or a few carefully defined segments.Result is a somewhat narrow range of product/service accompanied by high quality,high price,and highly selective promotional and distribution strategies.Usually done by a Co with limited resources,Slowly reputation and share of business increases Ex.A matl handling equipment mafrer concentrated on customers close to mfg unit to give superior pre and post sale service than competitors Risksmrkt potential in chosen segment may decline,a large competitor may invade the selected segment,Therfore good to concentrate on more than one segment.
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2 differentiated mrktng
Here the ind firm decides to target several mrkt segments whose needs,product usages,or mrkt responses are different from each other. Serve some and avoid other segments. Develops separate mrktng strategies/plans for each chosen segment All costs increase ,but objective is to achieve higher sales volume and a stronger position in each chosen segment. Differentiated strategy leads to higher sales and higher costs. But avoid over segmentation. EX.Electric motor division of a large multi product Co decided to enter 3 segments-OEMs,large users and dealers for small users.Different pricing promotion and distribution strategies were developed for each.The previously used undifferentiated strategy was giving lower sales and profits and hence this change for improvement.
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Ex of 3 strategies
1.Undifferentiated strategy CMS---------WHOLE MARKET 2.Differentiated strategy CMS1-------MS1;CMS2-----MS2;------CMS3----MS3 etc. 3.Concentrated marketing strategy CMS-----MS2
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3.Undifferentiated marketing
Means lack of effective markt segmentation since the co ignores segment differences and develops a single mrktg plan for all segments. Reason ;either lack of analysis or a conscious strategic decision due to standardised products or services sold to a mrkt where there is a lack of meaningful differentiation among customers. ADVANTAGES TOTAL COST LOW;ADV MR, INVENTORY ,PRODN. But in competitive mrkts,if competitors follow differentiated strategies,,even if products are similar,ind mrkertr should use other elements of marketing mix such as price,distrbn and promotion to differentiate them from competition..
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Service variables;Offer superior presales(solving customer problems),During-sales services(on-time dely),and after-sales services(repair service).Service variables become key competitive adv when products offered arte similar. Personnel variables.Recruiting better people and training them at various levels is a key differentiators in Cos like Infosis,TISCO etc.
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2-dimensional perceptual map for Co A vis a vis Cos B , C and D see TP,
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In ind mrktng product is a variable because of changes in Customer needsincreasing cost of land used for storing raw and finished goods lead to vertical stacking of materials from 2 meters to 6 meters height to save space and money. Technologyjelly-filled telecom cables replaced by fiber optic telecom cables.Many firms changed from main frame to personal computers. Govt policies or lawsliberalisation and globalisation in 1991 opened up new opportunities. PLC-drop,modify or develop new products when existing products reach maturity or decline stages.
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Mrkts are prospects,customers and consumers with unfulfilled needs,with a desire to fulfill the same and An ability to buy and willingness to buy, An ability to pay& willingness to pay and a willingness to be loyal as long as the marketers offer is perceived to be of far higher value than those of all substitute and competitive offers
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What is mrktng?
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Marktg is a continuous and proactive process of creating, nurturing and retaining a loyal customer base and helping them perceive that the cos offer is far superior to those of all current and future substitute and competitive offers
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Because its purpose is to create a customer,a business has two and only two basic functions; marktg and innovation. Mrktg and innovation produce results; all the rest are costs. Mrktng is too important to leave to a mrktng department. Mrktng is so basic that it cannot be considered to be a separate function.it is the whole business seen from the point of view of its final result, that is ,from the customers point of view, Peter F Drucker Concept of internal and external customers
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The producttion concept or orientation The product concept or orientation The selling concept or orientation The marketing concept or orientation
What are the differences?what are the implications? The elephantine electronics co case
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Elephantine case
The engineering manager of this co one day concieved of a new computer terminal that would do every thing but peel potatoes- a slight exaggeration perhaps ,but the concept was a widely applicable, broadly compatible device. Since the manager enjoyed excellent rapport with the firms general manager,who was also an engineer,it was easy to convince the GM of the merit of the idea, and a product development program was vigorously undertaken.
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Elephantine---- When the prototype was complete and functionally proven,a production line was set up and manufacturing was begun. About this time,the sales manager and his sales force were called in for a product presentation. After the new device was explained and demonstrated, they were told to go,sell it. SInce the new production line was capable of producing 500 units a month, this was established as average sales goal .The sales manager and the sales force went optimistically forth into the market, but 6 months later reported back to the general management that they were unable to move this wonderful new product in any thing approaching the target volume.
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Ele---contd
After firing the sales manager, the gm and the engg mgr commisserated with one another about the incompetence of sales people who couldnt sell a product that is obviously superior to anything else available and right for the markt. Neither of them knew quite where the mrkt was or who it was,and unforttunately even the ex sales mngr hadnt known either.Since the mountain wouldnt come to Mohemmad and Mohemmad didnt know where the mountain was, so he could go to it, a lot of time and money were wasted for practically nothing. It was certainly too bad Elephantine was so unlucky, because,when the product design was eventually sold to Whiz-Bang computer co, it was a roaring success.
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Elephantine----Discussion questions
1.Does ur group think Elephantine was really unlucky? Why? Why not? 2.What do u think whiz-bang did to make it a roaring success? Step by step process or activities? 3.What is wrong with Elephantine?What is right, If any? 4.What concept or philosophy drove Elephantine mngmnt? Whiz-bang mngmnt? 5.Do u think Ele learnt any mrktng lessons? What mrktng lessons did u learn? What is the moral of the story?
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Mrktng fundamentals
Mrktng is -- A rouge function-- Salesmen are cheats---they push you into buying things that you dont want Advertising is a bunch of lies Mrktng is a sheer waste. Goods cost us much less if we dont promote them and advertise. Inshort, life wd be better off without this function.
5.build competitive advantage Beating competition Sustainable advantages via branding and continuous improvement
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Beating competition Sustainable advantages via branding and continuous improvement 6.recognise environment changes Existing strategies erode Priorities to change and innovation
7.customer-focussed organisation Inverting and flattening the pyramid Prioritising service providers Lower costs-faster responsegreater motivation 8.monitor and bench mark customer satisfaction Quantitative research systems Indepth research.
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Mrktng plan
4.marketing mix A.product B.price C.promotion D.place
5 action programs
Value
Price
Advertising
Distribution
Service
Servicing
Guarantees
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Marketing Mix
1product Product Quality-featuresoptionsstylebrand namepackaging sizesserviceswarrantiesreturns 2price List pricediscountsallowancespayment periodcredit terms 3place Channelscoveragelocationsinventorytransport 4.promotion Advertisingpersonal sellingsales promotionpublic relations
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Charactiristics of-- 6.Recognise environment changes Existing strategies erode Priorities to change and innovation 7. Customer-focussed organisation Inverting and flattening the pyramid Prioritising service providers
8.Monitor and bench mark customer satisfaction Quantitative research systems In-depth research
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Airlines----contd
However to the mrktng mgmnt,it is obvious that while a price of $250 already begins to lose the business of low budget travellers,business people and the more affluent people would be willing to pay much more for superior service and comfort. The result was that the airlines moved to the differentiated strategy whereby they offered 3 levels of service on the plane;economy,business and first class at very different price levels. To get the same 80%occupancy level,the prices are respectively $250,500,and 1000 per passenger while the variable costs are$20,40 and 100 per passenger. It is estimated that the fixed cost would go up by 10% to accommodate the changes in the aircraft to provide the desired comfort to the upper 2 classes, each of them taking 50% of the additional amount.It is also estimated that the business class pssengers wd be 3 times the number of first class and economy passengers wd be double the business class occupants at 80% plane loading factor.
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Airline---contd.
The consequences are to massively enhance the revenue and the profitability for the airlines.In addition,the strategy better meets the needs of all customers by offering the values that the particular type of passenger prioritises And this example of airline segmentationis exactly analogous to the strategies pursued by most of the sophisticated cos of today! You are requested to calculate the profits,the profitability, the revenues and the costs incurred in both the strategies,for the full plane,for each class and per passenger in each class, assuming in both cases the plane is 80%loaded.Pl find the break even point in both. Discussion qs 1List all benefits of segmentation to all stakeholders of the airlines 2Who all could be the beneficiaries 3Do u think any segment is subsidising for any other segment? If so who to whom? If not,why not?What do u understand by absolute satisfaction and relative satisfaction?Do u think that there is a possibility that any cass may feel relatively dissatisfied although absolutely satisfied, When wd that happen? How wd mgmnt prevent it? 4When can segmentation go wrong?How to avoid segmentation from going wrong?What precautions to take?
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35%
Precisio 6546 n
25%
15% 20%
reliability 6 6 3 4
durability 5 3 2 5 service
5351
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5%
Delivery 2 5 5 5
5.5
4.6
3.7
4,3
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QUALITY-CONSCIOUS MARKTS-steps 1.find out quality dimensions,relative importance between them and assess performance of all current players on each dimension 2.If there is a gap between expectations and performance tae a position 3. fill the position by offering the highest value than the average value provider as well as the best value provider so that no one will find a gap in value to replace u in future. 4 constantly monitor and defend this position thro innovation.
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QUALITY OF PERFORMANCE-this has got to do with the level of quality Certain products promise and perform at higher level of quality and certain other products promise and perform at a lower level of quality. EXAMPLE.Which product has a higher quality of performance,Mercedes Benz? Or Maruti 800? Answer is the former.
Which of the above 2 products has a higher quality of conformance/ Answer is both can have the same level or one can have a higher or loer level than the other depending on the actual percetved performance over a period of time.
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Cdv=tcb-tcc
Compare the customer deliverd value of any 2 brands fighting with each other in the same TMS/ Compare cdv of kinetic Honda to ladies with cdv of Hero Honda to male Youth. Which one is greater?
