marketing energy products - hec...

MARKETING ENERGY PRODUCTS

Georges Zaccour,

HEC Montréal, Canada October 2013

Course Objectives

• Identify the characteristics of marketing • Apply these concepts to relevant

situations of energy products and/or companies

• Understand the role of marketing in energy firms

2

Pedagogical Approach

• Lectures (introduce terminology, concepts, key approaches, etc.)

• Discussions (how these elements apply or do not apply in your context)

• Case studies (learning-by-doing)

3

Introduction

• Marketing concept • Marketing model • Marketing in different markets

• Discussion: Is there any role for

marketing in the energy sector in Mexico?

4

The Marketing Concept

• Consumers (individual, organizations, etc.) have needs

• Companies attempt to meet consumers’ needs by offering the right product

• Objective of marketing: create a mutually satisfying relationship between firm and client

5

Level of Needs

6

BASIC NEEDS

SOCIAL NEEDS

PERSONAL NEEDS

Ex: food, energy

Ex: social status, to identify with others

Ex: personal achievement, values, personality

Marketing and Needs

• Marketing is about: – Identifying needs of different consumers

groups – Understanding the problems induced by

these needs – Developing a product or service able to

satisfy the needs

7

How to Satisfy Needs?

• By offering – The right product or service – At the right price – At the right place and time – With the right information

8

Mutual Satisfaction by Exchange

• The two parties achieve their goals by realizing an exchange or a transaction – The customer satisfies its need

• Satisfaction creates a new transaction cycle and loyalty

• Dissatisfaction breaks the transaction cycle – The firm realizes its objective

9

The Marketing Model

10

The Business firm The Market

Objectives Resources

Needs Demand Segments Consumer behavior

The marketing mix

Product Price Promo Place

Analyze markets

Integrate the marketing variables

Control for profitability and satisfaction

THE ENVIRONMENT OF THE MODEL

The Market

• Set of customers (buying units) characterized by – more or less complex needs – more or less complex buying behavior

• Aggregated needs constitute demand to the firm

• Differentiated needs require different offers (market segments)

11

The Integrated Offer

• Product or service: Functionality and other requirements (quality, design, after-sale service, etc.)

• Price: Value, cost, image, competition, etc. • Distribution: Available when and where needed by

consumers • Information: Customer needs information to

complete the exchange

12

Control

• Firm must control for two key elements: – How the exchange with markets allowed to

meet the objectives set at the beginning of the period

– How the exchange with the customers have resulted in customers’ satisfaction and loyalty

13

The Environment

• Environment is made of uncontrollable forces having an impact on the firm and the market – Competition (direct and indirect) – Regulation (competition rules, environmental

constraints, etc.) – Economic context (interest rates, revenues, etc.)

– Cultural and social contexts – Technology, …

14

Applications of Marketing (B2C Marketing)

• Buyer is a person or a household • Many potential buyers dispersed

geographically • Buyers frequently purchase small

quantities • Buying behavior, needs and motivations

are complex

15

Applications of Marketing (B2B Marketing)

• Buyer is an organization • Buyers are large and more concentrated • Large quantities • Needs and motivations are mainly

economical • Professional buyers (they do not buy for

themselves)

16

Applications of Marketing (Service Marketing)

• Services are sold in both consumer and business markets

• The main peculiarities compared to product are: – Service is intangible – Service is not storable (demand variation) – Quality is difficult to evaluate

17

Applications of Marketing (International Marketing)

• Export markets (products or services) • International markets differ with respect to

domestic market in terms of: – needs and cultures – legal and regulation contexts – institutions and political systems and customs – economic and demographic environment,...

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Other Applications of Marketing

• Non-profit organization (e.g., Red Cross, Oxfam)

• Political • High-tech marketing • Tourism (macro and micro) • Art marketing (theatre, museum,

symphony orchestra, etc.)

19

Discussion

• Is there any role for marketing

in the energy sector in Mexico?

20

Analyzing Markets

1. Defining the market

2. Defining competition

3. Understanding consumer behavior

21

The Marketing Model

22



Needs Demand Segment Consumer behavior

The marketing mix


Analyze markets




Market & Industry

• A market: a demand to satisfy a need • An industry: a group of firms using

(almost) the same technology and producing (almost) the same products

• Different products from different industries can satisfy the same need

• Direct and indirect substitutes

23

Competition

• Competition is about consumer choices among a more or less broad array of products or substitutes in order to satisfy a need

• Competition is also about producers of the same or different industries being directly or indirectly in competition for an exclusive relationship with the consumer

24

The Energy Market

LIGHTING

HEATING COOLING

DRIVING FORCE POWERING

COAL OIL GAS HYDRO BIOMASS

25

Energy Market

• Demand for energy is derived from other needs, e.g., lighting, cooking, heating, powering equipment, etc.

