The concept of Strategic Market Planning



There is no denying the fact that strategic market planning refers to long term setting indicators through which goals of the management is targeted and achieved.  A strategic market plan gives direction to a firm's efforts and better enables it to understand the dimensions of marketing research, consumer analysis, and product, distribution, promotion, and price planning, which plays a vital role to revitalize overall activities of the market.
We will have a special look at an impression of the strategic marketing process including the expansion of:
The strategic market plan is not a marketing plan rather it is a plan of all aspects of an organizations strategy in the market place. The process of strategic market planning yields a marketing strategy that is the structure and the development of the marketing plan. Developing a marketing plan is your group project assignment. A marketing plan deals primarily with implementing the market strategy as it relates to target market(s) and the marketing mix.
Strategic Market Planning
A Strategic marketing plan is an outline of the methods and resources required to achieve organizational goals within a specific target market(s). It enunciates the direction will pursue within its preferred environment and guides the allocation of resources and effort. Strategic planning requires a general marketing orientation rather than a narrow functional orientation. All functional areas must include marketing and must be coordinated to reach organizational goals. It is a hierarchal process, from companywide to marketing specific indicating Marketing concept and implemented from top down.)
Companywide - SBU
A firm can be broken down into several strategic business units. Each SBU is a division, product line, or other profit center within the parent company. An SBU has its own strategic plan and can be considered a separate business entity competing with other SBU's for corporate resources.
For example PepsiCo Companies SBUs include:
  • KFC
  • Taco Bell
  • Pizza Hut
  • Mountain Dew
  • Lipton Tea Brands
  • Frito Lay
IE The College of Business and Economics is an SBU of the University of Delaware.
A strategic plan gives:
  • Direction and better enables the company to understand mkt. function dimensions
  • Makes sure that each division has clear integrated goals
  • Different functional areas are encouraged to coordinate
  • Assesses SW & OT
  • Assesses alternative actions
  • It is a basis for allocating company resources
  • A procedure to assess company performance
The strategic planning process may include the following, although this differs from one organization to another:
  • Develop a SWOT analysis
  • Develop Mission Statement that evolves from the SWOT analysis
  • Develop Corporate Objectives that are consistent with the organization's mission statement.
  • Develop corporate strategy to achieve the organization's objectives. [if the organization is made up of more than one SBU, then follow loop again for each SBU, then proceed]
  • Marketing (and other functional objectives) must be designed to achieve the corporate objectives
  • Marketing Strategy, designed to achieve the marketing objectives.
The strategic market planning process is based on the establishment of organizational goals and it must stay within the broader limits of the organizations mission, that is developed taking into consideration the environmental opportunities and threats and the companies resources and distinct competencies.
In view of the above it is evident that a firm can then assess its opportunities and develop a corporate strategy. Marketing objectives must be designed so that they can be accomplished through efficient use of the firms’ resources. Corporate strategy is concerned with issues such as diversification, competition, differentiation, interrelationships between business units and environmental issues. It attempts to match the resources of the organization with the opportunities and risks of the environment (SWOT). Corporate strategy is also concerned with defining the scope and roles of the SBU's of the firm so that they are coordinated to reach the ends desired.






SWOT, a technique for Marketing Strategic Plan

Strength Weakness, Opportunity and Threat SWOT Analysis
A SWOT Analysis examines the companies:
  • Strengths...Internal
  • Weaknesses...Internal
  • Opportunities’...External
  • Threats...External
By developing a SWOT analysis, a company can determine what its distinctive competencies are. This will help determine what the organization should be in business for, what its mission should be.

Mission Statement
The following are example mission statements

Organizational goals
Organizational goals are derived from the mission, corporate strategy is derived from the organizational goals.
Goals must specify the end results that are desired, that are measurable and within a particular time frame.
SMAC
  • Specific
  • Measurable
  • Achievable
  • Consistent
Corporate Strategy
Issues include:
  • Scope of Business-----What Business you are in??
  • Resource deployment----How you are going to use your resources??
  • Competitive advantage----What are your competitive advantages??
  • Coordination of Production, Marketing, Personnel etc.----
  • Coordination process??
Tools for strategic market planning
The following are some of the many tools that are used in developing corporate strategy, they are supplements not substitutes for management's own judgment:
A separate strategy is needed for each SBU
  • Intense Growth-mkt penetration/development, product development in related markets.
    • Market Penetration...more products to the same market
    • Market Development...same product to new markets
    • Product Development...new products to same market
  • Diversified Growth-new products new markets Horizontal (unrelated products to current markets)/Concentric (NPNM)
  • Integrated growth Forward/Backward/Horizontal Disney's Purchase of Capital Citys/ABC, a content provider purchasing distribution
Handout Mattel Toy....
Handout Ben & Jerry's New CEO...
What should B&J do?

Develop SWOT Analysis
Propose Mission
Goals
Strategy:
  • Market Penetration
  • Market Development
  • Product Development
  • Diversification

Ben & Jerry's SWOT Analysis
Marketing Planning.
Marketing plans vary by:
  • Duration
  • Scope
  • Method of Development, bottom up/top down
Objective is to create a Marketing plan. A plan for each marketing strategy developed.
Marketing strategy encompasses selecting and analysing the target market(s) and creating and maintaining an appropriate marketing mix that satisfies the target market and company. A Marketing strategy articulates a plan for the best use of the organizations resources and tactics to meet its objectives. Do not pursue projects that are outside the companies objectives or that stretch the companies resources.
Plan includes:
  • Executive summary
  • Situation Analysis
  • Opportunity and Threat Analysis
  • Environmental Analysis
  • Company Resources
  • Marketing Objectives
  • Marketing Strategies to include:
    • Target market (Intended) A target market is group of persons/companies for whom a firm creates and maintains a Marketing Mix that specifically fits the needs and preferences of that group. Does the company have the resources to create the appropriate MM and does it meet the company's objectives.
    • Develop a marketing mix-how to reach the target market. The marketing mix is designed around the buying motive-emphasizing the marketing concept. The marketing environment effects the marketing mix, which is only controllable to a certain extent (the MM). Before developing the MM, need to determine the needs of the target market.
  • Financial Projections
  • Controls and Evaluations


Marketing control process consists of establishing performance standards, evaluating the actual performance by comparing it with the actual standards, and reducing the difference between the desired and actual performance.
Marketing does not occur in a vacuum. The marketing environment consists of external forces that directly and/or indirectly impact the organization.
Changes in the environment create opportunities and threats for the organizations.
Example:
PRODIGY (On-line service) ran a commercial 24 hours after the LA earth quake to inform customers/potential customers that they could contact friends/family in LA through its service when all the telephone lines were jammed. This illustrates a company (Prodigy), reactively responding to an environmental factor (nature), to further market its services to attract new customers.
To track these external forces a company uses environmental scanning. Continual monitoring of what is going on.
Environmental scanning collects information about external forces. It is conducted through the Marketing Information System.
Environmental analysis determines environmental changes and predicts future changes in the environment. The marketing manager should be able to determine possible threats and opportunities from the changing environment. This will help avoid crisis management.
Six Environmental Forces
Societal Forces
Pressure to create laws
Since marketing activities are a vital part of the total business structure, marketers have a responsibility to help provide what members of society want and to minimize what they don't want.
Important Considerations:
  • Marketers need to understand Cultural diversity--By the year 2000 15% of the entering work-force will be white male.
  • Great Melting Pot vs. Great Salad Bowl...different cultures maintain own cultural identity.
  • Aging population
Handout...Catering to middle aged BBs....
Change products due to changing needs of society, i.e. Baby Boomers are aging, they demand different attributes/benefits from their products (cars), i.e. performance and safety, marketers need to respond, as the car marketers have, to satisfy these changing needs.
  • Society becomes concerned about marketers actions when those actions are questionable.
.Calvin Klein Halts Jeans Ad Campaign
Calvin Klein's latest advertising campaign, American Family Association sent letters to 50 retailers suggesting store boycotts if there was no action taken....FBI investigating child porn allegations.
Driving force behind the societal marketing concept. Companies change ways of doing business re: societal concerns. Companies should evolve around societal concerns. The Green Movement Sows Demand where Companies now marketing products that are in response to societal concerns, i.e. recycled furniture is environmentally friendly.
Ralph Nader's Public Citizen group, acts as a watchdog on consumer interests. Lifted consumerism into a major social force. First with his successful attack on the automobile industry, resulted in the passage of the National Traffic and Motor Vehicle and Safety Act of 1962.
Societal forces pressure political forces to create legal forces governed by regulatory forces.


