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INTERNAL OPERATIONS
suppliers
PRODUCTS & SERVICES
EXTERNAL SERVICES
fees programs
ideas
R&D products Products & services Orders payments
dealer
customer
information
Adopt a philosophy
Customer analysis Estimate mkt. potential Develop a strategy Segmentation Positioning Competitor analysis
Forecast sales
Obtain feedback
Competitive Advantage
a position of advantage/superiority in any of the functions or activities performed by an organisation Caterpillar- after sales service Intel-product designing Ikea Hero motorcycles Sony- globally standardised components Toyota- flexible production systems
Competitive Advantage
(a) (b) CA is manifested in the form of either: Cost advantage Differentiation advantage Sources of CA are : Marketing, Manufacturing, Finance, HR, Corporate CA helps a firm to deliver superior value to the customer. This superior value delivery is possible the firm has to have a superior strength.
Competitive advantage
HUL distribution Infosys technically competent manpower ITC diversified businesses Intel designing Core parentals production process Apple technology Nirma price
Competitive advantage
Core competency is a special technical and manufacturing expertise . Core competency has three characteristics. 1. It is a source of competitive advantage which makes a significant contribution to perceived customer benefits. 2. It has application in a wide variety of markets 3. It is difficult for competitors to imitate.
Core competencies
Hero Honda-production costs control Dupont chemical technology Honda ic engine manufacturing 3M surface coating and adhesive technology Nike shoe design and merchandising
Competitive advantage
Competitive advantage ultimately comes from how well an enterprise has fitted its core competencies and distinctive capabilities into a tightly interlocking activities that competitors cannot easily imitate. Southwest airlines, Dell, IKEA.
Competitor analysis
Conventionally a competitor was perceived as someone who threatened a firms position or market share in a market. Michael Porter first developed the idea of defining a competitor as someone who impacted a firms profits. Five forces :
Competitor analysis
Brand : companies offering similar products and services to the same customers at similar prices (Safari, Scorpio , Qualis ) Industry : All companies making the same products or class of products (Bajaj Auto , Hero Honda ) Form : companies that try to satisfy the same customer need thru their products.(Air Deccan,Indian Railways.Tata,Bajaj Auto) Generic :All companies that compete for the consumers Rupee.(LG , Cox and Kings )
Competitor analysis
To prepare an effective marketing strategy, a company must study competitors present and potential. A companys closest competitor are those seeking to satisfy the same customers and needs and making similar offers
Competitor identification
Starts with identifying current and potential competitors. Two approaches of identifying current competitors: First way is the customers perspective, since the customer makes the choice among the competitors. (colgate pepsodent babool anchor- meswak) (surf tide ariel) .( Nirma wheel rin)
Competitor analysis
2nd approach attempts to place competitors in strategic groups on the basis of their competitive strategies. Strategic groups are those that follow similar strategies such as same distribution channels, similar communication strategies, same price/quality position. Have similar characteristics ( e.g size, aggressiveness) Have similar competencies ( national or global presence, R&D
Competitor analysis
The Strategic grouping of a large number of competitors helps in making the analysis compact, feasible and more useable
Competitor analysis
What does a company need to know about its competitors? Their objectives, strategies, strengths and weaknesses and response patterns. Questions about each competitor that needs to be answered: On OBJECTIVES: Is the competitor pursuing market share growth? Current profitability? Technological leadership?
Competitor analysis
ON STRATEGIES: how is the competitor trying to win: lower prices? higher quality? Better service? Lower costs? ON STRENGTHS and WEAKNESSES: which are the strengths relative to us? Which are the weaknesses that we can exploit? On RESPONSE PATTERNS: how will the competitor response if we raise our prices? Lower our prices? Increase our sales force size?