• Households: private use of energy to satisfy needs

• Industries and commerce: energy is an input in production

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Analyzing Consumer Behavior

• Firm must understand consumer behavior in order to plan its offer to consumer and produce satisfaction

• Consumer behavior is a process: – Need is created – Transaction is made – Satisfaction and loyalty are produced

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Consumer Behavior

• The key questions are: – Who buys (a person, a family, a group) – Why? (motives) – When? (timing) – How? (quantity, credit, etc.) – Where? (store, online, etc.) – What is the decision process?

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Buying Behavior

Consumers (individuals and households) Commerce and industry (groups buying for the organization) Governments and state enterprises (Buying under defined set of rules; public markets rules)

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Consumer Buying Behavior

Needs awakening

Information search

Evaluation criteria

Decision Buying Satis

faction ???

The process is influenced by personality, social environment (family, friends, reference group, etc.) and the culture of the buyer

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Information Search

• Consumer looks for information on the possible solutions and the different characteristics of those solutions

• Sources : advertising, Internet, friends, stores, salesmen, newspapers, etc.

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Evaluation Criteria

• Price

• Quality, brand

• Service (in-store, after sale, etc.)

• Reputation of the company

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Decision

• Buy or wait

• Decision rule that takes into account the different criteria: – Compensation or trade-off between criteria

(e.g., weighted average) – Sequential rule (e.g., lexicographic)

33

Buying

Buying (or shopping) is more than a simple act, it involves:

• The choice of an outlet (mall, online, specialized boutique, etc.)

• An experience in a store (physical aspect, contact with a salesperson, information, credit, etc.)

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Satisfaction

Satisfaction is a result of: • the experience during the buying process, • the use of the product, • the opinion of reference group, • the after-sale service (especially when there is a

problem). Positive experience reinforces satisfaction and

creates loyalty

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Buying Process

• Short resolution process (routine buying)

• Medium or modified resolution process

• Complete or in depth resolution process

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Industrial Buying Behavior

Context of B2B exchanges Task, buying situations, buying group and influences

Buying policies of governments

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Organizational Buying Context

• Capital goods vs. inputs for production

• Demand for intermediary goods is derived from final demand for their products or services

• Specific needs (specifications, quantities, qualities, service, etc.)

• Buying group (professionals)

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Buying Tasks

STEPS

1. Identifying and analyzing the need (problem) 2. Defining specifications 3. Identifying possible suppliers 4. Evaluating suppliers 5. Asking suppliers for proposals (price, service, etc.) 6. Selecting the best proposal and negotiating 7. Fixing the supply routine (Delivery, payments,

control) 8. Defining an evaluation grid of the different suppliers

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Buying Situations

STRAIGHT REBUY

MODIFIED REBUY

NEW TASK

Supplier chosen. Reorder the same item. Ordering routine, e.g., when remaining quantity reaches a given level (security stock)

Buyer reviews his routine (looking for new specifications, higher quality, new information from a competitor, etc.)

Buyer is making a major new decision (investment). Extensive search (identification and analysis of possible options and alternative suppliers)

40

Buying Groups

• User (department) • Professionals (engineers, etc.) to define

specifications and evaluate solutions • Supply dept.: identification and selection

of suppliers • Finance dept. : evaluation of proposals

and negotiation • Top management for approval

41

Buying Influences

Identification of needs

Final decision

Economic Motives Noneconomic Motives

Pricing

Quality

Assurance of Supply

Customer Service

Prestige

Career Security

Friendship & Social Needs

Personal Needs

42

Characteristics of Industrial Markets

• Stable relationship between buyer and seller – Shifting costs – Tight relationships between people – Common assets and joint projects

• With time, the buyer becomes the center of a

network of complementary suppliers who cooperate for achieving the best result

43

Government Buying Behavior

• Laws and rules to preserve public interests

• Different types of markets (bidding process)

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Types of Public Markets

• Least cost markets – commodity products where attributes can be

easily specified – bidding is open to all firms through public

announcement in order to maximize competition

– Select the lowest bid price

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Continued...

• Short listed markets: new tasks. • Buyer is looking for an original and expert

solution and the best price • Two-step bidding process:

– Qualifying potential suppliers on experience and technical competence

– A bidding process among a few selected suppliers

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Continued...

• Complex evaluation process using a weighted average of technical and economic criteria

• Examples of criteria: quality of the people who will work on the project, methodology, price, delivery date, etc.

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Internal and External Actors in Buying

• Who initiates the project? • Who will use? • Who will specify? • Who will finance? • Who will make the decision?

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An Example of Buying Behavior in the Energy Sector

• Suppose a gas company looking to develop the market for heating commercial building

• Gas is efficient for heating, the cost is interesting, pollution is limited

• Suppose a higher investment cost but a lower operating cost than other alternatives

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Continued...

