marketing strategy notes prof arijit b 21102014

8/10/2019 Marketing Strategy Notes Prof Arijit B 21102014

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Prof. Arijit Bhattacharya

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Marketing Strategy Overview

Marketing

Entire business from the point of view of the customer.

Identify, create, manage demand to provide value to a customer for a profit.

The right product, in the right place, at the right time, at the right price. Satisfaction of customer and their needs, focus of business activities.

Owned by everyone from within the organization.

Strategy: Performing differentactivities from rivals or performing similar activities in different

ways. (Porter)

How marketing relates to strategy?

Business activities aligned with business strategy achieve corporate objectives.

Marketingfirms link to customers and competitors, shapes strategy. E.g. Amuls corporate goal - to be worlds largest food brandis implemented by marketing

plans and tactics (global availability, effective communication, value price, products and

service to delight customers) should evolve around that goal. Amul can augment with new

brands, segments and categories with business potential where Amul can deliver on its

capabilities.

Marketing Strategy answer 2 questions

Why should our customers buy our product?

Which customer needs do our products fulfil more effectively than competitors?

Differentiation byprice, reach, delivery, design, service, technology etc; should be valuable

and meaningful to customers.

5Cs of Marketing Strategy (for Situation Analysis)

1. Company (product line, image, technology, experience, culture, goals, channels)

2. Customers (segments, size, growth, frequency, trends, decision making process, benefits

sought)

3. Competitors (actual/potential, direct/indirect, products, positioning, market shares, strengths,

weaknesses)

4. Collaborators (distributors, suppliers, alliances)

5. Climate/Context (PESTLE)

Strategic Management Process


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Strategic Management Framework

4As of Marketing (Sheth & Sisodia)

Acceptability, Affordability, Accessibility, Awareness

The 4A framework derives from a customer-value perspective based on the four distinct roles

that customers play in the market: seekers, selectors, payers and users. For a marketingcampaign to succeed, it must achieve high marks on all four As, using a blend of marketing

and non-marketing resources. The 4A framework helps companies create value for customers

by identifying exactly what they want and need, as well as by uncovering new wants and

needs. (For example, none of us knew we needed an iPad until Apple created it.) That

means not only ensuring that customers are aware of the product, but also ensuring that the

product is affordable, accessible and acceptable to them.

Marketing strategy defines

Target segment (size, demographics, and psychographics)?

How should the product be positioned to appeal to the market (primary benefit)?

How should the product be branded? Product potential (sales, market share, profit estimates)?

Situation: External factors and internal factors

External factors:Consumers, Competitors, Environment

Internal factors:Resources, Capabilities, Skills

Different levels of strategy making in organization

Corporate level Business(es) to be in Set strategic corporate goals

Defining corporate mission, Establishing SBUs

Assigning resources to SBUs, Assessing growth

opportunities

Business level Gain competitive advantage. SBU goals, develop broad strategy

Functional level Attain marketing goals. Marketing strategy implementation

Product level Implement tactics. Marketing mix

Analysing Industry

Industry Structure: Consolidated (auto, telecom) or Fragmented (restaurants, laundry)


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Level of Competition: Monopoly (Indian railways), Duopoly (Pepsi-Coke, Boeing-Airbus),

Oligopoly (pharmaceutical, auto, telecom, steel)

Market structure: Leader, Challenger, Followers, Nichers

Product Lines: Broad (electronics, auto), Narrow (steel, telecom, hotels)

Analysing Competition Does the product/product line satisfy same/similar needs? (Segments served)

Whore are the direct/Indirect competition? (Coke-Pepsi: Direct competition: other cola

brands; indirect competition: fruit juice, bottled water)

What products do competitors offers? (Brands, categories)

What channels of distribution do they use?

What pricing strategies do they use?

Competitors management and financial resources?

Competitors objectives, core competencies?

What alliances are they pursuing and for what purpose?

Competitors success in the marketplace? (Share of market/voice/mind/heart)

Analysing Customers

Who are the customers, segments?

What do they buy, where do they buy, when do they buy, how frequently do they buy?

How do they choose, how do they use, why do they prefer a product?

How do they respond to marketing programs?

Long term value of customers.

SWOT analysis

It assesses the internal/external environment a firm operates in.

Strengths (Internal) Weaknesses (Internal)

USP, capabilities, competitive advantage,

resources, experience, knowledge, data,

financials, marketing, reach, communication,

service, legacy, innovation, location,

geography, price, value, IT quality,

accreditations, processes, systems, culture,

values, behaviour, management, reputation

Propostion, capabilities gaps, presence,

reputation, reach, financials, vulnerabilities,

timescales, deadlines, pressures, supply

chain, morale, attrition, commitment,

leadership, processes and systems,

management

Opportunities (External) Threats (External)Market, business, new product development,

new market development, industry phase and

potential, competitor vulnerabilities,

demographics/lifestyle trends, technology,

innovation, niches, verticals/horizontals,

geographies, new contracts, research,

partnerships, distribution, volumes,

production, economies, season, influences.

PEST, competitive intentions, market

demand, contracts and partners, sustaining

capacities, finances and capabilities,

obstacles, industry cycles, seasonality

Environment:Internal, Micro, Macro


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Internal(Change management): 8Ms (Men, Material, Money, Minutes, Markets, Machines,

Methods, Mind)

Micro (Direct impact): 6Cs(Components, Corporate, Channel, Communication, Customer,

Competition)

Macro(Out of direct control): PESTLE (Political, Economic, Sociocultural, Technological,

Legal, Environmental)

PESTLE Analysis

Political Economic

Environmental, legislative, regulatory,

policy, stability, lobbies, war and conflict,

pressure groups, unions

Economy, global trends, taxes, levies, FDI,

interest, inflation, unemployment, GDP,

stocks, forex, climate, market, trade cycle,

industry specific factors

Sociocultural Technological

Demographics, lifestyles, social mobility,

educational levels, attitudes, opinions,

beliefs, buyer behaviour, ethnic and religious

factors

Competing and emerging technologies, R&D

costs and capacities, PLC, solutions,

innovation, information, communication,

IPR, licensing

Legal Environmental

Legislative structures, trade policies,

employment legislation, exit laws, foreign

trade regulations

Sustainability, green issues, energy, natural

factors

Marketing Plan

A campaign that aims to fulfil a companys market strategy.

What will the company do in case of new product development and supporting older ones? Timing of sales and promotional activities, pricing intentions and distribution efforts.

How will the plan be controlled and the results measured.

Executive Summary Objectives and implementation Plan

Table of contents

Situation analysis Data, environment, SWOT, gaps

Assessment of market opportunity Statement of target market segments

Customer and needs assessment

Competitive challenges to firm and products

Financial goals Incremental revenue improvements

Expected profits

Marketing goals Units sales/market share

Summary of companys marketing strategy Identify target market

Product positioning, distribution, pricing

Specific actions to achieve goalssales

force, customer rebates, ad campaign etc.

Monthly marketing budget

Monthly sales forecast (units and value)

Periodic plansmonitor, review, action

Implementing the Plan via the Marketing Mix


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Identify target customer segments.

Address customers through marketing mix-4Ps.

Marketing Plan Summary

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STPD Analysis

Concept Example (Moov)

Segmentation

Identify different needs and groups in the

market.

Pain segment

Targeting

Target markets it can satisfy in a superior

way.

Back pain segment within the pain segment

Positioning

Occupy distinct place in customers mind.

Relief from backaches aah se aha tak

DifferentiationCommunicate valuable and meaningful

differences.

Lamitube, non-staining, effective in backpain

Segmentation

Where to compete?

Divide market into distinct groups (distinct needs, characteristics, behaviors).

Basiscompetence, resources, potential (Segment size and growth, firms objectives and

resources).


