chapter 14 market development

8/12/2019 Chapter 14 Market Development

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Market Development, Information, and

Bargaining Power

Reasons for market

development

Strategy in market

development

Tools and outcomes

Participation in

commodities market

development

Bargaining power and

market stabilization

Market information


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define

Market development involves creating or

expanding a market for new or existing products

and/or increasing the value of these products

few consumers today are aware of the pricklypear, however, but farmers who grow this cactus

plant


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Promotion: Strategic and Tactical

Objectives

Awareness

Trial

Attitude toward theproduct

Beliefs

Preference

Temporary salesincreases

Emerging

Markets/

New Products

Mature markets

/established

products


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Marketing Strategy

MARKETING

OBJECTIVESWhat we want to

accomplish

TOOLSUse resources such

as distribution,

advertising, sales

promotion,

demonstrations

TACTICS

AND

ADAPTATIONImplementing strategy

as things change.More tough choices!

CONSUMER/

MARKET

RESPONSEConsumers or

intermediaries

respond

STRATEGYHow to best use

available resources

to accomplish objectives

under circumstances.Make tough choices!

OUTCOMESales are influenced

(e.g., volume,

frequency, switching,

price sensitivity)

ASSESS AND RE-EVALUATE

ASSESS AND RE-EVALUATE


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Strategies, Objectives and the Hierarchy of

effects

The promotional activities needed for a given product will

depend on factors such as its current stage in the

product life cycle.

Once more people know, a significant challenge is going

to get more people to actually try the product

This may be difficult to accomplish because of the high

cost of the product and the vast number of choices of

other products that consumers can consume.

There is simply not enough time or money to try

everything available.


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Strategies, Objectives and the Hierarchy of

effects

If a product category catches on, emphasis may

then need to switch to brand differentiation and

the firm may need to work on getting consumers

to hold favorable beliefs about their brand. In later stages of the product life cycle, where

most consumers opinions have largely been

set, temporary sales increases, usually through

price promotions, may be the only realisticobjective.


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Market Development: The Objectives

DECREASE CONSUMER PRICE SENSITIVITY

Costs a little more, but its worth it Zachy farms chicken ads

Campbells soup ads

GET MORE PEOPLE TO BUY PRODUCT

Hungry Man dinners Hot Pockets ads Variety seeking advertising Spam luncheon meets advertising

GET PRODUCT USED FOR NEW PURPOSESOrange juiceit isnt just for dinner anymore Beefits whats for dinner

Spam luncheon meets advertising Baking soda ads

DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDS

Kraft cheese ads suggesting that Kraft has more calcium Total cereal ads suggesting vitamins

Coke is the real thing The Pepsi generation The night belongs to

Michelob Florida orange juice Maxwellits good to the last dropProgresso and Campbells soup ads

GET CURRENT USERS TO USE MORE

Snickers satisfies you! Ask for A-1 Steak Sauce A sandwich just isnt a sandwich

without miracle whip Beefits whats for dinner The Incredible, Edible Egg Fast food restaurant advertising


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Market Development Issues

INCREASED

SALES OF

PRODUCT

DECREASE

CONSUMERPRICE SENSITIVITYGET MORE PEOPLETO BUY PRODUCT

GET CURRENT

USERS TO USE

MORE

GET PRODUCT

USED FOR

NEW PURPOSES

DEVELOP

PREFERENCE

RELATIVE TO OTHER

PRODUCTS OR BRANDS

DISTRIBUTION

ENHANCE-

MENT

ADVERTISING

SALES

PROMOTION

JOINT

VENTURES/

CO-

BRANDING

TRIAL

AWARE-

NESS

BUYING

CON-

VENIENCE

.Big picture

onlydetails

not important!


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Strategy Issues

Deciding on objectives Realism

Suitability for

Company strengths

Competitor positions Market structure and change

How much to spend on objectives Cost of advertising and/or other promotion relative to gains

Most appropriate ways of achieving objectives based on

Cost Effectiveness

Synergy

Consistency of objectives


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Some Tools

Advertising

Awareness

Trial

Preference

Reminder

New uses

Distribution

Availability inretail stores

Quality of

placement withinretail stores

Price/sales promotion

Coupons

Sales

Value

Premium Joint ventures/co-

branding

Demonstrations

Product investment

Quality Differentiation

Packaging

Usability convenience


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Setting strategy.

Improving quality, for example, might be

achieved either by increased research and

development, the use of higher quality materials,

or by investing in new manufacturingtechnology.

The most appropriate choice will depend on

factors such as cost and effectiveness, but may

also depend on risk.


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Tactics and implementation.

If a decision as been made to position a product

as a premium brand through advertising, specific

ads must be developed and tested and

appropriate media and advertising schedulesshould be resolved.

When implementation begins, results need to be

monitored.


