ACCAPaper P3

MARKETINGAND THE VALUE

OF GOODS & SERVICES

Customers &

Markets

Value chain analysis

Critical SuccessFactors

Benchmarking

Customers & markets

Market analysis

Customer analysis

Markets & segmentation

Marketing mix strategies

Customers & markets

Market analysis

A key aspect of strategy development is the identification of, and then meeting of, customer needs

Market analysis helps identify the appropriate marketing strategy – this analysis will include the

following

Appraisal & understanding of the present situation

Definition of objective of profit, turnover, product image, market share & market position by segmentEvaluation of the marketing strategies available to meet these objectives Definition of control methods to check progress against objectives & provide early warning

There are two purposes of the analysis

To identify gaps in the market where consumer needs are not being satisfied

To look for opportunities that the organization can benefit from, in terms of sales or development of new products & services

Customers & markets

Customer analysis

A customer may be an organization, a business firm or an individual consumer

Segmentation – sets of strategic questions

include the following: -

Who are the biggest, most profitable existing customers & who are the most attractive potential customers?

There are three sets of strategic questions that are used to analyze customers – segmentation, motivation & unmet needs

Do the customers fall into any logical groups on the basis of characteristics, needs or motivations?Can the market be segmented into groups requiring a unique business strategy?

Motivation – concerns the customers’ selection & use of their favorite brands, the elements of the product of service that they value most, the customers’ objectives & the changes that are occurring in the customer motivation

Unmet needs – considers why some customers are dissatisfied & some are changing brands or suppliers The analysis looks at the needs not being met that the customer is aware of

Customers & markets

Markets & segmentation One aim of segmentation is to identify groups of customers who share similar needs

for targeting

Traditional segmentation focuses

on identifying customer groups based on a

number of variable that include: -

Geographic variables Demographic variables

Psychographic variables Behavioral variables

Value based segmentation

looks at groups of customers in terms of the revenue they generate & the costs of establishing and maintaining relationships with them

Customers & markets

Marketing mix strategies

Each market segment can become a target market & would required a unique marketing mix for the organization to exploit it properly

The marketing mix is the set of controllable variables that the firm can use to influence the buyers’ responses (Kotler)

Brand name Product

The variables are commonly grouped into four classes the McCarthy refers to as ‘the four Ps’ – product, price, promotion & place

Packaging Features Options

Quality Warranty Service Style appeal

Level Price Discounts Allowances Payment terms

Delivery options

Contd.

Customers & markets

Marketing mix strategies

Sales promotion Promotion Personal

selling Publicity Advertising

Distribution channels Place Distribution

coverage Outlet locations

Inventory levels

Sales territories

Inventory locations

Critical success factors

What are critical success factors?

Developing suitable critical success

factors

Critical success factors

What are critical success factors?

Critical success factors (CSFs) are performance requirements that are fundamental to an organization’s success

In this context CSGs should thus be viewed as those product features that are particularly valued by customers

This is where the organization must outperform competition

Measured targets for CSFs are called key performance indicators (KPIs)

Critical success factors Developing suitable critical success factors

In developing CSFs from customer needs, the following issues should be borne in mind: -

CSFs need to focus on the most important factors that ultimately determine the buying decision

Many factors are taken for granted by customers – these give rise to threshold features, i.e. all products must have these simply to enter the market

CSFs will vary from segment to segment The organization will need to assess its strategic capabilities to identify which segments it should regret

Customers’ understanding of value can vary over time, so the organization needs to be open to changing the monitored CSFs

Value chain analysis

The value chain

Applying the value chain in a scenario

Value networks

Value chain analysis

The value chain

Porter developed the value chain to help identify which activities within the firm were contributing to a competitive advantage & which were not

The approach involves breaking down the firm into five ‘primary’ and four ‘support’ activities, & then looking at each to see if they give a cost advantage or quality advantage

Contd.