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Types of Segmentation

Geographic location/country, region, state,city (urban/semi-urban/rural), climate, city

Demographic gender, age, education, income, occupation, family size, family life cycle,

generation, social class, religion, nationality, culture, sub-culture gender

Psychographic needs and motivation, perception, personality, attitude, involvement

lifestyle (Activities: works, hobbies, sports, social events, entertainment;

Interests: home/family, job, community, recreation, food habit: Opinions:

social issues, politics, education, culture, business, economics, past,

present future)

Behavioural decision roles (initiator, influencer, decider, buyer, user),

awareness/buying readiness (aware, ever tried, recent trial, occasional

user, regular user, most often used), benefits sought, buying occasions,

buying frequency, loyalty status (hard core, split, shifting, switchers),

usage rate, shopping orientation

Targeting

Which product for which market?

Set of buyers sharing common needs or characteristics that a firm decide to serve.

Measure segment attractiveness, select target segments.

Factors to targetresources, competence, degree of product variability, PLC stage,

competitors strategies.

Targeting choices

Viability of a segment

Measurabletotal size, purchasing power, segmentation variables

Accessiblereachable

Substantiallarge and profitable enough to serve; has growth potential

Differentiablesegments respond differently to marketing mix


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Actionableeffective marketing programs can be designed

Targeting Strategies

Mass marketing Target marketing mix towards the entire market, not specific to any

segment.Differentiated/

Segmented marketing

Target different marketing mixes towards different segments.

Market concentr ation Concentrating mix on any one segment of the market.

Niche marketing Target small market segment with specific, specialized marketing mix.

Positioning

Designing an offer so that it occupies a distinct and valued place in the minds of the target

customer.(Kotler) What to position?: product attributes (LED, LCD tv), benefits/problem solutions (toothpaste,

shampoo), use, product user (J&J baby products), product usage (Moov), specific use

(greeting cards), services (Maruti service station), price, distribution (Dell), competitor

(Savlon vs. Dettol), quality (Sony, Apple)

Positioning strategies

o Desirable to customer, deliverable by the company, differentiating from competitors.

o Single (USP)/multiple (same product to various segments with intact central

positioning e.g. Horlicks: central positioning- nutrition, active people- energy, elderly

dietary supplement, pregnant womenessential supplement, kidsgrowth andnutrition, executivesrevitalize)

o Point-of-parity (POP)attributes/benefits that are not unique but shared with other

brands.

o Points-of-Difference (POD)attributes or benefits that consumers believe they could

not find in a competitive brand.

Perceptual Mapping

Brands mapped together on positioning mapcompared across parameters. Identify weak/strong/absent competitive positions.

Gaps regarded as opportunities for positioning/repositioning/launch.


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Differentiation

How to compete?

The process of adding meaningful and valued differences to distinguish the companys

offering from the competition.

A firm can differentiate along 5 dimensions:

o Product (Himalaya)

o Service (Caterpillar, Maruti)

o Personnel (Singapore Airlines)

o Channel (Eureka Forbes)

o Image (Louis Philippe; Upper Crust)

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Competitive Strategies

Competitive Advantage: A companys ability to perform in one or more ways that

competitors cannot or will not match.

Competitor centred firm Customer centred firm

-focus on competitor activities (reach, prices,

new services)

-formulate competitive reactions (increase

ad/promo spends, price cuts)

-alert firm, market focused

-focus on customer development

-reach, satisfy quality segment, avoid price

cuts

-identify opportunities, target customer and

emerging needs better with respect to

resources and goals

Market Structure - Leader, Challenger, Follower, Nicher

Company and Competitor focus

Company focused Competitor focused

Pushes boundaries Leader Challenger

Stays within boundaries Nicher Follower

Market Scope Strategy

Single Market Strategy Multi Market Strategy Total Market Strategy


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-concentrate efforts on single

segment

-avoid competition with

established firms

-serve several distinct markets

-avoid confrontation with firms

serving entire market.

-serve entire spectrum of the

market

-selling differentiated products

(and marketing mix) to

different market segments

-top management commitment,strong financial position

Market Entry Strategy

First in Strategy Early Entry Strategy Laggard Entry Strategy

Enter market with others Enter market just after the

leader

Enter market at end of

growth/maturity phase as:

-willing and able to take risks

-technological competence

-strive to stay ahead

-heavy promotion

-create primary demand

-

-superior marketing strategy

backed by ample resources

-strong commitment to

challenge market leader

-Imitator (me-too product)

-Initiator

Market Leaders Strategies

Market leader has largest market share but to retain dominance, the leader looks for ways to expand

total market demand, and to increase its share.

I. Expand total market demand

Expand market by:

o Find new users (convert non users, find new market segment, other countries)

o

New uses (Du Pont nylon: parachute>apparel>tyres>seat belts>carpeting)o Encourage new usage (one finger tip to Moov ki maalishusing ten fingers)

II. Defense StrategiesProtect current market share

1. Position defenseOccupying the most desirable market space in the minds of the consumers

by setting up barriers to market entry around a product, brand, product line, market segment

etc. (Google brand extensions: search engine>Internet Service Co.).

2. Mobile defenseThe leader stretches its domain over new territories through market

broadening (petroleum co.>oil>coal>nuclear>hydroelectric) and market diversification(ITC:cigarette>FMCG and food).


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3. Flanking defenseMarket leader tries to protect an unguarded or weakly guarded front

(market).

o Product Flanking: Different combinations of core product at different size and price,

to cover as many market segments as possible. (NirmaWheel; Intel introduced

Celeron take on cheaper Taiwanese chips)

4.

Contraction defense: Withdraw from the most vulnerable segments and redirect resources tothose that are more defendable. (Tata group sold TOMCO, Lakme Ltd to HUL).

5. Pre-emptive defenseDetect potential attacks and attack the enemies first.

o Product/brand proliferation to signal not to attack (SBI: a network of 17,000 branches

and 43,515 ATMs )

o Vaporware (MicrosoftXenix O/S)

6. Counter-offensive defenseResponding to competitors head-on attack by identifying the

attackersweakness and then launch a counter attack (Colgates response to Oral B

toothpaste launch, 2013)

III. Expand Market Share

Market Challengers strategies

Market Challengerstrong, dominant player who follows an aggressive strategy to gainmarket share.

Types:

1. Frontal attackMatch opponents 4Ps. Success difficult unless sufficient resources,

staying power or clear distinctive advantagesTypes: Pure frontal, limited frontal, price

based, R&D based(Coke-Pepsi, Ujala-Robin Blue, Nirma-Surf).

2.

Flanking attackChallenger attacks the leader at its weak point or blind spot.

Flanks

o Geographical flanking: by spotting underperforming areas of the leader.

o Segmented flanking: Challenger attacks market segment/area of technology

neglected by the leader. (Canon attacked market leader Xerox in small

photocopier segment).

3. Encirclement attackInvolves surrounding a competitor with several brands and

forcing it to defend itself on many fronts at the same time.

o Product encirclement: Introducing products with many different qualities,

styles and features that overwhelm the competitors product line (Seikos

global strategy: 2300 models worldwide and 400 for US market).4. Bypass attackBypassing the leader to attack easier markets.

o Diversifying into unrelated products(Pepsisentered bottled water (Aquafina)

and juice (Tropicana) to bypass Coca-Cola).

o Diversifying into new geographical markets (Regional brands)

5. Guerrilla attackSmall, intermittent hit-and-run attacks by a challenger to harass

and destabilize the defender. (1996 Cricket World Cup; Pepsis campaign:Nothing

official About ittocounter Coke, the official sponsor)

Drastic short-term price cuts (especially during a competitors product

testing/launch)

Sudden and intensive bursts of advertising

Product comparison


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Damaging PR activity

Geographically concentrated campaigns

Follower Strategies

Followerstrong, not dominant, content to stay there, safe, low risk player

Counterfeiter Copies leaders product and packages and sells it on the black market. e.g.

pirated music/ movie CDs; Rolex, Mont Blanc duplicates

Cloner Copies the leaders products as it is as well as name, packaging with slight

variations (RadoRada, Gucci-Gucca)

Imitator Copies some things from leader but differentiated on packaging, advertising,

pricing or location (Tata SkyVideocon)

Adapter Takes leaders products and adapts or improves them (Moovintroduced non

messy creams thus improving uponIodex)

Nicher Strategies

Specialises in small profitable sub-segments (niches), not served by/unattractive to larger

firms. Expand and protect them.

