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Marketing managemetn Notes by

Ahmed Fawzy
Eslesca 45D

Ahmedfawzy_80@hotmail.com











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Marketing Manegmemtn
Lectures Summery
Part 1



Core Marketing Concepts

Developing Marketing Strategies and Plans

Collecting Information and Forecasting Demand and Conducting Market
Research


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Core Marketing Concepts

What is the aim of marketing? The aim of marketing is to know and understand the customer so well that
the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready
to buy, All that should be needed then is to make the product or service available

A social definition shows the role marketing plays in society.
Marketing is a societal process by which individuals and groups obtain what they need and want through
creating, offering, and freely exchanging products and services of value with others

Marketings broader importance extends to society as a whole:
Marketing has helped introduce and gain acceptance of new products that have eased or enriched
peoples lives.
Successful marketing builds demand for products and services, which, in turn, creates jobs.
By contributing to the bottom line, successful marketing also allows firms to more fully engage in
socially responsible activities.

What to market? (8 Things)
Products, Service, Places, Property, Information, Ideas, Events, People

The term market is used to cover various groupings of customers.
Need markets (the diet-seeking market)
Product markets (the shoe market)
Demographic markets (the youth market),
Geographic markets (the Chinese market)

The term market can be extended to cover markets such as:
Voter markets, Labor markets, Donor markets

Marketing has always been defined in terms of satisfying customers needs and wants.
Critics, however, maintain that marketing does much more than that and create needs and want that did
not exist before, According to critics, marketers encourage consumers to spend more money than they
should on goods and services they really dont need.

Take a position:
Marketing shapes consumer needs and wants
Marketing merely reflects the needs and wants of consumers.

Needs, Wants, and Demands
Needs : are the basic human requirements
Wants : needs become Wants when they directed to specific objects that might satisfy the need.
Demands: are wants for specific products backed by an ability to pay.

Marketers are skilled at stimulating demand for their products, They seek to influence three variables to
meet the organization s objectives:
o Level of demand, Timing of demand , Composition of demand

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Eight demand states are possible:
Negative demand Consumers dislike the product and may even pay to avoid it.
Nonexistent demand Consumers may be unaware of or uninterested in the product.
Latent demand Consumers may share a strong need that cannot be satisfied by an existing product.
Declining demand Consumers begin to buy the product less frequently or not at all.
Irregular demand Consumer purchases vary on a seasonal, monthly, weekly, or daily basis
Full demand Consumers are adequately buying all products put into the marketplace.
Overfull demand More consumers would like to buy the product than can be satisfied.
Unwholesome demand Consumers may be attracted to products that have undesirable social
consequences.

Core Marketing Concepts

Market Segmentation
Segmentation is dividing up the market into distinct groups of buyers who might prefer or require
varying product and service mixes and who are homogenous among themselves

Market Targeting
After identifying market segments, the marketer decides which present the greatest opportunities
which are its target markets.

Marketing Offering
For each of the chosen segments, the company develops an offering
The offering is not limited to physical products but is a combination of products, services,
information, and experiences.

Value Proposition and Positioning
The offering is positioned in the consumers mind as delivering some central benefit, which is
called the value proposition.

Value and Satisfaction
We can think of marketing as the identification, creation, communication, delivery, and monitoring
of customer value.
The buyer chooses the offerings he or she perceives to deliver the highest customer delivered value.
Satisfaction reflects a person s judgment of a product s perceived performance in relationship to
expectations.

Supply Chain
is made up of the company, suppliers, distributors and ultimately customers who partner with each
other to improve the performance of the entire system
It is also referred to as the Value Delivery Network
Competition is between networks and not companies

Competition: The actual and potential rival offerings and substitutes that a buyer might consider.
4 levels of competition are based on degree of product substitutability
Brand competition, Industry competition,
Generic competition, Form competition
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The marketing environment: The marketing environment consists of the task environment and the broad
environment.
The task environment (Micro environment) includes the actors engaged in producing: Suppliers,
agencies, distributors, dealers, and customers.

The broad environment, external factors that affect the work : Demographic, technological,
economic, natural, political, legal, social, and cultural

The New Marketing Realities
Network information technology, Globalization, Consumer empowerment

Company Orientations toward the Marketplace

The Production Orientation (Mass Production as Chinese production )
The Product Orientation (Nish Products as Rolex watches)
The Selling Orientation (Aggressive selling technique, or make and sell technique)
The Marketing orientation (sense ad response strategy, being more effective than competitors ,
customer focuses , and customer satisfaction)
The Integrated Marketing orientation (right mix between the 4Ps)
The Holistic marketing orientation (Develop and implement full market programs )
Integrated marketing (Communicate product and services channels , deliver value to
customer )
Relationship Marketing (manage full relationship between customers ,suppliers , and
distribution channels )
Internal marketing : ensure to have strong marketing strategy and department inside the
organization
Social responsibility marketing applying ethics , environmental and legal responsibility to
the community


Company Orientations toward the Marketplace (In details)

The Production Orientation:
Holds that customers will prefer products that are widely available and inexpensive.
Focuses on high production efficiency, low cost, and mass distribution
Assumes that consumers are primarily interested in product availability and low prices
Most practiced when demand exceeds the supply, or when the cost of the product is too high and
improved productivity is required to bring it down

The Product Orientation
Holds that customers will prefer those products that offer the most quality, performance of
innovative features.
Focuses on making superior products and improving them over time.
Assumes that buyers admire well made products and can evaluate quality and performance



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The Selling Orientation
Holds that customers & businesses, if left alone, will not purchase enough products
Focuses undertaking aggressive selling and promotion effort
Assumes consumers typically show buying resistance and must be coaxed into buying.

Most practiced with unsought goods, non-profit and fund raising organizations, and when the company has
production overcapacity (Examples : Life Insurance and Time Share Companies)


Marketing orientation
Holds that the key to achieving organizational goals is being more effective than competitors in creating,
delivering, and communicating superior customer value to your target markets.
The marketing orientation is a customer-centered, sense-and-respond philosophy.
The job is not to find the right customers for your products, but the right products for your customers

Integrated marketing
Mixing strategy between the 4 main market components (4Ps : Product , Price , Place , promotion)

The Holistic )(marketing orientation
It is based on the development, design, and implementation of marketing programs, processes, and
activities that recognize their breadth and interdependencies.

Integrated marketing occurs when the marketer devises marketing activities and assembles
marketing programs to create, communicate, and deliver value. Two key themes are that:
Many different marketing activities can create, communicate, and deliver value
Marketers should design and implement anyone marketing activity with all other activities in mind.

Relationship Marketing has the aim of building mutually satisfying long-term relationship with
key parties.
The ultimate outcome of relationship marketing is a unique company asset called a marketing
network, consisting of the company and its supporting stakeholders customers, employees,
suppliers, distributors, retailers, and others with whom it has built mutually profitable business
relationships

Internal marketing, an element of holistic marketing, is the task of hiring, training, and motivating
able employees who want to serve customers well.
It ensures that everyone in the organization embraces appropriate marketing principles

Social responsibility marketing, The organization s task is thus to determine the needs, wants, and
interests of target markets and satisfy them more effectively and efficiently than competitors while
preserving or enhancing consumers and society s long-term well-being






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Summary

Marketing is an organizational function and a set of processes for creating, communicating, and delivering
value to customers and for managing customer relationships in ways that benefit the organization and its
stakeholders.
Marketing management is the art and science of choosing target markets and getting, keeping, and growing
customers through creating, delivering, and communicating superior customer value.

Marketers are skilled at managing demand: they seek to influence its level, timing, and composition for
goods, services, events, experiences, persons, places, properties, organizations, information, and ideas.
They also operate in four different marketplaces: consumer, business, global, and nonprofit.

Marketing is not done only by the marketing department. It needs to affect every aspect of the customer
experience. To create a strong marketing organization, marketers must think like executives in other
departments, and executives in other departments must think more like marketers.

Todays marketplace is fundamentally different as a result of major societal forces that have resulted in
many new consumer and company capabilities.
These forces have created new opportunities and challenges and changed marketing management
significantly as companies seek new ways to achieve marketing excellence.

There are five competing concepts under which organizations can choose to conduct their business: the
production concept, the product concept, the selling concept, the marketing concept, and the holistic
marketing concept. The first three are of limited use today.

The holistic marketing concept is based on the development, design, and implementation of marketing
programs, processes, and activities that recognize their breadth and interdependencies.
Holistic marketing recognizes that everything matters in marketing and that a broad, integrated perspective
is often necessary. Four components of holistic marketing are relationship marketing, integrated marketing,
internal marketing, and socially responsible marketing.


The set of tasks necessary for successful marketing management includes developing marketing strategies
and plans, capturing marketing insights, connecting with customers, building strong brands, shaping the
market offerings, delivering and communicating value, and creating long-term growth.


Marketing Steps:

Segmentation Targeting Market Offering Value Proposition and Positioning

Value and Satisfaction Supply Chain Management

Segmentation: identify meaningful group of customers.
Targeting: select which segment(s) to serve.
Positioning: Build and improve brand equity to chosen targets (by one of the 4Ps).

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Developing Marketing Strategies and Plans

The Central Role of Strategic Planning

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions
on allocating its resources to pursue this strategy.
In order to determine the direction of the organization, it is necessary to understand its current position and
the possible avenues through which it can pursue a particular course of action.

Strategic planning is the managerial process of developing and maintaining a viable fit between:

Market opportunity, Objectives Defined, Resources Required, Skills Developed

To ensure they select and execute the right activities, marketers must give priority to strategic planning in
three key areas:
Managing company s businesses as an investment portfolio.
Assessing each business s strength by considering the markets growth rate and the companys
position and fit in that market.
Establishing a strategy. The company must develop a game plan for achieving each business s long-
run objectives.




The Central Role of Strategic Planning

Corporate Level ==> Division Level ==> Business Unit ==> Level Product Level
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Corporate Level ==> Division Level ==> Business Unit ==> Level Product Level


Corporate and Division Strategic Planning

Corporate headquarters is responsible for designing a corporate strategic plan to guide the whole enterprise;
it makes decisions on the amount of resources to allocate to each division, as well as on which businesses
to start or eliminate
All corporate headquarters undertake four planning activities
1. Defining the Corporate Mission
2. Establishing Strategic Business Units (SBUs)
3. Assigning resources to each SBU
4. Planning new businesses, downsizing, or terminating older businesses (Growth Strategies)

1-Defining the Corporate Vision and Mission
To define its mission, a company should address Peter Druckers classic questions:
What is our business?
Who is the customer?
What is of value to the customer?
What will our business be?
What should our business be?

Organizations develop mission statements to share with managers, employees, and (in many cases)
customers. Clear, thoughtful mission statement provides a shared sense of purpose, direction, and
opportunity.
Mission statements are at their best when they reflect a vision, an almost impossible dream that
provides direction for the next 10 to 20 years.

Good mission statements have five major characteristics:
They focus on a limited number of goals.
They stress the companys major policies and values. They narrow the range of individual
discretion so employees act consistently on important issues.
They take a long-term view. Management should change the mission only when it ceases to
be relevant.
They are as short, memorable, and meaningful as possible.
They define the major competitive spheres within which the company will operate.


2. Establishing Strategic Business Units
Three characteristics of SBUs
Single business or collection of related businesses that can be planned for separately
Has its own set of competitors
Has a manager who is responsible for strategic planning and profit

A business must be viewed as a customer-satisfying process and not goods-producing products


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3. Assigning resources to each SBU
The purpose of identifying the companys business units is to : Develop separate strategies and
Assign resources

This could be done by using portfolio modeling:
Boston Consulting Group Model
The General Electric Model

Critique of portfolio models (Problems of the Portfolio Modeling):
Results can be manipulated to produce the desired location on the matrix.
Two or more business may end up in the same cell position but differ in the underlying ratings and
weights.
Business may end up the middle of the matrix which makes it hard to determine the appropriate
strategy.

Companies should avoid the following mistakes:
Requiring all business to aim for the same growth rate or return level.
Leaving cash cows with too little or too much in retained funds.
Making major investment in dogs hoping to turn them around but failing each time.
Maintaining too many stars but under investing in each.
























