Marketing Exam Notes All The Frameworks Porter’s Five Forces Potential Entrants, Suppliers, Buyers, Substitutes, Rivalry Among Existing Firms The Business Macroenvironment (PEST) • Political / Legal • Economic / ecological • Social / Cultural • Technology Situation Analysis (SWOT): Strengths, Weaknesses, Opportunities, Threats Situation Analysis (5Cs): competitors, climate (environment), collaborators, customers, company Customer: DMU, DMP, Value Driver, Segment, Acquisition & retention, size growth potential Marketing Strategy (STP): Segmentation, Targeting, Positioning
Marketing Mix (4Ps): Product, Price, Place, Promotion, Evaluation of Alternatives Implementation & Monitoring: implement decision, monitor & control, adapt & renew Profit = [Mkt. demand x mkt. Share x (Rev. per buyer – V Cost per buyer)] – Fixed Cost Set profit to zero for break-even, but don’t forget cannibalization Value Cycle comparative advantage, value proposition, competitive advantage, perceived value, sales share and profit leadership, customer equity, superior market value, market orientation Segmentation Scheme (AMISH): Per Market Segmentation PPT Accessible, measurable, identifiable, sustainable, homogenous ATR (used in test marketing): Awareness, Trial, Repeat Pricing Strategy: i. know how buyers value your offering (EVC, competitor pricing), ii. assess price sensitivity (elasticity, conjoint), iii. look for variation (ex: across countries), iv. anticipate competitive response, v. identify appropriate pricing structure, vi. check consistency with overall strategy, vii. assess response and fine tune, viii. assess whether it’s worth it to serve customer NTT DoCoMo • Customer segmentation. Do a DMP, DMU. Barco Marketing myopia o Failure to adequately define, understand, anticipate and/or respond to the marketplace and marketplace dynamics o Narrowly focusing on one aspect of the organization, rather than taking a balanced approach o Causes: organizational inertia, internal focus is easier, each function has its own ideas, human judgment is involved • Market oriented firm vs. technology oriented firm Marketing Myopia – Theodore Levitt • Shadow of Obsolescence o No such thing as a growth industry, only companies organized to take advantage of growth opportunities. Four danger signs: ?
Belief that growth is assured by expanding and more affluent population ? Belief that there is no substitute ? Too much faith in mass production and in the advantages of rapidly declining unit costs as output rises ? Preoccupation with a product that lends itself to scientific experimentation, improvement and manufacturing cost reduction • Production Pressures o Concern yourself with marketing not sales (volume) • Dangers of R & D o Don’t pay too much attention to r & d at the expense of considering marketing o Don’t believe that a great product will sell itself
SalesSoft • Must understand DMU and DMP, can’t just have a great product • who is involved, has power; use of information; stages of purchasing • Customer Analysis Tools • Customer Activity Cycle- customer’s view of benefits/costs of your product from pre-consumption to consumption to post-consumption • Economic Value to the Customer (EVC)- differentiation over reference value i. Ex: reduced startup and turnover, reduced sales cycle and implementation costs • Market Segmentation • Determines target market and who competition is
Dolan Article: Low-tech Marketing Math • Important! • Can calculate break-even point (# of units) • Can convert to share of market • Profit Drivers = revenues – costs • Sales volume x price; variable + fixed costs • Numbers are more useful when there’s a benchmark to compare to Black and Decker o Important! A lot of good stuff in the Marketing Plan PPT! o Know target audience: DMU, DMP, Values o Perform a 5C analysis o Marketing metrics: monitor performance, be willing to change, watch new opps. And threats o Break even analysis: $0 = Q (P-VC)-FC See the notes for Mark-up and Cannibalization Citibank Case • Continuous debate in whether to create a global brand or go local. Answer is of course finding the right balance, i. e. globalize where you can, adapt where you must. • Standardize globally to increase efficiency, adapt locally to increase effectiveness • Think about the costs & benefits before deciding whether to globalize or localize in each area: ? Positioning ? Product ? Price ? Promotion ? Place • Segmentation ? Group Buyers on the basis of similar needs & responsiveness to marketing mix ? Develop profiles Evaluate the segmentation scheme (AMISH) • Targeting ? Target based on segment attractiveness and competitive position ? Portfolio models provide important input at this point (BCG, GE) • Positioning ? Identify drivers of perceived value for target customers ? Determine the relative importance of each value driver ? Determine how current offerings (company and competitors) are perceived ? Select an appropriate positioning strategy (positioning sentence) ? Monitor the value proposition and allocate resources to support it Article The Lure of Global Branding – Aaker & Joachimsthaler