Focus on profit margins rather than revenue/market share.

Niche Specialist Firm Specialization

End user Serve one type of end user

Vertical level Vertical level of production-distribution value chainCustomer size Focus on selling to small/medium/large customers

Specific customer Limit selling to one/few customers

Geographic Limit selling to locality/region/area

Product/product line Carry/produce only one product/product line

Product feature Produce certain product types/features.

Job-shop Customise products for individual customers

Quality-price Focus on high/low quality ends

Service Offer one/more service(s) not available from competition

Channel Serves only one channel of distribution

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COMPETITON ANALYSIS

Porters 5 Forces Model (Industry Attractiveness Analysis)


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1) Threat of New Entrants

Threat of entry depends on

o Height of entry barriers

o Reaction new entrant can expect from existing players.

Entry barriers

o Advantages that incumbents have relative to new entrants

Supply-side economies of scale

Demand-side benefits of scale

Customer switching costs

Capital requirements

Incumbency advantages independent of size

Unequal access to distribution channels

Restrictive government policy

Expected retaliation

2) Bargaining Power of Suppliers

A supplier group is powerful if:

o Supplier group is more concentrated than the industry it sells to.

o Supplier group does not depend heavily on the industry for its revenues.

o Industry players face switching costs in changing suppliers.

o Offer products that are differentiated.

o No substitute for what the supplier groups provides.

3) Bargaining Power of Buyers A supplier group is powerful if:

o There are few buyers or large volume buyers.

o Industry products are standardized or undifferentiated.

o Buyers face few switching costs in changing vendors.

o Buyers can integrate backward and produce industrys product themselves.

4) Threat of Substitutes

The threat of a substitute is high if:

o Substitute offers an attractive price-performance trade-off to the industrys product.

o

Buyers cost of switching to the substitute is low.


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Receiving and warehousing of raw materials.

Distribution of raw materials to manufacturing and operations.

o Operations

Process of transforming inputs into finished goods and services.

o

Outbound logistics Warehousing of finished goods.

Distribution of those finished goods to customers or retail stores.

o Marketing and Sales

Identification of customer needs.

Deploying product into marketplace.

Process of selling to customers.

o Service

Supporting customers after they buy products and services.

o Support Activities

Supporting customers after they buy products and services.

Support Activities

o Procurement

Purchasing of raw materials and inputs needed to create the product.

o Technology Development

Technology developments that support value chain activities.

o Human Resource Management

Activities associated with recruiting, training, hiring and compensation.

o Firm Infrastructure

Legal team, accounting department, PR, quality department etc.

Porters Generic Business Strategies

Source of competitive advantageCost Leadership, Differentiation and Focus.

Cost Leadership Strategy

A firm offers products and services having the same utility/quality features as competitors products

and services/substitute products and services; but the price/cost lower than them.


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When to adopt:

Competition is based purely on price factor.

No significant differentiation in product/service features.

Customer loyalty very low; brand switching.

How to be a Cost Leader

A firm can lower its cost on the basis of economy of scale.

High capacity utilization

By going through vertical integration which is relevant for value creation.

A firm can save cost by standardizing its products and product-producing activities.

Investment in cost-saving technologies may help a firm to minimise its cost.

Benefits

Developing competitive advantage and achieving large market share.

The firm is comparatively more protected from the impact of downward trend in the industry. The firm can bear the pressures put by suppliers in the form of increasing prices of their

supplies as well as customers in the form of bargaining for lower product price.

Cost advantage acts as an entry barrier

Drawbacks

It can be sustained only if barriers exist that prevent competitors from achieving the same low

cost.

Severe cost reduction may dilute customer focus and customer interests may be ignored,

Customers requiring extra features and ready to pay higher price are lost.

Di ff erenti ation Strategy

Differentiation strategy is the act of designing a set of meaningful differences to distinguish

the companys offerings from competitorsofferings.

Suitable in following market conditions:

o Market size is large enough to accommodate various firms using differentiation

strategy.

o Customer needs and preferences are diversified so that the market can be segmented

into different groups.o If a firm makes attempts for creating value through differentiation, and charges higher

prices, customers should be willing to pay for this value creation.

o The nature of products/services is such that the customers develop brand loyalty.

Benefits

It can create a captive market for a company

High brand loyalty refrains new entrants in the market.

Customer group is not able to put pressure on the firm to lower down prices

In case of bargains for higher prices for supplies, the firm can offset this price increase by

increase in product/service prices because of brand loyalty


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Drawbacks

Has to make huge promotional efforts. It may not be a strong base to prevent the entry of newentrants.

If many firms start differentiation in any industry price becomes an ultimate decision factor.

The features not desired and not valued by customers do not create response or brand loyalty.

So differentiation becomes meaningless, Failure to communicate the benefits of differentiation or the intrinsic differentiating features

themselves to customers may lead to failure of this strategy.

Focus Strategy

In a focus strategy, firms focus on meeting the needs of a unique market segment in the best

possible way.

A focus strategy is a niche strategy.

Conditions:

The firm should have ingenuity to look for something out of ordinary and a sharp eye foridentifying niches,

Niche segment should be unique so that only specialized features could satisfy it,

Special features should be so distinct that common customers do not expect them to fulfill

Niche segment should be sufficiently profitable & having growth potential

The firm should be able to create loyalty of customers on the basis of acknowledgedsuperiority to serve them. It should also be able to create new niches.

Benefits

Firm is protected from competition to the extent that other firms operating in broader markets

do not pose competitive rivalry.

Customer Loyalty. Prevent new entrants.

Drawbacks

Cost structures of firms are higher.

Differentiators with comparatively lower cost can penetrate in the niche markets.

Niche markets turn to be attractive in many cases for the cost leaders and differentiators due

to technological development.

Stuck in the M iddle

To be successful in long-term, a firm must select only one of these three generic strategies. With more than one generic strategy, the firm will be stuck in the middle and will not

achieve competitive advantage. [Jet Airlines positioning was confusing to the customers due

to multiple branding (Jetlite, Jet Airways, Jet Konnect) who found it difficult to understand

what Jet stands fora full-service career or a low cost airline.]

Portfolio Models

BCG Growth-Share Matrix

Link market growth and relative market share to determine prospects for various SBU/brands. Helpsto plan portfolio, recommend strategy.


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Question mark

Low share of high growth market

Consume resources, generate little

Carefully weigh risk and rewards

Stars

Leaders. High share of high growth market.

High promotion costs, generate high income.

Invest

Cash Cows

Leader. High share of low growth market.

Ex-star. Generate cash, low investment. Fund others.

Milk

Dogs

Low share of low growth market. No cash generation, consume cash.

Divest

Limitations

Too simplistic; ignores trend, environment.

GE Matrix

A nine-cell (3 X 3) matrix used to perform business portfolio analysis as a step in the

strategic planning process. Helps analyse portfolio, determine which businesses should receive more/less investment and

which should be divested.

Market Attractivenessis measured by - Market Size, Market Growth Rate, Demand

variability, Industry Profitability, Competitive Rivalry, Global Opportunities, Entry and exit

barriers, Capital requirement, Macro environmental Factors (PEST)

Business Unit Strengthis measured by - Market Share, Distribution Channel Access,

Financial Resources, R&D Capability, Brand equity, Production Capacity, Knowledge of

customer and market, relative cost position


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Grow - strong business units in attractive industries, average business units in attractive

industries, and strong business units in average industries.