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Growth-share matrix

The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix, Boston Consulting
Group analysis, portfolio diagram) is a chart that had been created by Bruce Henderson for the Boston
Consulting Group in 1968 to help corporations with analyzing their business units or product lines. This
helps the company allocate resources and is used as an analytical tool in brand marketing, product
management, strategic management, and portfolio analysis.






Cash cows are units with high market share in a slow-growing industry. These units typically generate
cash in excess of the amount of cash needed to maintain the business.
They are regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to
own as many as possible. They are to be "milked" continuously with as little investment as possible, since
such investment would be wasted in an industry with low growth.

Dogs, or more charitably called pets, are units with low market share in a mature, slow growing industry.
These units typically "break even", generating barely enough cash to maintain the business's market share.
Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that
assist other business units, from an accounting point of view such a unit is worthless, not generating cash
for the company. They depress a profitable company's return on assets ratio, used by many investors to
judge how well a company is being managed. Dogs, it is thought, should be sold off.

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Question Marks (also known as problem child) are growing rapidly and thus consume large amounts of
cash, but because they have low market shares they do not generate much cash. The result is a large net
cash consumption. A question mark has the potential to gain market share and become a star, and
eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming
the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the
market growth declines. Question marks must be analyzed carefully in order to determine whether they are
worth the investment required to grow market share.

Stars are units with a high market share in a fast-growing industry. The hope is that stars become the next
cash cows. Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if
that's what it takes for the unit to remain a leader.
When growth slows, stars become cash cows if they have been able to maintain their category leadership,
or they move from brief stardom to dogdom.

As a particular industry matures and its growth slows, all business units become either cash cows or dogs.
The natural cycle for most business units is that they start as question marks, then turn into stars.
Eventually the market stops growing thus the business unit becomes a cash cow.
At the end of the cycle the cash cow turns into a dog.

The overall goal of this ranking was to help corporate analysts decide which of their business units to fund,
and how much; and which units to sell. Managers were supposed to gain perspective from this analysis that
allowed them to plan with confidence to use money generated by the cash cows to fund the stars and,
possibly, the question marks. As the BCG stated in 1970:

Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth
opportunities. The balanced portfolio has:
stars whose high share and high growth assure the future;
cash cows that supply funds for that future growth; and
Question marks to be converted into stars with the added funds.

















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The BCG-Matrix (Growth-Share Matrix)
The BCG-Matrix, also known as the growth-share matrix, is a framework first developed by the Boston
Consulting Group (BCG) in the 1960s to help companies think about the priority (and resources) that they
should give to their different businesses. Also known as the BCG-matrix, it puts each of a firms
businesses into one of four categories. The categories were all given memorable names cash cows, stars,
poor dogs and question marks which helped to push them into the collective consciousness of managers
all over the world.
The two dimensions of the BCG-Matrix are relative market share (or the ability to generate cash) and
market growth rate (or the need for cash).





1. Cash Cows High market share but low growth rate (most profitable)
2. Stars High market share and High growth rate (high competition)
3. Question marks Low market share and high growth rate (uncertainty)
4. Poor dogs Low market share and low growth rate (less profitable or may even be negative
profitability)
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There are four strategies possible for any product or business unit, which are used after the BCG-Analysis:
1. Build: By increasing investment, the product is given an impetus such that the product increases its
market share. Example: Pushing a Question mark into a Star and finally a cash cow (Success
sequence)
2. Hold: The Company cannot investor it has other investment commitments due to which it holds the
product in the same quadrant. Example: Holding a star there itself as higher investment to move a
star into cash cow is currently not possible.
3. Harvest: Best observed in the Cash cow scenario, wherein the company reduces the amount of
investment and tries to take out maximum cash flow from the said product which increases the
overall profitability.
4. Divest: Best observed in case of Dog quadrant products which are generally divested to release the
amount of money already stuck in the business.

The BCG Growth-Share Matrix
The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston
Consulting Group in the early 1970's. It is based on the observation that a company's business units can be
classified into four categories based on combinations of market growth and market share relative to the
largest competitor, hence the name "growth-share".
Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for
competitive advantage.
The growth-share matrix thus maps the business unit positions within these two important determinants of
profitability.
This framework assumes that an increase in relative market share will result in an increase in the generation
of cash. This assumption often is true because of the experience curve; increased relative market share
implies that the firm is moving forward on the experience curve relative to its competitors, thus developing
a cost advantage. A second assumption is that a growing market requires investment in assets to increase
capacity and therefore results in the consumption of cash. Thus the position of a business on the growth-
share matrix provides an indication of its cash generation and its cash consumption.
Henderson reasoned that the cash required by rapidly growing business units could be obtained from the
firm's other business units that were at a more mature stage and generating significant cash. By investing to
become the market share leader in a rapidly growing market, the business unit could move along the
experience curve and develop a cost advantage. From this reasoning, the BCG Growth-Share Matrix was
born.



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The four categories are:
Dogs - Dogs have low market share and a low growth rate and thus neither generate nor consume a
large amount of cash. However, dogs are cash traps because of the money tied up in a business that
has little potential. Such businesses are candidates for divestiture.

Question marks - Question marks are growing rapidly and thus consume large amounts of cash,
but because they have low market shares they do not generate much cash. The result is large net
cash consumption.

A question mark (also known as a "problem child") has the potential to gain market share and
become a star, and eventually a cash cow when the market growth slows. If the question mark does
not succeed in becoming the market leader, then after perhaps years of cash consumption it will
degenerate into a dog when the market growth declines. Question marks must be analyzed carefully
in order to determine whether they are worth the investment required to grow market share.

Stars - Stars generate large amounts of cash because of their strong relative market share, but also
consume large amounts of cash because of their high growth rate; therefore the cash in each
direction approximately nets out. If a star can maintain its large market share, it will become a cash
cow when the market growth rate declines.
The portfolio of a diversified company always should have stars that will become the next cash
cows and ensure future cash generation.

Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that is greater than
the market growth rate, and thus generate more cash than they consume. Such business units should
be "milked", extracting the profits and investing as little cash as possible. Cash cows provide the
cash required to turn question marks into market leaders, to cover the administrative costs of the
company, to fund research and development, to service the corporate debt, and to pay dividends to
shareholders.

Because the cash cow generates a relatively stable cash flow, its value can be determined with
reasonable accuracy by calculating the present value of its cash stream using a discounted cash flow
analysis.
Under the growth-share matrix model, as an industry matures and its growth rate declines, a business
unit will become either a cash cow or a dog, determined soley by whether it had become the market
leader during the period of high growth.
While originally developed as a model for resource allocation among the various business units in a
corporation, the growth-share matrix also can be used for resource allocation among products within a
single business unit. Its simplicity is its strength - the relative positions of the firm's entire business
portfolio can be displayed in a single diagram.


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Limitations
The growth-share matrix once was used widely, but has since faded from popularity as more
comprehensive models have been developed. Some of its weaknesses are:
Market growth rate is only one factor in industry attractiveness, and relative market share is only
one factor in competitive advantage. The growth-share matrix overlooks many other factors in these
two important determinants of profitability.

The framework assumes that each business unit is independent of the others. In some cases, a
business unit that is a "dog" may be helping other business units gain a competitive advantage.

The matrix depends heavily upon the breadth of the definition of the market. A business unit may
dominate its small niche, but have very low market share in the overall industry. In such a case, the
definition of the market can make the difference between a dog and a cash cow.
While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing a
corporation's business portfolio at a glance, and may serve as a starting point for discussing resource
allocation among strategic business units.



























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GE PORTFOLIO MODELING

What is The McKinsey Matrix?
The McKinsey Matrix is a model to perform a business portfolio analysis on the Strategic Business Units of
a corporation. Synonyms for this method are; GE Matrix,Business Assessment Array and GE Business
Screen.

What is Portfolio?
A business portfolio is the collection of Strategic Business Units that together form a corporation. The
optimal business portfolio is one that fits perfectly to the company's strengths and helps to exploit the most
attractive industries or markets.

What is Strategic Business Unite?
A Strategic Business Unit (SBU) can either be an entire medium size company or a division of a large
corporation. As long as it formulates its own business level strategy and has separate objectives from the
parent company.

The Aim of Portfolio Analyses
1. Analyze its current business portfolio and decide which SBU's should receive more or less investment
2. Develop growth strategies for adding new products and businesses to the portfolio
3. Decide which businesses or products should no longer be retained.

The BCG Matrix (Boston Consulting Group Matrix) is the best-known portfolio planning framework. The
McKinsey Matrix is a later and more advanced form of the BCG Matrix.




THE MCKINSEY MATRIX









Business sales vs Percentage
of market size is
represented in the pie chart
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The McKinsey Matrix is more sophisticated than the BCG Matrix in three aspects:
1. Market (Industry) attractiveness is used as the dimension of industry attractiveness, instead of
market growth. Market Attractiveness includes a broader range of factors other than just the market growth
rate that can determine the attractiveness of an industry / market.

2. Competitive strength replaces market share as the dimension by which the competitive position
of each SBU is assessed. Competitive strength likewise includes a broader range of factors other than just
the market share that can determine the competitive strength of a Strategic Business Unit.

3. Finally, the GE Matrix works with a 3*3 matrix, while the BCG Matrix has only 2*2.
This also allows more sophistication.

Typical (external) factors that affect Market Attractiveness:
- Market size
- Market growth rate
- Market profitability
- Pricing trends
- Competitive intensity / rivalry
- Overall risk of returns in the industry
- Entry barriers
- Opportunity to differentiate products and services
- Demand variability
- Segmentation
- Distribution structure
- Technology development

Typical (internal) factors that affect Competitive
- Strength of assets and competencies
- Relative brand strength (marketing)
- Market share
- Market share growth
- Customer loyalty
- Relative cost position (cost structure compared with competitors)
- Relative profit margins (compared to competitors)
- Distribution strength and production capacity
- Record of technological or other innovation
- Quality
- Access to financial and other investment resources
- Management strength

Often, Strategic Business Units are portrayed as a circle plotted in the GE Matrix, whereby:
The size of the circles represent the Market Size
The size of the pies represent the Market Share of the SBU's
Arrows represent the direction and the movement of the SBU's in the future



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A Six Steps Approach for the Implementation of the MCKINSEY Matrix

1. Specify drivers of each dimension. The corporation must carefully determine those factors that are
important to its overall strategy.
2. Determine the weight of each driver. The corporation must assign relative importance weights to the
drivers.
3. Score the SBU's on each driver.
4. Multiply weights and scores for each SBU.
5. View resulting graph and interpret it.
6. Perform a review/sensitivity analysis. Make use of adjusted other weights and scores (there may be
no consensus).


SOME LIMITATIONS OF THE MCKINSEY MATRIX

The valuation of the realization of the various factors.
Aggregation of the indicators is difficult.
Core Competences are not represented.
Interactions between Strategic Business Units are not considered.







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4 - Corporate Growth Strategies







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4 - Corporate Growth Strategies

Intensive Growth
Integrative Growth
Diversification Growth

Intensive Growth
Market Penetration
Market Development
Product Development

Integration Growth
Backward Integration
Forward Integration
Horizontal Integration

Diversification Growth
Concentric (Related) Diversification
Conglomerate (Unrelated) Diversification


Current Product New Product
Current Market Market Penetration Product Development
New Market Market Development Diversification


Corporate Growth Strategies (Intensive Growth)

Market Penetration is a strategy for company growth by increasing sales of current products to
current market segments without changing the product
Increase sales to current users
Attract users of competition
Convince non users of the product

Market Development is a strategy for company growth by identifying and developing new market
segments for current products (Example: selling milk for mothers)
Develop new markets in the same area
Develop more distribution channels
Develop new markets in other areas

Product Development is a strategy for company growth by offering modified or new products to
current market segments (Example: Colored Catchup Bottles)
Improve or add on current product features
Improve on current product quality
Develop new product in the same category


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Corporate Growth Strategies (Integration Growth)

Backward Integration: acquire resources in early stages in the supply chain, mainly supplier and
row materials producers

Forward Integration: acquire resources on the final stages in the supply chain , mainly
distribution and retails

Horizontal Integration : when company acquire other company working on the same industry
level or same level of production , or in other words acquire business activity at same level in the
value chain of production

Integration Pros:
Access to scarce resources of supply
Tighter control over its value delivery network

Integration Cons:
Risk inherent in committing substantial resources in one business.
Investment incurred often offsets the additional profitability

Corporate Growth Strategies (Diversification)

Concentric (related) Diversification
occurs when a firm internally develops or acquires another business that may or may not have
customers in common with its current businesses but that might contribute to internal synergy such
sharing production facilities or marketing and distribution skills.