Regulatory Political Forces of Marketing Strategy

There is no denying the fact that Companies that have relied on the defence industry have had to adapt their technologies to new markets in order to survive. ECC of Wayne, PA has recently begun producing vending machines for Snapple beverages...they had traditionally relied on winning defence contracts. The industry develops new legislation, like gasoline tax, welfare reform, health care reform. Legal interpretation by the courts had been given in due course.

We can exemplify on creation and activities of regulatory agencies. In the context of USA, Reagan era vs Clinton era where Health care reform impacting on small business.
Pressure on the tobacco industry indicating threatening to regulate cigarettes like other drugs..."underage sales prohibited" will appear on Philip Morris tobacco products. Philip Morris agrees to stop placing billboard ads in stadiums that can be viewed on TV....24yr TV advertising ban.
Actions may strengthen the market leaders, Philip Morris. Luxury Tax 10% excise tax on boats over $100,000. The luxury tax, that was supposed to aid in the redistribution of wealth, as far as taxing the wealthy to help finance government programs---actually harmed industries that marketed products that were to be taxed...i.e. the boat industry. Tax was created in 1989 and repealed in 1992.Government purchases about 20% GNP, government is therefore a significant purchaser of many organizations products.
Wayne firm gets boost...
Regulatory: Legal Forces
Created by the political force In statute
Three types
  • Anti Trust
  • Consumer Protection
  • Deregulation
The following are important acts to be familiar with:
  • Sherman Act (1890) Competition...restraining trade and monopolizing markets
  • Clayton Act (1914) Competition...limit specific activities, price discrimination, tying/exclusive agreements etc.
  • Federal Trade Commission Act (1914) Created FTC Competition
  • Robinson-Patman Act (1936) Competition
Booksellers say five publishers...
Five publishers are being sued by the ABA under the Robinson Patman Act which states:
It is unlawful to discriminate in prices charged to different purchasers [who compete with each other] of the same product, where the effect may substantially lessen competition or help create a monopoly.
There is no question as to the fact that charging different prices for no economic reason would lessen competition, therefore the issue is whether the publishers are being discriminatory. They were offering different prices that may well be justified by quantity discounts which are legal.
  • Wheeler-Lea Act (1938) Consumer Protection...unfair and deceptive acts
  • Celler-Kefauver Act (1950) Competition...acquisition of competitors shares if...
  • Consumer Goods Pricing Act (1975) Competition...price maintenance among mf. and resellers
  • Trademark Counterfeiting Act (1980) Consumer protection, counterfeit goods
  • Nutritional Labeling and Education Act (1990) Consumer protection...health claims, labelling May 1994, marketers had to follow new guidelines for explaining the contents of products on labels:
    Juice drinks...specify actual juice content
    Ben & Jerry's :(
    Pringles Right Crisps vs. Light Crisps.
  • Clean Air Act (1990) Emissions credits now being given to companies that reduce their pollution below a specified threshold, can trade these credits to companies that have been unable to fall below the requirements, so that they avoid heavy fines etc.
Regulatory Forces
Governing Legal forces
Business can be governed at the following level:
  • Federal Level
  • State Level
  • Local Level
  • Self-regulation
Examples of Federal Regulatory agencies:
  • Federal Trade Commission FTC...Governs commerce
  • Federal Communications Commission FCC Governs the airwaves...Howard Stern etc.
  • Food & Drug Administration FDA...Governs new labeling law etc.
  • Bureau of Alcohol and Tobacco ATF...Recent conflict with the marketers of ice beer focusing on alcohol content.
Economic forces
Business life cycles:
  • Prosperity
  • Recession
  • Depression
  • Recovery
Marketers may need to adjust their marketing mix as the economy passes through different stages.
Different between a depression and recession = the number of months certain economic figures decline etc., but different economists use different indicators.
Political force...Government uses fiscal and monetary policy to control the economy.
Fed: Alan Greenspan increased interest rates to try to curb excessive growth that would lead to inflation, has now reduced the rates since the economy has not shown the signs of anticipated inflation.
Interest rates have a big impact on COST OF MONEY...Business investment....consumer spending.
Consumer buying power determined by income (Interest, Rent, wages):
  • Pre-tax Income--Gross Income
  • After Tax income--Disposable income
  • After purchasing necessities--Discretionary income
Consumer demand and spending patterns are effected by the economy and the perception of the future. Need to determine:
  • Consumer buying power
  • willingness to purchase, a function of employment security etc. Credit, increases current buying power over future buying power.
Competitive forces
All firms compete for consumers dollars.
Handout...War on Smoking is Music to...
It is not only important to focus on your direct competitors (gum marketers) but also all marketers that target your customers and therefore compete with you for their income.
Competitive Structures:
  • Monopoly: One marketer in the marketplace. Governed by Sherman Anti Trust Act.
    Sometimes it is to the consumers benefit to have a monopoly; when competition would raise the price to the consumer (high barriers of entry to the marketplace being passed along etc.), i.e. Utilities...DP&L.
    DP&L must get permission from the Public Services Commission (regulatory agency) before it can raise prices etc.
  • Oligopoly: A few marketers (perhaps 3 or 4) dominate the market place. Examples: Cigarettes...Marlboro example, in 1 day, reduced the price by 20%, all competitors immediately followed. Airline Industry...$50 cap on commissions led by Delta, within one week all major airlines followed.
Handout...Microsoft's Rivals Urge It to Seperate...
Looks at the commercial on-line service industry and the threat of Microsoft to the balance of the industry.
  • Monopolistic Competition: many marketers competing in the market place. Most common market structure. Need to establish a differential advantage, i.e., trade mark, brand name, some reason for consumers to purchase your product as opposed to your competition's product.
  • Perfect Competition: all competitors are equal and have equal access to the market place. Very rare!! Commodities, unregulated agriculture market. Distribution is key.
Technological Forces
From research performed by businesses, universities and non-profit organizations.
Consumers technological knowledge influences their desires for goods and services.
Examples of +ve results of changing technology:
  • Change in transportation methods have enabled the development of out of town shopping centers.
  • Inventory control systems make companies more efficient, this cost efficiency can be passed onto the consumer. It has helped develop relationships with suppliers and their supplied.
  • Improved standard of living achieved by increased leisure time :)
  • Fax machines
  • Medicine
  • Being able to read this :)
Examples of -ve consequences of technological change:
  • Environmentally unclean pollution
  • Unemployment (employment shifts leading to temporary unemployment.)
  • Misuse of information
Patent protection leads to a barrier to entry, monopoly. Without it companies may be unwilling to launch new products that incorporate new technologies for fear of copying, therefore nothing is gained.