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Cdv concept of buyer decision making and its use for seller
3ways 1.Caterpiller can increase total customer value.By improving P,S,P,or I benefits 2,Caterpiller can reduce the buyers nonmo0netary costs By lessening the buyers time,energy and psychic costs. 3.Caterpiller can reduce buyers monetory cost,by lowering its price,providing easier terms,of sale,or in the longer term lowering its bulldozers operating or maintenance costs.
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Performance q vs conformance Q
Performance q-Refers to level at which a product peforms its function.Ex Mercedes provides higher performance Q than Volkswagen.Gives a smoother ride,handles better and lasts longer.It is more expensive and sells to upper segment. Conformance Q-Refers to freedom from defects and the consistency with which a product delivers a specified level of performance. A Mercedes and a Volkswagen offer equivalent conformance Q (each delivers consistently what it promises). A $ 50k car that meets all its requirements is a Q car. So is a $15k car that meets all of its requirements.
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The malcolm balridge national quality qward-Q principles applied by MR firmCRI-custom researchinc
1.focus on building major customer relationships 2 organise into cross-functional client-centered teams to get every one working toward customer satisfaction. 3,Develop high Q processes& procedures to get the work done ,then measure the results 4.Explicitly ask customers what they expect from a partnering relationship. 5.seek customer feed back on individual projects and overall relationship.
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Malcolm-- 6.Hire the best people and invest ti their development 7.Stay flexible,agile fast moving-empower every one in the Co to just do it 8.Have fun with hoopla and recognition 9.Build Q continuously 10.Never be satisfied.
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Lost custom-- The cost of attracting a new customer is estimated to be 5 times the cost of keeping a current customer happy.Traditionally we all make sales rather than build relationships, selling and pre selling becoming more important than after sales. Today, more Cos recognise importance of satisfying and retaining current customers . One study indicates cos can increase profits between 25-85% by reducing customer attrition by 5%.
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1.cost of an average sales call-incuding salary,commission,benefits,expenses,incentives etc.--$300 2.Av no. of sales calls to convert an average prospect into a customer-4. In fact this doesnt include advert,promoting,operations,planning etc. 3.Cos estimate of Av customer life time value Annual customer revenue--$5k Av no. of loyal years2 Co profit margin-10%. Q.Is customers LTV higher or lower than the cost of attracting a new customer? Q.How will u recommend this Co should do to add new customers? The Co is clearly spending more than they are worth to attract new customers.Unless the Co is signing up costomers with (a) fewer calls,(b)spend less per sales call,stimulate higher new customer annual spending,(d) retain customers longer,(e)sell them higher profit products,the Co is headed for bankruptsy.
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Retaining customers-CRM
Only attract new customers? Dont want to retain existing ones? Look at the statistics. !.Competition increasing vand so cost of attracting new customer is increasing. 2.5 times costlier to attract new customers 3.Offensive marketing costs more than defensive marketing. Coaxing satisfied customers away from competition is expensive. 4.By reducing customer defections by 5%,Cos can improve profits from 25-85%.
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Relationship marketing
The process of creating ,maintaining and enhancing strong, value-laden relationships with customers and other stake holders. All of Cos departments work together with marketing as a team to serve the customer. Involves building relationships at many levelseconomic,social,technical and legal-resulting in high customer loyalty.
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Develop strong customer bonding & satisfaction-3 value building Financial, socialapproaches and structural
1.Financial; Adding financial benefits to relationship .Ex.Frequent flier programs of airlines ; *room upgradesto frequent guests in hotels *P&Gs moneyback guaranteeon Crest tooth paste(cavities and tartar build up ion 6 months).P&G builds up data base .Dentist certificates. 2,Social;Individualise and personalise the products and services ,Ritz hotels offers financial and social benefits.Refer to guests by name& give each guest a warm welcome!.Record specific guest preferences & maintain data base accessible to all hotels in chain. A guest wanting a foam pillow Ritz in Montreal first and Atlanta later.
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Customer profitability the ultimate test-how to attract and keep profitable customers?
1.Usually 20-40% of customers are unprofitable. 2.Most profitable A/cs arent the largest a/cs; but mid-size a/cs. 3.Largest a/cs demand high services and high discounts,so low profits. 4.Smallest a/cs pay full price and receive less service ;but cost of handling high and so low profit. 5.Mid size a/cs paying good price and receiving good service are the most profitable. Therfore invade the middle not only the largest a/cs!
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Value-delivery system
System made of value chains of the Co and its suppliers ,distributors and ultimately customers who work together to deliver value to customers.EX. HONDA chose DONNELLEY Corporation for supply of car mirrors for US made cars. Honda engineers work together with Donnelly in improving products/operations.Donnelly could reduce costs by 2% in first year.And its sales to Honda improved from 5mn $ a year to $ 60 mn in less than 10yrs. Honda benefited from nan efficient low cost supplier in Donnelly for quality materials Hondas customers benefited from lower cost and high quality cars resulting from Hondas partnerships with donnelly and others.
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Modern value creation and delivery sequence CHOOSE THE VALUE-PRIVIDE THE VALUECOMMUNICATETNHE VALUE. Customer segmentation-market selection focus-value position----Product development-service developmentpricing-sourcingand making-distributing and servicing---personal selling-sales promos-advertising-PR-Publicity
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positionings
Usp developmentan attribute to tout as number 1common no1 positionsbest quality ----lowest pricesafest---best servicebest value---fastestmost customisedmost convenientmost advanced technology etc. Examples of value propositions
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Hll/lux
GeoDemoPsycho Tcchno
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Positioning errors--contd
3.Confused positioning; Too many changes in brands positioning too frequently.eg.stephen jobs sleek and powerful NeXT computer positioned first for students, then for engineers and then for business people all unsuccessfully. 4.Doubtful positioning; Buyers find it hard to believe the brand features.GMs Cadillac division launched Cimarron as a luxury competitor with BMW, Mercedes and Audi. While the car featured leather seats, a large luggage rack,lots of chrome and Cadillac logo stamped on the chassis, customers saw the car as a dolled-up version of Chevys Cavalier and Oldsmobiles Firenza. While the car was positioned as more for more customers saw less for more.
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1.Market analysis
A.How attractive are alternate mrkts? 1.Size 2.Growth 3.Competition 4.Profitability. 5.Socio-political issues B.Do we have the capability to compete effectively? 1.Mrkt share &position 2.Cost competitiveness 3.Technical capability 4. Mrktg & distribution 5.Future cash requirements.
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2.Customer analysis
1.How is the mrkt segmented? 2 What are the needs of each segment? 3.How are purchasing decisions made? 4.Who makes the key decisions? 5.Are there any new segments to appear or be created?
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3.competitor analysis
1.Who are the key competitors?intra-type?--Inter-type?---Innovative? 2.What are the strategies of competitors?--Aggressive?---Me-too?---Segmentation? 3.How are we positioned as competitors?---Where are they vulnerable?---Where are we vulnerable? 4.Are there any srategic windows?---New markt segmentation?----New technologies?---Market redefinition?----Channel changes?
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4.Trade analysis
1.What are the key channels? 2.Are new channel opportunities likely to develop? 3.What are the needs of our dealers? 4.Do we have an effective partnership to develop our mrkt opportunities? 5.How are we perceived relative to our competitors? 6.What can we add to enhanceour dealer business?
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5.Economic analysis
1.Can ROI and share holder valuebe enhanced ? 2.Can costs be reduced? 3.Can prices be revised ?up and down wards? 4. Can the product mix be improved? 5. Can volume be improved by investing in new mrkts or brand enhancements? 6. Can investment in fixed and current assets be rationalised? 7. Can time be taken out of the production and marktng processes?
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6.Environmental analysis
1 How are we likely to be affected by trends in the environment?---------------------Demographic?-------------------------------------Economic?----------------------------------- Pollution and environmental protection controls Technology? Political? Cultural? 2.what contingency and crisis mngmnt plans exist? For key vulnerabilities?
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Matching----- 4.Positioning by user;Associating a product with a user or class of users. 5.Positioning by competitorIdentifying a product by using a competitor as reference 6.Positioning by product category; 7.Positioning by quality& price D.Timex watches take a licking but keep on ticking EPreference by LOreal.It costs a little more, but I am worth it F.7-UP is the UnCola.Its lighter& more refreshing. G.A box of Arm&Hammer baking soda in your refrigerator will keep it cleansmelling
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Image drivers
Image drivers give customers the confidence in the product.This confidence value is in socio-psychological utility of the brand or its economic performance or both. Ex.Youngsters see Coke, Levis jeans,Sony Walkman,Nike shoes as consistent with their life styles.
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2 drivers of cost Michael Porters 5 force theory& value chain Typical P&L of a Co
Revenue---100 Materials-----25 Manfacture---15 R&D-----------o5 Sales&Distrbn15 Corp.OHS-----20 Mrktng OHS---15 TOTAL COST95 -------------------------Margin-----------05
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Cost drivers
It is cost drivers that decide if a Cos costs are lower or higher than its competitors.Eg. 1.Economies of scale 2.Learning curve or Experience curve 3.Capacity utilisation 4.Sharing of costs with group Cos 5.Vertical/horizontal integration 6,First/leader in mrkt 7.Location,Marktng strategy advantage.
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Value chain
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5 forces of porter
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Repositions--contd
5. Alter attribute importance rates; VOLVO raised importance of safety as an attribute in choosing a car thus enhancing the value of its differentiation. 6. Introduce new or neglected attributes;Unilever successfully introduced RADION, a new detergent that eliminated odour-a benefit previously considered not important.
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Repositionscontd.
7. Find a new mrkt segment; DUNHIL diversified from smoking accessories into mens clothing. Instead of getting into the crowded segments,created a new luxury segment of expensive high quality readyto-wear suits. As the only typically British competitor in the segment,it brought a unique brand with a strong appeal to affluent executivesespecially the Japanese.