Conglomerate (Unrelated) Diversification involves two businesses that have no commonalities.
Reasons for engaging in such strategy may be:
Decrease in demand on core company businesses.
Company has more cash than it needs to expand its current business
Targeted growth is not achieved by other strategies

Reasons for Diversification
Decrease the demand for the companys Core business
Company have more cash then its need to expand current business
Target growth is not achievable by other growth Strategies

Projecting Financial Income
Sales (a)
Cost of Goods (b)
Gross Operating Profit GOP = (a) (b)

Marketing expenses (c)
Administration & OH (d)
Net income before tax NIBT = GOP (c + d)

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Business Unit Strategic Planning Process



1.Developing the Business Mission /

2.Analyzing Internal Factors :
Internal analysis refers to the analysis of internal (company) functions.
The result of the internal analysis is an assessment of the businesss strengths and weaknesses.

Strengths : Internal competencies necessary to succeed in pursuing opportunities
Weaknesses : Internal weak points of the company/brand that should be addressed and transformed
to strengths

3.Analyzing External Factors
External analysis refers to the analysis of external environmental factors that might pose a threat
or shed light on an opportunity for the business.
Assessing opportunities and threats

Opportunities : Areas of need in which a company can perform profitably
Threats : Challenges posed by unfavorable development that would lead, in the absence of
marketing action, to sales or profit deterioration

Opportunities and Threats Both are factors cacalculated by Probability Impact Matrix


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4.Formulating Goals (Set Goals) :

Most business units pursue a mix of objectives, including profitability, sales growth, and market share
improvement, The business unit sets these objectives and then manages by objectives (MBO).

For an MBO system to work, the unit s objectives must meet four criteria:
They must be arranged hierarchically, from most to least important.
Objectives should be quantitative whenever possible.
Goals should be realistic.
Objectives must be consistent. It s not possible to maximize sales and profits simultaneously.
In short; goals should be SMART (Spacified , Measurable , Assignable , Realstic , Time Related)

5.Strategic Formulation : Marketing strategies serve as the fundamental underpinning of marketing plans
designed to fill market needs and reach marketing.

Porter generic strategies describe the different overall business strategies (Strategic Formulation ==>
Porter Generic Strategies)


Cost Leadership is a strategy, by which a business offers an average product at a low cost to the broadest
possible market. Economies of scale result in cost savings, partially passed to consumers. (ex: el Tawheed
we elnor or Wall-Mart chain)

Cost Focus is a strategy, by which a business offers an average product at a low cost to a specific customer
group (ex Esperanza Cars)

Product Differentiation is a strategy that focuses on offering a unique product to the broadest possible
market. The product offering necessitates continuous innovation in light of the highly competitive market
forces. . (Example: Apple)

Differentiation Focus is a strategy that focuses on offering a unique product to a specific customer group.
The customer relationship largely depends on the uniqueness of the product and the way the customer is
being served. . (Example: Rolex watches)

Product Planning: The Nature and Contents of a Marketing Plan
The next level of marketing strategy formulation address the following issues

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Segmentation and targeting Positioning and differentiationMarketing mix strategy
Commonly, marketing strategies are developed as multi-year plans, with a tactical plan detailing
specific actions to be accomplished in the current year

Summary

1. The value delivery process includes choosing (or identifying), providing (or delivering), and
communicating superior value.
The value chain is a tool for identifying key activities that create value and costs in a specific
business.

2. Strong companies develop superior capabilities in managing core business processes such as new-
product realization, inventory management, and customer acquisition and retention.

Managing these core processes effectively means creating a marketing network in which the
company works closely with all parties in the production and distribution chain, from suppliers of
raw materials to retail distributors.
Companies no longer compete marketing networks do.

3. According to one view, holistic marketing maximizes value exploration by understanding the
relationships between the customers cognitive space, the companys competence space, and the
collaborators resource space; maximizes value creation by identifying new customer benefits from
the customers cognitive space utilizing core competencies from its business domain, and selecting
and managing business partners from its collaborative networks; and maximizes value delivery by
becoming proficient at customer relationship management, internal resource management, and
business partnership management.

4. Market-oriented strategic planning is the managerial process of developing and maintaining a viable
fit between the organizations objectives, skills, and resources and its changing market
opportunities.
The aim of strategic planning is to shape the companys businesses and products so they yield target
profits and growth. Strategic planning takes place at four levels: corporate, division, business unit,
and product.

5. The corporate strategy establishes the framework within which the divisions and business units
prepare their strategic plans.
Setting a corporate strategy means defining the corporate mission, establishing strategic business
units (SBUs), assigning resources to each, and assessing growth opportunities.

6. Strategic planning for individual businesses includes defining the business mission, analyzing
external opportunities and threats, analyzing internal strengths and weaknesses, formulating goals,
formulating strategy, formulating supporting programs, implementing the programs, and gathering
feedback and exercising control.

7. Each product level within a business unit must develop a marketing plan for achieving its goals. The
marketing plan is one of the most important outputs of the marketing process.

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Collecting Information and Forecasting Demand
and Conducting Market Research

Conducting Marketing Research & Forecasting Demand

Marketing Strategic Planning and the Marketing Information System




The Components of a Modern Marketing Information System:



Marketing Strategic Planning and the Marketing Information System

An open system is a system which continuously interacts with its environment. The interaction can take
the form of information, energy, or material transfers into or out of the system boundary.

MIS is an open system that consists of people, equipment, and procedures to gather, sort, analyze, evaluate,
and distribute information that is needed in timely and accurate manner to decision makers
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The Marketing Information System (MIS)

A Marketing Intelligence System: This is the systematic collection and analysis of publicly
available information about competitors and development in the marketing environment,
The goal of marketing intelligence is to improve strategic decision making, assess and track
competitors actions and provide early warning for opportunities and threats.

Marketing Research: is the systematic design, collection, analysis and reporting of Data and
findings relevant to a specific marketing situation facing the company.

Types of research firms:

Syndicated-service research firms: These firms gather consumer and trade
information, which they sell for a fee .

Custom marketing research firms: These firms are hired to carry out specific project,
they design and study and report the findings.

Specialty-line marketing research firms : These firms provide specialized research
services , (ex the firms which sell field interviewing services to other firms )


The Marketing Research Process

Define the problem and research objectives
Develop the research plan
Collect information
Analyze information
Present findings
Make the decision


1. Decide what type of data to collect:

Secondary Data is information that already exists somewhere having been collected for another purpose. It
provides the starting point at low cost and ready availability

Secondary Data Pros and Cons
Pros : Low Cost , High Speed , Sometime information cant be get from other sources
Cons: Sometime it is irrelevant , low accuracy , important to my need

Primary data when the needed data do not exist, dated, inaccurate, incomplete, or unreliable the company
has to collect information for the specific purpose at hand

Primary Data Steps:
Research Approach Contact Method Sampling Plan Research Instrument How to gather data

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2. Decide on how to gather primary data

Research Type: Descriptive Research seeks to ascertain magnitudes such as the market size, market
growth rate, or market potential.

Research Approach: Survey Research involves gathering primary data by asking people questions
about their knowledge, attitudes, preference, and buying behaviors.
Research Tool: Questionnaires, which involves two types of questionnaires:
Close-ended questions measure how many people think in a certain way
Open-ended questions provide insight on how people think

Research Approaches: Behavioral Data Collection where customers leave traces of their
purchasing behind. Much can be learned by analyzing these data.

Research Type: Exploratory Research gathers preliminary information that sheds light on the nature of
the problem and suggests possible solutions.

Research Approach: Observational Research involves gathering primary data by observing
relevant people, actions, and situations.
Research Tools or Instruments:
Shadowing is observing people in their daily routine.
Behavior mapping photographing people with in a space to monitor there behavior.

Research Approach: Focus Group Research
Research Instrument: Discussion Guide

Research Type: Causal Research, which tests hypotheses about cause-and-effect relationships.

Research Approach: Experimental Research, which is the gathering of primary data by selecting
selective group of subjects, giving them different treatments, controlling related factors, and
checking for differences in group responses (testing one variable while fixing the others)

Descriptive Research Survey Research Questionnaires
Magnitude Behavioral Data Collection

Exploratory Research Observational Research Shadowing or Behavior mapping
Preliminary Information Focus Group Research Discussion Guide

Causal Research Experimental Research
Experimental

3. Prepare the Sampling Plan

Sampling Unit designates who is to be surveyed.
Sample Size designates how many people should be surveyed.
Sampling Procedure designates how the respondents should be chosen.

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Probability sample
Non-probability sample

Probability (random) sample:
Random sampling refers to taking a number of independent observations (subjects) from the same
probability distribution, without involving any real population.

The sample usually is not a representative of the population of people from which it was drawn
this random variation in the results is termed as sampling error.

In the case of random samples, mathematical theory is available to assess the sampling error. Thus,
estimates obtained from random samples can be accompanied by measures of the uncertainty
associated with the estimate; confidence limits of sampling error may be calculated

Types of probability random sample:

A simple random sample is selected so that all samples of the same size have an equal chance of
being selected from the entire population.

Stratified sampling The population is divided into mutually exclusive groups (such as age groups),
and random samples are drawn from each group

Cluster sampling The population is divided into mutually exclusive groups (such as city blocks),
and the researcher draws a sample of the groups to interview

Non-probability sample:
Non-probability sampling techniques cannot be used to infer from the sample to the general
population.

Performing non-probability sampling is considerably less expensive than doing probability
sampling, but the results are of limited value.

Should be used when the cost and time involved in probability sample is too high

Types of non-probability sample:
Convenience sampling: members of the population are chosen based on their relative ease of
access. To sample friends, co-workers, or shoppers at a single mall, are all examples.

Judgmental sampling the researcher chooses the sample based on who they think would be
appropriate for the study. This is used primarily when there is a limited number of people that have
expertise in the area being researched.

Case study - The research is limited to one group, often with a similar characteristic or of small
size.

Snowball sampling - The first respondent refers a friend. The friend also refers a friend, etc.

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Contact Methods

Mail questionnaire Response rate is low and/or slow , Respondents tend to give more honest
responses to personal questions , No interviewers involved to bias the respondents answer

Telephone interviewing: Higher and quicker response rate. , Inconvenient to some people ,
Unavailability of respondents

Personal interviewing : Intercept interviews , Arranged interviews

Online Marketing Research : Surveys or Online focus groups

4 Analyze information (Using SPSS system)
5 Make the decision (Using GIDS system)














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Summary

To carry out their analysis, planning, implementation, and control responsibilities, marketing managers
need a marketing information system (MIS).

The role of the MIS is to assess the managers information needs, develop the needed information, and
distribute that information in a timely manner.

An MIS has three components:
o An internal records system, which includes information on the order-to payment cycle and
sales information systems
o A marketing intelligence system, a set of procedures and sources used by managers to obtain
everyday information about pertinent developments in the marketing environment
o A marketing research system that allows for the systematic design, collection, analysis, and
reporting of data and findings relevant to a specific marketing situation.
Marketers find many opportunities by identifying trends (directions or sequences of events that have some
momentum and durability) and megatrends (major social, economic, political, and technological changes
that have long-lasting influence).

Within the rapidly changing global picture, marketers must monitor six major environmental forces:
demographic, economic, social-cultural, natural, technological, and political-legal.

In the demographic environment, marketers must be aware of worldwide population growth; changing
mixes of age, ethnic composition, and educational levels; the rise of nontraditional families; and large
geographic shifts in population.

In the economic arena, marketers need to focus on income distribution and levels of savings, debt, and
credit availability.

In the social-cultural arena, marketers must understand peoples views of themselves, others, organizations,
society, nature, and the universe.

