Marketing Exam 2

Strategic Planning

A "Matching" Process between Internal and External

Internal: Organization's Goals & Capabilities

External: Marketing Opportunities

Steps in Strategic Planning

Marketing Process Model (5)

Mission Statement

A statement of the organization's purpose (not part of the marketing plan)

Take into account:

What is our business?

Who is the customer? What do they value?

What are our core competencies?

What should our business be?

Good Mission Statements Are

Market-oriented

Realistic

Specific

Motivating

Illustrative of distinctive competencies

• What is our competitive advantage?

Mission statement leads to

Detailed supporting objectives for each level of management

Must be measurable

Designing the Business Portfolio (def, 3 objectives, alternate name)

A combination of businesses that has the potential to reach objectives.

1. Which businesses to enter?

2. Which to exit?

3. How much to invest?

"Businesses" may be called Strategic Business Units (SBUs), divisions, markets, product lines, etc.

BCG Growth Share Matrix

Some Criticisms of the BCG Matrix

• Limited number of variables used

• Ignores interrelationships between businesses. (e.g., some Disney movies are dogs)

• The placement of a business in the matrix is highly dependent on definition of market

Product/Market Expansion Grid

*Used to identify growth opportunities

Market Penetration

Strategy: to increase sales to current customers without changing the products being sold

• Can be achieved by:

  • Price

  • Place

  • Promotion

ex: Coupon to come back to a coffee company

Market Development

Strategy: identify and develop new markets (geographic or demographic) for current products

Product Development

Strategy: offering modified or new products to current markets.

Diversification

Strategy: start up or buy businesses outside of current products and markets.

Strategy Formulation Steps

1) What do we know?

2) What do we want to accomplish?

3 & 4) How will we do it?

Marketing Management

Marketing Plan (8 steps)

1. Executive Summary

2. Current Marketing Situation

3. SWOT Analysis

4. Objectives

5. Marketing Strategy:

a. Segmentation, Targeting & Positioning (STP)

b. The 4 Ps of the Marketing Mix

6. Action Programs

7. Budgets

8. Controls

SWOT Analysis

The Four Ps of Marketing

Marketing Implementation

Successful implementation depends upon (5)

The execution of a plan is usually the hardest part.

Successful implementation depends upon:

Company culture

Employees' shared beliefs and values

Organizational structure

Reward systems

Implementation often ends up being more about personal relationships and/or luck than plans took into account.

Marketing Control

Evaluate the results of marketing strategies and plans

- Set marketing goals

- Measure actual vs. expected performance on goals

- Take corrective action to close goals between goals and performance

Steps in STP

Segmentation

Targeting

Positioning

Segmentation

Dividing a market into smaller groups that:

- Have distinct needs, characteristics, or behaviors

- Respond similarly to marketing efforts, and therefore,

- Might require their own products and marketing (4 Ps)

• If you’re segmenting and you want segmentation to be differentiable, you have to distinguish the markets from each other

Types of Segmentation (5)

Geographic

Demographic

Psychographic

Behavioral

Intermarket

Geographic Segmentation

• Dividing a market into different geographic units (e.g., country, country region, city size)

• McDonald’s in different countries has different products

  • McDonald’s in Germany has beer

  • McDonald’s in New England has lobster rolls

Demographic Segmentation

Dividing a market based on demographic variables (e.g., age, gender, family size, family life cycle, race, generation)

Easier to measure than most other types of variables

Psychographic Segmentation

• Dividing the market based on:

  • Social class

    • Ex: upper, middle, working class, lower classes

  • Lifestyle

    • Ex: Hollister - California, high school/college, surfer look 

  • Personality

    • Ex: luxury travelers

    • Nike: everyone’s an athlete

    • Under Armour: fierce and intense

    • Adidas: creative

Behavioral Segmentation

Based on behaviors such as:

Benefits sought

Usage occasion

User status

Usage rate

Loyalty status

Intermarket Segmentation

Segments of consumers who have similar needs and buying behavior even though they are located in different countries

consumers use our products the same way, so we don’t have to change our product

Requirements for Effective Segmentation

Measurable

- can be identified and measured

Accesible

- can be reached and served

Substantial

- large and profitable enough

Differentiable

- separate from other segments

Actionable

- can be marketed to by our company

Targeting

• Choosing the segment that is most attractive to your organization

• companies selecting a specific age group to pursue

Evaluating Market Segments

Internal

• Does the segment fit with our objectives and resources?