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Secrets of--- Product image Service image Corporate image Channel image
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Customer focus/orientation
The role of engineering/R&D in success
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Cascade-- 1.HOW MUCH?v lowlowmedhigh 2.WHAT QUALITY? LOW QLETTER QUALITYDRAFT GRAPHICS BUSiness GRAPHICS 3.HOW OFTEN?SPORADIC NON_URGENT SPORADIC URGENTUNIFORM NON-URGENT UNIFORM URGENT 4.WHERE?PERSONALWORK GROUP DEPARTMENTSITE 5.WHAT PRICE?--<5k--5K-25K25K-100K-->100k
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Cascade- 6.ANALYSE OBJECTIVELY.DONT BE BIASED. 7.SEPARATE SEGMENTS FROM SELECTION.SELECTION IS NEXT STEP. 8.ALTERNATE THE Qs.ELIMINATE NON_USEFUL LREVELS. MYTHS OF SEGMENTATION we segment our mrkts THERE IS ONE IDEAL SEGMENTATION VARIABLE segments are technologies or products Segments are forever WE want to be in all segments ETC.
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Product strategies.HLL
1.product mix width strategy 2.product mix consistency satrategy 3.product line length strategy 4.product depth strategy PRODUCT MIX WIDTH measures the no of individual(INDEPENDENT) lines of products the co carries in its product portfolio. For ex,HLL has roughly 3 dozens of lines of products say,soaps,detergents,tooth pstes,toiletries,cosmetics,personal care products,ice creams,bread,shampoos,atta,salt,jams,jellies,tea,coffee etc,
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Product stra--- Advantages;wide mix helps 1,growyth in bad times for some lines 2.good customer coverage 3.prevent competitor entry 4develop trade interest 5reduce overall cost 6synergy etc. DISADVANTAGES 1.resources scarcely distributed 2.lack of focus 3.Confusion if overlap 4.too much inventories.
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Long lines-advantages
1different segments 2high sale,MS & profit 3.prevent competition 4.be first to open a swegment 5overal markt leadership 6.More satisfied customer groups7.synergies in marktng costs 7.satisfied trade
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Long line-disadvantages
Too long unnecessary-wasted inventory Slow non-moving stocks Low ROI Confuse customer choice if overlap. Lack of focus Resources too thinly distributed.
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Lux is available in 2 formulations,3 siges,3 colors and 2 skin types Therefore luxs product depth is 2.3.3.2=36 Why product depth? To cater to subsegmental needs To retain customers To meet needc fragmentation in evolving markts
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Branding strategies
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Brands
Creating & Nurturing Them
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Channel image
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To customers To company
To society
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Insufficient
Sufficient
Product features
Expected Features
Assumed Features
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Strong Brands
Commodity
Low
Cognitive Relationship
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Name Awareness
Perceived quality
Brand Associations
Brand Loyalty
Proprietary Assets
Provides value to firm by enhancing:
Provides value to customer by enhancing Customers Interpretation/processing of information Confidence in the decision Use satisfaction
Prices/margin
Brand Extension Trade leverage
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Competitive Advantage
Product
Unique Well Known
80% Buy Decision Whisper
Me - Too
Supplying company
Depends
Un known
On Sales Efforts
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Price Differentiation
Low
High
High
Branded markets
Whisper
Differentiation
Product Image
Low
Commodity Market
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Productivity
Low High
Niche
High
Outstanding Success
Marketing Innovation
Low
Commodity Marketing
Cost Leadership
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Productivity
Low High
SWISS Luxury Watches
High
SWATCH Fashion Based Low cost Production
Marketing Innovation
Low
SEIKO
Low cost Volume Production
In Watch Industry
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Awareness / Familiarity with Brand Information on Brand Attributes or benefits Creation of Brand Image / Personality Association of Feelings with Brand Linkage of Brands with Peers & Experts & Group Norms Reminder or Inducement to Brand Trial
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Ad Exposure
Brand Attitude
Purchase Behavior
I am Chevrolet
I am Chevrolet Optra
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Brand Personality
A Business Professional who cares for his family If Optra were to be a human being: It could be: Sachin Tendulkar 222
Lucky Draw
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Brand Attitude
More Approachable Dependable Symbol of Luxury Great Value for Money Satisfaction
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Purchase Behavior
Great Value for Money The purchasing behavior of the customers is reflected thru the ever-increasing sales GMs Sales growth increased 73% because of the Optra & now the positive image of Optra is rubbing off on the Tavera too.
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I am Chevrolet Optra
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BRAND ATTITUDE
PURCHASE BEHAVIOUR
Reminder of inducement about Brand trial: INNOVATIVE SANTRO ZIP AND THEN ZIP PLUS. ALSO XING , SUNSHINE CAR..
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Brand equity
Brand loyalty Reduced marketing costs Trade leverage Attracting new customers Create
Awareness
Reassurance
Anchor to which other associations can be attached Familiarity Liking Signal of substance/commitment Brand to be considered Reason to buy Differentiate/position Price Channel member interest Extensions Help process/retrieve information Differentiation/position Reason-to-buy Create +ve attitude/feelings Extensions
Provides value to customers: *Interpretation/ *Processing of info Mation *Confidence in purchase * Use satisfaction
ations
proprietary asstes
Provide value to firm By enhancing: *Efficiency/effectiveness Of marketing programs *Brand loyalty *Prices/margins *Brand extns *Trade leverage *Competitive advantage
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Competitive advantage
Levitts Model
Potential Augmented Basic
Styling
Payback
Core Benefit
Quality
Package
Operational efficiency
In a Project Sales
20% of Sales impacct
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Value
Price
Advertising
Distribution
Service
Servicing
Guarantees
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Definition of a brand
A brand is a differentiated product with a name,a logo,a symbol,a trade mark and usually a combination of some or all of these used in communicating the superior value to the TMS and helping them percieve how the offer is more in value and why they should be preferring this product to all other substitute / competitive products. A brand is a trust-mark which helps customers meet some of their self-image needs by rubbing off their images on to the users of the brand-thanks to the images they acqured over a period of time due to the brand builing investment and efforts put in by the mgnt.
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4 branding strategies
1.Line extensions-product category same,brand name same with a suffix or prefix.ex.lUX,LUX INTERNATIONAL soaps 2.BRAND EXTENSIONS-Product category different,brand name same with a suffix or prefix.ex.LUX SOAP,LUX SHAMPOO. 3.MULTI BRANDS-product category same,brand name different.LUX,LIRIL,LIFEBUOY soaps 4.NEW UNIQUE BRANDS-product category different brand name different.ex.LUX SOAP,KNORR ANNAPURNA SALT.
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1.line extensions-product category existing and brand name existing.ex.LUX soap and LUX international soap 2.brand extensions-product category new,brand name existing.ex.LUX soap,LUX shampoo 3.multi brands-product category existing,brand name new.exLUX soap,LIRIL soap. 4.new unique brands.-product category new,brand name new.ex.lux soap,kn orr annapurna salt.
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VMB is more powerful than HMB although cost is high due to building distinct brand identities.Ford paid $2.5bn to buy jaguar brand to provide entry into executive car mrkt.Toyota invested even more to develop Lexus. VMB generates higher revenues but offers lesser economies of scale and shared purchasing.mrktng,distrbn and service costs. In serving different customr segments and channels,firm can use same or diff names.
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3 reasons1.high failure rate of new products.Same name reduces , buyers percieved risk. 2.Building a complete new brand is expensive.Ingrocery,$30 mn required for a new product to be successful.Extension costs much less. 3.Cos look for economies of scale & scope in focussing resources around one umbrella brand.With too many brand names promotional resources can be fragmented and brands can be out-gunned by competitors able to concentrate support around one name. HLL calling 501 detergent cake as Rin advanced,Tajmahal tea sold as BRookebond Tajmakhal.Electrolux operates 5 brand names in the UK white goods mrkt-Electrolux,Janussi,Thorn,Hoover and Husquvarna . Together these give electrolux largest MS but, rival Hotpoint with only one brand outspends each of Es 5 brands and is growing faster. In India,LG is growing faster than E although E sells refrigerators under 5 brand names.
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Failure of brand extensions-- Excessive extensions can lower the brands Q image. Use of Lacoste alligator on a wide range of clothing of varying Q eroded its image in 80s. Pharma Cos are wary of umbrella branding due to danger of bad publicity arising from one brand area spilling over into other fields.
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BE principles--- 3.If a Co has diff DAs ,then it should use diff brand names .It can find some synergy if brands are appealing to same TMS,by using Co name with separate brand names.Eg.different Maruti brands may be selected within the same family unit. 4.If both TMS and DAs are diff,unique names are appropriate.P&G believes worth losing out on adv of common corporate name to position brands in mrkt separately-to give each brand a distinct positioning alppeal to a separate benefit segment.Eg.Toyota positioned Lexus separately.Because it wishes to position it uniquely away from its existing models.
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Revitalising,repositioning,and rationalisation
Improving brand performance-2 ways.Explore I first. 1Raise volumes 2.Improve productivity 1 Raise volume by brand revitalisation (Expanding the mrkt for the brand)or brand repositioning(Enhancing its competitive position in the mrkt.) 2.Improve productivity by raising prices or cutting costs.! Over time,it is necessary to revitalise and reposition the brand.Many factors erode a brands franchise and profitability---1market decline.2,New technology.3,Changing tastes.4,rising costs.5,New competition
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3. Find new uses or applications; Eg;make a chocolate not only tasty and fun-loving but also nutrient therefore skip lunch and eat a chocolate baking soda launched as a deodorant fior refrigerators.wash basins as well as pet animalls 4.increase consumption rates Increase lid size of a tooth paste Incentives/awrds for higher cosumption-loyalty rewards frequent flyer programs.reduce prices.change packsixe ,make the use easier dip,dip, dip tea bags,instant coffee Maggie 2 min noodles brush ur teeth 3 times a day for best results!wash ur hair 3 times with shampoo in every bath for best results.
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Brand repositioning
This focuses on increasing volume ,not by expanding the mrkt but by winning share from competitors.7 avenues to do are 1Real repositioningUpdate by latest technology,functions or design.Hond continuously repositioned its best selling Accord to maintain its position at the forefront of quality and value.and fashion. 2.Psychological repositioning.Change buyers beliefs about competitiveness of brand.Sainsbury supermarket group in early 90s used its advertising to emphasise that it had competitive prices as well as high Q merchandise.this works only if buyers truly underestimate the value of the brand.