They must market products that correspond to societys core and secondary values and address the needs of
different subcultures within a society.

In the natural environment, marketers need to be aware of the publics increased concern about the health
of the environment.

Many marketers are now embracing sustainability and green marketing programs that provide better
environmental solutions as a result.

In the technological arena, marketers should take account of the accelerating pace of technological change,
opportunities for innovation, varying R&D budgets, and the increased governmental regulation brought
about by technological change.

In the political-legal environment, marketers must work within the many laws regulating business practices
and with various special-interest groups.
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There are two types of demand: market demand and company demand. To estimate current demand,
companies attempt to determine total market potential, area market potential, industry sales, and market
share.

To estimate future demand, companys survey buyers intentions, solicit their sales forces input, gather
expert opinions, analyze past sales, or engage in market testing. Mathematical models, advanced statistical
techniques, and computerized data collection procedures are essential to all types of demand and sales
forecasting.

Companies can conduct their own marketing research or hire other companies to do it for them. Good
marketing research is characterized by the scientific method, creativity, multiple research methods, accurate
model building, cost benefit analysis, healthy skepticism, and an ethical focus.

The marketing research process consists of defining the problem, decision alternatives; and research
objectives; developing the research plan; collecting the information; analyzing the information; presenting
the findings to management; and making the decision.

In conducting research, firms must decide whether to collect their own data or use data that already exist.
They must also choose a research approach (observational, focus group, survey, behavioral data, or
experimental) and research instruments (questionnaire, qualitative measures, or technological devices).

In addition, they must decide on a sampling plan and contact methods (by mail, by phone, in person, or
Online).

Two complementary approaches to measuring marketing productivity are:

(1) Marketing metrics to assess marketing effects
(2) Marketing-mix modeling to estimate causal relationships and measure how marketing activity
affects outcomes.

Marketing dashboards are a structured way to disseminate the insights gleaned from
these two approaches within the organization.














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Identifying Market Segments & Targets ,
Segmenting Consumers Markets

Market Segmentation is dividing the market into distinct needs, characteristics, or behavior that might
require separate products or marketing mixes (Segmentation: identify meaningful group of customers)

Steps for segmentation & targeting:
Identify the appropriate basis market segmentation
Choose target markets
Identify the appropriate segment approach strategy

Bases for Consumer Market Segmentation
Geographic Segmentation (Where)
Country, Region, City, Metro size, Population density, Climate

Demographic Segmentation (What)
Age, Gender, Race, Family size, Religion, Income level,
Occupation, Nationality, Education, Family lifecycle.

Psychographic Segmentation (Who)
Social Classes : Upper-upper , Lower-upper, Middle, Working, Upper-lower,
Lower-lower

Life Style : Culture-oriented, Sports-oriented, Outdoor-oriented, Getaway actives,
Excitement seeking

Personality : Self-concept & brand personality
Persons actual self-concept, Ideal self-concept, Others self-concept

Behavioral Segmentation (How)
Occasions, Benefits, Loyalty status, Readiness stage, Attitude towards the product


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Examples of Marketing Segmentation





Segmentation: identify meaningful group of customers.

Targeting: select which segment(s) to serve.

Positioning: Build and improve brand equity to chosen targets (by one of the 4Ps).
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The VALS Segmentation System - An Eight-Part Typology:

One of the most popular commercially available
classification systems based on psychographic
measurements is Strategic Business Insights (SBI) VALS
framework.

VALS, signifying values and lifestyles, classifies U.S. adults
into eight primary groups based on responses to a
questionnaire featuring 4 demographic and 35 attitudinal
questions.

The VALS system is continually updated with new data from
more than 80,000 surveys per year.

The main dimensions of the VALS segmentation framework
are consumer motivation (the
horizontal dimension) and consumer resources (the vertical
dimension)


Consumers are inspired by one of three primary motivations: ideals, achievement, and self-expression.

Those primarily motivated by ideals are guided by knowledge and principles.
Those motivated by achievement look for products and services that demonstrate success to their peers.
Consumers whose motivation is self-expression desire social or physical activity, variety, and risk.

Personality traits such as energy, self-confidence, intellectualism, novelty seeking, innovativeness, impulsiveness,
leadership, and vanity in conjunction with key demographicsdetermine an individuals resources.
Different levels of resources enhance or constrain a persons expression of his or her primary motivation.

The four groups with higher resources are: The four groups with lower resources are:
Innovators: Successful, sophisticated, active, take-charge
people with high self-esteem.
Purchases often reflect cultivated tastes for relatively upscale,
niche-oriented products and services.

Thinkersmature, satisfied, and reflective people motivated by
ideals and who value order, knowledge, and responsibility. They
seek durability, functionality, and value in products.

Achievers: Successful, goal-oriented people who focus on
career and family. They favor premium products that
demonstrate success to their peers.

Experiencers: Young, enthusiastic, impulsive people who seek
variety and excitement.
They spend a comparatively high proportion of income on
fashion, entertainment, and socializing.

Believers: Conservative, conventional, and traditional
people with concrete beliefs. They prefer familiar, U.S.-
made products and are loyal to established brands.

Strivers: Trendy and fun-loving people who are
resource-constrained. They favor stylish products that
emulate the purchases of those with greater material
wealth.

Makers: Practical, down-to-earth, self-sufficient people
who like to work with their hands.
They seek U.S.-made products with a practical or
functional purpose.

SurvivorsElderly, passive people concerned about
change and loyal to their favorite brands

Marketers can apply their understanding of VALS segments to marketing planning.
For example, Transport Canada, the agency that operates major Canadian airports, found that Actualizes, who desire to
express independence and taste, made up a disproportionate percentage of air travelers.
Given that segments profile, stores such as Sharper Image and Nature Company were expected to do well in the firms
airports.

Psychographic segmentation schemes are often customized by culture. The Japanese version of VALS, Japan VALS,
divides society into 10 consumer segments on the basis of two key concepts: life orientation (traditional ways, occupations,
innovation, and self-expression) and attitudes to social change (sustaining, pragmatic, adapting, and innovating).
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Targeting Consumers Markets: is the process of evaluating each segments attractiveness and selecting
one or more segments to enter:
Evaluate market attractiveness
Select target segments

Evaluating Market Attractiveness



Selecting the Market Segments
Single segment concentration: Single Market, Single Product
Market specialization: Single Market, Many Produces,
Product specialization: Single Products, Multiple markets
Selective specialization: Multiple Products, Multiple markets
Full Coverage: Multiple Products, Full or high markets


37

Segment Approach Strategies



Mass (Undifferentiated) Marketing is a market coverage strategy in which the company approaches the
target markets with the same offer with the advantage of economies of scale.(Example : Redbull)

Segment (Differentiated) Marketing is a market coverage strategy in which the company approaches
several segments with offer for each.((Example : Air plans Economy class and Business class )

Concentrated (Niche) Marketing is a market coverage strategy in which the company targets a single
market with a single marketing mix (Example: isostare power Drink for athletes )

Local Marketing is the practice of tailoring products and marketing programs to the needs of local
customer groups (Example: targeting Italians in the USA)

Customization is the practice of tailoring products and marketing programs to the needs of small groups of
people. (Ex: HP)

Customerization is the practice of tailoring products and marketing programs to the needs of specific
individuals (Ex: Monster Cars Garage)




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Summary

Target marketing includes three activities: market segmentation, market targeting, and market
positioning.
Market segments are large, identifiable groups within a market.

Two bases for segmenting consumer markets are consumer characteristics and consumer responses.

The major segmentation variables for consumer markets are geographic, demographic,
psychographic, and behavioral. Marketers use them singly or in combination.

Business marketers use all these variables along with operating variables, purchasing approaches,
and situational factors.

To be useful, market segments must be measurable, substantial, accessible, differentiable, and
actionable.

We can target markets at four main levels: mass, multiple segments single (or niche) segment, and
individuals.

6A mass market targeting approach is adopted only by the biggest companies.

Many companies target multiple segments defined in various ways such as various demographic
groups who seek the same product benefit.

A niche is a more narrowly defined group.

Globalization and the Internet have made niche marketing more feasible to many.

More companies now practice individual and mass customization.

The future is likely to see more individual consumers take the initiative in designing products and
brands.

Marketers must choose target markets in a socially responsible manner at all times.


Notes from Lechers:
Social Class: can be identified by look (ex )
Economic Class: mainly depend on financial capabilities
Life Style: Buying Habits, Political and social outcome

Successful Brands have Personalities!
How to build brand personality: the product personality must match the personality of the buyer!(Example :
Peugeot 607 car vs. other Cars )

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Crafting the Brand Positioning

Developing and Communicating a Positioning & Differentiation Strategy

Positioning is the act of designing the companys offering and image to occupy a distinctive place in the
mind of the target market relative to its competitors.
Differentiation-based positioning can be either Physical or Perceptual

Position is the Result of the differentiation

Critical Capabilities, Competitive Advantage, and Positioning
Competitive Advantage is what the company gains over its competition by offering consumer
greater value.
Competitive advantage stems out of critical capabilities
The bases of sustainable competitive advantages:
Organizational advantages
Departmental and functional advantages.
Advantages based on relationships with external bodies

Steps to determining the positioning strategy for the iPhone (Example)

Identify competitors based on category membership.
Identify POP & POD
Category Points-of-Parity (POP) are associations that are not unique to the brand and which
consumers view as essential to be a credible offering with a product category. (Usually created by the
first company which release the product proto type)
Points-of-Difference (POD) are attributes or benefits consumers strongly associate with a brand,
positively evaluate, and believe that they wont find to the same extent in a competitive brand

Assessing consumers perception of competitors
Determining competitors positions
Analyze the consumers preferences
Develop the brand positioning statement.
This is a description of the core target audience to whom a brand is directed, and a compelling
picture of how the marketer wants them to view the brand.
There are four elements or components of a positioning statement:
Target Audience , Frame of Reference , Benefit/Point of Difference , Reason to Believe



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Positioning Statement for iPhone For the mobile user who is looking for a single multipurpose handheld device,
the I-Phone provides a phone with Internet access and a widescreen audio/video player. Unlike other smart phones,
the I Phone is years ahead with an ever-growing collection of applications for every purpose.

Marketers should decide to which level to anchor the PODs

Brand Values

Brand Benefits (Emotional)

Brand Benefits (Functional)

Brand Attributes


In the Brand Pyramid :

The higher the company goes in the
pyramed ,the stornger the company
became


Positioning as a strategic weapon:

Positioning by competitor
Repositioning your brand
De-positioning your competitor


Lecture Examples:
Pepsi position its self by: Favored by young Generation
Pepsi is for common people
Pepsi new position: The best just get better.

Pepsi Targeting younger generation
Cock is for higher profile market segment,
Coke represents the American culture as it is the American classic Drink

Competitive Advantage for Dr>Magdy Yakoub: Lowest Failure Rate !

HTC is the First Smart Phone worldwide; they created Points-of-Parity (POP) for the smear phones

Priority of POD is more important on the
higher levels than the lower once
41

Differentiation Strategies Means of Differentiation

Differentiation is the process of adding a set of meaningful and valuable differences to distinguish the
companys offering from that of the competitors.

Creating both physical and perceptual differences, using all the elements of the marketing mix is what
effective positioning seeks to accomplish.