Hold -average businesses in average industries, strong businesses in weak industries, and

weak business in attractive industries

Harvest [A strategic management decision to reduce the investment in a business entity

(division, product line, product or item) in the hope of cutting costs and/or improving cash

flow]- weak business units in unattractive industries, average business units in unattractive

industries, and weak business units in average industries.

Limitationscore competencies not represented, SBU interactions not considered.

McKinsey 7S Framework

Successful strategy implementation if all 7 elements present.

Strategy - Ways to achieve competitive advantage (refer Porters generic strategies).

Structure - Ways in which task and people are specialized and divided, and authority is

distributed (functional structure, divisional structure).

Systems - Formal processes and procedures to manage the organization (planning, budgeting,

performance measurement, reward, information, distribution etc.).

Staffing - People, their background and competencies (recruitment, selection, training,

employee development).


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Skills -Distinctive competencies in the organization (People, Management Practices,

Technologies).

Style - Leadership style of top management and overall operating style of organization

(norms, how people work, how they interact with each other and customers).

Shared Values- Core values shared in the organization and serve as guiding principles ofwhat is important.

Using the 7-S Model - All seven variables are interconnected. To make progress in one,

adjustments need to be made in others.

Porters Diamond Model To Study Competitive Advantage of Nations

Factors of production - Inputs need to be in an industrylabour, land, natural resources,

capital, infrastructure, educated workforce.

Demand conditions -Nature and size of domestic buyers needs.

Related and supporting industries - Suppliers, ancillary industries.

Firm strategy, structure and rivalry - Cooperative and competitive systems.

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PRODUCT STRATEGIES

What is Product? A product can be defined as a collection of physical, service and symbolic

attributes which yield satisfaction or benefits to a user or buyer.

Product Levels

Core benefi t Service/benefit customer is really

buying.

A hotel guest ins buying rest and

sleep.

Basic product Turn core benefit into a basic

product.

Hotel room includes a bed,

bathroom, towels, desk, dresser and

closet.

Expected product Set of attributes and conditions

buyers normally expect when they

purchase the product.

Hotel guest expect a clean bed,

fresh towels, working lamps, and a

relative degree of quiet.

Augmented product That exceeds customer expectations. Brand positioning and competition

take place at this level.


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Potenti al product New ways to satisfy customers or

differentiate offering.

Product Hierarchy

Need Family: Security

Product family: Savings and income Product class: Financial instruments

Product line: Life insurance

Product type: Term life insurance

Item (SKU/product variant): Prudential renewable term life insurance

Product mix/assortments: Set of all products and items a particular seller offers for sale.

Product Mix Decisions:Decisions on the product mix (the number of product lines and items in

each line) that the company may offer (single/multiple products)

New Product Development (NPD)

Why New Product Development?

Changing customer needs (Diet Coke, Saffola)

New segment entry (Maruti Ertega)

Changing market needs (Scooters to Bikes)

Successful brand/line extensions (Maggi)

Competitive success (Krackjack 50:50, Marie)

New technology (iPod, iPad, TV)

Product lifecycle (MS Office, Play Station, iPhone)

Portfolio/Business alignment (RIM)

Environmental changes (Music downloads)

New-to-the-World Products Incrementally Altered Products

-High risk, infrequent, costlier

-Envision market, create demand, educate market-electric lighting, antibiotics, microwave, credit

card, heart pacemaker, GPS

-Improvement in existing product.

-Low risk, more frequent, less costly-Listen to existing market, accommodate current

demand

- Intels Pentium IV (improvement over Pentium

III but has same basic technology), MS Office,

Apple iPhone

Identifying New Product Opportunities

Served Unserved

Unarticulated needs No No

Articulated needs Yes No


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New Product Development (NPD) Stages

Product Innovation:

A modified version of an existing product range

A new model in the existing product range

A new product outside the existing range but in a similar field of technology

A totally new product in a new field of technology.

Product Line: A group of products within a product class that are closely related because they

perform similar function, are sold to the same customer groups, are marketed through the same

channels, or fall within given price ranges. (opposite of product bundling).

Widthof a product mix: Number of different product lines the company carries.

Lengthof a product mix: Total number of items in a product line.

Depthof a product mix: How many variants are offered of each product in the line?

Consistencyof a product mix: How closely related the various product lines are in end use, production requirements, distribution channels, or some other way. (HUL: consistent-all

consumer goods; less consistent-functions)

Product Line extensions:When a company introduces additional items in the same product category

under the same brand name such as new flavors, forms, colors, added ingredients, package sizes.

This is as opposed to brand extension which is a new product in a totally different product category.

(Bisleri available in different product sizes: 500 ml, 1 lt, 5 lt etc).

Product extensions: Versions of the same parent product that serve a segment of the target market

and increase the variety of an offering. (Coke > Diet Coke)


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Expanding/Trimming the Product line

Upgrade customersMaruti 800>Wagon R

Cross-sellHP: PC and printers;

Line-stretchWhen a company lengthens its product line beyond its current range, whether

down-market, up-market, or both ways.o Popular (Titan), mass (Sonata), premium (Xylys), youth (Fastrack), ethnic (Raga)

Line fillA firm can lengthen its product line by adding more items within the present

range.

Line prunereduce unwarranted/unprofitable (Maruti Gypsy)

Major Product Line Strategies

Expansion of Product Mix

Contraction of Product Mix

Alteration of Existing Products Development of New Uses for Existing Products

Trading Up (adding higher priced product) and Trading Down (adding a low priced product)

o LG Sampoorna

Product Differentiation (based on quality, design, brand, packaging) and Market

Segmentation (to cater to different demands)

Other strategies related to Product

Packaging (and Labelling): 5thP

o Promotional value, functional components, aesthetic components

Warranties and guarantees After sales service

******************************************************************************

BRANDING STRATEGIES

Brand:a name, term, sign, symbol, or design, or a combination of them, intended to identify the

goods or services of one seller or group of sellers and to differentiate them from those of

competitors. (Kotler)

Brand comprises of: Tangible attributes, Product, Packaging, Labeling, Attributes, Functional

benefits, Intangible attributes, Quality, Emotional benefits,Values, Culture, Image

Branding

Creating differences between products.

Mental structure that clarifies decision making

o Who the product is

o What the product does

o Why consumers should care

Disney: Family, fun, entertainment. AppleInnovation. GoogleSimplicity.


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Branding Strategy: A plan for the systematic development of a brand to enable it to meet objectives

rooted in the brand's vision and driven by the principles of differentiation and sustained consumer

appeal.

Brands Positioning:The place in the consumers mind that the brand ownsthe benefit the

marketer wantscustomers to think of when they think of the brand. (Disney: Fun. Family.

Entertainment.)

Brand Building

Involves all the activities (Product development, Packaging, Advertising, Promotion, ales and

distribution) that are necessary to nurture a brand into a healthy cash flow stream after

launch.

Factors to consider before creating a brand

Choosing a brand name

o What does the brand name mean? (Considerations: product benefits, product quality,

names easy to remember, recognize, pronounce; distinctiveness, should not indicate

poor meanings in other markets or languages)

What associations / performance / expectations does it evoke?

Managing customer brand contact to meet and exceed expectations

Brand Equity: The added value endowed on products and services. It may be reflected in the way

consumers think, feel and act with respect to the brand, as well as in the prices, market share, and

profitability the brand commands.(Kotler)

When a commodity becomes a brand, it is said to have equity

A brand can command premium in the market

What happens when brands have high equity?

More leverage with the trade

Charge a premium on their product

Can have more brand extensions

Defense against price competition Improved perception of product performance.

Greater brand loyalty (Brand loyalty Pyramid: Brand Switchers>Satisfied Buyer>Committed

Buyers)

Building Brand Equity

Distinguishing it from others value proposition (broad positioning, specific positioning,

value positioning)

Brand promise must match brand delivery Choosing brand elements


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Brand Ambassadors:Giving a face and personality to the brand that is expected to be rubbed

off from the brand ambassador.