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Repositioning--- 3.Competitive depositioning.Comparative advtng is frequently used to seek to alter customers beliefs about competitorsbrands and to suggest that they represent poor value.Volkswagen sed this strategy against Ford in its advertising. 4.Reweighing values.sometimes buyers can be persuaded to attach greater importance to certain values in which the brand excels.Volvo emphasised safety as a criterion for selecting cars. 5.Neglected values.Sometimes new choice criteria can be introduced to buyers.Unilevers new Radion detergent was positioned on the claim that it removes odours as well as dirt-a value not previously thought salient in this mrkt .The Body Shop brand was founded on the then unique value that its products were not tested on animals.
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Repositions-- 6,Change preferences.It may be possible to switch the preferences of buyers.Buyers may be convinced to switch from low-price products to brands offering higher Q and economic value.Eg.Santro in preference to maruti 800. 7.Augment the brand.A brands competitive position may be enhanced by offering additional products and services alongside the core product.Guarantees,after-sales-service and advice can all add value.
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Improving brand prifitability-- Net profit is increased by half. 3.finally,profits will be boosted normally by range rationalisation.By eliminating marginal lines,costs and investments are likely to be cut by more than the volume lost.
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Global vs local
Product functionality and use (how people listen to music and drive a bulldozer ) tend to be universal characteristics.Further,scale economies tend to be imp here as these are high investment areas.Basic brand features (design,packaging.logo and name)can also generally be standardised across countries if planned systematically.
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Global-- At the next layer of branding, -positioning and advertising-difficulties begin to become greater as culture,attitudes,economics and language impinge on brands values and make standardisation more difficult.. The degree of standardisation possible depends on the product and the mrkt.National values and traditions are still very imp in food,but much less so in electronics.Cultural values are less imp in youth and more affluent mrkts than they are in mature and low-income ones.
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Global-- Moving further down the mrktg chain to selling,promotion and distrbn,these decisions are locally specified because of sharp differences that normally occur in mrkt and institutional characteristics. To summarise,global branding is a matter of degree.Few ,if any ,brands are marketed in an identical way across the world,or even across a region.But more brands have characteristics that are staNDARDISED ACROSS REGIONS-WITH THE PRODUCT FORMULATION AND THE BRAND NAME BEING TOWARDS THE FORE.
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Buying vs-- While cash flow implications of internal dev and acquisitions may be identical ,the former will appear to reduce the return on shreholder funds and the latter to increase it.These adv of speed and benevolent accounting conventions have made acquisitions an increasingly popular route ,especially for British and American Cos. Despite attractiveness of acquisitions,evidence exists that most such acquisitions fail to generate long-term value for acquirers shareholders or to build lasting brand portfolios.
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4 problems--- 3.Inadequate expertise. Frequently the acquirer lacks the knowledge or capability to appraise the real value of the acquisition in advance or subsequently to add value to it. 4.Pay too much. Acquirers often pay too much to obtain business. Stock mrkts value fairly most Cos. However to purchase a Co, the acquirer usually ends up paying a premium of 30-50% above the pre-bid valuation to win the acceptance of target Co shareholders. Such premiums can only be justified by quite exceptional synergies bet the 2 Cos. Of course ,sometimes, acquiring brands rather than building them makes sense.
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Build vs buy-- 3.acquisitions potential synergy A,cost redn potentiallow B.mrktg competenceunchanged C.complementaritylow D.relevent mgmnt expertise-low
High Increased
High transfers
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Build vs buy-- 4.brands strategic opportunity A.product performancebreakthrough B.positioning conceptnew C.mrkt opportunity-high 5.corporate situation A.growth potential-high B.cash situation-average Mrktng R&D capabilitystrong Me-too Mature Low Low
Abundant weak
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Build vs buy-- 1.acquisitions are likely to pay off if A.it is a low growth ,unattractive mrkt,building a new brand may cost too much B.it is generally cheaper to buy competition and a competitors distributive space than to beat out well entrenched brands.that is why Cos focus their acquisition strategies on dull,mature mrkts C.the relative cost of acquisition is low often stock mrkts under value these apparently boring Cos and there is substantial restructuring potential in selling parts after acquisition D.Acquisitions work when the acquirer can reduce joint costs or improve mrktng competence by coming together E.If the Cos current products are me-too,if it has limited skills,but abundant cash spun off from its portfolio of mature products.
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8/8 BM
A BRAND MGMT MODULE; Availability X Affordability X Acceptance X Awareness = Effective brand mrktng plan Emphasis here is given not only to product but to acceptance,not only to price but to affordability and finally not onlt to promotion and advertising but also to awareness and image which are relevent.
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8/8 BM
Young sters aspire to grow from a mgmt trainee to brand executive and on to brand mgr in due course. A BM is responsible for a product or brand and the position is similar to that of a corporate planner-who is not a line executive but an expert in BM. The task is to advise and assist the line sales and mrktg colleagues to be more effective in brands profitable growth consistently. The 8 elements of MM that need to be handled are:1,Product & its ingredients,2.Packaging,3.Advertising,4.Sales promotion,5.Costing,6.Pricing,7.Sales and 8,Distribution
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8/8 BM
Out of the 8 elements of the mix(clubbed as 4 Ps of MM),unfortunately,todays Bm is good and keen on only 3 of the functions.-thereby the BMs function doesnt receive the justice that it deserves. 1.THE PRODUCT & ITs INGREDIENTS:Interested in the overall aesthetic appeal of the product,Bm may not go into the depth of understanding of the composition of ingredients.May be imp specially in case of import substitution,higher effectiveness and even lower RM cost.The BM leaves it to PRODN or R&D incharge to work these out.than take interest in it himself.
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8/8 BM--- 2.Packaging. The BM is deeply interested in the design, color and aesthetics and spends lot of time with AD agency on shades of colors that should appear on the packaging. He is also reasonably good in researching the consumer and this element is well handled. 3.Advertising. Spends a major time in advertising, segmenting , positioning,as well as in production of artworks and POS materials. He enjoys this element ,loves coordinating with agency and printers He also handles research function of advertising in coordination with MR agency.
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8/8 BM-- 4.Sales promotion. The BM is keen on development schemes, trade promos,consumer promos and incentives to sales to help his brand sell more! 5.Costing. Reduction of cost is responsibility of every BM, without compromising on quality or perceived value-change of RM base, or improved technology or merely due to an increase in volumes. But very little emphasis is given to this function. He prefers to leave this to the cost accounting dept to handle.
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88 BM-- 6.Pricing.Here too BM is weak in understanding and implementing the pricing practices. He leaves it to the finance dept as his mind is more on advertising, packing and promos! 7.Mrktg vs sales.Todays BM considers sales function downscale compared to mrktg function. MBAs are reluctant to work in sales because mrktng people are considered to be superior people to sales people. Strong sales background is infact necessary to BMs.
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88 BM-- 8.Distribution.In terms of visibility,width and depth in distrbn, BM hesitates to work in mrkt place on a regular basis, understand stockist administration, motivation or to work out distrbn strategies by physically moving in the mrkt. BM feels this is best left to the sales and depot incharge to handle and hence there is lack of genuine knowledge and feel of mrkt.
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BM8/8----- Of the 8 elements of MM,BM is totally involved only in 3-packaging and design,sales promos and advertising.The other 5 are considered to be responsibility of finance,production and sales depts and hence avoided by BM. In a few well managed Cos a BM has well rounded personality with all 8 elements under his control.These are exceptions , Unfortunate todays BM has reduced himself to just 3/8 of what he should be ideally capable of achieving.
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Brand valuationbuying a stock-at what price should we buy a stock?a million $ question!
4 important parameters Current market value(cmv) *Present value(PV) *Future value(FP) *Rate of return(IRR) An investor wanting higher returns than another wd like to purchase the security at a lower price than the other So, investor wd like to know PV of the security to compare it with the current market value (CMV)
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Buying a stock-- If CMV is less than PV, buy it ; Since the investment wd give a higher return than the one used to discount, Otherwise,No. So,understand the rate of return! Say,an investor expects a 14% RR per annum 100 today=Expected 114 after I year100x1.14 =130 after 2 years 100x1.14x1.14 =148 after3 yrs100x1.14x1.14x1.14 This process is called compounding The opposite is called discounting
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Buying a stock-- PV, the present value of initial invest of 100,r is the required rate of return in % terms,,and n is the no of yrs of investment,and FV is future value of initial investment. FV=PV x (1+r) to the power of n. Discounting is the method of working out the PV which one should invest, from the future value ,which is realisable after a particular period of time,to get his required rate of return.
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Buying a stock-- If a particular security is known to hit Rs 129.96(130) after 2 yrs,at what price should he buy the security today to get a RR of 14%?
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Answer is 100.
Compounding is a series of multiplications .Discounting is a series of divisions. If one knows the FV, PV can be worked out from formula PV=FV divided by (1+r)to the power of n.Where r is the required rate of return,and n is the no. of yrs after which FV will be realised.
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Equity valuations
Dividend capitalisation method is a sound one conceptually. PV of the share is worked out by discounting the stream of dividends and the selling price at the end of holding period ,with the required rate of return. If expected next 3 yr dividends are D1,D2,D3,& P the expected selling price at end of 3 yrs,the price at which the share could be bought to get r return is Purchase price=D1/(1+r) + D2/(i+r) square +D3/(1+r)cube +P/(1+r)cube
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Buying a stock-- But the difficulty in practice is how to estimate future dividend and the price after 3 yrs. This involves lots of subjectivity though not impossible.
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The EPS average growth rate has been 5% per annum latest yr EPS for HLL was Rs 4 for a re1 share.
The analysis of HLLs P/E ratio historical shows an average P/E of 30.You know mrkt price P can be worked out by P = P/E x EPS Should we buy HLL share at the current mrkt price of rs 140 a share?