Four Segments

New building Existing building Built for own use

Built for lease to others

A B

C D

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Continued...

• A and B are the most interesting. Why? • Groups C and D will just consider the

investment cost and they will minimize that cost

• Group B: target old buildings who have to go through major repair. Shifting costs is the limit

• Influence sources?

51

Market Segmentation

1. Concept of segmentation

2. Segmentation analysis

3. Segmentation in industrial markets

4. Segmentation strategy

52

Concept of Segmentation

• Segmenting a market is: – Discovering meaningful differences among

customers (through extensive analysis)

– Adopting a segmentation strategy: selecting and serving segments

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Markets and Segments

• Markets are (frequently) made of consumers who differs in terms of – consumption patterns – Behavior – reactions to the marketing variables (different

sensitivities to price, promotion, product quality)

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How to Segment a Market?

• Choose a segmentation basis

• Describe the segments

• Measure the segment

• Analyze the segment profitability

55

Segmentation Basis

• User status (user or non user of the product)

• Intensity of use ( heavy user vs light user) • Attitude ( loyalty, innovativeness, etc) • Response to marketing variables ( price

elasticity, quality, reputation)

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Descriptors of Segments

• Demographics (age, revenue, schooling, professions, family size, geographic location)

• Psychographics ( personality attributes)

• Benefits searched by using the product

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Segmentation Strategies

• Undifferentiated (no significant differences between group of consumers, or non profitable segments)

• Concentrated (one attractive segment) • Differentiated (different offers to

different segments)

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Industrial Market Segmentation: Macro & Micro MACROSEGMENTATION

Demographics identifiers: -Industry group (ex: steel) -Company size ( ex: large) -Company location

MICROSEGMENTATION -Company technology -Purchasing policies -Buyer-seller relationships -Innovativeness

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Marketing Research

• Place and role of marketing research

• Types of marketing research

• Different steps in a marketing research

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Ex. of Research Questions

• What is the best positioning of a new product? • What is the market potential for a new gasoline? • What is the image of PEMEX? • What is the probable impact of deregulating the

electricity sector? • What are the best media to use to advertise the

merits of energy savings? • What are the characteristics of segments? • What is the market potential in country X?

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Marketing Research (MR)

Definition and scope set of techniques and principles for systematically collecting, recording, analyzing and interpreting data that can aid decision makers who are involved with marketing goods, services or ideas. Key word : Data (information)

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Types of Data

Primary data: Data collected for a special purpose Secondary data: Readily available data Internal (accounting, marketing, etc.) External

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External Data

• Syndicated data – Data provided by commercial firm usually on a

subscription basis (e.g., A.C. Nielsen brands sales) – Data provided by associations to their members (e.g.,

production, investment) • Public sources

– Data provided by national or international (statistics) organisms such as INEGI, Statistics Canada, Unesco (e.g., GNP per head, population, production, consumption, etc.)

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Benefits of Secondary Data

• Benefits of secondary data are usually assessed in terms of : – cost – accessibility – relevance for the problem at hand – accuracy (depend on sources and

methodological considerations)

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Uses of Secondary Data

• Assessing a market’s size • Describing segments (by characteristics

such as geographic, demographic, sociological and economical)

• Location studies • Analysis of an industry • Import/export analysis • Assessing price impact on sales

66

Uses of Primary Data

• New product introduction

• Positioning

• Consumer behavior

• Psycho segmentation

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Place and Role of Marketing Research

• Marketing research is part of the marketing information system (MIS) – Acquire and analyze data to understand

needs and consumer behavior – Measure and forecast demand

– Control the efficiency of marketing programs

and evaluate the environment of markets

68

Types of Marketing Research

Present Future

Market situation

Market response

Descriptive Research

Predictive Research

Causal Research

Predictive Causal

Research

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1. Define the marketing problem

2. Define the marketing research objectives

3. Choose a research methodology (data collection, instruments, data sources, etc.)

4. Collect data

5. Analyze data

6. Prepare a report

Steps in a marketing research

70

Marketing Problem and Research Objectives

• Identification and problem definition – Problem vs. symptoms – Identification of data needs – Study the management and its

environment – Formulate hypothesis

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Research design

• Type of research (exploratory, descriptive, experimental)

• Data collection forms (survey, observation, etc.)