Companies should work on creating strong brands in all markets through global brand leadership, i. e. using organizational structures, processes and cultures to allocate brand-building resources globally, to create global synergies and to develop a global brand strategy that coordinates and leverages country brand strategies: o Sharing insights and best practices o Supporting global brand planning o Assigning responsibility o Execution Segmentation, Targeting and Positioning Presentation Segmentation o Determines Organizational Systems and Structure, Investments in Technology, Required Skills and Resources, Etc. Defines who is – and who isn’t – a competitor o Why do we segment? o More accurate information about value drivers o Better focus for marketing efforts o To improve competitiveness o Even a monopolist will be better off o Segmentation is not just classification, demographics or product differentiation o Group people based on similar needs, develop profile, evaluate scheme (AMISH) Targeting o Two basic segments: benefits sensitive, cost sensitive o Strategies: mass marketing, concentrated marketing, differentiated marketing o BCG matrix: star, cash cow, question mark, dog
Positioning o Positioning – selection of a meaningful and distinct competitive position as perceived by the target customer o Perception is reality o Positioning criteria: distinct, dominant, desired, sustainable, simple, profitable Nestle – Contadina • Alternatives to test marketing: o Historical analogy o Pre-test market forecasting o Conjoint experiments – forecasting based on preferences o Regional roll outs • BASES model used. Another model is ASSESSORS. See noted for details. Both based on ATR (awareness, trial, repeat) • 95% of new businesses fail in first five years. 0% of new products fail at launch. • Signs of a good NPD (new product development) process o Top-Level support o Solid team performance and One visionary o Quality, cost and speed trade-offs made very carefully o Orderly process to kill bad ideas and fix good ideas • NPD (New product development) (7 step program): o Idea generation o Concept Screening / Idea Refinement o Product Development o Quantification of Volume o Test market o Commercial Evaluation o Introductory Tracking Customize Your Product Development – Edward Krubasik [pic] Biopure • Pricing 1. Cost based pricing = average total cost + markup . Simple but ignores demand 2. Reference price is what customers expect to pay (usually hard to change) 3. Steps: i. know how buyers value your offering (EVC, competitor pricing), ii. assess price sensitivity (elasticity, conjoint), iii. look for variation (ex: across countries), iv. anticipate competitive response, v. identify appropriate pricing structure, vi. check consistency with overall strategy, vii. assess response and fine tune, viii. assess whether it’s worth it to serve customer Dolan Article: How Do You Know When the Price is Right? Successful pricing efforts share two qualities: o The policy complements the company’s overall marketing strategy o The process is coordinated and holistic consider competitors’ reactions • 8 Steps to Better Pricing- listed above • Remember to consider competitors’ reactions Rohm and Haas Case • A great product with a great price is not enough. Marketing mix -4Ps- should be collaboratively handled in order to ensure the success of the product. ? Ensure your product “reaches” the customers through effectively utilizing your distribution network (intermediaries). “Perception is reality”. Therefore, effective promotion should be incorporated to the marketing plan in order to convey the superior product attributes and price/cost advantages to the customer. • Degree of authority is also important in conducting product management. Responsible-manager should also have the sufficient degree of authority (budget) to give required decision about the product. • Transaction costs can be minimized and service level can be optimized by the appropriate use of distribution channels (intermediaries). Trade-offs comes into scene at this point. Channel design process: o Define the target market and positioning o Determine which services the End-User (EU) values o Develop alternative End-User Interfaces (EUI) o Determine costs of supply chains for the EUI o Select channels that minimizes channel costs and maximize services o Check with a situational analysis • Push Strategy – Manufacturer sells vs. Pull Strategy – End user ask for the product Article Stern & Sturdivant – Customer-Driven Distribution Systems There are eight important steps in forming a well-performing distribution system: 1.