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HLL share-- EPS after 3 yrs is 4(1.05) to the power 3 Expected HLLs share price after 3 yrs is 30x EPS Dividends D1,D2 and D3 can be calculated from current dividend of rs 1.5 knowing the expected dividend growth rate for next 3 yrs. PV=FV/1.2 to the power of n =D1/1.2 + D2 /1.2square +D3/1.2cube +P/1.2cube where P is expected share price after 3 yrs. DECISIONIf PV>Rs140.Buy the stock otherwise NO!
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Valuing brands-why?
Some cos want to place brand values on their balance sheets to emphasise the cos asset strength 2.if prices are not put to brands, then a co can easily be undervalued by the stock mrkt and become a takeover target 3.brands are also sold or licensed ,so buyers and sellers need to place a value on them 4.if cos are to invest in brands, it is imp to see how their values change over time in order to judge whether the investment pays off.
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Valuing brands-- 5.future earnings valuation.the most satisfactory approach is to estimate the discounted present value of future earnings attributable to the brand.essentially this amounts to determining the multiple to be applied to current brand earnings-stronger brands achieving higher multiples.RHM,one of the first Cos to value brands on the balance sheet ,estimated brand strength from an analysis of brands rankings interms of leadership,brand support,mrkt attractiveness,international appeal and brand protection.
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Valuation methods-inaccuracy
All methods are approximate.because 1future mrkt conditions and hence long-term brand earnings are difficult to predict. 2.brands are often stand-alone.Where brands are marketed under corporate names,it is virtually impossible to separate the specific earnings attributable a single brand. 3.brand values are entangled with other intangible assetseg staff,patents,mrkt entry barriers etc.the value of an ad agency brand can be substantially changed by a walk-out of senior personnel.these and other factors make all such estimates of value hazardous.
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Buying a stock
Which firms stock would u buy? prefer? GM SALES----166BN $ ASSETS---229BN$ PROFITS7BN$ COCA COLA 19BN$ 17BN$ 4BN$
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Coke vs GM
In Jan 98,Coke had >4 times market value of GM partly because Cokes brand value is twice that of the value of entire GM firm.
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Grand metropolitan
At Grand Metropolitan,we believe our brands 1,to be our most valuable assets 2,are all about our businessin foods,drinks and retailing 3,are used to add value to our food and drinks products and to our retail outlets. 4,encourage consumer loyalty and confidence. 5,allow us to earn enhanced profits with benefits to share holders and staff alike. 6,are the core of our business, 7,provide the profits of today & gaurantee profits of tomorrow and future 8,provide us a combination of premium prices ,significant and reliable volume & a low cost base translating into substantial and predictable profits and cash flow.
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Grand metropolitan
We believe that the cost of purchased brands ,which does not go through the P&L A/c,should also appear on the B/S provided it is below market value.This is in line with the way in which we treat other substantial assets.Each year we verify that the value of those purchased brand assets is above the cost shown in our B/S.Sir Allen Sheppard.Chairman & group CE,GM plc.
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1.Is brand world class? A=Global; B=International with limits to expansion; C=Local 2.Is the brand expandable? A=Above average; B=average; C=Below average 3.does brand have dependable marketing edge? A=Pre-Emptive; B=Average; C=Below average *chris Macrae rates Disney,Hilton,Sony,Lacoste & Benetton As brands AAA He views BCB & BCC brands as being difficult for MNCs to manage
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Chris macraes method of brand valuation-a world class brand classification system
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Principles of brand-- 3.Separate the brand from other sources of value.The brands value can be intertwined both with the tangible product and related physical resources and with other intangible assets,such as human resources,knowhow,Co image and soforth. 4.Forecast the brands future uses and value.A brands value depends not only on its existing uses but also on a forecast of possible extensions,portfolio effects,new markets,licensing activities and other future uses.This forecast must make explicit assumptions of the level of future marketing support and ownership.
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Principles of -- 5.Assure reliability of brand valuation .The subjective judgements made/used in brand valuation must be consistent across different individuals,assets ,companies and time. 6. Check for validity and auditability.The brand valuation method must provide both checks on the validity of its assumptions and a process that can be audited for reasonable certainity. Allen Sheppard.when people ask me whether I look for long term or immediate profits,I simply say yesbecause clearly I must look for both.What other answer is there? Grand Met is not a short term business.But we do not forsake the profits we can make today for profits in the future.
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3 methods of -- 3.Brand earnings/Alternate return on investments. 1.Cash flow is isolated from the brand and then separatd from the generic equivalent. 2.The above is in turn calculated as the opportunity rate of return on the capital (that is the assets excluding the brand itself) employed in producing the product.The reminder is the cash flow that can be attributed to the brand asset. In all cases once the annual benefit is established, brand valuation is done either by (A) discounting future cash flows or (B) applying an earnings multiplier to average historic cash flows or to the first year estimated figure. And some do both. Discounted cash flows are sensitive to interest and growth rates and terminal values. Earnings multiplier ;Can be found in market place as Cos brands change hands.-Most familiar to investors, corporate finance people and share holders.
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Interbrand- The brand is assessed on each of thease factors and an overall brand strength score is calculated. It is this that determines the discount rates for future cash flows. A brand should only be valued when its name/TM are protected by law or other similar means in atleast its major markets. If the above is done,the brand strength and and hence an appropriate multiple should be decided
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Infosis-- Brand equity is not created overnight.It is the result of relentless pursuit of quality in manufacturing,selling,service,advertising and marketing.It is the integral of client experiences in dealing with the Co and its services over a sustained period. The most widely used method for estimating brand value is the earnings multiple method. Financial World magazine used a variant of this method in July 96 issue and evaluated the Microsoft brand at $5.63 Bn while its market cap was $60 Bn on the date of brand valuation.
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1.determine brand earnings.To do this, (a) determine brand profits by eliminating the non-brand profits from the total profits of the Co. (b) Restate the historical profits at present day values (c)provide for the remuneration of capital to be used for purposes other than promotion of the brand (d) adjust for taxes. 2.determine the brand strength or brand earning multiple.It is a function of a multitude of factors like leadership,stability,market,internationality,trend,support and protection.these factors have been evaluated on ascale of 1 to 100 internally by MGMT based on info available within Co.
Michael birkins brand valuation method book brand valuationedited by John Murphy 3 steps
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Infosis valuation-- Compute the brand value by multiplying the brand earnings with the multiple derived in step 2 above. RS.CRORES YR ended Mar 31 2000 99 98 PBIT 325 156 66 Less nonB income 35 4 2 Adj profit 290 152 64 Inflation Comp factor at 8%-1 1.087 1.18 PV of profits for brand290 166 75 Weightage factor 3 2 1 Weighted profits 872 331 75 3 yr Av weighted profit 213 Remuneration of capital (55 of Av capital employed) 35 Brand related profits 178 Tax @38,5% 69 Brand earnings 109 Multiple applied 48 Brand value 5246
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Infosis data
1.EPS rs 5 each-01 02 03 04 95 121 145 164 2.P/E . 00 --90 60 40 16 Brand value5246-5400-7250-7488-8185 Net FA 207---560 720 People value2237-5100-9500 Sales 92119602603 MCap 59340-26900-24654-26847-32909 Entprse value58830-26320-23624 Entpre value=mcap-cash+debt BSTR multiple48---22 ----18---- ----14 EVA 129---389---510--VA 723---15632239 Brand earnings109-- --- ---535 BV as % of MCAP1020---302925-323
frequency Tot units Tot mrkt MS of Br 100 1000 10% 100 1000 10% 100 1000 10% 100 1000 10%
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MYTH OF ms-- Major strategic implications for future Case1-get repeat buyers Case2-increase trials Case3-increase repeat buyers Case4-increase usage by repeaters All cases-increase frequency of purchases
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Myth of MS
Traditional approach to MS ignores these Qs 1.Consider the 4 competitors each with a 10% MS. Who gets higher profit?Whose sale is more assured? Who is to grow more? To give MS figure any meaning,one needs to look at (A) trial pattern (B)repeat buying and consumption pattern decided by frequency of buying and quantity bought and consumed in each buying visit. SOME MORE DETAILS NEEDED 1How is the market divided? 2.Where is the market headed?
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Repeat customer base is low- Many retailers miss the big picture.Instead of looking at target customer base of 100,they look at maximising their share out of 5. THERE FORE MINIMISE LOSS AT EACH STEP. Look at gains and efforts at each step.The gain/effort ratio reduces exponentially from step 1 to step 4.
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Gain and effort index-- 1.Efforts are minimal and unusually low and one time in step 1 and 2 and gains are much higher. 2.In step 3 and 4,it takes a lot of effort on almost an ongoing basis and gains are disproportionately low. 3.Therefore it is important to get act right in step 1.
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Reinforce brand loyalty- Lowering defection rate of clients by 5% leads to benefit increase of 25-85% 97% of French Canal pluspay TV channels 6 mn clients are loyal .Yearly subscription costs 2028 Francs .If loyalty drops by 1%,revenue loss 75 mn Francs. Strong brands have loyalty programs;1.service is adapted to clients.2,defensive actions give customer no reason to defect from brand or Co. 3,offensive to create a personalised relationship with client-more intimate therefore more involved bond.
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Potential,pseudo and active committed loyals- Look at Sonys situation. Committed loyals are 19% of Sonys entire customer franchise Potential loyals-4% Pseudo loyals-35% Each group needs a specific marketing proposition.
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Brand capital is percieved superiority Customer capital is USAGE Brand capital and customer capitalboth yes---19% for Sony.they are committed loyals Potential loyals are 4 %-costomer capital no but brand capital yes Pseudo loyals are 35%-customer capital yes,but brand capital no Balance 42% customers of sony are having neither customer nor brand capitalthat is they are at the origin.theyneed to be taken thro all 3 axes.