• Measurement instrument (e.g. content of a questionnaire)

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Data Collection Methods

• Data – Secondary, i.e., data are already collected by another

department or organization – Primary, i.e., data need to be collected

• Primary data collection methods: – Qualitative methods, – Experimentation, – Observation, – Survey

73

Research Instruments

• Secondary data • Questionnaires • Observation grid • Experimentation devices

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Collecting Data

• Defining and sampling the population • Choosing a collecting method:

– Personal interviews – Phone interviews – Mail questionnaires – Internet questionnaires

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Data Analysis

• Content analysis for qualitative research

• Statistical analysis for quantitative research

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Preliminary Data Analysis

• Before analyzing a data set using sophisticated techniques, a researcher should get a feeling for what the data are like. This is the purpose of preliminary analysis

• Preliminary data analysis involves usually descriptive statistics (central tendency, dispersion, etc.) and eventually two-way tabulation

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Presentation of Research Results

Communication here refers to both written and oral… Communicating the results of a M.R. project to decision makers is the last, but far from being the least important, step

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Preparing Effective Written Reports I

• Make it short – Decision-makers will not devote days to read

your report! – No absolute length standard – It is not necessary to report every single detail

• Make it interesting – Your report is not intended as a cure for

manager’s insomnia!

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Preparing Effective Written Reports II

• Make it methodical – No magic number of sections

• Preliminary sections – Transmittal letter, Title page, Table of contents – Executive summary

• Body of the report – Purpose, Method, Findings – Conclusions (and recommendations if requested)

• Addenda – List of references – Appendix

80

Preparing Effective Written Reports III

• Make it precise – Clear report : unambiguous statements – Comprehensive report : contains all necessary

information • Make it lucid

– Adopt the language of audience – Avoid indigestible technical statements – Use appropriate illustrating tools (tables, etc.)

• Make it error-free – The price of carelessness can be quite high

81

Oral Presentations

• Same characteristics of a written report • The following tasks are especially

important for the success of verbal presentations: – Researching the audience (who,

backgrounds, information needs, etc.) – Choosing the main points (not too many) – Making good use of visual aids

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Some Remarks

• Useful vs. needed information – Any information can be useful but may not be

necessary • Cost of gathering and treating information

– Nothing comes free • Value of information is subject to

decreasing marginal returns – Complete and perfect information is probably

not economical (and out of reach)

83

Some Remarks

• Delaying a marketing decision – Decide today with imperfect knowledge vs

later on with eventually less imperfect knowledge

• Perceptions may be very different from reality – Importance of methodology

• Cost of a research vs. research at a certain cost – Do the right research or avoid doing research

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M.R. and Decision Making

Role: assisting decision makers in: 1. Setting marketing goals

2. Developing and implementing marketing

plans

3. Evaluating the effectiveness of marketing plans

M.R. does not replace decision making!

85

Providers of M.R.

In-house marketing research Commercial marketing research firms (e.g., A.C. Nielsen ). Differ in range and services international vs. national vs. regional custom designed services vs. syndicated services specialized firms : fieldwork services, brand names, packaging studies, etc. Academic consultants Trade agencies: offer a wide range of services but rarely conduct a custom designed research 86

In-house : Advantages and Disadvantages

• Researchers know very well the company and the sector

• Researchers are too much involved to be objective

• Cost effective if M.R. is of regular use • Rapid answers

87

When to Use External Services?

• Firm does not have the capacity to conduct the whole or part of the project

• Management needs a credible outside opinion before making a decision

• Lower cost than external services • In many cases the design is made in-

house but field work subcontracted

88

Criteria for Selection of an External Supplier

• Competence w.r.t. the problem considered • Prestige or reputation of the supplier • Past experience • Personnel, non-technical skills,

communication, etc. • Price • Weighted average of these factors to

choose among bidding suppliers 89

Marketing Information System

1. Why information is needed?

2. Components of an MIS

3. Advantages of an MIS

4. How to develop one?

90

Why Information is Needed?

• One major task of marketing is to analyze the needs and markets; the firm must: – Continuously collect data on market

environment, demand, competition, customers

– Collect data on sales, prices – Collect data on customer complaints,

satisfaction

91

Marketing Model Integrating MIS

The Firm

Objectives and

Strategy

The Market

Customer Demand Segment

THE MIS Register and classify

transactions for analysis

Register and classify information on the environment

Register and classify

information collected by marketing research

Exchange with the market

The environment of the market 92

Advantages of MIS

• MIS gives the firm – A continuous flow of information on markets,

transactions, customer satisfaction and profitability

– The opportunity to identify new needs and changes in the market

– The means to forecast future customer behavior and demand

93

Continued...