Example: (Flying High with SW Airlines)
In 1967 (Established in as a commuter flight between Dallas, Huston, & San Antonio, Cheap fares; no
meals or movies.
In 2004 (Operates in 55 cities, Jet bunnies, Love potion, Love bites First come first served basis, Casual
atmosphere

Employee Differentiation
Competence
Responsiveness
Credibility
Reliability
Friendliness

Channel Differentiation
Companies can more effectively and efficiency design their distribution channel coverage,
expertise, and performance to make buying the product easier

Image Differentiation
Companies can craft powerful, compelling images that appeals to consumers social and
psychological needs, The primary explanation for Marlboros extraordinary worldwide market
share (around 30%) is that its macho cowboy image has struck a responsiveness chord with
much of the cigarettes-smoking public .
Wine and liquor also work hard o develop distinctive image for their brands,
Sellers physical space can be powerful image generator , Hyatt regency hotels develop a
distinctive image through its atrium lobbies

Service Differentiation:
A service company can differentiate its self by designing better and faster delivery system that
provide more efficient and effective solution so the consumers








42

Emotional Branding: many marketing experts believe a brand position should have both rational and
emotional components, in other words , a good position should contain points-of-difference , and points-of-
parity that appeals to both head and hart

In General, the film should monitor three variables when analyzing potential threats posed by competitors

Share of Market: The companies share of the target market

Share of Mind: The percentage of customers who named the competitors in responding to the
statement name the first company that comes to mind in this industry

Share of Hart The percentage of customers who named the competitors in responding to the
statement name the first company from which you buy the product



Note : Cosuetemr Types :
Inovaors : 2 to 3% of the population , that adopot or buy new tecknology once it is out
Adopters : 15% of the population , thay buy when the price are lower .
Majority :
Laggers : Pople who buy late or when product is declining

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Product Life Cycle: Introduction Growth Maturity Decline



44

Product Life-Cycle: Maturity phase strategies

Product modification
Quality improvement
Feature improvement
Style improvement

Market Modification
Convert non-users
Enter new market segments
Win competitors customer
Increase Brand Usage
Use the product in more occasions
Use more of the product in each occasion
Use the product in new ways

Summary
To develop an effective positioning, a company must study competitors as well as actual and potential
customers. Marketers need to identify competitors strategies, objectives, strengths, and weaknesses.

Developing a positioning requires the determination of a frame of reference by identifying the target market
and the resulting nature of the competition and the optimal points-of-parity and points-of-difference brand
associations.

A companys closest competitors are those seeking to satisfy the same customers and needs and making
similar offers.

A company should also pay attention to latent competitors, who may offer new or other ways to satisfy the
same needs. A company should identify competitors by using both industry- and market-based analyses.

Points-of-difference are those associations unique to the brand that are also strongly held and favorably
evaluated by consumers.

Points-of-parity are those associations not necessarily unique to the brand but perhaps shared with other
brands.
Category point-of-parity associations are associations consumers view as being necessary to a
legitimate and credible product offering within a certain category.

Competitive point-of-parity associations are those associations designed to negate competitors
points-of-difference or overcome perceived weaknesses or vulnerabilities of the brand.

The key to competitive advantage is relevant brand differentiation consumers must find something unique
and meaningful about a market offering. These differences may be based directly on the product or service
itself or on other considerations related to factors such as employees, channels, image, or services.

Emotional branding is becoming an important way to connect with customers and create differentiation
from competitors.

Although small businesses should adhere too many of the branding and positioning principles larger
companies use, they must place extra emphasis on their brand elements and secondary associations and
must be more focused and create a buzz for their brand.
Increase Brand Usage
Different between Market
modification and Market
Development
45

Developing Pricing Strategies and Programs

Pricing
Price is the one element of the marketing mix that produces revenue.
Price is the easiest marketing-mix element to adjust.
Price communicates the intended value position of the brand.


Setting Pricing Policy
Selecting the pricing Strategy
Determining demand
Estimating Cost
Analyzing competitors cost, price, and offers
Selecting the final price
Selecting a pricing method

Selecting the Pricing Strategy (1/6)

Market-penetration pricing
Prices are set low to ensure high level of sales
It is best used when:
Market is highly price-sensitive, and a low price stimulates market growth,
Production and distribution costs fall within accumulated production experience

Market skimming
Initial prices are set high and gradually reduced to capture greater number of market
segments.

It is best used when:
A sufficient number of buyers have a high current demand
High price communicates the image of superior product

Product-Quality Leadership
Relative prices are set at a premium due to the brands perceived relative high quality

Early Cash Recovery
This can be delivered by mass distribution, rigorous credit control policy, special offers and
discounts to trigger immediate sales and prompt payment.

It is best used when:
Faced with problem of liquidity or a belief that the product life is likely to be short.
Risky Products due to copy right (to avoid piracy) , that need fast cash collection

Note: Definition
Price Indifferent Band: the limit that the increase in the price will not affect the demand.


46

Determining Demand (2/6)

Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or
elasticity, of the quantity demanded of a good or service to a change in its price.

More precisely, it gives the percentage change in quantity demanded in response to a one percent
change in price (holding constant all the other determinants of demand, such as income)




The relationship between PED and total revenue:
Perfect inelasticity, changes in the price do not affect the quantity demanded for the good; raising
prices will cause total revenue to increase.
Relative inelasticity, the percentage change in quantity demanded is smaller than that in price.
Hence, when the price is raised, the total revenue rises, and vice versa.
Unit elasticity, the percentage change in quantity is equal to that in price, so a change in price will
not affect total revenue.
Relative elasticity, the percentage change in quantity demanded is greater than that in price.
Hence, when the price is raised, the total revenue falls, and vice versa.
Perfect elasticity, any increase in the price, no matter how small, will cause demand for the good to
drop to zero. Hence, when the price is raised, the total revenue falls to zero

Price elasticity of demand PED depends on:
Number of substitutes or competitors
Buyers awareness of substitutes
Buyers justification of price change
Frequency of purchase
Expenditure to buyers total income
Usage in conjunction with assets previously bought
The product perceived quality, prestige, and/or exclusiveness
Long-run versus short-run elasticity
Magnitude of price change (Price indifference band)

Estimating Demand Curve
Statistically analyzing quantities sold at different prices to estimate the relationship.
Conduct price experiments
Consumer surveys
47

Estimating Cost (3/6)

Three costing methods for Cost Estimation:

The average costing method
Fixed costs = Over head
Variable costs vary directly with production
Total cost = VC + FC
Average cost = TC / production

Activity-based costing (ABC)
This is a costing model that identifies activities in an organization and assigns the cost of
each activity resource to all products and services according to the actual consumption by
each.

Target price costing
The starting point is the target price and cost is calculated working backwards.


Analyzing Competitors (4/6)

Within the range of possible prices determined by market demand and company costs, the firm must take
competitors costs, prices, and possible price reactions into account.
If the firms offer contains features not offered by the nearest competitor, it should evaluate their worth to
the customer and add that value to the competitors price.
If the competitors offer contains some features not offered by the firm, the firm should subtract their value
from its own price. Now the firm can decide whether it can charge more, the same, or less than the
competitor.

Points of Analyses
Comparable product features Costs Pricing strategies
Price associated value Nature of their offerings


48

Selecting a Pricing Method (5 Pricing methods) (5/6)

Cost Oriented Pricing Methods:
Markup Pricing
Target-Return Pricing
Break-even volume

Market Oriented Pricing Methods:
Going rate pricing
Perceived-Value Pricing

Definitions:
Return on Investment (ROI) = How much percent I will earn as profit form the invested capital

Return on Sales (ROS) = How much percent I will earn as profit from each unite sale

Cost Oriented Pricing Markup Pricing: The most elementary pricing method is to add a standard markup
to the Products cost.

Examples: Construction companies submit job bids by estimating the total project cost and adding a
standard markup for profit. Lawyers and accountants typically price by adding a standard markup on their
time and costs.

Unit Cost = variable cost + (fixed cost/projected unit sales)
Markup price= unit cost/ (1 desired return on sales)



Example:


The manufacturer will charge dealers $20 per toaster and make a profit of $4 per unit.
If dealers want to earn 50 percent on their selling price, they will mark up the toaster 100 percent to $40.
49

Markups are generally higher on seasonal items (to cover the risk of not selling), specialty items, Slower-
moving items, items with high storage and handling costs, and demand-inelastic items, such as prescription
drugs.
Does the use of standard markups make logical sense? Generally, no. Any pricing method that ignores
current demand, perceived value, and competition is not likely to lead to the optimal price.
Markup pricing works only if the marked-up price actually brings in the expected level of sales.


Cost Oriented Pricing Target-Return Pricing:

In target-return pricing, the firm determines the price that yields its target rate of return on investment.

Public utilities, which need to make a fair return on investment, often use this method.
Suppose the toaster manufacturer has invested $1 million in the business and wants to set a price to earn a
20 percent ROI, specifically $200,000.

The target-return price is given by the following formula:




Target-return price = unit cost + (Desired ROI * Invested Capital)/Projected unit sales




















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Cost Oriented Pricing Break-even volume: Break even point is the level of sales at which profit is zero.

According to this definition, at break even point sales are equal to fixed cost plus variable cost. This
concept is further explained by the the following equation:

[Break even sales = fixed cost + variable cost]



The break even point can be calculated using either the equation method or contribution margin method.
These two methods are equivalent.

Equation Method: The equation method centers on the contribution approach to the income statement.
The format of this statement can be expressed in equation form as follows:

Profit = (Sales - Variable expenses) - Fixed expenses

Rearranging this equation slightly yields the following equation, which is widely used in cost volume profit
(CVP) analysis: Sales = Variable expenses + Fixed expenses + Profit

Sales = Revenue = Sales price per unit * Quantity of Unite Sold
Variable expenses = Variable expenses per unite * Quantity of Unite Sold

Sales price per unit * Q = Variable expenses per unite * Q + Fixed expenses + Profit
Break even quantity by defenetion is the quantatu Q at which Profet is equal zero

Sales price per unit * Q = Variable expenses per unite * Q + Fixed Cost

Break Even Volume Q = Fixed cost / (Sales price per unit - Variable expenses per unit )


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According to the definition of break even point, break even point is the level of sales where profits are zero.
Therefore the break even point can be computed by finding that point where sales just equal the total of the
variable expenses plus fixed expenses and profit is zero.

Contribution Margin Method:

Contribution margin is the amount remaining from sales revenues after all variable expenses have
been deducted.
Contribution Margin = Sales Revenue Variable Cost

The contribution margin method is actually just a short cut conversion of the equation method already
described. The approach centers on the idea discussed earlier that each unit sold provides a certain amount
of contribution margin that goes toward covering fixed cost. To find out how many units must be sold to
break even, divide the total fixed cost by the unit contribution margin.

Breakeven point in units = Fixed expenses / Unit contribution margin

This approach is particularly suitable in situations where a company has multiple products lines and wishes to
compute a single break-even point for the company as a whole.

The following formula is also used to calculate break-even point

Break Even Sales in Dollars = [Fixed Cost / 1 (Variable Cost / Sales)]


Market Oriented Pricing Methods: Going Rate Pricing

Setting a price for a product or service using the prevailing market price as a basis.

Going rate pricing is a common practice with homogeneous products with very little variation from one
producer to another, such as aluminum or steel.

The bench mark is the price set by the market leader.

The firm sets the price at the same level, just above, or just below, depending on the availability or absence
of any distinguishing features irrelevant of the cost





52

Market Oriented Pricing Methods: Perceived-Value Pricing

An increasing number of companies now base their price on the customers perceived value.
Perceived value is made up of a host of inputs, such as the buyers image of the product performance, the
channel deliverables, the warranty quality, customer support, and softer attributes such as the suppliers
reputation, trustworthiness, and esteem.

Companies must deliver the value promised by their value proposition, and the customer must perceive this
value. Firms use the other marketing program elements, such as advertising, sales force, and the Internet, to
communicate and enhance perceived value in buyers minds

Factors associated with perceived value
Buyers image of the product performance,
Product Quality
Warranty
Customer support
Suppliers reputation
After sales service





Select a pricing Method (6/6)








53

Summary

Despite the increased role of none price factors in modern marketing, price remains a critical element of
marketing. Price is the only element that produces revenue; the others produce costs.

Pricing decisions have become more challenging, however, in a changing economic and technological
environment.

In setting pricing policy, a company follows a six-step procedure.
It selects its pricing objective.
It estimates the demand curve, the probable quantities it will sell at each possible price.
It estimates how its costs vary at different levels of output, at different levels of accumulated
production experience, and for differentiated marketing offers.
It examines competitors costs, prices, and offers.
It selects a pricing method, and it selects the final price.

Companies usually set not a single price, but rather a pricing structure that reflects variations in
geographical demand and costs, market-segment requirements, purchase timing, order levels, and other
factors.
Several price-adaptation strategies are available:
Geographical pricing,
Price discounts and allowances,
Promotional pricing,
Discriminatory pricing.