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Myth of MS- Managements must ask the right strategic questions. When measuring MS Cos should ask questions such as 1 what is the market? 2.What is MS by units? Value? 3.should Co look at the share of total market?or the share of mind,body and heart and wallet? 4.should the Co compete with intra-competitors?or intercompetitors? Or innovative competitors? 5.is there a fight amongst categories?If so how to tackle?
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Fournier--- 5.close friendship.Voluntary union based on a sense of shared intimacy and rewards.A consumer believes a brand of sneakers is a comrade in hand in daily sports activities. 6.compartmentalised friendship.A highly specialised friendship often dependent on the situation ,characterised by low intimacy.A woman, Fournier examined, used different brands of perfumes for different activities.and different dresses for different occassions.
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Fournier-- 7.kinship.This is an involuntary union of the sort associated with a family. A cook feels obligated to use the same kind of flour that his mother was using . 8.rebound relationship.A union based on desire to replace prior partner.Eg,Enemys enemy is a friend. A woman, Fournier had interviewed, has stopped using a particular brand of mayonnaise because she did not want to use the brand her ex husband was using.
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Fournier-- 9.childhood friendship. Affectionate relation of infrequent interaction dating back to childhood. A man buys a brand of instant dessert because he remembers eating it in his childhood. 10.courtship. Period of testing before deciding on a committed partnership. Fournier saw a woman experimenting with 2 brands of perfumes before deciding on one. 11.dependency.Obsessive attraction that results in suffering when the partner is unavailable. A consumer is upset when her favourite brand of butter is out of stock. eg Amul butter.
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Fournier-- 12.fling.A short term engagement with great emotional reward. A man tastes another brand of coffee out of compulsion at a friends place, but feels guilty (although enjoys it) because of attachment with and loyalty to his favorite brand of coffee. 13.adversarial relationship. Intense relation characterised by negative feelings and a desire to inflict pain. A man refuses to buy a brand of computer he hates,buying another computer out of spite.
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Fournier-- 14.enslavement.Involuntary relationship governed exclusively by the partners wishes or desires. Eg Ambassador during 70s . 15.secret affair. Highly emotional private affair. Relationship is considered risky. A consumer hides his favorite brand of frozen dessert in a refrigerator and sneaks some late at night when nobody observes him.
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Thinking small why wd a consumer select smaller, newer brand? Top 10 Cos By growth of sales
2003of Cos >100 cr COMPANY YOY GROWTH RATE 32.4% 26.9% 21.4% 14.5% 14.1% 14.5% 13.3% 11.6% 7.9% 6.5% sourceAc Nielsen Connect2003 !.Parakh foods 2.Haldiram 3.Anchor Health 4.Dhara Veg Oils&foods 5.Perfetti India Kanpur Detergents CavinKare Marico Industries Godrej Hicare Cadburys
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4 directions-- 3.Find new applicationsArm and Hammer baking soda sale increased from $15mn in 70 to $400mn in 90 by finding new uses primarily as a deodoriser for fridges,sinks.animals etc. 4.Increase brand usage rate.Raise frequency of consumption.---Make it easy to use(instant tea),provide incentives to use(Frequent flier discounts),Reducing disincentives to use(Decaffeinated coffee)or finding new ways to increase the quantity used(large bottles)
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Glow case
Sri Krishna Ranganathan,the VP-sales &maktng at Angar limited is fighting a losing battle.His R&D has developed a soap with an antiinfection ingredient ,which Mr Ranganathan felt, had a potential niche mrkt at that point of time and that it could easily outperform the Cos mother brand GLOW.in terms of sales volume Confronted with severe resourse constraints in finance and faced with an organisation structure ill-suited for launch of an altogether new brand,Ranganathan found himself in a dilemma.His CEO Mr Manubhai Shah strongly felt that extension of a brand that is synonimous with beauty & complexion care into health soap segment would do more harm than good.However,Mr R wouldnt like to let go of this wonderful opportunity, come whatever constraints may!Arent they solvable? If only he could get a solution?
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Glow contd
Glow! It cares for you became a catchy campaign making Glow another name for beauty & complexion care. Since inception in 1984, Glow has had 6 brand extensions on the beauty and complexion care platform, all put together, accounting to a leading MS of 45% in the segments with a total sale value of Rs 250 crores per annum.
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Glow discussion Qs
1.Why does R have a dilemma while his boss doesnt have one? 2.What is Rs dilemma? 3.Do u agree with Rs decision of launching Glow extension? Why? Why not? Justify? 4.Should R go ahead with line or brand extension,how do u help him convince his boss and minimise/eliminate the risk of brand erosion? What positioning strategy wd u recommend? 5.In case R wants to go ahead and launch as a multi brand, how can he get over the resourse constraints? 6.What is the moral of this story? In terms of brand mgmnt?
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Price is the only p that gets revenue all others add to cost!
Prem strategyHigh Q,High PROLEX Economy StrategyLow Q, LowP-Timex Usually coexist,since markt consists of atleast 2 groups of buyersThose seeking Q and those seeking P. Good Value strategy---A way to attack premium pricer.we have high Q but at a low P.If really true,and Q sensitive buyers believe this,they buy and save money.---Un less the premium product offers more status or snob appeal.
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Skim-penetrate------ Penetration Promotion-customers understand product Distribution-existing system Production-high scale economies,experienc e curve effects Skim strategy Unfamiliar product Unfamiliar channel Few scale economies and experience curve effects.
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Price problem
Case 1. A toaster marketer has the cost and pricing structure as below. Fixed cost;$300,000 Price/unit;$20 Variable cost/unit;$10 Q1.What is the break-even volume in units and value in $ Q2.The Co invested $10,00,000 and wants a 20% return on investment (ROI).How much should the Co sell in units and value? Q3.At an expected unit sale of 50000 what is the total manufacturing cost per unit? Q4.At the above manufacturing cost per unit,what should be the selling price A,to earn a mark-up of 20% on cost? B,to earn a margin of 20% on selling price?
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10,000 &600
10,500 &1100 11,000 &1600
0.36
0.09 0.01
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The markt leader is selling a machine tool (product X) at a price of Rs.30,000.The customer will also have to cover start-up costs of rs.20,000-(installation,initial training etc.)and post-purchase costs over the life of the machine with a present value of rs.50,000(labor,maintainance,power and other operating costs).Thus the total LIFE CYCLE COST of the m/c is Rs100,000.In other words,the price is under 1/3rd of the total cost of employing the m/c.
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Customers a superior value.The higher vpriced product may offer value because (a),it generates more output thanits competitor or (b),because the operating costs associated with it (mint,labor,depreciation etc)are lower over its economic life. If a competitor wants to dislodge the markt leader ,it must offer superior EVC.One way is simply to price-cut.But this is not likely to be a decisive strategy here,because,even if the m/c price is cut by 20%,the savings to customer of Rs.6000 is only 6% of total cost.
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By developing an offer with high EVC ,a Co can charge significantly higher prices and stll offer its
By Rs.10,000 and post-purchase cost by Rs 20,000.What do u think is the highest price the customer will be willing to pay for product Y,assuming both X & Y would have the same life cycle cost and productivity?This represents the EVC that Y offers to the customer and below the EVC it would be rational for the buyer to switch to Y ,provided that all other things were equal between the 2 suppliers.
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There are 2 other better ways.For ex,a new product Yis shown as reducing the start-up cost
Value pricing
Here sellers chargea fairly low price for a high quality offering,such that the price should represent a high value offer to the consumers. Value pricing is not a matter of simply setting lower prices on ones products compared to competitors. It is a matterof reengineering the cos operations to become a low cost producer without sacrificing quality and lowering prices significantly to attract a large no of value-conscious customers. An imp type of value pricing is every day low pricing(EDLP) at the retail level.High-low pricing is resorted to by promotion oriented competitors. Here the retailer charges higher prices on every day basis but then runs frequent promos in which prices are temporarily lowered to below EDLP levels. As super mrkts face increasing compttn,from counterparts and alternate channels,the key to success is using a combination of high low and EDLP strategies with increased ad promos!
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A variations in geographical demands/costs B.markt segment requirements C.purchase timing D.order levels E.delivery frequency F.guarantees G.service contracts
Adapting the price.Cos dont set a single price,they follow a pricing structure that reflects
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Ex; excess plant capacity Declining markt share Drive to dominate markt thro lower costs Risks of price cuts Low-quality trap Fragile-merkt share trap-high priced competitors may cut prices& can withstand due to deep pockets
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1.trading-up.Quality improvement is the basis.alongwith commncn to customers.a better Q for high P Ex.Rin,rin shakti etc.
2.LINE EXTENSIONS.New features is the basis to pass price increase on to less price sensitive customers 3.UNBUNDLING.Initial price plus charge extra for elements that were previously supplied free.ex delivery,installation,warranties,training. 4.MULTIPLE BRANDING.Introduce FIGHTER brands to match competitors if they are forcing prices down,and simultaneously rise the price of current version.Price-sensitive customers can select fighter brand and less priceoriented buyers may take the premium version. 5OPPORTUNISTIC PRICING.Changes in environment and customer circumstances may reduce buyers sensitivity to a price.Ex.industrial buyers more interested in total cost of obtaining,operating and servicing the product over its life rather than just price. Eg rise in price of oil would increase economic value of a fuel-efficient engine.and thereby helping in a price incresase.
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6.REPOSITIONINg.Reposition a product to get higher prices.Eg.Chivas regal scotch.boost In early 80s, scotch whiskey was increasingly sold on price to
flagging volumesGuinness succeeded well in in repositioning many of the brands as premium products taking advantage of increasin g affluence and snob appeal of these established brand names. 7.Escalator clauses.with long term contracts and long gestation periods,escalation clauses will allow producers pass on cost increases to buyers. 8.Reduction in discount.Most Cos erode their basic price with bcash discounts for pre payment,quantity trade discounts,seasonal and pomo allowances,or trade-in.Many of them can be dropped or reduced without significant customer dissatisfaction. 9.Cost plus price formuylas.Offer to meet new customer needs on basis of cost plus pricing.thus introduce enhanced products with the buyer guaranteeing the margin.
