Business Policy & StrategyChapter Seven

Marketing

Murdick, Moor, Babson & Tomlinson, Sixth Edition, 2000

Marketing ConceptConcern of every area of the businessFoundation for overall strategy and policies of the businessCustomer-oriented business approachTells what business(es) to start, products/service to introduce or discontinue and basic culture of the organization

Marketing Concept Begins With Potential Customers’ Needs-Four

P’sProductPricePlacePromotion

An organization’s existence depends on satisfying the customer.

S.W.O.T. AnalysisSWOT: strengths, weaknesses, (INTERNAL)Opportunities, Threats (EXTERNAL)

• Analysis used to develop corporate strategy

ForecastingShort Term VS. Long Term

• Short term (now-next year) provides info on:

# Of units that should be produced# Of employees neededWhat revenue and expenses to expect

• Long term provides info on:Need for productive capacityIndustry prospects and resource

allocation

Forecasting TechniquesQuantitative techniques

Past trendsSurveys

Qualitative techniquesInterviewsFocus GroupsDelphi Technique

Impact of BenefitsConsumer spending not necessarily correlated with price of productsCompany cannot rely on word of mouth to promote products benefits in short run, so

Promotional techniquesAdvertisingPersonal selling

• Key to successful promotion involves stressing benefits.

ProductProduct can be considered a serviceProduct brand and packaging affects the saleProducts can include convenience, impulse, shopping and specialty goodsProduct life cycle

The Role of PriceA lower price(penetration price) may generate more volume and profit or lower volume and profitAnalysis of customer to find best price

how much they buywhat value do they perceive losing customers to a competitor

The Role of PricePricing Techniques

cost-oriented pricing (contractors)demand-oriented pricing (athletic events)competition-oriented pricing (gas)

• Price varies due toseasonal changesinventory adjustmentTrendsage of product

Lowering prices may increase or decrease profits

Shaft examples:Ex. 1$20x 2 $40- 20 @$10each$20•Complementary

product

Ex. 2$15x 6$90- 60 @$10each $30

Basic Elements of Promotional Mix

AdvertisingPersonal sellingAll otherspublicity contestspublic relations authors signing

bookstrade fairs couponsexhibits displaysentertainers

Techniques to use:1) Concentration of consumers2) Extent of demonstration required3) Customizing to consumers’ needs4) Degree of benefits offered5) Complexity of technique6) Funds available

Relationship to elements in Marketing Mix

ProductState how product satisfies needsState how products satisfies needs better than competition

PriceAssist customers in seeing the benefits are more important than price

PlaceState added benefits/value of superior distribution

PlaceIntermediariesAdditional benefitsTarget market Design channelRelationship to Marketing Mix

IntermediariesWholesalers

MerchantsBuy from producerSell to retailers or industrial buyers

Agent/BrokersAssist in moving goods from producer to consumer or industrial markets

IntermediariesRetailers

ConvenienceQualityStore excitementPriceBreadth/DepthService

Target Market

Industrial Consumer

Design ChannelCoverageRequirementsProfitable

Relationship to other elements in Marketing Mix

ProductSelect appropriate distribution channelMay need to use different channels

PriceShould be consistent with distribution channel

PromotionSuperior distribution in comparison to competitionProvide how distribution provides additional benefits

Product Policy AnalysisDesigned to indicate the direction the firm will grow in the future.Designed to keep the company from running off in all directions.

Marketing Policy Analysis

Designed to clarify the geographic, customer, and other characteristics of the market as appropriate for the firm.

Profit Policy AnalysisSales volume to provide a sizable dollar amount.Minimum profit as a percentage of sales.

Personal-Selling Policy Analysis

Guiding the structure of the sales organization.Behavior of sales representatives on the job.

Customer Relations Policy Analysis

Relations with customers, often unwritten

Advertising Policy Analysis

Broad company wide promotion policies are not usually written.Reveal underlying philosophy of management.

The policies must be examined relative to strategic marketing plans

of the company.

Product PolicyMarket Category PolicyProfit Policy

Personal-Selling PolicyCustomer Relations PolicyAdvertising Policy

Three Policy ChoicesExpand sales into new categories of customersIncrease penetration into existing market segmentsHold present market share by concentrating on product design and manufacturing innovations; no marketing innovations

Expand Sales to New Categories

May be a good approach depending on the situationResearch and cost/benefit analysis will determine if this is a good choice“what to do” and “how to do” plans must be developed

A firm may:Expand geographicallyDevelop additional related products or models within product line to enter new market areaDevelop new products unrelated to its present lineDevelop customized products

Increased penetrationMost difficult marketing taskProduct/Brand differences are small or non-existentMajor way to sell more products/services is to take customers away from existing competitors

Increased penetration accomplished by:

Superior marketing effortsPromotional techniques to drown out competitors’ advertisingTotal market can be expandedPricing/Service mix to give a competitive advantage

Non-Marketing InnovationsAdopt current marketing practices

Works well with small firms where their core competency is in another area.Rather than wasting money developing new marketing strategies, the firm will concentrate on quality and service

What To Consider When Determining A Marketing

MixDo all activities share the same goals and objectives?Can additional costs in individual divisions be justified?Budgets and schedules should be formally prepared on a regular basis

Marketing PitfallsSales grow at a rate where manufacturing can not keep upFocus too much on large customers

may fall into the trap of maintaining a large number of unprofitable small customers80/20 Rule

Not enough research

DemandElastic is when the customers are price sensitive. Increased prices may lower sales and therefore, lower total revenue.With inelastic demand, customers will generally purchase the product regardless of the price (food, gas, etc)