Firms often need to change their prices. A price decrease might be brought about by excess plant capacity,
declining market share, a desire to dominate the market through lower costs, or economic recession.

A price increase might be brought about by cost inflation or over demand. Companies must carefully
manage customer perceptions when raising prices.

Companies must anticipate competitor price changes and prepare contingent responses.
A number of responses are possible in terms of maintaining or changing price or quality.

The firm facing a competitors price change must try to understand the competitors intent and the likely
duration of the change.
Strategy often depends on whether a firm is producing homogeneous or nonhomogeneous products.

A market leader attacked by lower-priced competitors can seek to better differentiate itself, introduce its
own low-cost competitor, or transform itself more completely.









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Integrated Marketing Communication





55

Integrated Marketing Communication (IMC) is a concept of marketing communications planning that:
Evaluates the strategic roles of different communications disciplines, Combines these communications
disciplines to provide clarity, consistency, and maximum impact through the integration of
communication messages.

Marketing Communications and Brand Equity

Firm Level: A calculation is made regarding how much the brand is worth as an intangible asset.
Subtract tangible assets from the value of the firm, as derived by its market capitalization - and then
the residual would be the brand equity.

Product Level: Compare the price of a private label product to an "equivalent" branded product.
The difference in price, assuming all things equal, is due to the brand.

Consumer Level: This approach seeks to map the mind of the consumer to find out what
associations with the brand the consumer has. This approach seeks to measure the awareness (recall
and recognition) and brand image






























56

Marketing Communication Disciplines or MARKETING COMMUNICATIONS MIX the marketing
communications mix consists of eight major modes of communication

AdvertisingAny paid form of none personal presentation and promotion of ideas, goods, or services by
an identified sponsor via print media (newspapers and magazines), broadcast media (radio and television),
network media (telephone, cable, satellite, wireless), electronic media (audiotape, videotape, videodisk,
CD-ROM, Web page), and display media (billboards, signs, posters).

Sales promotionA variety of short-term incentives to encourage trial or purchase of a product or service
including consumer promotions (such as samples, coupons, and premiums), trade promotions (such as
advertising and display allowances), and business and sales force promotions (contests for sales reps).

Events and experiences 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.

Public relations and publicity: A variety of programs directed internally to employees of the company or
externally to consumers, other firms, the government, and media to promote or protect a companys image
or its individual product communications.

Direct marketing Use of mail, telephone, fax, e-mail, or Internet to communicate directly with or solicit
response or dialogue from 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.

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 sellingFace-to-face interaction with one or more prospective purchasers for the purpose of
making presentations, answering questions, and procuring orders.


57

From Presentation

Sales Promotion (1/8): A variety of short term incentives that create a stronger and quicker response, thus
encouraging trial or purchase.
Used for the purpose of:
Boosting sagging sales, managing production over-capacity or moving stock/dated items.
Tools Sales Promotion: Contests, games, sweepstakes, lotteries, Premiums and gifts, Sampling,
Fairs and trade shows

Public Relations (2/8):
Provides an organization with exposure to their audiences using topics of public interest and news
items through:
Financial relations: providing information to business reporters and stakeholders
Consumer relations: gaining publicity without using advertising; for example through fairs and
exhibitions
Crisis relations: responding to negative accusations or information
Industry relations: providing information to trade bodies
Government relations: engaging government departments to influence policymaking
Tools for Public Relations: Press kits, Speeches, Seminars, Annual reports

Personal Selling (3/8): Personal presentation by the firms sales force for the purpose of:
Making sales, Building customer relation, Building up buyer preference and conviction , Soliciting fast
buyer action
Tools Personal Selling: Sales presentation, Sales meetings

Direct Marketing (4/8): This is a form of advertising that reaches its audience through techniques such as
fliers, catalogue distribution, and promotional letters.
It has the advantages of:
Directly connecting with carefully targeted individual consumers
Localized and customized used to reach well defined target segments
Tools Direct Marketing: Catalogs, Mailings, Telemarketing, Electronic shopping

Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services.
Builds up long term image
Cost efficient in reaching geographically dispersed buyers.
Has an effect on sales merely by being present.
Gives the image of good value to the advertised brand.
Triggers quick sales if used to support sales promotion
Tools for Advertising: Print and broadcast ads, Packaging-outer, Packaging insert Motion pictures

The Marketing Communications Tools Summery
Advertising: Print and broadcast ads, Packaging-outer, Packaging insert Motion pictures
Sales Promotion: Contests, games, sweepstakes, lotteries, Premiums and gifts , Sampling, Fairs
and trade shows
Public Relations: Press kits, Speeches, Seminars, Annual reports
Personal Selling: Sales presentation, Sales meetings
Direct Marketing, Catalogs, Mailings, Telemarketing, Electronic shopping
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Marketing Communication Effects: The way brand associations are formed does not matter. In other
words, whether a consumer has an equally strong, favorable, and unique brand association of Subaru with
the concepts outdoors, active, and rugged because of exposure to a TV ad that shows the car driving
over rugged terrain at different times of the year, or because Subaru sponsors ski, kayak, and mountain bike
events, the impact in terms of Subarus brand equity should be identical.

But these marketing communications activities must be integrated to deliver a consistent message and
achieve the strategic positioning.

The starting point in planning marketing communications is a communication audit that profiles all
interactions customers in the target market may have with the company and all its products and services.

For example, someone interested in purchasing a new laptop computer might talk to others, see television
ads, read articles, look for information on the Internet, and look at laptops in a store.

To implement the right communications programs and allocate dollars efficiently, marketers need to assess
which experiences and impressions will have the most influence at each stage of the buying process.

Armed with these insights, they can judge marketing communications according to their ability to affect
experiences and impressions, build customer loyalty and brand equity, and drive sales. For example, how
well does a proposed ad campaign contribute to awareness or to creating, maintaining, or strengthening
brand associations? Does a sponsorship improve consumers brand judgments and feelings? Does a
promotion encourage consumers to buy more of a product? At what price premium ?

In building brand equity, marketers should be media neutral and evaluate all communication options on
effectiveness (how well does it work?) and efficiency (how much does it cost?).




















59

The Communications Process Models: Marketers should understand the fundamental elements of
effective communications, two models are useful: a Macromodel and a Micromodel.

MACROMODEL OF THE COMMUNICATIONS PROCESS a macromodel with nine key factors in
effective communication.



Two represent the major parties sender and receiver.
Two represent the major tools messageand media.
Four represent major communication functionsencoding, decoding, response, and feedback.
The last element in the system is noise, random and competing messages that may interfere with the
intended communication.

Senders must know what audiences they want to reach and what responses they want to get.
They must encode their messages so the target audience can decode them.

They must transmit the message through media that reach the target audience and develop feedback
channels to monitor the responses.
The more the senders field of experience overlaps that of the receiver, the more effective the message is
likely to be.
Note that selective attention, distortion, and retention processes concepts first introduced in Chapter 6
may be operating during communication.

Target audience may not receive the intended message due to selective:

Attention : Audience Attention and concentration , state of mind while watching the Adv. , and
Distortion : Assumed Vision that the audience may add and assume they exist
Retention: What the Audience remember after long term from time from watching the adv.



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MICROMODEL OF CONSUMER RESPONSES Micromodel of marketing communications
concentrate on consumers specific responses to communications.
Next Figure summarizes four classic response hierarchy models.


All these models assume the buyer passes through cognitive, affective, and behavioral stages, in that order.
This learn-feel-do sequence is appropriate when the audience has high involvement with a product
category perceived to have high differentiation, such as an automobile or house.

An alternative sequence, do-feel-learn, is relevant when the audience has high involvement but perceives
little or no differentiation within the product category, such as an airline ticket or personal computer.

A third sequence, learn-do-feel, is relevant when the audience has low involvement and perceives little
differentiation, such as with salt or batteries. By choosing the right sequence, the marketer can do a better
job of planning communications.

Lets assume the buyer has high involvement with the product category and perceives high differentiation
within it. We will illustrate the hierarchy-of-effects model (the second column of Figure) in the context of a
marketing communications campaign for a small Iowa college named Pottsville:


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Awareness. If most of the target audience is unaware of the object, the communicators task is to build
awareness. Suppose Pottsville seeks applicants from Nebraska but has no name recognition there, although
30,000 Nebraska high school juniors and seniors could be interested in it. The college might set the
objective of making 70 percent of these students aware of its name within one year.

Knowledge The target audience might have brand awareness but not know much more. Pottsville may
want its target audience to know it is a private four-year college with excellent programs in English, foreign
languages, and history. It needs to learn how many people in the target audience have little, some, or much
knowledge about Pottsville. If knowledge is weak, Pottsville may select brand knowledge as its
communications objective.

Liking Given target members know the brand, how do they feel about it? If the audience looks unfavorably
on Pottsville College, the communicator needs to find out why. In the case of real problems, Pottsville will
need to fix these and then communicate its renewed quality.
A good public relations call for good deeds followed by good words.

Preference The target audience might like the product but not prefer it to others. The communicator must
then try to build consumer preference by comparing quality, value, performance, and other features to those
of likely competitors.

Conviction. A target audience might prefer a particular product but not develop a conviction about buying
it. The communicators job is to build conviction and intent to apply among students interested in Pottsville
College.

Purchase Finally, some members of the target audience might have conviction but not quite get around to
making the purchase. The communicator must lead these consumers to take the final step, perhaps by
offering the product at a low price, offering a premium, or letting them out.

Pottsville might invite selected high school students to visit the campus and attend some classes, or it might
offer partial scholarships to deserving students.

To increase the odds for a successful marketing communications campaign, marketers must attempt to
increase the likelihood that each step occurs. For example, the ideal ad campaign would ensure that:

1. The right consumer is exposed to the right message at the right place and at the right time.
2. The ad causes the consumer to pay attention but does not distract from the intended message.
3. The ad properly reflects the consumers level of understanding of and behaviors with the product and
the brand.
4. The ad correctly positions the brand in terms of desirable and deliverable points-of-difference and
points-of-parity.
5. The ad motivates consumers to consider purchase of the brand.
6. The ad creates strong brand associations with all these stored communications effects so they can have
an impact when consumers are considering making a purchase.

The challenges in achieving success with communications necessitates careful planning, a topic we turn to
next.

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Steps in Developing the Promotional Plan

Identify Target Audience Determined Objectives Design Message
Select channel Establish Budget Decide on Media MixMeasure Result
Manage Integrated Marketing Communication


Identify Target Audience Determined Objectives Design MessageSelect channel Establish Budget Decide on Media
MixMeasure ResultManage Integrated Marketing Communication

Identifying the Target Audience: The process must start with a clear target audience in mind: potential
buyers of the companys products, current users, deciders, or influencers, and individuals, groups,
particular publics, or the general public.
The target audience is a critical influence on the communicators decisions about what to say, how, when,
where, and to whom.
Though we can profile the target audience in terms of any of the market segments identified in Chapter 8,
its often useful to do so in terms of usage and loyalty. Is the target new to the category or a current user? Is
the target loyal to the brand, loyal to a competitor, or someone who switches between brands? If a brand
user, is he or she a heavy or light user? Communication strategy will differ depending on the answers.
We can also conduct image analysis by profiling the target audience in terms of brand knowledge

In this step the strategist determines who should be addressed:
Initiator , Influencer , Decider ,Buyer ,User

Analyze Image: Image is a set of a set of ideas, beliefs, and impressions that affect a persons behavior or
attitude towards a product, a service, or a company.

Semantic differential: method is used to analyze brand image.
It involves:
Developing a set of relevant dimensions
Administering the tool to respondents.
Averaging the results
Checking image variance




63

Identify Target Audience Determined Objectives Design MessageSelect channel Establish Budget Decide on Media
MixMeasure ResultManage Integrated Marketing Communication

Determine the Communication Objective
Marketers can set communications objectives at any level of the hierarchy-of-effects model.

John R. Rossiter and Larry Percy identify four possible objectives, as follows

Category Needestablishing a product or service category as necessary to remove or satisfy a perceived
discrepancy between a current motivational state and a desired motivational state.
A new-to-the-world product such as electric cars will always begin with a communications objective of
establishing category need.