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3.BLOCKING PRODUCTS.Sell at an economic price to block competitive entry. Eg.cross-subsidise sales in one segment or geographical area to
dissuade competition. 4.BUNDLED AND OPTION PRicing.Advertise the product at a low stripped-down price and at POP,encourage to add high margin features.merc price Rs 20 lacs and Rs 5 lacs on options. In contrast Japanese competitors bundle a comprehensive range of features into the sticker price to offer superior value proposition. 5.PARALLEL IMPORTS.Increasingly pricing is becoming international problem with differences in living stds and distribution systems.countries differ in price responsiveness and therefore set prices differently in diff countries but legl restrictions and parallel imports are making such strategies difficult .
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Customer types based on price and perceived value.VALUE OF MONEY vs VALUE OF DIFFRNCN. 1.PRICE BUYERS OR CREDIT BUYERS OR
COMMODITY BUYERS-diff low and vom high.Suppliers develop multiple vendors and encourage them into kamikaze price wars.Scream loudest and dictate price,credit and selling strategies.Profits so low attn unjustified but provide volume sale. 2.VALUE BUYERS OR VALUE LOVERS Best position to be as customers.Want lower prices,longer credit where possible,more efficient operations,superior features or services And wd pay faster for superior value where justified. From marktg pt of view,firms that attract value customers get the loyal buyers as part of the bargainand sell to the price buyer only when profitable and reasonable,
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LOYAL BUYERS_lovers of the care from suppliers. Less concerned about price or credit.Often have a single supplier and dont intend to qualify others. COMFORT BUYERS lovers of convenience Dont care who is supplying,what price,what credit,as long as readily available.Most profitable segment,but unfortunately have little brand loyaltyand offer no SDA.
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Physical distribution/marktg logistics-Physical distribution is process of delivering product to marktng channels &consumers.Logistics has a higher scope covers PD plus part of task of mrktg channels PD takes care of transportation,ware housing and inventory mgmt to facilitate flow of product while channels connect the firm with its customers and thus bring in greater value addition in delivery chain SCM has even higher scope encompassing the materials mgmt task as well. Has all 5 primary activities of value chain-both front end and back end of the process to spread value and develop competitive edge.
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Physical distribution-importance
Ensures physical flow of product Confers place &time utility on products Helps build clientele Where production locations and markets are distanced,PD becomes crucial A promising area of cost reduction.PD costs are high and second only to materials-a neglected area of cost control.
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Outsourcing logistics
Volvo-GM outsourcesmarktg logistics tying up withFedEx. Dealers when requre spares in an emergency call FedEx on a toll fgree no and FedEx supplies parts by air the same night either at dealers shop or at roadside at the breakdown site.A central warehouse was set up andsome of traditionalregional warehouses&reduced overall inventory csotsby 15%. In India AFL, Elbee,& Bluedart are some of the Airexpress Cos collaborating with manufacturers for outsourcing
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Channel functions--- 6.Share the financial burden of the principal;Provide deposits;Finance the stocks till they are sold to the ultimate consumers;Extend credit to retailers/consumers 7.Provide salesmanship 8.Provide pre and after sales service 9.assist in sales promos 10.Assist in merchandising
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Channel functions-- 11.Assist in introducing new products 12.Assist in implementing the price mechanism;assist in price negigotations 13.Assist in developing sales forecasts/sales plans for the territory. 14.provide markt intelligence & feedback. 15.Maintain records,16,take care of laison needs17.Helpdiffuse innovationsamong consumers,act as change agentsand generate demand
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Channel design-- 4.Archies gifts &greetings Proximity to customers,convert low involvement purchase inti HighIP,Make purchase an enjoyable experience. 4.Outlets close to upper echelons of society,the TMS.Go for exclusive shops/shop-inshops;Trendy interior design and peppy ambience.Wide range of appealing merchandise
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Channel design--- 5,BBLIL(premerger with HLL)Strong reach,Provide choice of brand,place&time utility Fresh stocks to consumers always. 5.embrace all types ofshops,super mrkts,grocery stores&kirana shops.A 3tier channel with CFAs,RSs and Rs.Provide for proper inventory/dely backup.At each level minimise distance bet issuing & receiving points.
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Channel objs & design--- 3.Philips(appliances ,Pers care )Cover mrkts intensively<extensively;Af ter sales servoice integral part of channels--,Build barriers to competitors. 3.Have a 3-tier channel of CFAs,distributors& retailers(22ooRs).Authris ed Philips Service Centers(100 APSCs) and 4 CRCs(consumer response centers).60 engineers laise with APSCs.Motivate channel with guaranteed 30%ROI toAPSCs. Make all strong dealers philips dealers.
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Channel design---- 6.Louis Philippe Promote as a complete & premium wardrobe line,with shirts,trousers,ties,socks, blazers,belts etc. Cover the TMS(well-to-do gents) adequately. Maintain an edge over comptn by competing on quality,service,image & value. 6.Go for exclusive show rooms,ensure full line at all outlets.Go for multi brand outlets and for shop-in-shop in super stores like Akbar alis where spl areas are provided as shop in shops.
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Channel design- 7.ITC tobacco division,ensure easy availability of cigarettes. Build brands through advertising. Go for CFAs and wholesalers who distribute resell to retailers(8000) Go for different types ofretailers,branded,traditi onal and non traditional. Have branded retailers and franchisee retailers who sell only ITC cigarettes and not other brands
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Product communicates
Product personality as a whole communicates.produc t personality constitutes various elements such as The physical features,the material,the size,shape,design,the finish etc The package,its color,size,design &labeling The brand name,the co name. IN SHORT,THE PRODUCT SENDS OUT MULTI-PRONGED MESSAGES
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Pr-management of reputation
Pr accomplishes the task of explaining to the outside world about the issues that are going on within the co. Good corporate reputation makes selling easier & cheaper.It saves on advertising,and renders every activity easier. Pr is more vigorous in in bad times ;for ex,in recession,large cos often cut the ad budjet and spend part of it on PR.
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Advertising mangmnt
advertising originates from the latin advertowhich means to turn round. Therefore advertising denotes the means used to draw attention to to any object or purpose. In marktng, advertising is defined as any paid form of non-personal presentation and promotion of ideas,goods,or services by an identified sponsor Popularisation of products is basic aim of advertising and hence rests on a thorough understanding of the buying process-and influencing the purchase behaviour of consumers in a way favorable to the advertiser.-- ATTENTION<AWARENESS<INTEREST<DESIRE<ACT ION<SATISFACTION <LOYALTY.
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Attitudes created by advertising-- 1cognitive component of attitude deals with cognition or knowledge.It is the faculty of knowing,or percieving or concieving ideas.It is the sphere dealing with knowledge. 2.The affective component deals with affections /emotions.For ex feelings of likes and dislikes towards objects are dealt on the affective plane. 3.The conative component deals with behavior or action.these 3 components together shape what is known as attitude.
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Theories of attitude
Consistency theory.Man seeks consistency ,balance or harmony in his belief system.He tries to resolve inconsistencies or imbalances because he cannot tolerate them for long. When inconsistencies occur between existing belief system and new information,to which he gets exposed,the given attitude will tend to change, so that the inconsistency will get resolved.
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Ad objectivesmodels that link buyers attitude change and purchase with advertising
Some useful models; 1.AIDA-the 4 stage model proposed in 1920s for any impersonal sales presentation 2.5-stage & 6-stage models;proposed in 1930s by rural socialogists studying the process of innovation-adoption.There are 5 stages in any adoption process-Awareness,Interest,Evaluation,trial and Adoption.Then came 6-stage model;Awareness,Knowledge,Liking,Preference,Conviction and Purchase.divided into 3 main components;cognitive component(Knowledge component-First two),Affec tive component(emotions component-next two), and lastly conative component(Action component-last two) All these mod.els belong to a class called hierarchy of effectmodels 3.DAGMAR..Looks at advertising as performing a commncn task and not a sales task. What is required is a balancing act-advtng can not be loaded with the sales task making it totally responsible for bringing in sales; nor can it be totally exempted from a sales-related responsibility.
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Ad objs
8.aiding total selling function by taking customer thro steps in purchase process-from awareness to purchase 9.closing an immediate sale-clincher ads 10.supporting other sales promotion activities 11.stimulating impulse buying 12.enthusing the channel to stock the product 13.supporting &supplementing sales selling effort and dealers selling effort.
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Deciding ad budget
1.Competitive parity 2.Affordability 3.A fixed % of turnover 4.Budget based on functions to be performed 5.Regression analysis;An advanced quantitative technique to arrive at budget.Done based on Historical data-either time series data or cross-se4ctional data Time series data are records of past ad expenditures and sales over time.Cross-sectional data are records of ad expenditure and sales for a specific period over different markets.The aim is to predict the dependent variable sale or market share.Advertising expenditure level would be one of the independent variables.The regression coefficient crresponding to the advertising variable serves as a measure of the short-term response to advertising.
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Deciding the copy-copy refers to all that appear in an ad written matter,pictures,labels,logo,and designs
To decide copy platformor a precise statement of the ad story, 1,close interaction between advertiser and ad agency 2,clear-cut ad objectives by advertiser 3,knowledge of market & consumer characteristics, 4,nature of competition 5,profile of competing brands/products. 451
Major tasks in copy development1.fact finding stage and 2,idea finding stage alex osborn
the big idea in Advertising 1.All effective commercials have a big idea.Says Roser reeves;The big idea in itself is a USP.Get a big idea and say it in a simple style. 2.David Ogilvy says;Unless ur campaign contains a big idea,it will pass like a ship in the night. 3.Says Leo Burnett;Not only is great copy deceptively simple,so are great ideas.And if it takes a rationale to explain an ad,then it is too complicated--452
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Testing the ad copy-2 types post tests;after product launch and pre-tests before
3 copy testing methods-1,lab tests,2,tests that attempt to simulatethe natural reading or viewing environment and3,tests done in the real/natural environment,called market tests. 1.lab tests-use phisiological measuring techniques with aids like eye-camera,polygraphs etc. 2.simulated environment tests include intercept research,mobile trailers,fixed facility research,and in-home interviewing. 454
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Ponds website
Ponds interactive site is positioned as a one-stop site for skin-care tips and Ponds products.While other sites concentrate on co-specific product oriented info,ponds attempted to give general info and advice on common skin-care problems to make it universal. Ponds took 1 yr and invested more than Rs 1 crore in the project to start with.