Designing holistic marketing activities

Leveraging Secondary associations

o

Create brand equity by linking the brand to other information in memory that conveysmeaning to consumers.

Brand Equity Model: Brand Resonance Pyramid (Kotler)

Measuring Brand Equity: Brand Value Chain (Kotler)

o Brand audit

o Brand-tracking studies

Critical Factors of Brand Building (David Jobber)

1. Quality :core benefit

2. Positioning : clear and unique

3. Repositioning :Gatorade: sports drink to lifestyle beverage

4. Well blended communication :Use of IMC: awareness, brand personality, reinforcing the

perception)

5. Being first in the market :before completion enters

6. Long-term perspective :invest in the brand long-term for awareness, communicating brand

message, loyalty programs

7. Internal marketing: Stakeholders should understand brand pillars and positioning


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Branding Strategies

Product branding: give each individual product an exclusive brand name. for the company

to evaluate brand performance but major drawbacks are product cannibalization if consumers

cannot differentiate clearly among product brands and involves higher advertising and

promotion budget.

Product line branding: The products appear under the same brand name and possess the

same basic identity but with slightly different competencies

Product-range branding: Compared to product-line branding, product-range branded

products carry out the basically the same functions but at different performance levels like

various cars in the Mercedes S, E, C and A class and Intels Pentium and Celeron ranges of

microprocessors.

Corporate branding: The companypromotes its name as the main brand name. Sometimes

called umbrella branding. e.g. IBM, Sony, Tata.

Brand extension:Using an existing brand name to promote a product in a different category

(Park AvenueShirts, Shaving cream, Jeans, Belts, Perfumes).

o Sub-brand:When marketers combine a new brand with an existing brand (Adobe

Acrobat software)

o Line extension

o Category extension

Product-Market Matrix

Old Market New Market

New Product Market DevelopmentBrand extension

Line extension

DiversificationBrand extension

Old Product Market PenetrationFlanker brands

Co-branding

Product DevelopmentCo-branding

Ingredient branding

Product Line-Brand Matrix

Existing Product Line New Product Line

New Brand

Name

Flanker Brand Diversification

Old Brand

Name

Line Extension Brand Extension

***************************************************************************

Pricing Strategies


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What a customer must give up in exchange for a product or service.

Customers interested in value of product/service, not costs.

Commodities are differentiated by price, quality.

Brands command premium.

Setting the Price

1. Selecting Pricing Objective

a) Survival

b) Maximum current profit

c) Maximum market share

d) Maximum market skimming

e) Product-quality leadership

f) Other objectives

2.

Determining Demanda.

Price sensitivity

b. Price elasticity of demand

3. Estimating Costsa.

Types of costs and levels of production

b. Accumulated production

4. Analysing Competitors Costs, Prices and Offersa. Competitor

b.

Financial situation

c.

Recent sales

d.

Customer loyalty

e. Corporate objectives

i. Market share objective

ii. Profit-maximization objective

5. Selecting a Pricing Methoda. Markup Pricing

i.

A standard markup to products cost.

b. Target-Return Pricing

i.

That yields firms target rate of ROI. (Acer)c. Perceived-Value Pricing (Meru Cabs)

i. Deliver more unique value that competitor and to demonstrate this to

prospective buyers.

d. Value Pricing

i.

Reengineering companys operations to become a low-cost producer without

sacrificing quality (e.g. IKEA, Walmarts EDLP)

e.

Going-Rate Pricing

i. Price largely based on competitors prices.

f. Auction-Type Pricing

i.

Online marketplaces

ii.

Reverse auction


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1. Suppliers submit online lowest price they are willing to be paid

(Pfizer)

6. Selecting the Final Pricea. Impact of other marketing activities

b.

Company pricing policiesi. Cancellation charge, sms/ATM charge of banks

c. Gain-and-risk-sharing pricing

d. Impact of price on other parties

Reference Prices

Fair Price (what consumers feel the product should cost)

Typical Price

Last Price Paid

Maximum price most consumers would pay

Minimum price most consumers would pay

Historical competitor price

Expected future price

Usual discounted price

Adapting the Price

Geographical Pricing

Pricing products to different customers in different locations and countries.

Price Discounts and Allowances

Discount, Quantity discount, Functional discount, Seasonal discount, Allowance.

Promotional Pricing loss-leader, special event, special customer, cash rebates, low-interest financing,

longer payment terms, warranties and service contracts, psychological discounting.

Differentiated Pricing

Price discrimination: customer-segment, product form, image, channel, location, time.

Yield pricing (airline, hospitality business)

Initiating and Responding to Price Changes

Initiating Price Cuts

Excess plant capacity, market domination

Possible traps: low-quality, fragile-market-share, shallow-pockets, price-war

Initiating Price Increases Cost inflation, overdemand

Delayed quotation, Escalator clauses, Unbundling, Reduction of discounts

Responding to Competitors Price Changes

Nirma-Surf, AMD-Intel

Pricing Strategies

Penetration: setting a low price for a new product to gain market share.

Skimming: Setting a high price for a new product. Used when competitive advantage notsustainable.


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Premium: Use of high price where there is uniqueness about the product/service. Used when

substantial competitive advantage exists.

Economy: No frills low price.

Discriminatory pricing: customer segment, product-form, location, time

Psychological pricing: When the marketer wants the consumer to respond on an emotional,

rather than rational basis. Geographical pricing: Where there are variations in different parts of the country or world.

Promotional pricing: To promote a product for a short period (BOGOF)

Product Line Pricing: Where there is a range of product or services the pricing reflect the

benefits of parts of the range.

Product Bundle Pricing: Sellers combine several products in the same package.

Reasons for price cutsExcess capacity, price competition

Reasons for price increaseCost inflation, overdemand

Alternative approaches that avoid increasing prices Reduce amount of product instead of raising the price.

Substituting less-expensive materials or ingredients.

Reducing/removing product feature.

Reducing/removing product services (e.g. installation, free delivery)

Using less-expensive packaging material/larger package sizes.

Reduce number of sizes and models offered.

Creating new economy brands.

*********************************************************************************

DISTRIBUTION STRATEGIES

Distribution (Place)

Set of institutions performing activities to move product from production to consumption.

Functions: Order processing, warehousing, inventory, transportation, collections

Ensures: Availability, visibility, movement, feedback

Width: Trade coverage

Reach: Customer coverage

Depth: Brand coverage

Growing impact of convergence (internet, mobile, retail) Amazon (convenience, 24/7, greater selection, reviews), Dell (skipping trade channels,

capture customer information, made to order manufacturingreduce costs, product available

24/7)

Channel Decisions

How to effectively reach target segment.

Intensivedistribution (all retail outlets)

Selectivedistribution (key outlets)

Exclusivedistribution (sole rights)

Direct/indirect channels

Single/multiple channels


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Length of channel

Types of intermediaries

Number of intermediaries at each level

Inter/Intra channel conflict

Complementary(each channel handles non-competing product/segment)

Competitive(two different and competing channels sell the same product)

Marketing Channels

Moves goods from producers to consumers.

Forward flow (company>customer): storage and movement, title, communications

Backward flow (customers>company): ordering and payment

Both directions: information, negotiation, finance, risk taking

The Supply Chain of a Manufacturing Company

Channel Functions and Flows

Channel-Design Decisions

Analysing customer needs and wants


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o Lot size

o Waiting and delivery time

o Spatial convenience

o Product variety

o Service backup

Establishing objectives and constraintsIdentifying major channel alternatives

o Types of intermediaries

o Number of intermediaries

o Terms and responsibilities of channel members

Evaluating major channel alternatives

o Economic criteria

o Control and adaptive criteria

Channel Management Decision

Selecting channel members

Training and motivating channel members

o Channel power (coercive, reward, legitimate, expert, referent)

o Channel partnerships

Evaluating channel members

Modifying channel design and arrangements

o Channel evolution

Channel modification decisions

Global channel considerations

Channel Conflict

Horizontal Channel conflict: Conflict with firms at the same level of the channel.