Brand Awareness: fostering the consumers ability to recognize or recall the brand within the category, in
sufficient detail to make a purchase. Recognition is easier to achieve than recallconsumers asked to think
of a brand of frozen entres are more likely to recognize Stouffers distinctive orange packages than to
recall the brand. Brand recall is important outside the store; brand recognition is important inside the store.
Brand awareness provides a foundation for brand equity.

Brand Attitude Helping consumers evaluate the brands perceived ability to meet a currently relevant
need. Relevant brand needs may be negatively oriented (problem removal, problem avoidance, incomplete
satisfaction, normal depletion) or positively oriented (sensory gratification, intellectual stimulation, or
social approval).Household cleaning products often use problem solution; food products, on the other hand,
often use sensory-oriented ads emphasizing appetite appeal.

Brand Purchase Intention: Moving consumers to decide to purchase the brand or take purchase-related
action. Promotional offers like coupons or two-for-one deals encourage consumers to make a mental
commitment to buy. But many consumers do not have an expressed category need and may not be in the
market when exposed to an ad, so they are unlikely to form buy intentions. In any given week, only about
20 percent of adults may be planning to buy detergent, only 2 percent to buy a carpet cleaner, and only 0.25
percent to buy a car.

Communication objectives:
Create/increase awareness for a brand
Trigger trial for a brand
Build corporate or brand image
Communicate a sales promotion to trigger purchase.
Convey information about a corporation/brand
Remind the consumer of a certain brand.
Change consumer behavior towards a brand
Position/reposition a brand
Reposition a competitive brand






64

Identify Target Audience Determined Objectives Design MessageSelect channel Establish Budget Decide on Media
MixMeasure ResultManage Integrated Marketing Communication

Designing the Message: Formulating the communications to achieve the desired response requires solving
three problems: what to say (message strategy), how to say it (creative strategy), and who should say it
(message source).

Designing the message involves:

The content: What to say. (Message Strategy

The structure: How to say it. (Creative Strategy
Conclusion drawing
One sided versus two sided arguments
Order of presentation

The Source: Who will say it. (Message Source)
Indirect Source
Direct Source:
A number of factors should be considered in using celebrities:
The principle of congruity
Overshadowing the product.
Celebrity overexposure.
Risk posed by celebritys behavior.

The format and it describes the appeal to use. .

Message Strategy in determining message strategy, management searches for appeals, themes, or ideas
that will tie in to the brand positioning and help establish points-of-parity or points-of-difference. Some of
these may be related directly to product or service performance (the quality, economy, or value of the
brand), whereas others may relate to more extrinsic considerations (the brand as being contemporary,
popular, or traditional).

Researcher John C.Maloney felt buyers expected one of four types of reward from a product:
Rational, Sensory, Social, or Ego-satisfaction.

Buyers might visualize these rewards from
Results of-use-experience, Product-in-use experience, or Incidental-to-use experience.

Crossing the four types of rewards with the three types of experience generates 12 types of messages.

For example, the appeal gets clothes cleaner is a rational-reward promise following results-of-use
experience.
The phrase real beer taste in a great light beer is a sensory-reward promise connected with product-in-use
experience.


65

Creative Strategy: Communications effectiveness depends on how a message is being expressed, as well
as on its content. If a communication is ineffective, it may mean the wrong message was used, or the right
one was poorly expressed.

Creative strategies are the way marketers translate their messages into a specific communication. We can
broadly classify them as either informational or transformational appeals.

Informational Appeals An informational appeal elaborates on product or service attributes or benefits.

Transformational Appeals A transformational appeal elaborates on a none product-related benefit or
image. It might depict what kind of person uses a brand (VW advertised to active, youthful people with its
famed Drivers Wanted campaign) or what kind of experience results from use (Pringles advertised Once
You Pop, the Fun Dont Stop for years). Transformational appeals often attempt to stir up emotions that
will motivate purchase.

Message Source Messages delivered by attractive or popular sources can achieve higher attention and
recall, which is why advertisers often use celebrities as spokespeople. Celebrities are likely to be effective
when they are credible or personify a key product attribute.


Identify Target Audience Determined Objectives Design MessageSelect channel Establish Budget Decide on Media
MixMeasure ResultManage Integrated Marketing Communication

Select Communication Channels: Selecting an efficient means to carry the message becomes more
difficult as channels of communication become more fragmented and cluttered.
Communications channels may be personal and none personal, within each are many sub channels.

Personal communications channels let two or more persons communicate face-to-face or person-to-
audience through a phone, surface mail, or e-mail.
They derive their effectiveness from individualized presentation and feedback and include direct and
interactive marketing, word-of-mouth marketing, and personal selling.

We can draw a further distinction between advocate, expert, and social communications channels.

Advocate channels consist of company salespeople contacting buyers in the target market.
Expert channels consist of independent experts making statements to target buyers.
Social channels consist of neighbors, friends, family members, and associates talking to target buyers.

Personal influence carries especially great weight, when products are expensive, risky, or purchased
infrequently, and when products suggest something about the users status or taste.

None Personal (Mass) communications channels (MASS) None-personal channels are communications
directed to more than one person and include advertising, sales promotions, events and experiences, and
public relations. Much recent growth has taken place through events and experiences.



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Integration for the Communication Channels: Although personal communication is often more effective
than mass communication, mass media might be the major means of stimulating personal communication.
Mass communications affect personal attitudes and behavior through a two-step process. Ideas often flow
from radio, television, and print to opinion leaders, and from these to less media-involved population
groups.

This two-step flow has several implications.
First, the influence of mass media on public opinion is not as direct, powerful, and automatic as
marketers have supposed. It is mediated by opinion leaders, people whose opinions others seek or
who carry their opinions to others.
Second, the two step flow challenges the notion that consumption styles are primarily influenced by
a trickledown or trickle-up effect from mass media.

People interact primarily within their own social groups and acquire ideas from opinion leaders in their
groups. Third, two-step communication suggests that mass communicators should direct messages
specifically to opinion leaders and let them carry the message to others.

Personal channels:
Advocate and expert channels
Social channels: online and offline

Non-personal channels
Print: magazines and newspapers.
Broadcasting: radio and TV
Electronic: online advertising
Display: billboards
Network: text messages


Identify Target Audience Determined Objectives Design MessageSelect channel Establish Budget Decide on Media
MixMeasure ResultManage Integrated Marketing Communication

Setting the Budget:
Establish the Total Marketing Communications Budget One of the most difficult marketing decisions is
determining how much to spend on marketing communications.

John Wanamaker, the department store magnate, once said, I know that half of my advertising is wasted,
but I dont know which half.

Industries and companies vary considerably in how much they spend on marketing communications.
Expenditures might be 40 percent to 45 percent of sales in the cosmetics industry, but only 5 percent to 10
percent in the industrial-equipment industry. Within a given industry, there are low- and high-spending
companies.
How do companies decide on the communication budget? We will describe four common methods:
The affordable method, The Percentage-of-sales method,
Competitive-parity method, The Objective-and-task method.


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Affordable Method: Some companies set the communication budget at what they think the company can
afford.
The affordable method completely ignores the role of promotion as an investment and the immediate
impact of promotion on sales volume.
It leads to an uncertain annual budget, which makes long-range planning difficult.

Advantages
It is simple
Disadvantages:
Ignores the role of promotion as an investment
Leads to an uncertain annual budget, which makes long range planning difficult

Percentage-of-Sales Method: Some companies set communication expenditures at a specified
percentage of current or anticipated sales or of the sales price.

Automobile companies typically budget a fixed percentage based on the planned car price. Oil companies
appropriate a fraction of a cent for each gallon of gasoline sold under their own label.

Supporters of the percentage-of-sales method see a number of advantages.
First, communication expenditures will vary with what the company can afford, This satisfies
financial managers, who believe expenses should be closely related to the movement of corporate
sales over the business cycle.
Second, it encourages management to think of the relationship among communication cost, selling
price, and profit per unit.
Third, it encourages stability when competing firms spend approximately the same percentage of
their sales on communications.

In spite of these advantages, the percentage-of-sales method has little to justify it :

It views sales as the determiner of communications rather than as the result.
It leads to a budget set by the availability of funds rather than by market opportunities.
It discourages experimentation with countercyclical communication or aggressive spending.
Dependence on year-to-year sales fluctuations interferes with long-range planning.
There is no logical basis for choosing the specific percentage, except what has been done in the past
or what competitors are doing.
Finally, it does not encourage building the communication budget by determining what each
product and territory deserves.

Advantages:
Expenses are related to sales movement.
Establishes a relation between promotion cost, selling price, and profit per unit
Disadvantages:
Views sales as a determiner of promotion rather than a result.
Sets the budget by the availability of funds rather than by market opportunities.
It discourages experimenting with aggressive spending
Dependence on year-to-year fluctuations in sales interferes with long range planning

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Competitive parity method (SOV share-of-voice parity)
Some companies set their communication budget to achieve share-of-voice parity with competitors.

There are two supporting arguments:
That competitor expenditures represent the collective wisdom of the industry, and that maintaining
competitive parity prevents communication wars. Neither argument is valid.

There are no grounds for believing competitors know better. Company reputations, resources,
opportunities, and objectives differ so much that communication budgets are hardly a guide. And there is
no evidence that budgets based on competitive parity discourage communication wars.

Supporting arguments
o Competitors expenditure represents the collective wisdom of the industry
o Maintaining competitive parity prevents promotion war

Counter arguments
o There are no grounds for believing that competitors know better.
o Company reputation, opportunities, resources and objectives differ so much that promotion budgets
are hardly a guide.
o There is no evidence that budgets based on competitive parity discourage promotion war

The Objective-and-task method: The objective-and-task method calls upon marketers to develop
communication budgets by defining specific objectives, determining the tasks that must be performed to
achieve these objectives, and estimating the costs of performing them.
The sum of these costs is the proposed communication budget.

Example: Suppose Dr. Pepper Snapple Group wants to introduce a new natural energy drink, called Sunburst, for the
casual athlete. Its objectives might be as follows:
1. Establish the market share goal.
2. Determine the percentage of the market that should be reached by advertising
3. Determine the percentage of aware prospects that should be persuaded to try the brand.
4. Determine the number of advertising impressions per 1 percent trial rate
5. Determine the number of gross rating points that would have to be purchased
6. Determine the necessary advertising budget on the basis of the average cost of buying a gross rating point

Communication Budget Trade-Offs A major question is how much weight marketing communications
should receive in relationship to alternatives such as product improvement, lower prices, or better service.
The answer depends on where the companys products are in their life cycles, whether they are
commodities or highly differentiable products, whether they are routinely needed or must be sold, and
other considerations.

Marketing communications budgets tend to be higher when there is low channel support, much change in
the marketing program over time, many hard-to-reach customers, more complex customer decision making,
differentiated products and nonhomogeneous customer needs, and frequent product purchases in small
quantities.

In theory, marketers should establish the total communications budget so the marginal profit from the last
communication dollar just equals the marginal profit from the last dollar in the best none communication
use. Implementing this principle, however, is not easy.
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Identify Target Audience Determined Objectives Design MessageSelect channel Establish Budget Decide on Media
MixMeasure ResultManage Integrated Marketing Communication

Factors in setting the Marketing Communications Mix: Companies must allocate the marketing
communications budget over the eight major modes of communication advertising, sales promotion, public
relations and publicity, events and experiences, direct marketing, interactive marketing, word-of-mouth
marketing, and the sales force.
Within the same industry, companies can differ considerably in their media and channel choices.
Type of product market, Stage of the product in its Product Life Cycle (PLC).
Buyer-Readiness Stage.

Factors in Setting the Marketing Communications Mix
Companies must consider several factors in developing their communications mix: type of product market,
consumer readiness to make a purchase, and stage in the product life cycle.

Type of Product Market Communications-mix allocations vary between consumers and business markets.
Consumer marketers tend to spend comparatively more on sales promotion and advertising; business
marketers tend to spend comparatively more on personal selling.
In general, personal selling is used more with complex, expensive, and risky goods and in markets with
fewer and larger sellers (hence, business markets).