– The means to assess the probable impact

of marketing decisions (pricing decisions, advertising decisions, new services introduction,…)

– The means to improve customer service by having online all the necessary information on customers

94

Components of an MIS

• Internal data (mostly from accounting department and marketing department)

• External secondary data (government, association, private sources)

• Marketing research • Marketing models and decision support

models

95

Internal Data

• Accounting department: sales and profits by product category, by customer and customers group, by region, by segment, by period

• Marketing department: salesmen reports, customer complaints, new customers, lost customers

96

External Secondary Data

• Data from statistical bureau (population data, industries data, investment data, new construction, prices index, regulation)

• Data from industry associations (national and international) ex: trends in technology, in deregulation, in new products

• Data on competition: monitoring competition in the market

97

Marketing Research

• Marketing research methods, instruments, etc

• Marketing research reports (in house or specialized companies)

• Data basis created from previous surveys

98

Marketing Models

• Sales forecasting techniques (time series models, causal models)

• Assessment models (for measuring, e.g., impact of price variation on demand or impact of an advertising campaign)

• Simulation models of market acceptance of new products or services

99

How to Develop an MIS

• MIS development involves many departments (accounting and finance, marketing, information systems, production)

• MIS must be tailored for the marketing strategy (product lines, customer groups, etc)

• MIS requires an integration of information technologies and databasis

100

Product and Service Policy

• Concept of product or service • Product or service line • Trademarks for product or service • Positioning product or service • Product or service life cycle • Marketing at different moment of the life

cycle

101

The Marketing Model




The marketing mix


Analyze markets




102

Points of View on the Product or Service

• Firm: the product or service is mainly a bundle of technical attributes, which creates the functionality of the product

• Consumer: a much larger vision…

103

Product for Consumer

CORE TECHNICAL FUNCTIONS

QUALITY

BRAND NAME

WARRANTY

INSTALLATION

104

An Example: Electricity

• Core service: current with its technical characteristics

• Enhanced service: constant, continuous, provided by a company of good reputation

• Enlarged service: low cost, efficiency, service, advisory services etc.

105

Product or Service Line

• Different customer groups

• Different products or services (in terms of characteristics, price, quality, packaging, etc)

• Offer of the firm: one or many product lines, each having one or many articles

106

Product Line of Electricity Services for Residential Customers

Basic electricity supply for home needs

Diagnosis of energy use and efficiency

Appliances rental and sale for home

Appliances repair services

107

Line of Electricity Services for Commercial Customers

Electricity supply programs

Environmental services (technology solutions to minimize environmental impact)


Small power services on site in case of power interruption

108

Line of Electricity Services for Industrial Customer

Electricity supply under different contract terms (power, interruption etc.)


R&D for applications of electrotechnologies to production

Energy management for the customer (electricity, gas, oil)

Power services on site for interruption

109

Trademarks

• A trademark is a name, a picture or a logo which is used to designate a product or a service

• Functions of a trademark: – Helps to identify the product or the service – Protects legally that name from use by others – Facilitates advertising and promotion

110

Why Use Trademarks in Services?

• Services are intangible and difficult to remember for customers

• Consumers are looking for good reputation of services

• Services are easily copied by competitors

111

Product or Service Positioning

• Positioning:

choice of characteristics and communication for each product or service

in order to be perceived by consumers as a

valuable solution

112

How to Do Positioning?

• By identifying the main evaluation criteria used by consumers when deciding which product to buy

• By knowing how customers evaluate our product compared to main competitors’ products on the key evaluation criteria

113

Product Life Cycle

TIME

SALES

Introduction

Growth

Maturity Decline

114

Strategy for Introduction

• Product or service is not known • Demand is limited to innovators

(consumers who are not sensitive to price but to newness)

• Main task is to communicate with target – to increase awareness of the product – to provide information about main product’s

characteristics – to bring the consumer to try the product

115

Strategy during Growth

• Customers know the product (through firm’s communication and word-of-mouth

• Demand is now growing fast • Main task is to

– position well the product – analyze market segmentation – develop the product line – increase the distribution

116

Strategy for Mature Markets

• Competitors are already in • Price competition is frequent • Watch for changes in customer needs, • Preserve customers (loyalty programs and

good customer service)

117

Strategy for Declining Markets

• The product is losing ground (better technological solution or change in tastes)

• The firm has the option of – Repositioning the product on a small segment

of traditional users, or – Withdrawing the product

118

Pricing

1.Determinants of pricing

2.Objectives

3.Pricing electricity

119

The Marketing Model




The marketing mix


Analyze markets




120

Price Determinants

Costs Competition, Regulation

Consumer perception

Price Objectives of company

Pricing policy

121

Objectives

Objectives

Profit

Sales

Competitive equilibrium

Image & reputation

Profit maximisation; target return on investment; acceptable profits

Growth; market share

Same price as competitors; make price less important for customers

Quality, reputation of brand, service

122

Pricing in the Electricity Industry

• Often, flat tariff for large customer groups.