External

• How big is the segment? What is its growth potential?

What is the competitive climate like? Are there lots of substitute products?

How much power do suppliers and customers hold?

Target Marketing Strategies

Differentiated (Segmented) Marketing

Targets several market segments and designs separate offers for each

Concentrated (Niche) Marketing

Targets a large share of one or a few small segments or niches

• TetraMin fish food - main go-to for fish food

• Southwest Airlines - used to be specifically in the Southwest

• Etsy - someone can sell their crocheted llamas and be THE crochet llama seller

• Coca-Cola has so many different flavors, which goes after a small niche

Micromarketing

Tailoring products and marketing programs to suit the tastes of specific locales and/or individuals.

- Local Marketing

- Individual Marketing

• ex: making your own pizza, custom products

Individual Marketing

a.k.a. Markets-of-One Marketing or One-to-One Marketing

Main tool: mass customization

Positioning

• The key concept to be communicated to the target consumer

• The place the product occupies in the consumer's mind relative to competing products

• the stage companies focus on the messaging

"The Battle for the Mind"

"Products are created in a factory, but brands are created in the mind."

Walter Landor

Competitive Advantage

Differentiate your brand based on:

• Product

• Services

• Channels

• People

• Image

Two Types of Differentiation

Vertical Differentiation:

- One product is clearly better

- 5 star hotel vs 1 star hotel

Horizontal Differentiation:

- "Better" is a matter of opinion

- Nike vs Adidas

Positioning Statement

A statement that summarizes company or brand positioning

Slogans are based on positioning

• To (target segment) who (need) (brand) is (concept) that (point-of-difference).

Marketing Process Model (3)

Core Customer Value

Actual Product

- Brand name, Quality, Features, Packaging

Augmented Product

- Delivery, Product support, Warranty, After-sale service

Product decisions are driven by:

Customer Behavior

Marketing Information

Microenvironment

Macroenvironment

Strategy

Maslow's Hierarchy of Needs

Types of Consumer Products

Convenience

Shopping

Specialty

Unsought

Convenience Consumer Products

Frequent purchase, little planning, little comparison/effort

Low price

Widespread distribution; convenient locations

Mass promotion by the producer

Ex. Toothpaste, paper towels, detergent, toilet paper, etc

Consumer Products - Shopping

Less frequent purchase; much planning and shopping effort, comparison of brand price, quality, and style

Higher price

Selective distribution in fewer outlets

Advertising and personal selling by both producer and resellers

Ex. Airpods, Beats Headphones, North Face jackets, Major appliances, tv, furniture, clothing

Specialty Consumer Products

• Strong brand preference and loyalty; special purchase effort; little comparison of brands; low price sensitivity

• High price

• Exclusive distribution in only one or a few outlets per market area

• More carefully targeted promotion by both the producer and resellers

• don’t have wide distribution strategies

• Ex. Luxury goods, like Rolex, Bentley, diamond jewelry stuff over $1000

Unsought Consumer Products

Little product awareness or knowledge (or, if aware, little or even negative interest)

Price varies

Distribution varies

Aggressive advertising and personal selling by the producer and resellers

Ex. Life insurance, Red Cross blood donations, Free food, butter spreader, dictionaries

Other "Products"

Industrial products

Organizations: For-profit (businesses) and nonprofit (schools, churches, etc.)

People ("Persons"): Politicians, entertainers, pro athletes, doctors, lawyers, etc.

Places: Tourism, country-of-origin, immigration, etc.

Ideas (social marketing): Public health campaigns, environmental campaigns, family planning, human rights, etc.