Nature
Examples:
  • Hurricane ANDREW
  • Floods
  • Severe winter
  • Humid Summer...Drought
Environmental Responses
Two ways to respond to the environment:
  • Reactive response- Change your marketing mix in response to environmental changes.
    Most common type of response.
  • Proactive response- Try to change the environment. Example would be lobbying.
What is Consumer Buying Behavior?
Definition of Buying Behavior:
Buying Behavior is the decision processes and acts of people involved in buying and using products.
Need to understand:
  • why consumers make the purchases that they make?
  • what factors influence consumer purchases?
  • the changing factors in our society.
Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for:
  • Buyers reactions to a firms marketing strategy has a great impact on the firms success.
  • The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy.
  • Marketers can better predict how consumers will respond to marketing strategies.
Stages of the Consumer Buying Process
Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next.
The 6 stages are:
  1. Problem Recognition(awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat.
    Can be stimulated by the marketer through product information--did not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.
  2. Information search--
    • Internal search, memory.
    • External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc.
A successful information search leaves a buyer with possible alternatives, the evoked set.
Hungry, want to go out and eat, evoked set is
    • Chinese food
    • Indian food
    • burger king
    • Klondike kates etc
  1. Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, indian gets highest rank etc.
    If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives.
  2. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc.
  3. Purchase--May differ from decision, time lapse between 4 & 5, product availability.
  4. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc.
    After eating an indian meal, may think that really you wanted a chinese meal instead.
Handout...Pillsbury 1-800#s
1-800 #s gives the consumer a way of communicating with the marketer after purchase. This helps reduce cognitive dissonance when a marketer can answer any concerns of a new consumer.

Types of Consumer Buying Behavior
Types of consumer buying behavior are determined by:
  • Level of Involvement in purchase decision. Importance and intensity of interest in a product in a particular situation.
  • Buyers level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others.
High involvement purchases--Honda Motorbike, high priced goods, products visible to others, and the higher the risk the higher the involvement. Types of risk:
  • Personal risk
  • Social risk
  • Economic risk
The four type of consumer buying behavior are:
  • Routine Response/Programmed Behavior--buying low involvement frequently purchased low cost items; need very little search and decision effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc.
  • Limited Decision Making--buying product occasionally. When you need to obtain information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate amount of time for information gathering. Examples include Clothes--know product class but not the brand.
  • Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or infrequently bought products. High degree of economic/performance/psychological risk. Examples include cars, homes, computers, education. Spend alot of time seeking information and deciding.
    Information from the companies MM; friends and relatives, store personnel etc. Go through all six stages of the buying process.
  • Impulse buying, no conscious planning.
The purchase of the same product does not always elicit the same Buying Behavior. Product can shift from one category to the next.
For example:
Going out for dinner for one person may be extensive decision making (for someone that does not go out often at all), but limited decision making for someone else. The reason for the dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also determine the extent of the decision making.
Categories that Effect the Consumer Buying Decision Process
A consumer, making a purchase decision will be affected by the following three factors:
·         Personal
·         Psychological
·         Social
The marketer must be aware of these factors in order to develop an appropriate MM for its target market.

Personal
Unique to a particular person. Demographic Factors. Sex, Race, Age etc.
Who in the family is responsible for the decision making.
Young people purchase things for different reasons than older people.
Handout...From choices to checkout...
Highlights the differences between male and female shoppers in the supermarket.
Psychological factors
Psychological factors include:
  • Motives--
A motive is an internal energizing force that orients a person's activities toward satisfying a need or achieving a goal.
Actions are effected by a set of motives, not just one. If marketers can identify motives then they can better develop a marketing mix.
MASLOW hierarchy of needs!!
    • Physiological
    • Safety
    • Love and Belonging
    • Esteem
    • Self Actualization
Need to determine what level of the hierarchy the consumers are at to determine what motivates their purchases.
Nutriment,  a product marketed by Bristol-Myers Squibb originally was targeted at consumers that needed to receive additional energy from their drinks after exercise etc., a fitness drink. It was therefore targeted at consumers whose needs were for either love and Belonging or esteem. The product was not selling well, and was almost terminated. Upon extensive research it was determined that the product did sell well in inner-city convenience stores. It was determined that the consumers for the product were actually drug addicts who couldn't not digest a regular meal. They would purchase Nutrament as a substitute for a meal. Their motivation to purchase was completely different to the motivation that B-MS had originally thought. These consumers were at the Physiological level of the hierarchy. BM-S therefore had to redesign its MM to better meet the needs of this target market.
Motives often operate at a subconscious level therefore are difficult to measure.


  • Perception strategy in Marketing

Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. IE we chose what info we pay attention to, organize it and interpret it. Information inputs are the sensations received through sight, taste, hearing, smell and touch.
Selective Exposure-select inputs to be exposed to our awareness. More likely if it is linked to an event, satisfies current needs, intensity of input changes (sharp price drop).
Selective Distortion-Changing/twisting current received information, inconsistent with beliefs.
Advertisers that use comparative advertisements (pitching one product against another), have to be very careful that consumers do not distort the facts and perceive that the advertisement was for the competitor. A current example...MCI and AT&T...do you ever get confused?
Selective Retention-Remember inputs that support beliefs, forgets those that don't.
Average supermarket shopper is exposed to 17,000 products in a shopping visit lasting 30 minutes-60% of purchases are unplanned. Exposed to 1,500 advertisement per day. Can't be expected to be aware of all these inputs, and certainly will not retain many.
Interpreting information is based on what is already familiar, on knowledge that is stored in the memory.
South Africa wine....
Problems marketing wine from South Africa. Consumers have strong perceptions of the country, and hence its products.
  • Ability and Knowledge--
Need to understand individuals capacity to learn. Learning, changes in a person's behavior caused by information and experience. Therefore to change consumers' behavior about your product, need to give them new information re: product...free sample etc.
South Africa...open bottle of wine and pour it!! Also educate american consumers about changes in SA. Need to sell a whole new country.
When making buying decisions, buyers must process information.
Knowledge is the familiarity with the product and expertise.
Inexperience buyers often use prices as an indicator of quality more than those who have knowledge of a product.
Non-alcoholic Beer example: consumers chose the most expensive six-pack, because they assume that the greater price indicates greater quality.
Learning is the process through which a relatively permanent change in behavior results from the consequences of past behavior.
  • Attitudes--

Knowledge and positive and negative feelings about an object or activity-maybe tangible or intangible, living or non- living.....Drive perceptions
Individual learns attitudes through experience and interaction with other people.
Consumer attitudes toward a firm and its products greatly influence the success or failure of the firm's marketing strategy.
Handout...Oldsmobile.....
Oldsmobile vs. Lexus, due to consumers attitudes toward Oldsmobile (as discovered by class exercise) need to disassociate Aurora from the Oldsmobile name.
Exxon Valdez-nearly 20,000 credit cards were returned or cut-up after the tragic oil spill.
Honda "You meet the nicest people on a Honda", dispel the unsavory image of a motorbike rider, late 1950s. Changing market of the 1990s, baby boomers aging, Hondas market returning to hard core. To change this they have a new slogan "Come ride with us".
Attitudes and attitude change are influenced by consumers personality and lifestyle.
Consumers screen information that conflicts with their attitudes. Distort information to make it consistent and selectively retain information that reinforces our attitudes. IE brand loyalty.
There is a difference between attitude and intention to buy (ability to buy).
  • Personality--