Vertical Channel conflict: Conflict at different levels e.g. between wholesaler and retailer.

Multichannel conflict:Apple sells smartphones through brick-and-mortar shops and throughe-retailers.

Channel Integration and Systems

Conventional marketing channel: Made up of independent producers, wholesalers, and

retailers with separate businesses trying to maximize their individual profits even at the

expense of the entire channel.

Vertical Marketing Systems (VMS): A distribution channel structure in which producers,

wholesalers and retailers act as a unified system. One channel member owns the others, has

contract with them, or has so much power that they cooperate. Types:

o Corporate VMS: Successive stages of production and distribution are owned by a

single entity (channel leader) achieved through forward and backward integration.

(Breweries, Petrol stations, Coke-Parle)


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o Contractual VMS: A VMS in which independent firms at different levels join

contractually to create efficiencies and economies of scale that could not be achieved

alone.Types:

Wholesaler-sponsored voluntary groups: small grocery stores agree to form a

chain to achieve economies with which to compete against corporate chains(Apna Bazar)

Retailer-sponsored

Franchise system: Fast food chains

o Administered VMS: A dominant firm within the channel system, such as the

manufacturer, wholesaler or retailer, coordinated the flow of goods by virtue of its

market power.Manufacturers of top brands can obtain strong trade cooperation and

support from resellers. Channel leaders that have enough money and resources to

control the direction of the channel. They have more control than any other channel

member (Microsoft, Nike).

Horizontal Marketing Systems

o A channel arrangement in which two or more companies at one level join together to

follow a new marketing opportunity.

o Coke and McDonalds, PSO and Pizza Hut

Channel Design Model:

The model involves six basic steps:

List the factors that could potentially influence the direct/indirect decision. Each factor must

be evaluated carefully in terms of the firms industry position and competitive strategy.

Pick out the factors that will have the most impact on the channel design decision. No factor

with a dominant impact should be left out. For example, assume that the following four

factors have been identified as having particular significance; market concentration, customer

service level, asset specificity, and availability of working capital.

Decide how each factor identified is related to the attractiveness of a direct or an indirect

channel. For example, market concentration reflects the size distribution of the firms

customers as well as their geographical dispersion. Therefore, the more concentrated the

market, the more desirable the direct channel because of the lower costs of serving that

market (high = direct; low = indirect). Customer service level is made up of at least threefactors: delivery time, lot size, and product availability. The more customer service required

by customers, the less desirable is the direct channel (high = indirect; low = direct). The

direct channel is more desirable, at least under conditions of high uncertainty in the

environment, with a high level of asset specificity (high = direct; low = indirect). Finally, the

greater the availability of working capital, the more likely it is that a manufacturer can afford

and consider a direct channel (high = direct; low = indirect). Note that a high level on a

factor does not always correspond to a direct channel.

Create a matrix based on the key factors to consider the interactions among key factors. If

only two factors are being considered, a two-by-two matrix of four cells would result. Forthree factors, a three-by-three matrix of nine cells would result.


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Decide (for each cell in the matrix) whether a direct channel, an indirect channel or a

combination of both a direct and an indirect channel is most appropriate, considering the

factors involved. Combination channels are becoming more common in business practice,

especially in industrial markets.

For each product or service in question, locate the corresponding cell in the box model. Theprediction in this cell is the one that should be followed or at least the one that should be most

seriously considered by the firm.

Distribution Scope Strategy:Selecting Distribution Intensity: The number of intermediaries or

outlets through which a manufacturer distributes its goods.

o Intensive distributionFirms products in nearly every available outlet.

o Selective distribution Limited number of retailers to distribute its product lines.

o

Exclusive distribution Limits market coverage in a specific geographical area

Channel-Structure Strategy: The channel-structure strategy refers to the number of intermediaries

that may be employed in moving goods from manufacturers to customers.

Channel Levels


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Selection of Suitable Distribution Policies \based on the Relationship between Type of Product

and Type of Store

Shopping store/

Convenience good

The customer is indifferent to the

brand of product he or she buys

but shops different stores to secure

better retail service and/or retail

price.

Intensive

Shoppingstore/

Shopping good

The customer makes comparisons

among both retail controlled

factors and factors associated with

Intensive


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the product (brand).

hopping Store /Specialty good

The consumer has a strong

preference as to product brand but

shops a number of stores to secure

the best retail service and/or price

for this brand.

Selective/Exclusive

Specialtystore/

Convenience good

The consumer prefers to trade at a

specific store but is indifferent to

the brand of product purchased.

Selective/

Exclusive

Specialty store /

Shopping good

The consumer prefers to trade at a

certain store but is uncertain as to

which product he or she wishes tobuy and examines the stores

assortment for the best purchase.

Selective/

Exclusive

Criteria for choosing Channel Partners:

Financial Strength of Prospective Channel Partner : revenue, P& L statement , balance sheet

etc.

Sales Strength : no. of salesmen and their technical competency Product Lines: 1) Competitive products, 2) Compatible products 3) Complementary products.

Reputation: 1) leadership 2) Well Established 3) Level of expertise.

Market coverage: Geographic coverage, outlets per market area.

Sales Performance.

Advertising & Sales promotion programs.

Ordering & Payment Procedures.

Willingness to share data: a) customers b) Inventory c) sales figures.

Installation & Repair services.

Multiple-Channel Strategy:

The multiple-channel strategy refers to a situation in which two or more different channels are

employed to distribute goods and services.

Complementary Channels: Complementary channels exist when each channel handles a

different non-competing product or non-competing market segment. An important reason to

promote complementary channels is to reach market segments that cannot otherwise be

served. (Orpat Calculators with Stationery, Orpat Clocks thru Watch shops in the same

place.)

Competitive Channels: Competitive channels exist when the same product is sold throughtwo different and competing channels. Two franchises could be issued to the same dealer,


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but they are normally issued to separate dealers. Competition between dealers holding

separate franchises is both possible and encouraged. (Amul Ice creams are sold in competing

retail channels)

Channel Modification Strategy: Firm to periodically review and modify its channel

arrangements. Modification becomes necessary when:

The distribution channel is not performing.

Consumer buying patterns change.

The market expands.

New competition arises.

Innovative distribution channels emerge.

The product moves into later stage in the product life cycle.

No marketing channel will remain effective over the whole product life cycle. Early buyers

might be willing to pay for high value-added channels, but later buyers will switch to lower-cost channels.

Small office copiers were first sold by manufacturers direct sales forces, later through office

equipment dealers, still later through mass-merchandisers, and now by mail-order firms and

internet marketers.

Introductory stage - Radically new products or fashions tend to enter the market through

specialist channels (such as boutiques) that spot trends and attract early adopters.

Rapid growth stage - As interest grows, higher-volume channels appear (dedicated chains,

department stores) that offer services but not as many as the previous channels.

Maturity stage - As growth slows, some competitors move their product into lower-costchannels (mass-merchandisers).

Decline stage - As decline begins, even lower-cost channels emerge (mail-order houses, off-

price discounters).

Channel Integration: Firms have to build this activity in their Channel ActivitiesBenefits: When

managed properly the synergy at the marketplace provides a high competitive advantage and smooth

flow of information, goods and services

Factors for Integrating Channels:a) Connectivity: ensures real time flow of information onactivities of the channels. b) Community: Ensure a common vision and a shared set of objectives

with the channel members. c) Collaboration: Recognize Mutual interdependence. Promote shared

understanding beyond contractual obligations.

***************************************************************************

COMMUNICATIONS MIX STRATEGIES

Modern marketing is more than developing a good product, pricing it attractively, and making it

accessible to target customers.