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Consumer adoption of new food products

One way to spread new foods is through

massive advertising. This strategy has been

used in marketing the Hot Pockets

convenience products. Many foods also spreadas some groups of consumers imitate others

they see consuming them, and some are

encouraged to try new foods based on word-of-

mouth communication.


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Consumer Adoptions of New Foods or New Food

Uses

ADOPTION BY

LIMITED GROUP

MEDIA

COVERAGE

INCREASING

ADOPTION/

ADAPTATION

PROMOTION

WORD OF MOUTH

OBSERVATION

TRIAL

TRIAL


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Levels of market development.

Development efforts may center at several

different levels.

Florida orange growersmay want to promote

their food, hoping that preference will bedeveloped relative to other food categories

Alternatively, development efforts can focus on a

branded product (e.g., Diet Coke), a brand

(e.g., all Coca Cola branded products),


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Commodities Market Development Programs

Typically regionale.g., Florida orange juice;

Idaho potatoes; Hawaiian sugar cane;

Washington Apples; Texas beef

Intention is to differentiate Compulsory participation in advertising

programs

Development is not worthwhile for the individual

farmer

The individual farmer is assumed to benefit from

overall campaign


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Level of Market Development

Levels

Commodity

Differentiation from competing commodities

Increase in demand for commodity

Corporate product category (e.g., Coca Cola

drinks, including Dasani)

Product category brande.g., Kraft American

cheese slices Brand (product line)e.g., Kraft foods


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Effects and Outcomes

SALES

Volumes

Prices

AWARENESS

PREFERENCE

USED IN

MORE

SITUATIONS

REDUCED

PRICE

SENSITIVITY

USED

MORE

FREQUENTLY

USE BY

MORE

PEOPLE

REPEAT

PURCHASES

TRIAL


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Definitions

Innovation: An idea, practice, orproduct perceived to be new by the

relevant individual or group.

Diffusion process: The manner in

which innovations spread through

the market.


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To Adopt or Not to Adopt: How Will Consumers Answer theQuestion?

Some causes of

resistance to adoption

Perceived risk--financial

and social

Self image Effort to implement

and/or learn to use the

product

Incompatibility

Inertia/overwhelming

existing choices


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Types of Innovations

Fashionstastes goback and forth overtimee.g., food fatcontent

Fadsproduct is infor a short time andthen fades (e.g., ostrichmeat)

Trendsconsumption

of a food product eitherincreases or decreasesconsistently over time


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0

10

20

30

40

N

um

b

er

o

fn

e

w

a

d

op

-2.50 -1.50 -0.50 0.50 1.50 2.50

Adoption of Innovations Over Time

Innovators

2.5%Laggards

(13.5%)

Early

majority

34%

Early

adoptors

(13.5%)

Late

majority

34%

Innovators and Imitators:The Lifecycle of A Product


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0

0.2

0.4

0.6

0.8

1

P

e

rce

nt

d

iffu

sion

0 5 10 15 20 25

Time

The S-Shaped Diffusion Curve

100% adoptionor saturationpoint

One Diffusion Pattern--Nicely Balanced...


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Implications for Foods

Many substitutes and individual tastes

Trying new foods for variety is common

Social opportunities for trial

Food tastes tend to be learned early in life

Best opportunities for spread are with younger

consumers


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Influences on the Speed of Diffusion

Risk to expected benefit ratio (relativeadvantage)usually not an issue forfoods

Observabilityis the product

consumed in public Product pricingscarce foods are

rationed through cost

Trialabilityusually easy for foods

Switching difficulties and learningrequirements/ ease of usenot aproblem for foods eaten out but maybe for foods to be produced at home


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Pioneering Advantage

Consumer expectations are usually shaped

by the first encountered brand

Satisfying and awareness by consumers

Order of entry vs. pioneering advantage

Positioning of existing pioneer vs. strategy

of first entry


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Bargaining Power

Impact

Price

Conditions

Returns

Time of payment Interest or finance

charges

Quality or other

adjustments

Transportation or otherservices

Sources

Size, number, and

concentration of firms

Supply control

Unequal information Diversification (?)

Product differentiation

Control of resources

Financial resources Ratio of fixed to variable

costs


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Marketing Orders and Agreements

Mandates intended to stabilize markets

Types of issues

Grades, size

Packaging Market allocation (quotas)

Minimum prices

Contributions to research

Advertising (market development)


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Market Information

Some issues

Crop forecasts

Demand forecastsquantity

and prices

Government information

programs

Problems

Price specification

(comparability of location,

time, and other factors)

Net vs. gross prices

(allowances and discounts)

Cost vs. accuracy of

information

Changing market orientation

and scope of market

(proportion of buyers andsellers involved in open

markets)

Voluntary cooperation

chapter 14 market development

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