all the internal traits and behaviors that make a person unique, uniqueness arrives from a person's heredity and personal experience. Examples include:
    • Work holism
    • Compulsiveness
    • Self confidence
    • Friendliness
    • Adaptability
    • Ambitiousness
    • Dogmatism
    • Authoritarianism
    • Introversion
    • Extroversion
    • Aggressiveness
    • Competitiveness.
Traits effect the way people behave. Marketers try to match the store image to the perceived image of their customers.
There is a weak association between personality and Buying Behavior, this may be due to unreliable measures. Nike ads. Consumers buy products that are consistent with their self concept.
Recent US trends in lifestyles are a shift towards personal independence and individualism and a preference for a healthy, natural lifestyle.
Lifestyles are the consistent patterns people follow in their lives.
EXAMPLE healthy foods for a healthy lifestyle. Sun tan not considered fashionable in US until 1920's. Now an assault by the American Academy of Dermatology.
Handout...Here Comes the Sun to Confound Health Savvy Lotion Makers..
Social Factors
Consumer wants, learning, motives etc. are influenced by opinion leaders, person's family, reference groups, social class and culture.
  • Opinion leaders--
Spokespeople etc. Marketers try to attract opinion leaders...they actually use (pay) spokespeople to market their products. Michael Jordon (Nike, McDonalds, Gatorade etc.)
Can be risky...Michael Jackson...OJ Simpson...Chevy Chase
  • Roles and Family Influences--
Role...things you should do based on the expectations of you from your position within a group.
People have many roles.
Husband, father, employer/ee. Individuals role are continuing to change therefore marketers must continue to update information.
Family is the most basic group a person belongs to. Marketers must understand:
    • that many family decisions are made by the family unit
    • consumer behavior starts in the family unit
    • family roles and preferences are the model for children's future family (can reject/alter/etc)
    • family buying decisions are a mixture of family interactions and individual decision making
    • family acts an interpreter of social and cultural values for the individual.
The Family life cycle: families go through stages, each stage creates different consumer demands:
    • bachelor stage...most of BUAD301
    • newly married, young, no children...me
    • full nest I, youngest child under 6
    • full nest II, youngest child 6 or over
    • full nest III, older married couples with dependant children
    • empty nest I, older married couples with no children living with them, head in labor force
    • empty nest II, older married couples, no children living at home, head retired
    • solitary survivor, in labor force
    • solitary survivor, retired
    • Modernized life cycle includes divorced and no children.
Handout...Two Income Marriages Are Now the Norm
Because 2 income families are becoming more common, the decision maker within the family unit is changing...also, family has less time for children, and therefore tends to let them influence purchase decisions in order to alleviate some of the guilt. (Children influence about $130 billion of goods in a year) Children also have more money to spend themselves.














Individual identifies with the group to the extent that he takes on many of the values, attitudes or behaviors of the group members.
Families, friends, sororities, civic and professional organizations.
Any group that has a positive or negative influence on a persons attitude and behavior.
Membership groups (belong to)
Affinity marketing is focused on the desires of consumers that belong to reference groups. Marketers get the groups to approve the product and communicate that approval to its members. Credit Cards etc.!!
Aspiration groups (want to belong to)
Disassociate groups (do not want to belong to)
Honda, tries to disassociate from the "biker" group.
The degree to which a reference group will affect a purchase decision depends on an individuals susceptibility to reference group influence and the strength of his/her involvement with the group.
  • Social Class--
an open group of individuals who have similar social rank. US is not a classless society. US criteria; occupation, education, income, wealth, race, ethnic groups and possessions.
Social class influences many aspects of our lives. IE upper middle class Americans prefer luxury cars Mercedes.
    • Upper Americans-upper-upper class, .3%, inherited wealth, aristocratic names.
    • Lower-upper class, 1.2%, newer social elite, from current professionals and corporate elite
    • Upper-middle class, 12.5%, college graduates, managers and professionals
    • Middle Americans-middle class, 32%, average pay white collar workers and blue collar friends
    • Working class, 38%, average pay blue collar workers
    • Lower Americans-lower class, 9%, working, not on welfare
    • Lower-lower class, 7%, on welfare
Social class determines to some extent, the types, quality, quantity of products that a person buys or uses.
Lower class people tend to stay close to home when shopping, do not engage in much repurchased information gathering.
Stores project definite class images.
Family, reference groups and social classes are all social influences on consumer behavior. All operate within a larger culture.
  • Culture and Sub-culture--
Culture refers to the set of values, ideas, and attitudes that are accepted by a homogenous group of people and transmitted to the next generation.
Culture also determines what is acceptable with product advertising. Culture determines what people wear, eat, reside and travel. Cultural values in the US are good health, education, individualism and freedom. In american culture time scarcity is a growing problem. IE change in meals. Big impact on international marketing.
Handout...Will British warm up to iced tea?
No...but that is my opinion!!...Tea is a part of the British culture, hot with milk.
Different society, different levels of needs, different cultural values.
Culture can be divided into subcultures:
    • geographic regions
    • human characteristics such as age and ethnic background.
IE West Coast, teenage and Asian American.
Culture effects what people buy, how they buy and when they buy.
What is a Market?
A market is:
An aggregate of people who, as individuals or organizations, have needs for products in a product class and who have the ability, willingness and authority to purchase such products (conditions needed for an exchange).
Types of markets:
  1. Consumer Intend to consume or benefit, but not to make a profit.
  2. Organizational/Business For:
    • Resale
    • Direct use in production
    • or general daily operations.
Handout...Catering to Middle-Aged BBs...
TM = Baby Boomers...40-60 year olds
PRODUCT Attributes:
  • High Powered
  • Roomy
  • Safety Features
PRODUCTS:
  • Toyota Avalon
  • Oldsmobile Aurora
  • Mercury Mystique
  • Dodge Intrepid
  • Chrysler Concorde
  • Vision
DON'T WANT THEIR FATHER'S CAR
Developing a Target Market Strategy
Developing a target market strategy has three phases:
  1. Analyzing consumer demand
  2. Targeting the market(s)
    • undifferentiated
    • concentrated
    • multisegmented
  3. Developing the marketing strategy
Selecting Target Markets (Analyzing Demand)
Need to aggregate consumers with similar needs.
Demand patterns: Do all potential customers have similar needs/desires or are there clusters? Types of demand patterns are:
  • Homogeneous Demand-uniform, everyone demands the product for the same reason(s). Very rare in the US, staple foods...
  • Clustered Demand-consumer demand classified in 2 or more identifiable clusters. IE Automobiles:
    • luxury
    • cheap
    • Sporty
    • Spacious
  • Diffused Demand-Product differentiation more costly and more difficult to communicate IE Cosmetic market, need to offer hundreds of shades of lipstick. Firms try to modify consumer demand to develop clusters of at least a moderate size. Or uses one MM.
Targeting The Market
Undifferentiated Approach (Total Market Approach)
Single Marketing Mix for the entire market.
All consumers have similar needs for a specific kind of product. Homogeneous market, or demand is so diffused it is not worthwhile to differentiate, try to make demand more homogeneous.
Single MM consists of:
  • 1 Pricing strategy
  • 1 Promotional program aimed at everybody
  • 1 Type of product with little/no variation
  • 1 Distribution system aimed at entire market
The elements of the marketing mix do not change for different consumers, all elements are developed for all consumers.
Examples include Staple foods-sugar and salt and farm produce. Henry Ford, Model T, all in black.
Popular when large scale production began. Not so popular now due to competition, improved marketing research capabilities, and total production and marketing costs can be reduced by segmentation.
Organization must be able to develop and maintain a single marketing mix.
Major objective is to maximize sales.
Market Segmentation Approach.
Individuals with diverse product needs have heterogeneous needs.
Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product needs, there are clusters of needs.
The purpose is to design a MM(s) that more precisely matches the needs of individuals in a selected market segment(s).
A market segment consists of individuals, groups or organizations with one or more characteristics that cause them to have relatively similar product needs.
There are two Market Segmentation Strategies.
Concentration Strategy.
A single market segment with one MM.

                        Market
                        |
                        |A Market Segment
                        |-------------------
One MM------------------>A Market Segment
                        |-------------------
                        |A Market Segment
                        |
PROS include:
  • It allows a firm to specialize
  • can focus all energies on satisfying one group's needs
  • A firm with limited resources can compete with larger organizations.
CONS include:
  • Puts all eggs in one basket.
  • Small shift in the population or consumer tastes can greatly effect the firm.
  • May have trouble expanding into new markets (especially up-market). Haggar having problems finding someone to license their name for womens apparel, even though women purchase 70% Haggar clothes for men.
Objective is not to maximize sales, it is efficiency, attracting a large portion of one section while controlling costs.
Examples include
ROLEX, Anyone wear one.
Who are their target market?? Over $100,000

Multi-segment strategy
2 or more segments are sought with a MM for each segment, different marketing plan for each segment. This approach combines the best attributes of undifferentiated marketing and concentrated marketing.