Although marketers rely more on sales calls in business markets, advertising still plays a significant role:
Advertising can provide an introduction to the company and its products.
If the product has new features, advertising can explain them.
Reminder advertising is more economical than sales calls.
Advertisements offering brochures and carrying the companys phone number or Web address are
an effective way to generate leads for sales representatives.
Sales representatives can use copies of the companys ads to legitimize their company and products.
Advertising can remind customers how to use the product and reassure them about their purchase.
Advertising combined with personal selling can increase sales over personal selling alone.
Corporate advertising can improve a companys reputation and improve the sales forces chances of
getting a favorable first hearing and early adoption of the product.36 IBMs corporate marketing
effort is a notable success in recent years.

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Stage of the product in its Product Life Cycle In the introduction stage of the product life cycle,
advertising, events and experiences, and publicity have the highest cost-effectiveness, followed by personal
selling to gain distribution coverage and sales promotion and direct marketing to induce trial. In the growth
stage, demand has its own momentum through word of mouth and interactive marketing.

Advertising, events and experiences, and personal selling all become more important in the maturity stage.
In the decline stage, sales promotion continues strong, other communication tools are reduced, and
salespeople give the product only minimal attention.





Buyer-Readiness Stage Communication tools vary in cost effectiveness at different stages of buyer
readiness. Below Figure shows the relative cost-effectiveness of three communication tools.

Advertising and publicity play the most important roles in the awareness-building stage, Customer
comprehension is primarily affected by advertising and personal selling.

Customer conviction is influenced mostly by personal selling; closing the sale is influenced mostly by
personal selling and sales promotion. Reordering is also affected mostly by personal selling and sales
promotion, and somewhat by reminder advertising.


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Characteristics of the Marketing Communications Mix
Each communication tool has its own unique characteristics and costs, we briefly review them here:

Advertising reaches geographically dispersed buyers. It can build up a long-term image for a product
(Coca-Cola ads) or trigger quick sales (a Macys ad for a weekend sale).
Certain forms of advertising such as TV can require a large budget, whereas other forms such as
newspaper do not.
The mere presence of advertising might have an effect on sales:
Consumers might believe a heavily advertised brand must offer good value.
Because of the many forms and uses of advertising, its difficult to make generalizations about it.

Yet a few observations are worthwhile:

1. PervasivenessAdvertising permits the seller to repeat a message many times. It also allows the
buyer to receive and compare the messages of various competitors. Large-scale advertising says
something positive about the sellers size, power, and success.

2. Amplified expressivenessAdvertising provides opportunities for dramatizing the company and
its brands and products through the artful use of print, sound, and color.

3. Controlthe advertiser can choose the aspects of the brand and product on which to focus
communications.

Sales Promotion Companies use sales promotion toolscoupons, contests, premiums, and the liketo
draw a stronger and quicker buyer response, including short-run effects such as highlighting product offers
and boosting sagging sales.

Sales promotion tools offer three distinctive benefits:

1. Ability to be attention-gettingthey draw attention and may lead the consumer to the product.

2. Incentivethey incorporate some concession, inducement, or contribution that gives value to the
consumer.

3. Invitationthey include a distinct invitation to engage in the transaction now.

Public Relations and Publicity: Marketers tend to underuse public relations, yet a well-thought-out
program coordinated with the other communications-mix elements can be extremely effective, especially if
a company needs to challenge consumers misconceptions.

The appeal of public relations and publicity is based on three distinctive qualities:
1. High credibilityNews stories and features are more authentic and credible to readers than ads.

2. Ability to reach hard-to-find buyersPublic relations can reach prospects who prefer to avoid
mass media and targeted promotions.

3. DramatizationPublic relations can tell the story behind a company, brand, or product.
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Events and Experiences There are many advantages to events and experiences as long as they have the
following characteristics:

1. Relevant: a well-chosen event or experience can be seen as highly relevant because the consumer is
often personally invested in the outcome.

2. Engaging: given their live, real-time quality, events and experiences are more actively engaging for
consumers.

3. Implicit: Events are typically an indirect soft sell.

Direct and interactive marketing messages: Take many forms over the phone, online, or in person.

They share three characteristics:
1. Customizedthe message can be prepared to appeal to the addressed individual.

2. Up-to-datea message can be prepared very quickly.

3. Interactivethe message can be changed depending on the persons response.

Word of Mouth marketing: also takes many forms both online or offline.

Three noteworthy characteristics are:
1. Influential; because people trust others they know and respect, word of mouth can be highly
influential.
2. Personal: Word of mouth can be a very intimate dialogue that reflects personal facts, opinions, and
experiences.
3. Timely: Word of mouth occurs when people want it to and are most interested, and it often follows
noteworthy or meaningful events or experiences.

Personal Selling is the most effective tool at later stages of the buying process, particularly in building up
buyer preference, conviction, and action.
Personal selling has three notable qualities:

1. Personal interaction: Personal selling creates an immediate and interactive episode between two or
more persons. Each is able to observe the others reactions.

2. Cultivation: Personal selling also permits all kinds of relationships to spring up, ranging from a
matter-of-fact selling relationship to a deep personal friendship.

3. Response: The buyer is often given personal choices and encouraged to directly respond.






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Identify Target Audience Determined Objectives Design MessageSelect channel Establish Budget Decide on Media
MixMeasure ResultManage Integrated Marketing Communication

Measuring Communication Results: Senior managers want to know the outcomes and revenues resulting
from their communications investments, too often, however, their communications directors supply only
inputs and expenses: press clipping counts, numbers of ads placed media costs.

In fairness, communications directors try to translate inputs into intermediate outputs such as reach
and frequency (the percentage of target market exposed to a communication and the number of exposures),
recall and recognition scores, persuasion changes, and cost-per-thousand calculations.

Ultimately, behavior-change measures capture the real payoff , After implementing the communications
plan, the communications director must measure its impact.

Members of the target audience are asked whether they recognize or recall the message, how many times
they saw it, what points they recall, how they felt about the message, and what are their previous and
current attitudes toward the product and the company

The communicator should also collect behavioral measures of audience response, such as how many
people bought the product, liked it, and talked to others about it.

Below Figure provides an example of good feedback measurement: We find 80 percent of the consumers in the total
market are aware of brand A, 60 percent have tried it, and only 20 percent who tried it are satisfied. This indicates
that the communications program is effective in creating awareness, but the product fails to meet consumer
expectations. In contrast, 40 percent of the consumers in the total market are aware of brand B and only 30 percent
have tried it, but 80 percent of them are satisfied. In this case, the communications program needs to be
strengthened to take advantage of the brands potential power.



Impact measurement:
o Does the target audience recognize or recall the message?
o How many times has the target audience seen the message?
o How did the target audience feel about the message?

Behavioral measurement: Ultimately, behavior change measure capture the real pay-off from
communications
o What was the target audiences previous versus its post attitude towards the product and the
company?
o How many people bought the product
o How many talked to others about it?
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Managing the Integrated Marketing Communications Process
Many companies still rely on only one or two communication tools.
This practice persists in spite of the fragmenting of mass markets into a multitude of minimarkets,
each requiring its own approach; the proliferation of new types of media; and the growing
sophistication of consumers.

The wide range of communication tools, messages, and audiences makes it imperative that companies
move toward integrated marketing communications. Companies must adopt a 360-degree view of
consumers to fully understand all the different ways that communications can affect consumer behavior in
their daily lives.

The American Marketing Association defines integrated marketing communications (IMC) as a
planning process designed to assure that all brand contacts received by a customer or prospect for a
product, service, or organization are relevant to that person and consistent over time.

This planning process evaluates the strategic roles of a variety of communications disciplinesfor
example, general advertising, direct response, sales promotion, and public relationsand skillfully
combines these disciplines to provide clarity, consistency, and maximum impact through the seamless
integration of messages.

Media companies and ad agencies are expanding their capabilities to offer multiplatform deals for
marketers. These expanded capabilities make it easier for marketers to assemble various media properties
as well as related marketing services in an integrated communication program.

Coordinating Media :
Media coordination can occur across and within media types, but marketers should combine
personal and none personal communications channels through multiple-vehicle, multiple-stage
campaigns to achieve maximum impact and increase message reach and impact.

Promotions can be more effective when combined with advertising, for example. The awareness and
attitudes created by advertising campaigns can increase the success of more direct sales pitches.

Advertising can convey the positioning of a brand and benefit from online display advertising or search
engine marketing that offers a stronger call to action.

Many companies are coordinating their online and offline communications activities. Web addresses in ads
(especially print ads) and on packages allow people to more fully explore a companys products, find store
locations, and get more product or service information, Even if consumers dont order online, marketers
can use Web sites in ways that drive them into stores to buy.

Implementing IMC
In recent years, large ad agencies have substantially improved their integrated offerings.
To facilitate one-stop shopping, these agencies have acquired promotion agencies, public relations
firms, package design consultancies, Web site developers, and direct-mail houses.

They are redefining themselves as communications companies that assist clients to improve their overall
communications effectiveness by offering strategic and practical advice on many forms of communication.
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Many international clients such as IBM (Ogilvy), Colgate (Young & Rubicam), and GE (BBDO) have
opted to put a substantial portion of their communications work through one full-service agency. The result
is integrated and more effective marketing communications at a much lower total communications cost.

Integrated marketing communications can produce stronger message consistency and help build brand
equity and create greater sales impact.

It forces management to think about every way the customer comes in contact with the company, how the
company communicates its positioning, the relative importance of each vehicle, and timing issues.

It gives someone the responsibility where none existed before to unify the companys brand images and
messages as they come through thousands of company activities.

IMC should improve the companys ability to reach the right customers with the right messages at the
right time and in the right place. Marketing



Summary

Modern marketing calls for more than developing a good product, pricing it attractively, and making it
accessible to target customers.

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

The marketing communications mix consists of eight major modes of communication: advertising, sales
promotion, public relations and publicity, events and experiences, direct marketing, interactive marketing,
word-of-mouth marketing and personal selling.

The communications process consists of nine elements:
Sender, Receiver, Message, Media, Encoding, Decoding, Response, Feedback, and Noise.
To get their messages through, marketers must encode their messages in a way that takes into account how
the target audience usually decodes messages.

They must also transmit the message through efficient media that reach the target audience and develop
feedback channels to monitor response to the message.

Developing effective communications requires eight steps:
1. Identify the target audience.
2. Determine the communications objectives.
3. Design the communications.
4. Select the communications channels.
5. Establish the total communications budget
6. Decide on the communications mix.
7. Measure the communications results.
8. Manage the integrated marketing communications process.
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In identifying the target audience, the marketer needs to close any gap that exists between current public
perception and the image sought.

Communications objectives can be to create category need, brand awareness, brand attitude, or brand
purchase intention.

Designing the communication requires solving three problems:
What to say (message strategy),
How to say it (creative strategy),
Who should say it (message source).

Communications channels can be personal (advocate, expert, and social channels) or none personal (media,
atmospheres, and events).

Although other methods exist, the objective-and-task method of setting the communications budget, which
calls upon marketers to develop their budgets by defining specific objectives, is typically most desirable.

In choosing the marketing communications mix, marketers must examine the distinct advantages and costs
of each communication tool and the companys market rank.
They must also consider the type of product market in which they are selling, how ready consumers are to
make a purchase, and the products stage in the company, brand, and product.

Measuring the effectiveness of the marketing communications mix requires
Asking members of the target audience whether they recognize or recall the communication
How many times they saw it, what points they recall
How they felt about the communication,
What are their previous and current attitudes toward the company, brand, and product

Managing and coordinating the entire communications process calls for integrated marketing
communications
(IMC): marketing communications planning that recognizes the added value of a comprehensive plan to
evaluate the strategic roles of a variety of communications disciplines, and that combines these disciplines
to provide clarity, consistency, and maximum impact through the seamless integration of discrete
messages.













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Marketing Manegmemtn
Lectures Summery

Part 2



Identifying Market Segments & Targets , Segmenting Consumers Markets
Crafting the Brand Positioning
Developing Pricing Strategies and Programs
Integrated Marketing Communication



78

Marketing Manegmemtn
Lectures Summery
Part 1



Core Marketing Concepts

Developing Marketing Strategies and Plans

Collecting Information and Forecasting Demand and Conducting Market
Research


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