Companies must communicate with present and potential stakeholders and with the general public.


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Promotional Objectives

Improve long-run perf ormance

o Store-image and positioning

o Public service

Improve short-run performance

o Attract new customers

From existing trade area

Expand trade area

o Increase existing customer patronage

Promotional Strategies

Push Strategies:Companies promote the product to members of the marketing channel, not

to end users.

Pull Strategies:Promote a product by generating consumer demand for it, primarily through

advertising and sales promotion appeals.

Promotional Mix

Combination of Personal and Non-Personal selling techniques designed to achieve

promotional objectives.

o Non-Personal Selling: Advertising, sales promotion, public relations, and

sponsorships.

o Personal Selling: Interpersonal promotional process involving a sellers face-to-face

presentation to a prospective buyer.

Marketing Communications Mix

1. Advertising: Any paid form of non-personal presentation and promotion of ideas, goods, or

services by an identified sponsor viaprint media, broadcast media, network media, electronic

media, display media

2. Sales promotion:A variety of short-term incentives to encourage trial or purchase of a

product or service to draw stronger and quicker buyer response, highlight product offers,

boost sagging sales (samples, coupons, cash refund offers, contests, sweepstakes, free trials

etc).

3. Events:Company-sponsored activities and programs designed to create daily or special

brand-related interactions with consumers, including sports, arts, entertainment and cause

events as well as less formal activities (Idea Filmfare awards).

4.

Public relations and publicity:Variety of programs directed to promote or protect acompanys image or its individual product communications (Press kits, speeches, seminars,


37/50



annual reports, charitable donations, publications, community relations, company magazine,

advertorials)

5. Direct marketing:Use of mail, telephone, e-mail, or Internet to communicate with or solicit

response or dialogue form specific customers and prospects.

6. Interactive marketing: Online activities and programs designed to engage customers or

prospects and directly or indirectly raise awareness, improve image, or elicit sales of products

and services.

7. Word-of-mouth marketing: People-to-people oral, written, or electronic communications

that relate to the merits or experiences of purchasing or using products or services.

8. Personal selling:Face-to-face interaction with one or more prospective purchasers for the

purpose of making presentations, answering questions, and procuring orders.

Steps in Developing Effective Communications

1. Identify target audience.

2. Determine objectives.

3. Design communications.

4. Select channels.

5. Establish budget.

6. Decide on media mix.

7.

Manage Integrated Marketing Communication (IMC).

Determine Communication Objectives

Category need

Brand awareness

o Brand recall

o Brand recognition

Brand attitude

o Negative oriented (problem removal/avoidance)

o

Positively oriented (sensory gratification, social approval)

Brand purchase intention

Designing the Communications

Solving three issues

o What to say (message strategy)

o How to say it (creative strategy)

o

Who should say it (message source)


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39/50


40/50



o highlight product offers

o boost sagging sales

Events:Company-sponsored activities and programs designed to create daily or special brand-related

interactions with consumers, including sports, arts, entertainment and cause events as well as less

formal activities (Idea Filmfare, Standard Chartered Mumbai Marathon).

Public Relations and Publicity:Variety of programs directed to promote or protect a companys

image or its individual product communications. (Press kits, speeches, seminars, annual reports,

charitable donations, publications, community relations, company magazine, advertorials.)

Direct Marketing:Use of mail, telephone, e-mail, or Internet to communicate with or solicit

response or dialogue form specific customers and prospects.

Interactive Marketing:Online activities and programs designed to engage customers or prospects

and directly or indirectly raise awareness, improve image, or elicit sales of products and services.

o I nternet Adverti sing: A form of marketing and advertising which used the Internet to

deliver promotional messages to consumers. Types: email marketing (directly

marketing a commercial message to a group of people usingemail), search engine

marketing (involves the promotion ofwebsitesby increasing their visibility insearch

engine results pagesthrough optimization and advertising), social media marketing

(gainingwebsite traffic/attention through social media sites), display advertising (pop

up, banner), and mobile advertising. Benefits: wide coverage, low cost, easy

measurement of advertising effectiveness which helps in fine-tuning the

communication, wide variety (audio, video) of interactive messages, easier to target asegment based on their online profile. Concerns: Viewer fatigue, ad blocking

software, spam, click fraud, privacy concerns (tracking cookies).

Word-of-Mouth Marketing:People-to-people oral, written, or electronic communications that

relate to the merits or experiences of purchasing or using products or services.

Personal Selling:Face-to-face interaction with one or more prospective purchasers for the purpose

of making presentations, answering questions, and procuring orders.

*********************************************************************************

Marketing Strategies at Different Stages of Product Life Cycle (PLC)

Characteristics Introduction Growth Maturity Decline

Sales Low sales Rapidly rising sales. Peak sales. Declining sales.

Costs High cost/customer Average

cost/customer

Low cost/customer Low cost/customer
http://en.wikipedia.org/wiki/Emailhttp://en.wikipedia.org/wiki/Websiteshttp://en.wikipedia.org/wiki/Search_engine_results_pagehttp://en.wikipedia.org/wiki/Search_engine_results_pagehttp://en.wikipedia.org/wiki/Web_traffichttp://en.wikipedia.org/wiki/Web_traffichttp://en.wikipedia.org/wiki/Search_engine_results_pagehttp://en.wikipedia.org/wiki/Search_engine_results_pagehttp://en.wikipedia.org/wiki/Search_engine_results_pagehttp://en.wikipedia.org/wiki/Websiteshttp://en.wikipedia.org/wiki/Email


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Profits Negative Rising High Declining

Customers Innovators Early adopters Middle Majority Laggards

Competitors Few Growing Stable, begins to

decline

Declining

Marketing Objectives Product

awareness,trial

Maximise market

sharemarket

modification

Maximize profit

while defending share

Reduce cost, milk

brand

Strategies

Product Basic product Product flankingquality, feature, style,

, service, warranty

Diversify brands,models

Phase out weakproducts

Price Cost-plus Penetration Match/best

competitors

Cut price

Distribution Selective Intensivecoverage,

channels

More intensive Selective; phase out

unprofitable

Communication Awareness, trial

early adopters,

dealers

Preference, loyalty

mass market

Brand differences ,

benefitsbrand

switching

Minimumhard core

loyals

Introduction Stage

Profits negative/low

High promotional expenditure

o To inform potential customers, induce product trial and ensure availability

Market pioneer(inventor, product/market pioneer) - can be rewarding, but risky and

expensive

o Advantages: strong brand recall, establishes brand attributes of product class,

economies of scale, technological leadership, patents and ownership of scarce assets.

o

Weaknesses: Crude new products, high product-development costs, lack of resources,improper positioning, an idea before its time, managerial incompetence or

complacency.

Coming latermakes sense with superior technology, quality or brand strength.

Growth Stage

Rapid climb in sales; customer base grows

Profits increase; costs fall due to volumes

New competitors enter market attracted by opportunities.

Price maintained or fall slightly.

Companies maintain/increase promotional expenditures

o

To educate market, take on competition

Strategies to sustain rapid market growtho Add new product feature; improve quality, style.

o Add new models, flanker products, enter new market segments.

o Increase distribution coverage, enter new distribution channels.

o Shift from product-awareness advertising to product- preference advertising.

o Lower prices to attract the next layer of price-sensitive buyers.

o Trade-off between high market share and high current profits.

o Invest in product improvement, promotion and distribution to capture a dominant

position.

o

Fortress defense, Flanker brands, Niche strategy


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Maturity Stage

Growth declines. Could be a long stage.

Sales growth rate starts to decline.

Flat sales due to market saturation.

Sales decline, customers begin to switch. Sales slowdown triggers industry overcapacity, intensifies competition.

Industry consolidation; few dominant firms, many niche players; profits through volumes.

o Key issue: be in the big 3 or niche

Abandon weaker products; concentrate more on more profitable and new products.