                         Market
 MM--------------------->|A Market Segment
                         |_______________________
 MM--------------------->|A Market Segment
                         |_______________________
 MM--------------------->|A Market Segment
                         |_______________________
 MM--------------------->|A Market Segment
                         |
                         |
Example: Marriott International:
  1. Marriott Suites...Permanent vacationers
  2. Fairfield Inn...Economy Lodging
  3. Residence Inn...Extended Stay
  4. Courtyard By Marriott...Business Travellers
PROS include:
  • Shift excess production capacity.
  • Can achieve same market coverage as with mass marketing.
  • Price differentials among different brands can be maintained Contact Lens!!
  • Consumers in each segment may be willing to pay a premium for the tailor-made product.
  • Less risk, not relying on one market.
CONS include:
  • Demands a greater number of production processes.
  • Costs and resources and increased marketing costs through selling through different channels and promoting more brands, using different packaging etc.
  • Must be careful to maintain the product distinctiveness in each consumer group and guard its overall image (Contact lens
·         The only difference is when you throw them away.
Discusses the individual branding of contact lenses.
3 brands:
  • Sequence2 $7-$9
  • Medalist $15-$25
  • Optima $70
The core product is the same, use different Packaging, Brand Name, Price to differentiate and create a different marketing mix.
What will happen if consumers find out??
Objective: Sales maximization, but can remain a specialist. Can get firmly established in one segment, then pursue another.

Criteria needed for segmentation
For segmentation to occur:
  1. Segments must have enough profit potential to justify developing and maintaining a MM
  2. Consumer must have heterogeneous (different) needs for the product.
  3. Segmented consumer needs must be homogeneous (similar)
  4. Company must be able to reach a segment with a MM, IE Review to reach Delaware undergraduates.
    How do marketers reach children?
    • Cartoons on saturday
    • Nickelodian
    • Cereal boxes
    • Sports illustrated for kids
Look at how media has changed recently due to changing demographics etc. and therefore the need of marketers to reach these groups.
Media must respond because they are essentially financed by the marketers or at least heavily subsidised
Handout...Stations switching to lucrative...
Indicates how media format changes due to changing population needs.
  1. Must be able to measure characteristics & needs of consumers to establish groups.
Variables that can be used to segment markets.
Need to determine the variables that distinguish marketing segments from other segments.
  • Segmentation variables should be related to consumer needs for, and uses of, or behavior toward the product. IE Stereo; age not religion.
  • Segmentation variable must be measurable. No best way to segment the markets. Selecting inappropriate variable limits the chances of success.
Variables for segmenting Consumer Markets include:
  • Demographic - age, sex, fertility rates, migration patterns, and mortality rates, ethnicity, income, education, occupation, family life cycle, family size, religion and social class.
Handout...Photography companies try to click...
Photography companies identify a new target market (children) to market their product to, current sales are declining with current target market due to advances in technology (video cameras etc.)
Handout...Two income marriages are now the norm
Families have more income and less time...esp. for children!!
Handout...Travel agents target grandma and grandpa
Travel agents developing a MM to attract grandparents, not senior citizens!!
  • Geographic -Climate, terrain, natural resources, population density, subcultural values, different population growths in different areas.
City size
    • Metropolitan Statistical Area
    • Primary Statistical Metropolitan Area
    • Consolidated Metropolitan Statistical Area
Market density-# of potential customers within a unit of land.
Handout...Social well being mapped out...
Geographic breakdown of the wealth/well being of the US.
  • Psychographic - personality characteristics, motives and lifestyles
Handout...Lifestyle appropriate greeting cards
Marketers must be aware of the changing lifestyles and market products accordingly.
  • Behavioristic Variables - Regular users-potential users-non users Heavy/moderate/light users, 80-20 rule
    Frequent User Incentives
    It is five x more expensive to attract a new customer, as it is to satisfy your current customers.
    Benefits segmentation-focus on benefits rather than on features.
Single Variable vs. Multi-Variable Segmentation
  • Single variable--achieved by using only one variable to segment
  • Multi-variable-- more than one characteristic to divide market.
    Provides more information about segment. Able to satisfy customers more precisely. More variables creates more segments reducing the sales potential in each segment.
Will additional variables help improve the firms MM. If not there is little reason to spend more money to gain information from extra variables.

Introduction

In order to implement the marketing concept, marketers require information about the characteristic, needs, wants and desires of their target markets.
Definition:
Marketing research is the process of defining a marketing problem & opportunity, systematically collecting and analyzing information, & recommending actions to increase an organizations marketing activities.
It is the function that links the consumer (customer) and public to the marketer through information.


Need to approach the research in a logical manner. Difference between good and bad research can depend on the quality of the inputs.
  • must be conducted in a systematic manner
  • involves a series of steps/processes
  • data may be available from different sources
  • research applies to any aspect of marketing that needs information
  • findings must be communicated to the appropriate decision maker
There are 5 steps in the marketing research process, it is an overall approach, not a rigid set of rules.
Defining and Locating the problem
Usually a departure from some normal function, IE conflicts between or failures in attaining objectives. (goals may be unrealistic) Need to probe beneath the superficial symptoms.
Research objective specifies what information is needed to solve the problem.
Marketing Plan...to determine the unfulfilled needs/wants within specified target market(s). (University students/local residents)
May need to use exploratory research here, before conclusive research.
Therefore query news group with your ideas to better define your research needs perhaps, refine your ideas before developing your hypothesis!!
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1.       Assess the decision factors

Different sets of variables, alternatives and uncertainties that combine to give the outcome of a decision.
Alternatives---decision maker has control
Uncertainties--uncontrollable factors
Decision maker must:
    1. Determine the principal alternatives that can be considered reasonable approaches to solving the problem...i.e. reasonable outcomes of research.
    2. The major uncertainties that can affect particular alternative and result in it being a GOOD OR POOR SOLUTION TO A PROBLEM.
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2.       Collect Relevant Information