BRAND BUILDING
Role of Brands: identify the source or maker of a product. Simplifies decision making and product handling or tracing. Offers legal protection for unique features or aspects of the product. Signals a certain level of quality Is a means of competitive advantage
Scope of branding
Branding is all about creating differences between products. Branding creates mental structures that help consumers organize their knowledge about products and services For successful branding consumers must be convinced there are meaningful differences among brands
Scope of branding
Branding can apply to physical goods (Lux soap, Tata Nano, Splendour) services (ICICI bank, Jet airways) retail stores(Bigbazar,Pantaloon,Westside, Shoppersstop)persons (AamirKhan,Sachin) places (Goa,Mahableshwar) an organization (UNICEF, CRY) ideas (polio eradication, family planning, RTI) commodities (Ashirwad )
Core & context interact to create the brand experience Core is actually context in another location
Pay attention to the match between your brand values and personality and those of your partner/s
In many products, the brand experience can affect brand perception more strongly than product performance
Retail Durables Office automation computers
Signage
The Brand
Retail points
After marketing
Drive to work
Drive to meeting
Watch TV Go shopping
For a bank
TV news ATM Screen saver Cheque credit via SMS Debit/credit card Direct mailer
Wake up Gym
Drive to work
Drive to meeting
Tea Break
FM, Signage
eNewsletter
FM, Signage
Go shopping TV news
Wake up Gym
Drive to work
Drive to meeting
Tea Break
Dispenser
FM, Signage eNewsletter FM, Signage
Go shopping TV ad
Services marketing
Internal customer focus is as important as external customer orientation Moments of truth Virtually all services require supporting goods. (car repair service) (airline service) (purchase of shirt) Helpful to think of every product as a mix of goods and services
Services marketing
From a strategic marketing perspective it is useful to separate services into two categories. 1. Services that are the main purpose or object of transaction. (in a car rental business the customer buys transportation services which is the main purpose of the transaction) 2. Services that support or facilitate the sale of a good or another service( accident insurance, use of a cell phone.. for the customer seeking car rental )
Services marketing
Characteristics of services 1. intangibility: impossible to sample, feel, see, hear, taste, or smell a service before it is bought. Strategies that could be used to reduce the effect of intangibility are: ( visualisation: visuals, pictures) (association: connecting the service with a person, object, place, )
Services marketing
(physical representation: use of colours-credit cards, hands protecting a flame-LIC) (documentation: past performance and future capability) 2. Inseparability: creator and seller cannot be separated; many services are created, dispensed and consumed simultaneously.( dentist, fast food ).This limits distribution, hence direct selling is the only channel of distribution.
Services marketing
3.Hetrogeneity- the variation in consistency from one service transaction to another. Almost makes it impossible for a service operation to be 100% perfect quality on an ongoing basis. Consistency varies from firm to firm; individual to individual delivering the service and even varies when interacting with the same service provider on a daily basis
Services marketing
Possible solutions to heterogeneity : * customization-however all customers do not prefer customized service if issues such as cost, speed or consistency are issues of concern. * Standardization- possible with intensive training but not always guaranteed. However,it can reduce prices, increase speed and yet some consumers may perceive it as unfriendly
Services marketing
4.Perishability services cannot be inventoried. Unused capacity cannot be reserved. Without the benefit of inventory matching demand supply is the biggest challenge for a services firm. Solution lies in managing demand and or managing supply.
Services marketing
Strategies for managing demand *Creative pricing *reservation system *complementary services *developing non peak demand
Services marketing
Strategies for managing supplies*use of part time employees *capacity sharing *utilization of Third Parties *enhance customer participation.
promotion
What is price ?
To the seller price is revenue, the primary source of profits. The price paid is based on the satisfaction consumers expect to receive from a product and not necessarily the satisfaction they actually receive.
Pricing
Price also termed: fees, fares, rent, duty, interest, toll, minimum balance, premium. Pricing is almost always a top management decision Often in large corporations Product managers work on pricing and seek approval of top management for implementation
Pricing
Pricing decisions are always team decisions involving marketing , sales , Operations, finance, etc. Each function brings in largely cost inputs such as material cost, machine cost,labour cost, finance cost etc. Marketing and sales bring in competitor and customer perspectives.
Pricing
The competitor inputs cover a wide range of factors concerning industry, technology, global scenario. The customer inputs cover essentially economics and behavioral issues.
Pricing
Strategic pricing involves balancing good value to the customer with the 0rganizations need to cover costs and earn profits. SOME FLAWED PARADIGMS: The cost plus delusion: historically the most common pricing procedure; carries an aura of financial prudence. Theoretically it is a simple guide to profitability, but in practice it is a blueprint for mediocre financial performance. Pricing affects sales volume and volume affects cost.