Value chain analysis

The value chain

Primary activities Inbound logistics – receiving, storing & handling raw material inputs Operations – transformation of the raw materials into finished goods & services Outbound logistics – storing, distributing & delivering finished goods to customers Marketing & sales – e.g. sponsorship of a sports celebrity could enhance the image of the product Service – all activities that occur after the point of sale, such as installation, training and repair

Support activities Firm infrastructure – how the firm is organized

Technology development – how the firm uses technologyHuman resources development – how people contribute to competitive advantage Procurement – purchasing, but not just limited to materials

Contd.

Value chain analysis

The value chain

All organizations in a particular industry will

have a similar value chain, which will include

activities such as:

Obtaining raw materials

Designing products

Building manufacturing facilities

Developing co-operative agreements

Providing customer service

It is vital that the linkages between the different elements of a value chain are considered Firstly this is to ensure consistency Secondly it may be that through linking separate activities more effectively than competitors, a firm can gain a competitive advantage

Value chain analysis

Apply the value chain in a scenario

To gain a competitive advantage over its rivals a company must either

Perform value creation function at a lower cost than its rivals ORPerform them in a way that leads to differentiation & a premium price

Value chain analysis looks at each of the

processes that make up the chain of activity and:

Rates how important it is in a given company’s production or service activity

Rates how the company compares to its competitors

Helps to decide how individual activities might be changed to reduce costs of operation Helps to improve the value of the organization’s offerings

Value chain analysis

Value networks

The organization’s value chain does not exist in isolation. There will be direct links between the inbound logistics of the firm and the outbound logistics of its suppliers, for example. An understanding of the value system & how the organization’s value

chain fits in to it will therefore aid in the strategic planning process

A value network is a web of relationships

that generate economic value & other benefits

through complex dynamic exchanges

between two or more individuals, groups or

organizations

Tangible value exchanges – involve all exchanges of goods, services or revenue, including all transactions involving contracts & invoices, return receipt of orders, request for proposals, confirmations or payment

Intangible knowledge exchanges – include strategic information, planning knowledge, process knowledge, technical know-how, collaborative design, policy development, etc.

Benchmarking

Why benchmarking?

Types of benchmarking

Benchmarking

Why benchmark?

Benchmarking is the process of systematic comparison of a service, practice or process

Its use is to provide a target for action in order to improve competitive position

The main benefits include:

Improved performance & added value

Improved understanding of environmental pressures

Improved competitive position

A creative process of change

A target to motivate & improve operations

Increased rate of organizational learning

Contd.

Benchmarking

Why benchmark?

Assign responsibilities •Structure team•Clarify roles & authority•Collect internal, information

Select processes to be benchmarked

•Critical •Significant

Review•Appropriateness of measures/objectives •Benchmarking process

Identify potential partners •Benchmarking club•Successful partners•Known leaders

Implement •Establish new standards •Define objectives & time scale•Assign responsibility

Analysis •Performance gap•Target future performances

Interaction •Visit •De-brief •Document

Benchmarking

Types of benchmarking

Managers compare the performance of their products or processes externally with those of competitors & best-in-class companies and internally with other operations

within their own firms that perform similar activities

Strategic benchmarking Involves considering high-level aspects such as core competencies, developed new products & services and improving capabilities for dealing with changes

Historical benchmarking Internal benchmarking involves seeking partners from within the same organization

Industry/sector benchmarking

Performance benchmarking is used where organizations consider their positions in relation to performance characteristics of key products or services

Functional benchmarking is used when organizations look to benchmark with partners drawn from different business sectors or areas of activity to find ways to improving similar functions or work processes Contd.

Benchmarking

Types of benchmarking

Best-in-class benchmarking

External benchmarking involves seeking outside organizations that are known to be best-in-class

Process benchmarking is used when the focus is on improving specific critical processes and operations

International benchmarking

Used where partners are sought from other countries because best practitioners are located elsewhere in the world and/or there are too few benchmarking partners within the same country to produce valid results

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