Concepts
Developing Hypothesis
Drawn from previous research and expected research findings. An informed guess or assumption about a certain problem or a set of circumstances.
Residents of Newark, DE, as well as students of the University of Delaware would frequent a Bagel Store.
As information is gathered researchers can test the hypothesis. Can have more than one hypothesis in a study.
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Methods
Collecting the data
Two types of data, Primary, Secondary inside or outside the organization.
Secondary data collection
Internal database data (MIS). Accounting data, government data, magazines, survey of buying power, syndicated data services, Marketing Research Corporation of America.
PRO Inexpensive, quick to obtain, multiple sources available, obtain info. that cannot be obtained through primary research, independent therefore credible.
CON maybe incomplete, dated, obsolete, methodology maybe unknown, all findings may not be public, reliability may be unproven.
SOURCES: internal = budgets, sales figures, profit and loss statement, all research reports.
External = government, must consider dates, census of population/manufacturing/retail trade, regular publications, IE Wall Street Journal, Business Week, Commercial research houses: for a fee as a subscriber IE AC Nielsen.
Primary data collection
Information "collected specifically for the purpose of the investigation at hand", Dictionary of Marketing Terms. When a thorough analysis of secondary research provides insufficient information for a marketing decision to be made.
PRO Fits the precise purpose of the organization, information is current, methodology is controlled and known, available to firm and secret from competitors, no conflicting data from different sources, reliability can be determined, only way to fill a gap.
CON Time consuming, costly, some information cannot be collected.
Research Design
The frame work or plan for a study that guides the collection and analysis of data, it includes:
o    Who collects the data?
o    What should be collected?
o    Who or what should be studied?
o    What technique of data collection should be used?
o    How much will the study cost?
o    How will data be collected (personnel)?
o    How long will data collection be?
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Gathering Data
Sampling
To select representative units from a total population.
A population "universe", all elements, units or individuals that are of interest to researchers for a specific study. IE all registered voters for an election.
Sampling procedures are used in studying the likelihood of events based on assumptions about the future.
o    Random sampling, equal chance for each member of the population
o    Stratified sampling, population divided into groups re: a common characteristic, random sample each group
o    Area sampling, as above using areas
o    Quota sampling, judgmental, sampling error cannot be measured statistically, mainly used in exploratory studies to develop a hypotheses, non-probablistic.
Survey to news group is an example of quota sampling...will be non-probablistic.
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Survey Methods
o    Mail-wide area, limited funds, need incentive to return the questionnaire Mail panels, consumer purchase diaries. Must include a cover letter to explain survey!!
news group...electronic survey
o    Telephone-speed, immediate reaction is negative, WATS, computer assisted telephone interviewing.
o    Personal interviews-flexibilty, increased information, non-response can be explored. Most favored method among those surveyed. Can be conducted in shopping malls.
o    In home (door-to-door) interview, get more information but it is costly and getting harder to accomplish.
o    Mall intercepts-interview a % of people passing a certain point. Almost half of major consumer goods and services orgs. use this technique as a major expenditure. Can use demonstration, gauge visual reactions. Regarding social behavior, mall surveys get a more honest response than telephone surveys. There is a bias toward those that spend alot of time in malls. Need to weight for this. On site computer interviewing, respondents complete self administered questionnaires conducted in shopping malls. Questions can be adaptive depending on the responses.
o    Focus groups-observe group interaction when members are exposed to an idea or concept, informal, less structured. Consumer attitudes, behaviors, lifestyles, needs and desires can be explored in a flexible and creative manner. Questions are open ended. Cadillac used this method to determine that they should be promoting safety features.
Questionnaire Construction
Designed to elicit information that meets the studies requirements. Questions should be:
o    clear
o    easy to understand
o    directed towards meeting an objective.
Need to define objectives before designing the questionnaire. Must maintain impartiality and be very careful with personal data. Four basic types of questions are:
o    Open ended
o    Dichotomous
o    Multiple choice.
o    Scaled (lickert)
Time frame must be stipulated so that it does not drag on. Only ask needed questions...keep it short!!
Demographic questions at the end!!...Always!!
Always attach an explanatory cover letter!!
Example of poor questions from a survey sent to parents of children that went on summer camp:
What is your income to the nearest hundred dollars?
Should not be at the beginning! Should use multiple choice...categories of income!
Are you a strong or weak supporter of overnight summer camping for your children?
What does strong/weak mean!? No middle ground answer!
Do your children behave themselves well at summer camp?
Yes [ ] No [ ]
Of course they do ;-) Would parents really know?!
How many camps mailed literature to you last April, this April?
No-one will remember!
What are the most salient and determinant attributes in your evaluation of summer camps?
What do you mean ;-)
Do you think it is right to deprive your child of the opportunity to grow into a mature person through the experience of summer camping?
Of course not!!
Observation Methods
Record overt behavior, note physical conditions and events. "How long does a McDonald's customer have to wait in line". Can be combined with interviews, IE get demographic variables. To avoid bias must avoid being seen.
Mechanical observation devices, IE cameras, eye movement recorders, scanner technology, Nielsen techniques for media.
Observation avoids the central problem of survey methods, motivating respondents to state their true feelings or opinions. If this is the only method, then there is no data indicating the causal relationships.

                        Find a Solution

The best alternative that has been identified to solve the problem.

                        Evaluate the results

Coke, do the results make sense, don't always accept them at face value.
introduction
Relationship Marketing Definition:
Organizations efforts to develop a long term, cost effective link with individual customers for mutual benefit.
Handout...Unisys system helps companies
Handout...Using Computers to Divine Who Might Buy a Gas Grill
Indicate the developments and benefits of relationship marketing.
3 key elements link the organization to its customers:
Information technology (IT)
IT designed computer and communication systems to satisfy organizations information needs.
Marketing Research  is the information gathering arm of IT.
IT is the framework for the day-to-day management and structuring of information gathered regularly from sources outside and inside the organization:
          Data Inputs------>Processing-------->Information Outputs
          ^                                   |
          |                                   |
          --------------Feedback--------------


     DATA----------->PROCESSING--------------->INFORMATION

Difference between DATA and INFORMATION...Effective IT
Provides a continuous flow of information, re: prices, advertising expenses, sales, competition and distribution expenses.
Inputs:
    • Accounting records
    • Information from 1-800 #s
    • Transaction Information
    • Frequent User Programs
    • Public Information
    • Survey Information
Processing-classifying information and developing categories for meaningful storage and retrieval. Marketers can then determine which information-the output-is useful for decision making. Feedback enables adjustments to the input.
Recent Developments in IT:
    • Enabled marketers to effectively utilize the information they have been storing for years, but have not been able to use, it was therefore data, not information.
    • Processing element of IT has allowed marketers to merge (essentially) their transactional databases with their customer profile databases.
    • Customer relations, locate/identify problems more quickly. Identify problem in 10 calls, not 10,000
    • Customer service reps on 1-800 lines have computer info
    • Customer service major IT expense
    • Lower inventory costs...renegotiate with suppliers etc.
    • $1bn spent in 1994 on IT
  • Micro Marketing (Database marketing)
An Organizations efforts to collect:
    • demographic
    • media
    • consumption profiles of customers.
In order to target customers more efficiently marketers can use multi variable segmentation incorporating Buyer Behavior information and Demographic information.
What people have done in the passed (Purchase) is a better predictor to future behavior than any other characteristic/variable
Use frequent user programs to collect data on heavy user customers.
Media...direct mail...catalogs
Old model, sell one product to as many customers as possible (target market).
New model, sell as many products to one person, one-to-one
Focus on the life-time value of the customer (LVC) instead of the individual transaction.
Customers always had a 1 2 1 relationship with companies, now companies have the technology to have a 1 2 1 (few) relationship with their customers.
Need continual monitoring of customers.
Relationship marketing and information...key weapons that offer a competitive advantage for those with the technological capabilities.
Customers becoming more demanding...have many alternatives, therefore have high expectations.
Increasing number of communication sources going into home (500 channels cable etc.), fragments audience, therefore must develop customer relations.
Used to be only the small "mom" and "pop" stores had the ability to perform relationship marketing.
Must satisfy customers to keep them...cost to keep vs. cost to recruit!!....Five times as much to market to a new customer than to keep an existing customer satisfied.
PROBLEM:
"information chernobyl"...all this information on our customers can be of concern to the customer if the information is used inappropriately. American Express debacle...offering 7 yrs of info on many customers as opposed to one months information on a couple of customers.
Evaluating the Markets and Sales Forecasting
Need to measure the sales potential of the chosen markets.
Market Potential--Industry wide, need to specify time frame and level of industry marketing activities.
Sales Potential--Maximum % of Mkt. potential that a single firm within an industry expects to obtain - absolute limit.
Breakdown approach: economic-mkt. potential-sales potential
Buildup approach: # of potential buyers purchases * # buyers in area, same for each area, then add areas to calculate total market potential. Then estimate the proportion for the company.
Sales penetration= Actual sales/Sales potential
Developing Sales Forecasts
Sales forecast is the amount of a product that a company actually expects to sell during a specific period at a specified level of marketing. Actual instead of potential. Can be short term, medium term or long term.
Methods: Choice depends on costs, type of product, characteristics of market, time span of the forecast, purpose of the forecast, stability of historical data, availability of required information and forecasters expertise and experience.
  • Executive judgment--swayed by recent experience, based only on passed experience
  • Surveys--Customer, good when only a few customers (business markets), expensive, rely on customer estimates. Sales forecast surveys, expert forecast surveys
  • Time Series Analysis--trend, cycle, seasonal and random factor
  • Correlation method, regression analysis, indicates association not causal relationships.
  • Market tests, actual vs. intended. Can see changes in MM. Other companies can manipulate, other companies can see offering.
Marketers will generally use more than one method.
Future
Marketers will look at the sales potential of a customer (LCV) for all its products as opposed to the market of one product with the use of relationship marketing.


Marketing Mix

We are now focusing on the major elements of the marketing mix, the ingredients of the marketing mix.
First element...The Product!!
Product Planning refers to the systematic decision making related to all aspects of the development and management of a firms products including branding and packaging.
Each product includes a bundle of attributes capable of exchange and use.
Product definition:
A product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers and is received in exchange for money or some other unit of value.