Find out what your customers want (conjoint analysis, hybrid modeling and constant-sum scales) a. Lot-size b. Market decentralization c. Waiting time d. Product variety e. Service backup 2. Decide on appropriate outlets Focus on the relation between market segments and the outlets where services are normally delivered. 3. Find out about the costs a. Find out if what customers want is feasible for the company b. Determine what kind of collaboration or support from other up-stream players will be required c. Project the total cost 4. Bound the “Ideal”
Incorporate the opinions of the company executives to the system being designed 5. Compare your options 6. Review your pet assumptions Incorporate outsiders to review the basic assumptions 7. Confront the gap – Get together to decide between what customers want and what management wants 8. Prepare to implement Review Session o Look at questions first o Spend about 1 hr. reading the case o Don’t spend more than 15 minutes doing the numbers o The sample exam answers were at a Pass level. Give more detail. o Prioritize the key problems o Identify and evaluate alternatives o He will post Marketing Math slides tonight Keep break-even analysis in mind, profit equation = $0 o Variable costs vs. fixed costs o Market share break-even: Break even / Market size. Is it achievable? o Mark-up = (Retail Price – Wholesale Price) / Wholesale Price o Wholesale price = Retail price / (1+ Markup) o TEST in D1279 at 12:10 pm GLOSSARY OF MARKETING TERMS Brand Equity Brand equity is the differential effect that brand knowledge has on buyer response. The key components of brand equity are brand awareness and brand associations. Brand Extension A new product that uses an existing product’s brand name.
Concentrated Marketing The organization selects a single market segment and focuses all resources on meeting customer needs of that segment. Comparative Advantage An organization is said to have a comparative advantage when it possesses unique skills and resources that are valued by customers. Comparative Advantage Theory A theory of competition that suggests firms should seek to build a comparative advantage in resources that will support a marketplace position of competitive advantage (superior customer value), and, thereby, superior financial performance. Competitive Advantage
A competitive advantage exists when an organization successfully delivers perceived value more effectively and efficiently than competition. In other words, when a firm has a marketing mix that the target market sees as offering better customer value than a competitor’s mix. Customer Activity Cycle A tool for mapping out the entire chain of activities customers must engage in to produce benefits sought. Customer Equity The net present value of expected cash flows from customers, both current and potential. Customer Satisfaction Customer’s post hoc evaluation of a consumption experience.
Differentiated Marketing Similar to concentrated marketing except that the firm develops a unique marketing program – positioning and marketing mix – for each target market segment. DMP (Decision-Making Process) The buyer’s decision-making process. DMU (Decision-Making Unit) All those with power and stake in the decision-making process. Early Leader Early leaders are firms that establish a dominant position in the market before the end of the growth phase. Early leaders enter an average of 13 years after pioneers, yet are much more successful. The Four P’s
An organizing framework for thinking about the marketing mix. Product – the offering or ‘input’ that produces buyer benefits (eg, physical product and features, service aspects, brand image, website functions). Place – the ‘right’ product to the ‘right’ buyer at the ‘right’ place at the ‘right’ time (e. g, channel logistics, information, delivery). Promotion – communications about the firm’s offering (eg, advertising, public relations, direct mail, viral marketing, permission marketing). Price – an important component of a buyer’s ‘total cost’ (eg, price, financing, billing, fees, rent, discounts).
The Five C’s The five components of the situation analysis – company, customers, collaborators, competitors, and climate. Generic Customer Benefits A framework for thinking about generic drivers of perceived benefits that cut across industries: Product Benefits — Benefits derived from product consumption. Service Benefits — Benefits derived from service experience. Reputation Benefits — Benefits derived from the offering and supplier’s image and reputation. Relationship Benefits — Benefits derived from maintaining a relationship with the supplier (e. . , better understanding of needs, membership in a community, etc) Generic Customer Costs A framework for thinking about generic drivers of perceived costs that cut across industries: Perceived Price — Perceptions of price (e. g. , fairness, value) Transaction Costs — Time, Monetary, Psychological, and Effort costs associated with obtaining an offering (e. g. , travel time, storage costs) Production Costs — Time, Monetary, Psychological, and Effort costs associated with producing desired benefits (e. g. , preparing a meal, installing irrigation pipe).
Perceived Risk — Monetary and Psychological risk from using a particular product or service. Generic Value Drivers A classification scheme for thinking about benefits (product, service, reputation, and relationship) and costs (price, transaction costs, production costs, and risk) from the customer’s point of view. Generic Value Positions Three basic strategies for achieving superior perceived value – benefit leadership, low cost advantage, and dominant value. Lifetime Value of the Customer Lifetime Value of the Customer (LVC) is a measure of customer equity – the net present value of future customer cash flows and costs.