• Tariff based on average generation, transmission and distribution historical costs plus a reasonable margin

• Prices do not change frequently; any price change is the result of a long political process

123

Limitations of Flat Rate Pricing

• Costs (generation, transmission, distribution) vary with time of use (seasons, months, weeks, days, hours) and demand variation

• Customers have no incentives to change behavior. They can use electricity inefficiently (almost) without cost

• Having no inventories, producers must meet demand with extra high cost capacity

124

Best Solution to Pricing

• Flexible pricing system, i.e., a tariff based on a series of variables

• Examples: time of use, quantity, reliability of service, predictability of use, willingness to forgo consumption in emergencies, location of customers

• Price is a signal that reflects marginal cost

125

Problems with Pricing at Marginal Cost

• Continuous fluctuations with changes in supply and demand conditions

• Company needs a real time two-way communication systems with customers (collect real-time demand and provides a price)

126

Continued...

• Difficulties of pricing at marginal cost: – Technological constraints (meters, telecom

infrastructure, computer capacity, software)

– Information overflow: at the limit the pricing system is working like a spot market where supply and demand are continuously adjusted by prices

127

Intermediate Solutions

• Develop a price structure that takes into account key variables determining costs – The main elements of time of use – Quantity used – Predictability of use, etc

• The limit to such a price structure is in its complexity and the capacity of customer to understand it and use it for decision making

128

Communication & Promotion

1.Communication variables

2.Direct and indirect communication

3.Decisions in indirect communication

129

The Marketing Model




The marketing mix


Analyze markets




130

Promotion

• Promotion: communication organized by the firm with all its publics – Customer groups – Government – Media – Financial community, suppliers, etc.

131

Promotional Variables

• Personal selling and representation • Advertising • Promotional actions • Public relations • Corporate image management

132

Personal Selling and Advertising

• Personal selling: direct face to face communication

• Advertising: an indirect mode of communication using a media

• They differ in terms of the cost and the extent of the message

133

Cost vs. Effectiveness

Communication effectiveness

Cost per contact

HIGH LOW Field sales

Tele marketing

Direct mail Trade

journal

Electronic advertising

134

Direct vs. Indirect Communication

Direct Indirect

Message Tailor made by the salesman

Standardized message

Feedback Immediate

Slow and indirect

TARGET

A potential customer

General

CONTENT

Message can be long, complex and specific

Message is short, simple and general

135

Promotional Actions

• Promotional actions are events created by the firm in order to communicate with customers for a defined period and a defined objective

• Examples of objectives: favor trial of a new product, reduce inventories, modify pattern of demand, etc.

• Examples : price discount, two for one, coupons, etc. 136

Public Relations

• Communication with media, government, financial community and the general public about the firm as a corporate citizen

• Announcing major events : new investment, major change, new products or services etc

• Manage crisis, e.g., technical accidents, financial or commercial scandals

• Inform the public of firm’s point of view and try to create a good image in the public

137

Corporate Image Management

• Coordination and integration of all elements that could communicate the identity, the value and the style of the company in order to have a maximum impact – Name and logo of the company on all official

documentation (paper, business cards, documentation, internet site)

– Name and the logo on buildings, vehicles, products, etc

138

Advertising Management

• Advertising: standard, short and simple message to a vast audience almost impossible to reach by direct contact

• Three players: – the sponsor (the company), – the advertising agency – the media (tv, radio, newspapers, etc.)

139

Managing Advertising

ADVERTISING BUDGET COMMUNICATION

OBJECTIVES

CREATION STRATEGY

MEDIA STRATEGY

PRINT MEDIA

ELECTRONIC MEDIA

CONTENT PRODUCTION

DIFFUSION OF THE MESSAGE AND EFFICIENCY MEASURES 140

How to Define Objectives

• Target population • End result expected from the advertising

campaign • Quantify the end result, the time period • Example: In 6 month, the company

would like 30% of the population of this city to be aware of the new service offered by the company

141

Types of Effects of Advertising

AWARENESS

KNOWLEDGE

ATTRACTIVENESS

PREFERENCES

ADOPTING A NEW BEHAVIOR OR BUYING

142

Creation Strategy

• Message to deliver and its production

• The message has two key dimensions: – The content of the message (what do we

have to say) – The form of the message ( the way we are

saying it) • The content and the form influence the

production of the message

143

Expressing a Message

• Informative mode: an objective statement of facts and evidence about the product

• Convincing mode: a statement of arguments in favor of the product

• Psychological mode: an emotional situation related to the adoption or the use of the product

• Imperative mode: a message inviting customers to action

144

Production of the Message

• Message must be made for different media (tv, radio, print media)

• Plan the verbal or written message, the visual elements, the scenario, the actors etc.

• Produce messages of different sizes: 30 second spots, 1 page or half page print, other advertising materials

145

The Media Strategy

• What are the available media? • Which mix of media permits to optimally reach the

target? (cost and benefits) • Which media or mix of media are best to support the

message? • Which mix of media permits to have the desired

frequency of the message? • Is the media compatible with the image of the firm

or the product?