Performance vs Conformance Quality

Performance Quality

- how well it performs its intended function and meets customer expectations (ex: “Lexus is so well-built”)

Conformance Quality

- the degree to which it meets established specifications and requirements (ex: “Honda is reliable”)

Levels of Product Decisions

Individual product decisions

Product line decisions

Product mix decisions

Individual Product Decisions

Labeling

• Identifies the product or brand

• Supports the brand's positioning

• Adds personality to the brand

Product Line Decisions

• The number of items in a product line

  • Apple has iphone, airpods, macbook, ipad product lines

• Adjust length by:

  • Stretching

    • Downward

      • Apple releasing a $200 phone for kids with 1 hr battery life

    • Upward

      • Apple releasing a $3000 phone with unlimited storage that will never break

    • Both directions

    • Filling

      • iPhone coming in two different sizes, colors, and different amounts of storage

Product Mix

All of the product lines and items that a particular seller offers

Product mix dimensions:

• Width - the number of different product lines carried

  • iPhone, AirPods, MacBook, iPad: 4 product lines for Apple

• Length - the number of items in a line

• Depth - The number of versions offered of a product in a line

  • We add to depth by filling

• Consistency - how closely related various lines are

Product Line & Mix Example

Product Mix: Smeal College of Business (all of it)

Product Lines: Smeal ETM classes, Smeal majors, Smeal major-specific classes (specific lines as part of the product mix)

What is a brand?

• A marker of identification for a product

• A promise to the customer

• Brand identity and brand consistency lead to feelings of trust

Brand Equity

The positive effect that knowing the brand name has on customer response to the product.

High brand equity provides:

• Greater awareness and loyalty

• Basis for strong, profitable customer relationships

• Willingness to buy over competitors and/or willingness to pay a premium for the brand

Brand Positioning

Based on:

- Product attributes

- Benefits

- Beliefs and values (ex: Dove)

Brand Name Selection

Desirable qualities:

- Suggests product's benefits and qualities

- Easy to pronounce, recognize, and remember

- Distinctive

- Extendable, not limited to one particular product

- Translates easily into foreign languages

- Capable of being registered and legally protected

- Rhyme

- Alliteration

- Repetition

Brand Name Protection

• Genericization voids trademark’s legal protection

  • Genericization - when a brand name becomes the common, generic term for a type of product

• Must include the registered trademark symbol 

• Some include the word “brand” for added protection

  • Examples: Tabasco, Jell-O, Band-Aid

The Law of Shape (Ries and Ries*)

The ideal shape for a logo is Horizontal

Brand Development Strategies

Line Extension

Introduction of additional items within the current product category under the same brand name (e.g., new flavors, forms, colors, ingredients, or package sizes)

- Ex. Bud Light Lime, Cherry Coke, Golden Oreo

Cannibalization

Killing the sales of the original product after a new line extension

(Avoid Cannibalization)

Brand Extension

• Using a successful brand name to launch a product in a new category 

  • Apple using its successful brand name to launch watches

  • Mr Clean creates a car wash 

• There is instant credibility when a successful brand name creates new products

• Customers accept the products faster

Multibranding

• Multiple brands by the same company in the same product category 

  • Yum! Brands owns A&W, KFC, Long John Silver’s, Pizza Hut, Taco Bell

  • Pepsi owns Pepsi, Mountain Dew, Mug, Sierra Mist

New Brands

Used when existing brand names are either unsuitable for brand extension or the company doesn't want to dilute them

The Law of the Word (Ries and Ries*)

• a brand should aim to own a single, powerful word in the consumer's mind.

• ex: Mercedes-Benz may own the word "prestige" in the minds of consumers (22 Immutable Laws of Branding)

Four Service Characteristics

New Product Development, (Why new products?)

New products are crucial for the health of the enterprise

- Rejuvenate

- Grow

Tied to higher stock values and internal motivation for employees

NPD Process (9)

Idea generation

Idea Screening

Concept Development

Concept Testing

Marketing Strategy Development

Business Analysis

Product Development

Test Marketing

Commercialization

*Having skill sets for one point in the process does not mean you're also good at the others.

Idea Generation

The systematic search for new product ideas.

Internal sources:

• Company employees at all levels

External sources:

• Customers, competitors, distributors, suppliers, outsourcing partners

Idea Screening

Screening process to reduce # of ideas by spotting good ones and dropping poor ones.