Differences between Goods and Services

Goods are tangible. You can see them, feel them, touch them etc.
Services are intangible. The result of human or mechanical efforts to people or objects.
Major distinguishing characteristics of Services:
  • Intangibility-major component of a service is intangible
  • Pershibality-many cannot be stored for future sales Airline/Amusement ride
    Number of hair cut hours in one week: i.e., if Christies employs 3 people, who work forty hours per week, they have potentially 120 hair cut hours to offer. If they do not have any customers at a particular period during the day, they will lose the opportunity to cut hair at that time and therefore the opportunity to generate revenue...the opportunity has perished...they no longer have the ability to earn revenue from 120 hair cut hours that week!!
  • Inseparability-customer contact is often the integral part of the service...Legal services/hair dresser, therefore often a direct channel of distribution.
  • Variability-in service quality, lack of standardization, because services are labor intensive.
Sales of goods and services are frequently connected, i.e. a product will usually incorporate a tangible component (good) and an intangible component.

Levels of Product

There are 3 levels of products
  • Core Product- Marketers must first define what the core BENEFITS the product will provide the customer.
  • Actual Product-Marketer must then build the actual product around the core product. May have as many as five characteristics:
all combined to carefully deliver the core benefit(s).
  • Augmented Product-offer additional consumer benefits and services.
    • Warranty
    • Customer training
EXAMPLE SONY CAMCORDER:
  • Core--the ability to take video pictures conveniently
  • Actual--Sony Handy cam (brand name), packaged, convenient design so you can hold it, play back features etc. that provide the desired benefits, high quality etc.
  • Augmented--receive more than just the camcorder. Give buyers a warranty on parts and workmanship, free lessons on how to use the camcorder, quick repair service when needed and toll free telephone number when needed.
Marketers must first identify the core consumer needs (develop core product), then design the actual product and find ways to augment it in order to create the bundle of benefits that will best satisfy the customer.

Classifying Products

Products can be classified depending on who the final purchaser is.
Components of the marketing mix will need to be changed depending on who the final purchaser is.
  • Consumer products: destined for the final consumer for personal, family and household use.
  • Business to business products: are to satisfy the goals of the organization.
The same product can be purchased by both, for example a computer, for the home or the office.

The following are classifications for consumer products:

  • Convenience: Packaging is important to sell the product. Consumers will accept a substitute. Marketers focus on intense distribution, time utility. Convenience products can be categorized into staple (milk), impulse (not intended prior to shopping trip).
  • Shopping: Consumers expend considerable effort planning and making purchase decisions. IE appliances, stereos, cameras. Consumers are not particularly brand loyal. Need producer intermediary cooperation, high margins, less outlets than convenience goods. Use of sales personnel, communication of competitive advantage, branding, advertising, customer service etc. Attribute based (Non Price Competition), product with the best set of attributes is bought. If product attributes are judged to be similar, then priced based.
  • Specialty: Buyer knows what they want and will not accept a substitute, IE Mercedes. Do not compare alternatives. Brand, store and person loyal. Will pay a premium if necessary. Need reminder advertising.
  • Unsought: Sudden problem to resolve, products to which consumers are unaware, products that people do not necessary think of purchasing. Umbrellas, Funeral Plots, Encyclopedia!!

The following are classifications for Business to Business products:

  • Production Goods
    • Raw Materials:
    • Component parts: becomes part of the physical product
    • Process materials: not readily identifiable part of the production of other products
  • Support Goods
    • Major Equipment:
    • Accessory Equipment: Type writers and tools
    • Consumable Supplies: IE Paper, pencils or oils
    • Business to Business services: Financial, legal marketing research etc.
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Elements of a Product Mix

If an organization is marketing more than one product it has a product mix.
  • Product item--a single product
  • Product line--all items of the same type
  • Product mix--total group of products that an organization markets
Depth measures the # of products that are offered within each product line. Satisfies several consumer segments for the same product, maximizes shelf space, discourages competitors, covers a range of prices and sustains dealer support. High cost in inventory etc.
Width measures the # of product lines a company offers. Enables a firm to diversify products, appeals to different consumer needs and encourages one stop shopping.
Proctor & Gamble example in class.
Why so many different products?
Different needs of different target markets for the same product. Channels of distribution economies etc.


Product Positioning and Product Repositioning

Definition:
This refers to a place a product offering occupies in consumers' minds on important attributes, relative to competing offerings.
How new and current items in the product mix are perceived, in the minds of the consumer, therefore reemphasizing the importance of perception!!
New Product--need to communicate benefits
Established Products--need to reinforce benefits

Ideal Characteristics

Need to introduce products that possess characteristics that the target market most desires, ideal. Product positioning is crucial.
Consumers desires refer to the attributes consumers would like the products to possess--IDEAL POINTS.
Whenever a group of consumers has a distinctive "ideal" for a product category they represent a potential target market segment.
A firm does well if its attributes (of the product) are perceived by consumers as being close to their ideal. The objective is to be "more ideal" than the competitors.
Each product must provide some unique combination of new features desired by the target market.
Instead of allowing the customer to position products independently, marketers try to influence and shape consumers concepts and perceptions.
Marketers can use perception maps.
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Existing Products

Handout...Here Comes the Sun to Confound Health-Savvy Lotion Makers

                              ^
                              |
                              |
     Old Position             |         New Position
                              |
                              |
                              |
Glamour--------------------------------------------------Health
                              |
                              |
                              |
                              |
                              |
                              |
                              |
Traditional sun tan lotion positioned as aiding in getting a very glamorous deep tan etc.
Dermatologist reports...skin cancer etc.
Lifestyle needs change, move to more health conscious (previously discussed)
Need to reposition sun tan lotion as a healthy way to be exposed to the sun.
Target market has shifted from the left quartile to the right quartile as far as needs are concerned.
Sun tan marketers need to do same as far as changing consumers perception for the product.
How?
  • Change Promotion: "Tan don't Burn" The St. Tropez Tan vs. Ultra Sweat Proof Serious tan for...Be Sun Smart
  • Change Product: Sunscreen and sunless tanning agent.

Handout...BMW Banks on Affordability...

                              ^
                         Very Safe
                              |         Lexus/infiniti
                              |                   Mercedes
                              |                      BMW
                              |
                              |
                              |
Cheap--------------------------------------------------Expensive
                              |
                              |
                              |
                              |
                              |
                              |
                              |
                         Very Unsafe
BMW, to reposition up to the left
Due to the exchange rate, Lexus moves to the right
Why did they repositition?
Safety
Affordability
Competitors include Infiniti, Lexus, Mercedes Benz and Aurora
If you already have a brand in the market, must be sure to avoid cannibalization. Attributes and brand image should give a product distinct appeal.

New Product Positioning

When developing a new product, a company should identify all the features that are offered by all its major competitors.
Second, identify important features/benefits used in making purchase decisions.
Determine the overall ranking of features by importance and relate the importance of each feature to its "uniqueness".
For example you wouldn't buy a spreadsheet program that if it didn't perform basic math, so basic math is very important.
However since every spreadsheet has that its an "important fundamental feature", instead of an "important differentiating feature".
The flip side would be a spreadsheet that displays all numbers in binary (0-1) instead of "normal" numbers (0-9). This is unique but not important.
The evaluation becomes a 2 x 2 matrix with uniqueness on the X-axis and importance on the Y-axis.
                              ^
X                        Important to TM (Stockbroker)           X
Math functions                |                        Import Data
                              |
                              |              
                              |
                              |
                              |
----------------------------------------------------------Unique
                              |
                              |
                              |
                              |
                              |
                              |
                              |                           X
                                                       Binary Data
If the feature is in the upper right hand corner then you have probably got a winning feature.
This is known as feature positioning, as opposed to product positioning. One can then see what type of customer needs the important (and perhaps unique) features.
If your spreadsheet accepts continuous data in real-time (such as stock market data) while Lotus 1-2-3 doesn't, you'd position your spreadsheet as a "real-time spreadsheet with all calculations needed by Wall Street."
Its a claim that tells something unique about your product, who it's for, and by implication, that Lotus 1-2-3 can't do it.