Pricing
Flawed Paradigms continued Customer driven pricing Never sell on low prices, sell on value. Low pricing is never a substitute for adequate marketing and sales effort. Competition driven pricing Although price cutting is the quickest way to achieving sales objectives, it is usually a poor decision financially
Pricing
Financial techniques for cost driven pricing and financial analysis for profit driven pricing does not by itself determine a price. It only specifies the conditions under which a price change will be profitable. The short comings of this approach therefore, forces managers to integrate customer and competitor analysis into pricing decisions.
Pricing rules
Other factors besides demand and costs that influence price decisions are: Stages in the PLC Competition Distribution strategy- (impact of internet) Promotion strategy Govt. regulations
3.CHOSE A STRATEGY-to
determine a base price HIGH PRICE STRATEGY(SKIMMING) LOW PRICESTRATEGY (PENETRATION) GOING RATE PRICING (STATUS QUO)
Price skimming
Sometimes called market-plus approach to pricing .Skimming the cream off the top Skimming enables an organisation to recover its product development costs quickly. The price determined is a high price A full cost pricing approach is used as against an incremental cost approach
Price skimming
Suitable under following conditions: The product has unique and distinctive features desired by the consumers. Demand is fairly inelastic. Lower prices are unlikely to produce greater total revenue. Product is protected through one or more entry barriers. (patent)
Skimming strategy
Suitable when. Product is perceived to enhance buyers status Product is perceived as a technological breakthrough. Competition is non existent or even when threat of potential competition is high.
Penetration strategy
Objective is to get a foot hold in a highly competitive market. The price determined is lower than competition and low from the customers perspective. Most suitable when: Market size is large and is growing. Used as an entry strategy There is intensive competition
Penetration pricing
Penetration pricing is not necessarily cheap, but they are low relative to perceived value. ( Indigo Manza, Hyundai Elantra, Skoda Laura, Toyota Lexus) Exclusive or prestige products often do not have buyers at low prices. When price is a trivial expenditure penetration pricing attracts few buyers. (chewing gum)
Pricing Tactics
Single price tactic: offers all goods and services at the same price. Removes price comparisons from the buyers decision making process. Price bundling : Two or more products in a single package for a special price. (PC with maintenance contract) (hotel packages)
Pricing tactics
Two part pricing: involves establishing two separate charges to consume a single good or service. ( club membership) (mobile hand set + service)
Pricing tactics
Predatory pricing: practice of charging a very low price for a product with the intent of driving competitors out of business. Once the competitor is out price is raised. Geographic pricing: FOB Origin pricing Uniform delivered pricing
Distribution
Distribution
Marketing channel management + Logistics Management
Definitions
A set of people and firms involved in the transfer of title to a product as it moves from producer to ultimate consumer or business user. Stanton. set of inter dependant organizations involved in the process of making a product or service available for consumption or use. Stern, Ansary, et al
Channel systems
Vertical Marketing Systems : comprises the manufacturer, wholesaler, retailer acting as a unified system. The principal channel member has substantial control over the other members. Corporate VMS :combines stages of production and distribution under single ownership.
Corporate VMS
Reliance Fresh retails Reliance milk. Bata shoes are retailed thru Bata stores. Administered VMS: Manufacturers of dominant brands are able to demand and influence high levels of co operation from channels. (Kodak, P&G, Gillette.
Contractual VMS
Independent firms at different levels of manufacturing and distribution integrate on a contractual basis.(Value adding Partnerships.) Whole seller sponsored Retailer cooperatives Franchise organizations
Channel design
Factors to be considered: Product mix and nature of products Marketing mix elements Width and depth of coverage planned Long term commitments to channel partners Level of customer service planned Affordability Control requirements.
Channel design
Questions that need to be addressed: What activities are the channel members required to perform? Which activity is to be performed by which channel partner? Number of channel members required?