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Measuring TV viewership(TRP)
Television Rating Point (TRP) is ca measure of the viewership level of the program.It reveals % of audience tuned to a program. TRP system involves collection of viewership data on a weekly basis from a panel of TV viewers in select market territories,Viewership figs are presented as % of total tv audience with 1 TRp representing 1% of audience. EG.A serial on ZEE TV has a viewership of 11.5%among a sample of men of age 25 plus in Mumbais C&S homes While Zee News had just 0.2%viewership.That means the serial has a TRP of 11.5 and Zee News has a TRP of 0.2.
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$ spots on a program with a TRP of 20 yield a GRP of 80.Programs are compared on basis of cost per rating point=ad tariff divided by TRP. TRP measurement; Diary system,people meter and Laser meter. Diary system is the most common,It is a system of program recall by panel members who are supposed to keep a diary on what they watch. The people meter is a mechanical device ,which records when the tV set is on and which member of the family is watching at a particular point.The viewer has to clock in by pressing a button. The Laser meter is a more advanced device.It automatically records the no of people present in aroom thro heat sensors Laser meter overcomes the limitations of both the previous devices.which demand the active and timely participation of panel members.If the viewer forgets to clock in or make timely notingsin the diary,then projections become unreliable in case of people meter and diary system respectively.
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Disruptive competitors
1.break the rules 2.buy shre rather than earn3.take large risks 4,in general shake-up the industry Eg.American Airlines finds Delta & United to be well-behaved,but finds TWA,Continental & America westdisruptive since they de stabilise airline industry thro continued heavy price discounting and wild promotional schemes.
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Disruptive competitors
1,Break the rules 2,Buy share rather than earn 3,take large risks 4.In general shake-up the industry. EG,American Airlines finds Delta & United to be well-behaved,but finds TWA,Continental & america West disruptive since they destabilise airline industry through continued heavy price discounting & wild promotional schemes
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Comp strategies-- Cos persuing a clear strategy (one of the above) perform well.Middle-of-the-roaders like sears,Chrysler & International harvester suffered the worst because they didnt stand out as the Lowest in cost Or highest in perceived value Or best in serving some market segments. Middle-of-the-roaders try to be good on all stategic counts but end up being not very good at anything.
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Competitor myopia
Kodak was worried of Fuji. But real competition was from film less cameras sold by Cannon & Sony that take video still pictures that can be shown on a TV set turned into hard copy IDENTIFY COMPETITORS BY linking industry And by market analysis by mapping out product/maket segments 1.From industry point of view-Cokes competitors are Pepsi,7-Up,Dr pepper 2.From market point of view-Cokes competitors are thirst quenchers such as iced tea,friit juice,bottled water etc,
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Customer segmentation
children/teens Plain tooth paste CP,P&G Tp with fluorideCP,PG GEL-CP,PG,LEVER STRIPED-Beecham Smokers TP--------- Age19-35 36+ CP&P&G CP&P&G CP&PG CP,PG
Identifying competitors-- P&G with several versions of Crest & Gleam and CP with Colgate occupy 9 of the segments Lever Bros with Aim occupy 3 segments,Beecham one(AquaFresh) and Topol two. If Topol wants to enter other seg bments it must estimate the market size of each segment,the shares of current competitors,and their current capabilities,objectives and strategies. Each product/Markt segment poses different competitive problems and opportunities.
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Leaders strategies
A product innovation may come along and hurt the leader .Ex.Tylenols non-aspirin pain killer took the lead from baeyers aspirin . The leading firm might grow fat & slow ,losing against new & peppier rivals.Xeroxs share came down from 80% to 35%,when Japanese producers challenged with cheaper & more reliable copiers. SOME BEST KNOWN LEADERS ARE GM in autos,Kodak in photography,IBM in computers,COCA Cola in soft drinks,WaLL MART in retailing,Mc Donalds in fast food,And Gillette in razors and blades.
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3 actions for leader to remain no 1 1.Expand total market 2.Protect MS thro defensive and offensive actions 3.Expand MS further even if mrkt size remains same or even declines. 1.EXPANDING THE TOTAL MARKET A.Find new users.Some customers are still unaware and some resist on price or features.Ex Revlons perfume.Opened virgin mrkt by convincing women who dont use perfumes, and also looked at other demographics by producing cologne for men,and geographically by selling perfumes in other countries. Johnsons baby shampoo Ad campaign aimed at adults and it soon became a leading brand total shampoo market.
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Leaders actions-- B.Find new uses.Eg.Duponts Nylon Fiber for parachutes Womens stockings Major matl in shirts/blouses Automobile tyres Upholstery and carpeting ARM&HAMMER baking soda as refrigerator deodorant-by heavily advertising to put an open box of baking soda in Fridge,
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Leaders 3 actions
C.more usage;Convince people to use more often or more per occasion.Eg.Colgate tooth paste.Head & Shoulders shampoo;more effective with 2 applications instead of one per shampoo. Michelin began rating French restaurants on a 3 star system .Many of the best restaurants are in south of France leading many Parisians to take week end drives to South.It encouraged car qwners to drive more miles per year.
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Coke against Pepsi,Gillette against Bic,Mc Donalds against Wendys,GM VS Ford.HOW? 1.Prevent weaknesses that provide opportunities to competitors :keep costs down and price proportional to value customers see in the brand. 2.Plug holes so competitors dont jump in. 3.The best defense is a good offense & the best response is a continuous innovation. It takes the offensive and sets the pace and exploits competitorsweaknesses
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3.pre emptive defense-By contrast, the leader may employ a more aggressive preemptive defense striking competitors before they can move against the Co. Ex when threatened in mid 80s,by the impending entry of the Japanese into US,Cummins slashed its prices by 1/3 rd to save its No 1 position in the 2 bn $ heavy duty truck engine mrkt. Ex cummins now has a 50% MS in North America .Not a single Us built Tractor-trailer Truck has a Japanese engine.
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4.counter offensive defense.When a leader is attacked despite its flanking or preemptive efforts,it can launch a counter offensive defense. Ex.When Fuji attacked Kodak,in the Us film makt,Kodak counteracted by greatly increasing its promotion and introducing several innovative film products. Ex.When Cloroxs detergent with bleach attacked it,P&G responded with tide with bleach which enabled it capture a 17% share of all Us detergent sale!
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MS increase leading to profit increase depends on the share increase strategy.There are many high share Cos with low profit and low share Cos with high profit.THE COST OF BUYING HIGH SHARE MAY EXCEED THE RETURNS. Highe shares tend to produce higher profits only when unit costs fall with increased share, or when the Co offers a superior quality product and charges a premium price that more than covers the cost of offering higher quality!
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Leader strategies-- Profitability increases as business gains shre relative to competitors in its served marktpreferably at a highr price, Not surprising why Cos like GE want to be atleast NO1 or2 in each of its mrkts or get out!It shed its computer,AC,& TV businesses sinse it couldnt achieve the top dog position here. Mercedes has a small share of total car mrkt,but earns high profit because it is a high share Co in its luxury car segment. And it achieved a high share because it does many things right such as producing high Q,giving good service,and holding down its costs!
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Challenger stra--- 2 options 1.Attack the mrkt leader-obj being not to topple but just wrest a certain mrkt share increase as in BIC vs GILLETTE; OR take over on leader as IBM in PCs Or2,to avoid the leader and challenge firms its own size or smaller local and regional firms 1.Attacking the market leader---High risk but potentially high gain strategy;Makes sense if leader not serving mrkt well and attacker has some SDA-a cost adv leading to lower prices or ability to prov
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Attacking leader
In construction equipment industry, komatsu challenged Caterpiller by offering same quality at much lower prices .Kimberly Clarks Huggies grabbed from P&G a big share of disposable diaper mrkt by offering a better fitting diaper with reusable fasteners UJAAlA vs RobinBlue;MOOV vs IOdex ATTACING THE SMALLER FIRMS Either under-financed Cos or those that are not serving their customers well.Several big Cos of today grew to their present size not by challenging large competitors but by gobbling up small local or regional competitors.The obj being to put the small player out of business!
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Followers adv
4Following isnt the same as being passive or a carbon copy of the leader .Each follower brings in distinctive adantages to its target mrkt location,services,financing etc. 5.The follower is often the major target of attack by challengers.Therefore folloer must keep mfg cost lowand product and service Q high.It must also enter new mrkts as they emerge.
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Nicher
Ex.A law firm specialises in civil,criminal or business law mrkts-particularly those neglected by majors. ---selling their entire output to a single Co such as TATAMOTORS,WalMart Or GM. ---Sell in a certain locality ,region of the world. --operate at the low or high end of the mrkt.eg,HP specialises in high Q-high Price end of hand calculator mrkt --offers services not available from other firms.eg,a bank taking loan request over phone and hand deliver the money to customers.RTC reservations.
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nichemanship
The key idea in nichemanship is specialisation A mrkt nicher can specialise along any of several mrkt,customer,productor marketing mix lines. For ex, ONE TYPE OF END USERlaw firm Custm size groupssmall,med One or a few specific costomerstelco,walmart etc. Geographical nichers-- Q-P nichers---low or high end Service nichersbank ex prev slide.
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Risks of niching
The mrkt niche may dry-up. 2.may grow to the point that attracts larger competition 3.So,practise multiple niching by developing 2 or more niches ,the co improves chances of survival. 4,Even some large firms prefera multiple niche strategy to serving the total mrkt.HLL.One large law firm developed national reputation in the 3areas of Mergers & acquisitions,Bankruptsies,& Prospectus development and little else!
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