Developing and Managing Products

To compete effectively and achieve goals of an organization, the organization must be able to adjust its product mix.
Need to understand competition and customer attitudes and preferences.

Handout...At Timex, They're...

1982, Timex turned down the opportunity to market "Swatches". Timex was resting on its laurels, simple low cost watches. Digital revolutionized
Developing New Products industry (technological change), Timex stuck with analog.
DID NOT KEEP UP WITH WATCHES EVOLUTION FROM A FUNCTIONAL OBJECT TO A FASHION ACCESSORY.
Now consumer owns 5 watches up from 1.5 30 years ago (emphasizing fashion need). Timex has acquired Guess and Monet Jewelers (distribution outlets) in an effort respond to change.
Product mix:
Dressy watches to Walt Disney Character watches, Indigo. Now have 1,500 styles, 300 in 1970.
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Need to develop new products. A new product can be:
  • Continuous Innovation...No new buyer behavior to learn, i.e. -products not previously marketed by the firm, but by others
  • Dynamic Continuous Innovation...minor education needed for consumers to adopt product
  • Discontinuous Innovation...entirely new consumption patterns

Handout...In Battle over Video Disk Standard

What will be the winning format?
New Product (Technology)
Need to appeal to:
    • Hollywood
    • Ultimate consumers
Battle between:
    • Sony and Phillips
    • Toshiba, Pioneer and Time Warner
Swing voter...Matsushita Electric Industry (Toshiba/Pioneer)
DVD could transform movie business (like CDs for music) Movie studios can resell all movies in new format therefore very important to them, also sell through market, video rentals are decreasing, due to competing service.
Set of requirements:
    • 135 mins on 1 disc
    • quality superior to vhs
    • cd quality audio
    • able to add multiple languages
    • parent lockout system
    • iron clad copying protection
Sony announced going ahead (Vaporware!)
If 2 systems go to market, best system will win, only one technology can survive, WINNER WINS BIG...LOSER LOSES BIG (DUE TO INVESTMENT) VHS vs Betamax

For a new product to succeed it must have:

  • desirable attributes
  • be unique
  • have its features communicated to the consumer (mkt support necessary)
Developing new products is expensive and risky.
Failure not to introduce new products is also risky. IE Timex

Firms develop new products in two ways:

  • By acquisition, i.e. Timex bought Guess and Monet Jewellers in 1992, bringing in new products to their product mix.
  • Internal development, this is what we are going to focus on.
17,363 (8,077 food) new items hit supermarket and drug stores in 1993, according to marketing experts, a 9.3% increase over 1992.
Launching a new product risky and expensive therefore 75% of new products were brand-extension brands in 1993, up from 68% in 1992 (continuous innovations)
name along with new product is very
Why New Products Fail
Lack of differentiating advantage
Poor marketing plan
Poor timing
Target market too small
Poor product quality
No access to market

Seven phases to new product development:

New Product Strategy Development
Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by systematic approach. Need a purposeful, focused effort to identify new ways to serve a market. New opportunities appear from the changes in the environment.
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1.      Idea Generation

Continuous systematic search for new product opportunities.
    • Marketing oriented sources--identify opportunities based on consumer needs, lab research is directed to satisfy that research. 1-800#s, research etc.
    • Laboratory oriented sources--identify opportunities based on pure research or applied research.
    • Intrafirm devises--brain storming, incentives and rewards for ideas. 3Ms Post it, from choir practice. Hewlett Parkards lab is open 24 hrs. day. Analyzing existing products, reading trade publications.
      Brainstorming for your group project. Ideas should not be criticized, no matter how off-beat they are.

2.      Product Screening and Evaluation

New product check list; list new product attributes considered most important and compare each with these attributes. Check list is standardized and allows ideas to be compared.
--General characteristics, Marketing Characteristics and Production Characteristics.
Ideas with the greatest potential are selected for further research.
Do they match the organizations goals (DuPont and ICI have many patents that they have not exploited for this very reason.)
Look at companies ability to produce and market the product.
Need to look at the nature and wants of the buyers and possible environmental changes.
Concept Testing
Sample of potential buyers is presented with the product idea through a written or oral description to determine the attitudes and initial buying intentions.
This is done before investing considerable sums of money and resources in Research and Development.
Can better understand product attributes and the benefits customers feel are most important.
Would you buy the product?
Would you replace your current brand with the new product?
Would this product meet real needs?
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3.       Business Analysis

Analyze potential contribution to sales, costs and profits.
Does the product fit into the current product mix?
What kind of environmental and competitive changes can be anticipated?
How will these changes effect sales etc.?
Are the internal resources adequate?
Cost and time line of new facilities etc.?
Is financing available?
Synergies with distribution channel etc.
MIS to determine the market potential sales etc.
Patentability should be determined, last 17 years, 14 years for a pharmaceutical product.
Find out if it is technically feasible to produce the new product.
If you can produce the new product at a low enough cost so as to be able to make a profit.
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4.       Product Development

Develop a prototype, working model, lab test etc.
Attributes that consumers have identified that they want must be communicated through the design of the product.

5.       Test Marketing

Can observe actual consumer behavior.
Limited introduction in geographical areas chosen to represent intended market.
Aim is to determine the reaction of probable buyers.
It is the sample launch of the Marketing Mix.
Determine to go ahead, modify product, modify marketing plan or drop the product.
PROS are:
    • Lessens the risk of product failure.
    • Reduces the risk of loss of credibility or undercutting a profitable product.
    • Can determine the weaknesses in the MM and make adjustments.
    • Can also vary parts of the MM during the test market.
    • Need to select the appropriate MM and check the validity.
CONS are:
    • Test market is expensive.
    • Firm's competitors may interfere.
    • Competitors may copy the product and rush it out. IE Clorox detergent with bleach P&G. "In a live test you've tipped your hand, and believe me, the competition is going to come after you. Unless you have patented chemistry, they can rip you off and beat you to a national launch" -Director of Marketing at Gillette's Personnel division.
Alternatively can use a simulated test market. Free samples offered in the mall, taken home and interviewed over the telephone later.

Handout...Miller's Momemtum....

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6.       Commercialization

Corresponds to introduction stage of the Product Life Cycle.
Plans for full-scale marketing and manufacturing must be refined and settled.
Need to analyze the results of the test market to determine any changes in the marketing mix.
Need to make decisions regarding warranties etc (reduces consumers risk). Warranties can offer a competitive advantage.
Spend alot of $s on advertising, personnel etc. Combined with capital expenditure makes commercialization very expensive.

Handout...American Express To Try a Credit Card...

All stages above are identified in this article except market testing.
Need to consider:
  • the speed of acceptance among consumers and channel members;
  • intensity of distribution,
  • production capabilities,
  • promotional capabilities,
  • prices,
  • competition,
  • time period to profitability and commercialization costs.
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Buyers' Product Adoption Process

1.       Awareness
Buyers become aware of the product
2.       Interest
Buyers seek information and is receptive to learning about product
3.       Evaluation
Buyers consider product benefits and determines whether to try it
4.       Trial
Buyers examine, test or try the product to determine usefulness relative to needs
5.       Adoption
Buyers purchase the product and can be expected to use it when the need for the general type of product arises.
Rate of adoption depends on consumer traits as well as the product and the firm's marketing efforts.
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Diffusion Process

The manner in which different members of the target market often accept and purchase a product (go through the adoption process)
1.       Innovators
Techno-savvies first customers to buy a product, 2.5 % of consumers
2.       Early Adopters
Tend to be opinion leaders. Adopt new products but use discretion, 13.5%
3.       Early Majority
34% of consumers, first part of the mass market to buy the product
4.       Late Majority
Less cosmopolitan and responsive to change, 34%
5.       Laggards
Price conscious, suspicious of change, 16%, do not adopt until the product has reached maturity.
Implications to marketers, company must promote product to create widespread awareness of existence and benefits.
Product and physical distribution must be linked to patterns of adoption and repeat purchase.

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