Segmenta tion
positioning
Focus
development
Channel Design
The decision includes : Number of channels to employ. Number of levels to be included. Type of intermediaries to employ
CENTRAL WAREHOUSE
FRANCHISE
DISTRIBUTORS
SUB DISTRIBUTORS
WHOLE SELLERS RETAILERS
Conceptual Framework
The framework takes a bottom up approach starting from the consumer. Buyer needs Retailers requirements Distribution needs Legal requirements
Channel conflict
1. 2. 3. 4. A situation of discord or disagreement between channel members from the same channel system. STAGES OF CONFLICT: Latent Perceived Felt manifest
Conflict
Channel conflict is a situation in which one channel member perceives another channel member(s) to be engaged in behaviour that prevents it from achieving its goals. The amount of conflict is, to a large extent, a function of goal incompatibility, domain dissension and differing perceptions of reality.
Channel conflicts
Vertical channel conflicts Horizontal channel conflicts Multi channel conflicts Channel expansion conflicts Goal differences Demarcation of Territories & Roles
Channel power
Channel members are not naturally inclined towards coordinated behaviour. This causes sub optimal channel performance. Channel power is a method of inducing coordinated behaviour. The channel members resources are their bases of power.
Reward power
Granting bigger margins. Allocate special allowances. (over riding commissions) Assign exclusive territories Best Distributor awards.
Coercive power
It is the flip side of Reward power. Recommended as a last recourse Illegal coercion Withholding incentive payment . Pressurising on payment terms. Clubbing supplies
Expert power
Expert knowledge of the trade which can be beneficial to other members of the channel. (imports, global trends, legal and technology issues etc.) (technical sales support)
Referent power
Mercedes dealership vs Hyundai Trust is a major prerequisite for building referent Power (HP is open, honest, trustworthy group to do business with)
Legitimate power
Emanates from contracts or agreements usually in writing Acceptance of standardised, time honoured and proven practices that influence policies Legitimate power stems from the values, processes, systems, internalised by a channel member
MARKETING PLAN
Evolves from the Co.s mission statement which defines the businesses the Company wishes to pursue and the customers to be targeted Is prepared annually Includes historical data and recommendations on how to improve performance
Marketing plan
Combines a set of marketing strategies with a time table for action so that specific goals can be achieved. Includes 1.SITUATION ANALYSIS: Company situation covering:current sales, growth trends, net income, market share, strengths and weaknesses.
MARKETING PLAN
2. ENVIRONMENT: Competitive plans, opportunities, threats, laws, regulations. External environmental factors, shifting demands, technological changes, availability of labour or raw material. Competitive strategies, prices, domestic and foreign rivals
MARKETING PLANS
3. TARGET MARKETS: Definition of markets in terms of demographics, geographics and life styles- must mention market size of each intended market segment and its respective growth estimates, specific product or service features sought by the segment.
Marketing plan
4.OBJECTIVES: Where the company intends its products or business to go in the future.( 20% sales growth, 15% pre tax profits, 2% increase in market share) must also specify how the data needed to measure the achievement of objectives will be collected and analyzed.
MARKETING PLAN
5.STRATEGY: States how the organisation will achieve its objectives. An effective strategy informs management what path to follow for the key marketing mix elements. (for example sustainable competitive advantage can be built through brand identification, product differentiation or low costs. Brand can be strengthened by increased ad spend etc.
MARKETING PLAN
6.ACTION PLANS :next step in the marketing plan is to translate strategy statements into specific actions and tactics. It sets timetable showing start dates and end dates and other milestones, it assigns responsibility, it also firms up plan review frequency and dates.
Marketing plan
7.CONTINGENCY PLANS: Needed because unforeseen real world events often interfere with the best market plans. This section answers the question what if and tries to answer them
Customer analysis
The purpose of an enterprise is to create a customer Theodore Levitt. The most important ingredient in the success of any organisation is a satisfied customer,
Customer analysis
Who are my customers? Consumer customer: the focus is Transaction marketing. Business customer : the focus is Interaction marketing. Nonprofit customer. Government
Customer analysis
When do customers buy ? Adapting to customer buying patterns (24x7,toll free, happy hours) Time Occasion Event Age Planned Impulsive
Customer analysis
What do customers want? Product characteristics? Price? Delivery times? Service? Prestige? Fame? ( the 3M experience)
Customer analysis
How do customers buy? The decision process:
Recognition Of problem Or need Search for alternatives Evaluation Of alternati -ves purchase
Influencing factors
Business buying Decision Proces Need recognition-Identification Of alternatives-Evaluation Of alternatives-Purchase -Post purchase behaviour