146

Media Decisions

• Mix of media to use (main media, support media)

• Number of time the message will be repeated over a period

• Size or duration of the message, the colors, the graphical aspects

147

Distribution

• Definition • The main functions of distribution • Types of intermediaries working in

distribution • Distribution channels • Factors determining channels • Example of electricity • Franchising in oil sector

148

The Marketing Model




The marketing mix


Analyze markets




149

Distribution Definition

• Distribution is finding a way to accomplish all necessary tasks in order – to make the product or service available to

the customer (when it is needed), – to complete the transaction, – to insure customer satisfaction

150

Distribution Functions

• Managing inventories to make the product available at the right place and time (level of service)

• Providing information to consumers • Grouping products in a convenient way for the

customer to minimize shopping costs • Completing the transaction (delivering, cashing) • Providing credit and after sale service

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Intermediaries

• Wholesalers: they buy products from manufacturers and resell to distributors

• Distributors: they buy products from wholesalers and sell to the final customer

• Agents: they arrange for transactions (do not buy products or stock them)

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Types of Channel

DIRECT Firm Customer

SHORT CHANNEL Firm Customer Distributor

LONG CHANNEL

Firm Customer Distributor Wholesaler

VERY LONG CHANNEL

Firm Customer Distributor Wholesaler Agent

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Factors Affecting Distribution Channels

• Customers: – When customers are numerous, spread all

over the market, are buying in small quantities then channels tend to be long

– When customers are limited in number and/or concentrated geographically, buying in large volume and/or less frequently, then channels tend to be short

154

Continued

• Product: – When product is standardized and of small value, channels

tend to be long – When products are technologically complex and of high

value, channels tend to be short • Resources of the firm:

– Type of channel is a function of the financial resources available to the firm. If the firm decides to develop and own the channel, the investment will be very high

155

Continued

• Competition – If a channel is already taken by competition,

then the firm is forced to develop its own

– The firm may want to differentiate itself from competitors by using a different channel

156

Electricity Industry

• Electrical utilities are (or used to be) vertically integrated.

• As in many network industries (telecom, water) the reasons have been financial and technical

157

A Changing Logic

• The logic of distribution in network industries is changing, e.g., telecom industry

• The idea is to separate production from distribution and sometimes to develop alternative and competitive distribution channels.

158

Wheeling

• The concept of wheeling refers to the use of transmission facilities of one network to deliver power of and for another entity

• The concept is based on independent and competitive power generators, competitive energy brokers and regulated transmission and distribution networks

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Future Structure?

THE POWER

GENERATORS

FINAL CUSTOMER

REGULATED TRANSMISSION AND

DISTRIBUTION

ENERGY BROKER

BUY SELL

WHEELING TO CUSTOMER

160

Franchising

• Players: Franchisor and Franchisees • Rule of the game specified by a contract

(Entry fee, Royalty, Exclusivity, Responsibilities, Termination, etc.)

• Advantages: Brand equity, Standardization of quality, Management, etc.

161

Customer Service

• A definition of customer service • Customer service components • The key steps in a customer service

approach • Continuous improvement • The outcomes of a better customer

service

162

Definition

• Definition: Customer service is about all experiences the customer gets through in doing business with the firm

• Customer service looks at all relationships the customer is having with any components of the firm in order to organize those relationships in a way that will make the customer satisfied

163

Components of Customer Services

CUSTOMER SERVICE

PRETRANSACTION ELEMENTS: organizational structure, system flexibility written policies

TRANSACTION ELEMENTS: order information, order cycle, shipments, system accuracy, payments, credit

POSTTRANSACTION ELEMENTS: installation, warranty, repairs, customer complaints, demand of information

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Key Steps in a Customer Service Approach

TOP MANAGEMENT PHILOSOPHY AND INVOLVEMENT

ANALYSIS OF THE SITUATION

DECISIONS RELATED TO CUSTOMER SERVICE POLICY

IMPLEMENTATION OF CUSTOMER SERVICE

CONTROL THE LEVEL OF SERVICE

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Top Management Philosophy and Involvement

• Customer service is the result of a strong commitment of the firm for customer satisfaction involving all the departments and a philosophy of continuous improvement

• Top management must state that the reason for the existence of the firm is their customer satisfaction

166

Continued...

• Each employee must understand that customer satisfaction is his own responsibility

• All the company policies and procedures must be made in order to facilitate the many interactions the customer is having with the firm

167

Analysis of the Situation

• The analysis of the situation is the starting point of a customer service approach

• Identify all the key experiences (contact points) the customer is having with the firm, (salesperson, phone with different departments, Internet, production employees, accounting department, after-sale service)

168

Continued...