Describe product, target market, and competition

Estimate market size, product price, development time and costs, manufacturing costs, and rate of return

Evaluate against a set of company criteria for new products

Concept Development

• Translate your product idea into a detailed concept stated in meaningful consumer terms (i.e., what will the consumer get out of this product?)

• E.g., A (descriptor of product) that provides (benefit/feelings/results)

• E.g., A convenience restaurant that provides high-quality, fresh, made-to-order food

  • Sheetz changed their logo because they were adding decent food to their array of products

Concept Testing

• Do this with a group of target consumers to find out level of appeal

• In doing so, describe the product and elicit responses to the product

• Sample Testing:

  • Do you understand the concept behind the product?

  • Is this concept believable?

  • What are the major benefits of this product?

  • How does it compare with other similar products?

  • What improvements might you suggest?

  • What factors might affect your decision to buy this product?

Marketing Strategy Development

• An initial marketing strategy is designed for the new product, consisting of:

  • Target market and initial objectives

    • Target market, planned product positioning, and goals for sales, market share, and profit for the first few years. Usually first-year market is higher than other years

  • Launch tactics 

    • Price, distribution, and marketing budget for the first year

  • Long-term objectives

    • Long-run sales and profit goals, marketing mix (4Ps) to be used

Business Analysis

Does the idea make business sense?

Involves a review of the sales, costs, and profit projections to assess fit with company objectives

Assess risk under various scenarios

If results are positive, project moves to the product development phase

Product Development

Develop from concept into actual product ("_").

Investment increases considerably: moving from idea into realm of reality.

Product testing often happens alongside development.

Test Marketing

Product & marketing program introduced in a limited setting

Can be expensive and time consuming, and shows your plans to competitors

New Product Failures

- Only 10% of new consumer products are still on the market and profitable after 2 years.

- Less than 2% are considered "truly successful."

Failure is due to:

- Problems at any stage of the marketing process

Commercialization

• LAUNCH!!

• Must decide when and where to initially introduce the product

  • Ex: Sheetz Card

• Must develop a market rollout plan

  • Where to go next?

Product Life Cycle (PLC)

Introduction Stage

Product is first launched

Cost of informing & acquiring customers is high, and sales (as well as sales growth) are usually slow

Profits are usually negative

Objective: Create product awareness and trial

Growth Stage

If the product gains traction, sales start growing rapidly

Higher unit sales lead to lower average costs per unit sold, and profitability can be achieved

Objective: Maximize market share. The growth in sales will lead to a number of competitors entering the market, fighting over initial customers

Maturity Stage

• Sales level off

• Many people already have the product; some are re-buying or upgrading

• Production costs are usually low, so those with high market share can still make good profits

• Objective: Defend market share. Try to get customers to switch to your product

Ways to Grow during "Maturity"

Modify the Market

• Target new segments OR increase usage among current customers

Modify the Product

• Deliver an improved product to get new or repeat customers

Modify the rest of the Marketing Mix

• Add services, cut prices, change distribution, change promotion

Decline Stage

Sales fall, as people do not need to buy the product anymore

Unit sales and prices fall; difficult to remain profitable despite low production costs

Some niche products may do well when competitors exit the market

Objective: Reduce expenses to stay profitable, milk the product and invest elsewhere. If able to, "restart" PLC, otherwise look for a way out on time

Styles, Fashions, Fads

• Style is a basic but distinctive mode of expression (e.g., formalwear vs casualwear, country music, leather and denim jackets, a colonial house, hip-hop music)

• Fashion is a popular style in a given field (e.g., Uggs, white Air Force 1s, Beats headphones, lululemon cross bags, big teased hair, Jay-Z, athleisure)

• Fad is a fashion that enters quickly, is adopted quickly, and declines fast (e.g., pet rocks, silly bands, Webkinz, Gangnam Style, Rubik's Cube, fidget spinners, Pokémon Go, dab, Snapchat dog filter)

Practical Problems of the PLC Model

Reality is never as "clean" and clear as the PLC curve

It can be hard to even identify which stage of the PLC a product is really in

Hard to forecast the length of each stage of the PLC

Strategy is both a result and a cause of the PLC