Marketing Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organizational objectives. The Marketing Concept The marketing concept holds that the key to achieving organizational goals consists in determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors. In other words, the key to success is to deliver superior value efficiently. The Marketing Mix
The marketing mix is the firm’s offering to the target segment –it is how the firm will deliver on it’s value proposition. Marketing Myopia Failure to adequately define, understand, anticipate, and/or respond to the marketplace and marketplace dynamics; and/or narrowly focusing on one aspect of the organization, rather than taking a balanced approach. Market Orientation The entire organization is focused on delivering superior value efficiently. A market-oriented firm envisions a value proposition that is thoroughly grounded in an understanding of the marketplace and its dynamics.
The organization – people, processes, structure, resources, skills, and tasks – is aligned to support the value proposition. All decisions, from strategic investments in building capabilities to day-to-day operational decisions are guided by the value proposition. To make market-oriented decisions, the firm systematically gathers information on customers and competitors (both current and potential), analyzes that information for the purpose of developing marketing knowledge, and uses such knowledge to guide the creation, selection, implementation, and adaptation of marketing strategy and tactics.
Marketing Strategy Marketing strategy is the process of determining what value we will provide and to whom. What group(s) of customers should we serve? And not serve? What value should we offer? What should we not offer? Mass Marketing Treating the entire market as if all customers had the same needs and offering the same marketing mix to all buyers. Perceived Value The customer’s perception of what they actually get (total perceived benefits) relative to what they have to give up (total perceived costs). PEST
An acronym for the portion of the Situation Analysis dealing with macroenvironmental forces and trends P. E. S. T. stands for Political/Legal, Economic/Ecological, Social/Cultural, and Technological Perceptual Mapping A tool for measuring customer perceptions and preferences regarding an organization’s market offering and those of it’s competitors. Pioneering Advantage A (questionable) theory stating that market pioneers enjoy significant advantages in the long-run. Positioning Selection of a meaningful and distinct competitive value position as perceived by the target customer.
Positioning Statement A concise, simple, and creative statement of our ‘points of difference’ relative to the competition. Pull Strategy Stimulating end-user demand to ‘pull’ a product through the channel (e. g. , building brand equity). Push Strategy ‘Pushing’ a product through the channel to end-users (e. g. , via incentives such as merchandising allowances). Segmentation Grouping together buyers with similar preferences that can be served with a distinct marketing mix. Situation Analysis A framework for analyzing business situations.
STP STP – segmentation, targeting, and positioning – is an organizing framework for thinking about the process of formulating marketing strategy. Superior Customer Value Customers perceive the value provided by our marketing mix to be better than the competition’s marketing mix. Target Market A group of customers that we are seeking to serve. Targeting Selecting which group(s) of customers to serve and not serve. Total Product The entire offering as perceived from the customer’s point of view. Transaction Costs
Time, effort, psychological, and monetary costs that a customer must incur during the pre-consumption, consumption, and post-consumption phases of producing the benefits they seek. The Value Cycle The value cycle is a conceptual framework showing how organizations can build a continuous cycle for creating value. Importantly, it integrates the internal (comparative advantage, competitive advantage, and accounting measures of performance) and market-based perspectives (value proposition, customer perceived value, and market-based measures of performance). Value Components
The set of perceived benefits and perceived costs that determine perceived value (see ‘generic value components’). Value Disciplines To align organizational processes with the value proposition, organizations utilize three basic internal strategies – or ‘value disciplines’ – for creating value: operational excellence ( ‘supply chain management’); product leadership (‘management of innovation’); and customer intimacy (‘customer relationship management’). Value Drivers Aspects of the firm’s offering that affect perceived value (see ‘generic value drivers’). Value Position
The target set of benefits and costs that we intend to provide, as perceived by a customer in the target segment (see ‘generic value positions’). The Value-Profit Chain The value-profit chain is a useful tool for diagnosing and evaluating business models. It takes a systems view of value creation by linking together comparative advantage in resources, competitive advantage in delivering value, customer advantage in terms of customer equity, and financial performance. Value Proposition A value proposition envisions a target ‘marketplace position’ – how the firm will create a match between firm capabilities, it’s offering, and target arket needs. So, choosing a value proposition means selecting whom to serve (the target market) as well as what to provide (the value position). A good value proposition should provide a basis for building a comparative advantage in resources, gaining a competitive advantage in delivering value, and achieving superior financial performance. ———————– [pic] Development Risk ————————————-( Crash program Step-by-step 100% Right Acquisition Exit Joint Venture