• Analyze customer satisfaction in all those interactions with the firm by marketing research and by analyzing customer complaints

• Analyze the organization motivations for customer service and all policies, procedures and tools which have an impact on the quality of the service to customers

169

Results of the Analysis

• A measure of customer satisfaction in dealing with the firm, e.g., delays, inefficiencies, irresponsible behavior, quality defects etc.

• Identification of causes of dissatisfaction: employee motivation, employee training, bad job definition, inefficient procedures, lack of information systems, etc.

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Decisions on Customer Service Policy

• Define the relationship between customer service and the overall firms objectives

• Define a concept of customer service appropriate to the objective of the firm

• Translate that customer service concept in terms of norms ( ex: 24 hour/ service, etc)

• Translate that customer service in a promise that will be transmitted and promoted to customers

171

Continued...

• Define objectives for each department and employee groups in terms of customer service

• Identify the key areas and the key processes within the company that will have to be improved in order to deliver the customer service you are promising

172

Implementation

• Run a full examination and diagnosis of the things to change in the key areas identified

• Revise policies and procedures in those areas

• Revise physical layouts and equipment • Revise employee tasks definition • Prepare a training program for employees

173

Control

• Define mechanism to control customer services and customer satisfaction

• Measure continuously the level of customer service and customer satisfaction – Questionnaires – Complaints, etc

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Continuous Improvement

• Create a committee of customer service involving different departments

• Allocate a budget for customer service implementation

• Define an agenda for different actions to be taken in order to improve customer service

• Mobilize employee toward the objectives and the promise of customer service

175

Outcomes

• Better customer satisfaction, better competitive position, less lost customers

• A strong basis to build customer long term relationship

• Efficiency gains through reviewing procedures (gains in time, gains in costs) 176

Continued...

• Better communication, coordination and cooperation between departments in order to serve customer

• Better employee motivation and involvement in the company mission

177

Marketing Strategy and Control

• Marketing strategy and plan definition

• Generic marketing strategies

• The marketing planning process

• Marketing audit

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Marketing Strategy

• Definition: – Marketing plan is responsive to the overall

corporate strategy

– Marketing plan describes all components of the marketing strategy: markets or segments to be served, products or services to be marketed, marketing programs to be implemented over the planned period

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Generic Marketing Strategies

Market

Product

ACTUAL

NEW

ACTUAL NEW

MARKET PENETRATION

MARKET DEVELOPMENT

NEW PRODUCT DEVELOPMENT

PRODUCT AND MARKET DIVERSIFICATION

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Marketing Planning Process

Preplanning requirements

Situation analysis

Problems and opportunities

Defining marketing objectives

Strategies and tactics

Marketing detailed plan

Control and measurement

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Preplanning Requirements

• Top management expectations • Marketing strategy must be in line with

the overall corporate strategy. – How marketing will serve growth,

profitability, diversification and leadership objectives in the industry

• Marketing strategy must be coordinated with other functional strategies of the firm

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Situation Analysis

• Questions – where are we in the market? – where are we going in the next few years?

• Review market needs, analyze competition,

review company performance, identify outside influences, assess strengths and weaknesses

183

Problems and Opportunities

• What are the marketing success factors in the market?

• Are we having problems in the market?

• What are the opportunities for growth and profits in the market we are serving or in new markets?

184

Defining Marketing Objectives for Years to Come

• Marketing objectives are defined in terms of • markets and segments targeted • positioning against competition • volume of sales • market share • profit contribution • customer satisfaction

185

Strategies and Tactics

• Ways to reach the objectives for each product / market or segment

• For marketing those ways are – Pricing policies – Product and new product policies – Distribution policies – Promotion policies – Customer service policies

186

Marketing Detailed Plan

• Marketing detailed plan answer the question: how we will do it?

• Schedule all marketing activities during the forthcoming period, for each marketing variable

• Define responsibilities to conduct the programs

• Plan for changes in order to meet unforeseen events

187

Continued...

• Estimate and prepare the marketing budget

• Evaluate human resources needed to support the marketing plan (ex: new salesperson, need to hire marketing research specialists, etc.)

• Define measures to control the success of the plan and the way to control

188

Control

• Three levels of controls: – Budgetary control: ensure that the marketing

budget is on target – Marketing plan control: ensure that the plan is

executed on time and as planned – Marketing objectives control: ensure that the

objectives are met by plan

189

Continued...

• Control of the objectives must be regular in order to identify any deviation from the objectives during the execution of the plan

• Corrective actions could be needed in order to refocus the plan on meeting objectives

190

Marketing Audit

• Marketing audit is reviewing the basic marketing strategies of the firm over time

• Marketing control is answering the question: has the firm reached its objectives?

• Marketing audit is answering the question: was the chosen marketing strategy the best one?

191

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