Market Modificationo Expand mature brand market by driving sales volume growth(=no. of users x usage

rate/user)

o Expand numbers of brand users

Converting nonusers, entering new market segments, competitors consumers,

convincing current users to increase brand use. Product Modification

o Modifying product characteristics through quality, feature, style improvement.

o Quality improvement (to increase functional performance/ease of use)

o New features (to expand products performance, versatility, safety, convenience)

o Style improvement (to increase aesthetic appeal)

o Build image as an innovator; loyalty of market segments that value these features.

Strategic choices in Mature Markets

Expand Number of Users Increase Usage Rates Among Users

Convert nonusers. Have consumers use the product on more

occasions.

Enter new market segments. Have consumers use more of the product on

each occasion.

Attract competitors customers. Have consumers use the product in new ways.

A critical marketing objective for a firm in a mature market is to maintain the loyalty ofexisting customers.

To accomplish that goal, firms must pursue improvements in the perceived value those

customers receive from their offeringseither by differentiating themselves on the basis of

superior qualityor service, by lowering costs and prices, or both.

Threats and opportunities in a mature market:shifts in customer needs and preferences,

product substitutes, increased raw material costs, change in government regulations, entry of

low-cost producers, M&A

Differentiationof product offering

o Product qualityfeatures, performance, durability, brand name, reliability,

serviceabilityo Service qualityreduce 5 Service Gaps


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Low-costposition (no-frills product, innovative product design, cheaper raw materials,

innovative production processes, low-cost distribution, reductions in overhead)

Strategies for Extending Volume Growth

o Increased penetration strategy

Targeting nonusers Develop and sell integrated systems that help improve the basic products

performance/ease of use.

Offering services that improve its performance/ease of use for the potential

customer.

Expanding distribution/developing more convenient and accessible channels

o Extended Use Strategy

Increasing frequency of use

Developing new and more varied ways to use the product

o Market Expansion Strategy

New/underdeveloped domestic geographic markets

Identify and develop entirely new customer/application segments Domestic market expansion through Private Labelsfor large retailers.

o Global Market Expansion

Firms with leading position in mature domestic markets, less-developed

markets in foreign countries

Decline Stage

Sales decline

o Technology advances; consumer tastes and competition shift.

Over capacity, increase price cuts, profit erosion

o

Firms may withdraw from market or reduce number of products offered. Firms stop, increase or maintain investment.

Drop unprofitable customer groups, strengthen investment in lucrative niches.

Harvest firms investment to recover cash quickly.

Divest the business.

Strategy depends on industry attractiveness and firms competitive strength.

Rejuvenating mature product, often by adding value to original product.

Strategies of Declining Markets

Condition of demandtechnological advances produce substitutes of higher quality or

lower cost, demographic shifts, change in needs, tastes or lifestyles, cost of

inputs/complementary products

Exit barriershigher exit barrierless attractive market

Intensity of Future Competitive Rivalrysize and bargaining power of customers,switching cost (substitutes, alternative suppliers)

Divestment/Liquidationquick divestment may not be possible if high exit barriers.

Harvestingstrategyto generate cash quickly by maximizing cash flow over a relatively

short term

Involvesavoiding any additional investment in the business, greatly reducing operatingexpenses,

raising prices


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continues to lose market share. Harvesting strategy has been popularized by the Boston

Consulting Group in its application to what is termed 'dogs'.

*********************************************************************************

Grand Strategy

Also called Corporate Strategy. Involves analysis of internal and external environment.

Corporate strategy is used to identity: businesses/industriesthat the company should compete in,

value creation activitiesthat the company should perform in those businesses, method to enter or

leave businesses or industriesin order to maximize its long-run profitability.

Types:1. Stability strategy

2.

Growth strategy

3. Retrenchment strategy

4.

Combination strategy

Stability strategy

A firm attempts to maintain its status-quo with existing levels of efforts and is satisfied with

incremental growth by marginally changing its business.

Continuing to serve the same customers by offering the same product/service, maintaining

market share, and sustaining the organizationsReturn on Investment.

Growth strategy An organization plans to achieve the increased level of objective that is much higher than its

past achievement level.

o To increase profit, sales, or market share.

o To reduce cost/unit.

o To increase in performance objectives.

Because of :

o new entrants in the field.

o higher input cost, obsolescence in plant and machine

o opportunity ofEconomy of Scale.

o competitive advantage

I. Concentric/Intensive Growth Strategies

Investing resources to expand firmspresent business.

Doing more what we are already doing and where we are best at doing.

Types:

o Market penetration: existing productsexisting market through greater marketing

efforts

o Market development: existing productnew markets (geography, segment)

o Product development: improved/new products (innovation) - existing market

o


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Ansoffs product-market growth matrix: The purpose of this matrix is to help managers consider

how to grow their business through existing/new products or in existing/new markets which involve

differing degrees of risk.

Existing product New product

Existingmarket

Market penetration-increase market share by increasing

use/frequency/quantity; convert non-

users to users (Marutirural India

penetration, Titan: launch of Sonata,)

Product development-product modification, new features,

different quality levels, new products,

line extensions

(MarutiRitz, Swift, TitanEdge,

Automatic, AppleiPad)

New

marketMarket development

-new markets, new distribution

channels, new geographic areas (Maruti

export, Titanexport, Apple

emerging market)

Diversification

-build, buy (M&A), Ally (JV)

(Maruti Car> Driving Schools, Titan >

Fastrack> Titan Eye+)

II. Vertical Integration Growth Strategy

In addition to present activities, along the line of value addition stages (from raw materialstage to production and ultimately distribution of goods to customers), so as to gain

ownership or increased control and thereby expand the business.

Expanding operations backward into an industry that produces inputs for the company or

forward into an industry that distributes the companys products.

Types:

o Backward integration: Company expands its operations into an industry that produces

inputs to the companys products) e.g. a) manufacturer of detergent bought soda ash

(raw material for detergent) producing company. b) Starbucks has bought coffee beanproducing firms. c)Amul ice-cream has control over its milk supply through dairy

cooperatives.

o Forward integration: Company expands into an industry that uses,

distributes, or sells the companys products. E.g. a) Reliance sells fruits, vegetables

directly procured from farmers through itsReliance Freshstores. B)Raymonds, a

manufacturer of textiles,sells through its company owned exclusive stores.

II. Horizontal Integration Growth Strategy

It is the process of acquiring or merging with competitors or another company in the same

industry value chain, leading to industry consolidation.

Examples: a) Exxon with Mobile (oil production, refining and distribution)c) Disney mergingwith Pixar (movie production) d) Daimler Benz and Chrysler merger (car developing,

manufacturing and retailing)

Benefits:growth of the company in size, reduce competition, achieve economies of scale

(hence lower costs), access new markets, increased product differentiation

Problems: merging different company cultures, in case of hostile takeoverhigh turnover,

overestimating benefits and underestimating problems)

Differences Between Vertical and Horizontal Integrations


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III. Diversification strategy

Entry into a business which is new to an organization

Why?

o Reduce dependency on a single business line.

o In a better position to sustain growth across business cycles.

Factors to judge before diversifying:

o Attractiveness (Porters 5 Forces), synergy, cost of entry etc.

Mode of diversification:o Acquisition, Joint Venture V, internal new venture (start-up)

Types:

o Related/Concentric Diversification

Diversifying into business whose value chains has strategic fits with the

value chain of the present business.

Any backward (control over inputs) orforward (control over supplier and

distribution)integration.

o Unrelated/Conglomerate Diversification

Into non-core businesses with no strategic fit. Firms pursuing unrelateddiversification are often called as conglomerates.

ITC: tobacco>hotels>paper and packaging>agri-business>non-cigarette

business (packaged foods, personal care, education and stationery, apparel)

Reliance Industries: Petrochemicals and Textiles (core)> Power generation >

Fertilisers >Telecom>Retail

marketing strategy notes prof arijit b 21102014

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