LTW 2012 - 00 Marketing Basics

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Global Marketing and SalesDoing Business in Latin America

00. Marketing Basics

This presentation (and extra material) belongs to Natalia Ceruti´s Global Marketing Course, within the Leading the Way to Success in Latin America Program. Should not be copied, nor reproduced, in full or in parts, without Natalia Ceruti´s permission.

The Very Basics


First things, first

Marketing consists of the activity, institutions, and

processes that create, communicate, deliver, and

exchange offerings that have value for stakeholders

and society.


First things, first

Marketing consists of the activity, institutions, and

processes that create, communicate, deliver, and

exchange offerings that have value for stakeholders

and society.


Value

Value Proposition is the set of benefits or values a company promises to deliver to customers to satisfy their needs.

Perceived Benefit

• Product or Service

• Additional Services

• Personal Value

• Image

Perceived Sacrifice

• Price (Money)

• Time

• Effort

• Psychological Cost

Value: difference (between benefits and sacrifices) perceived by a Customer, among the company´s

offering and the competence´s offering.

V = B - S


Value

Value for Customer

Value for Shareholder

VALUE FOR MONEY MONEY FOR MONEY

Double mission


Controllable & Uncontrollable


Marketing Strategy & Plan


PEST


Porter´s Five Forces


Michael Porter

• Four basic competitive positioning strategies

1. Overall cost leadership

2. Differentiation

3. Focus

4. Middle-of-the-roaders


Michael Porter

Overall cost leadership strategy is when a company achieves the lowest production and distribution costs and allow it to lower its

prices and gain market share.

Differentiation strategy is when a company concentrates on creating a highly differentiated product line and marketing program

so it comes across as an industry class leader.

Focus strategy is when a company focuses its effort on serving few market segments well rather than going after the whole market.

Middle-of-the-roaders are companies without a clear strategy. Companies that pursued a clear strategy would achieve superior

performance, others would not succeed.

Consumer Markets &Consumer Behaviour


Consumer Behaviour

Consumer Buyer Behavior refers to the buying behavior of final consumers - individuals and households who buy goods

and services for personal consumption.

Consumer Market refers to all of the personal consumption of final consumers.


Model of Consumer Behaviour

Marketing:ProductPricePlace

Promotion

Stimuli

Other:Economical

TechnologicalPoliticalCultural

Individual Characteristics

Black Box

Decision Process

ProductBrandShop

TimingQuantity

Responses


Model of Consumer Behaviour


Cultural Factors

Culture is the learned values, perceptions, wants, and behavior from family and other important institutions.

Subculture are groups of people within a culture with shared value systems based on common life experiences and

situations (Hispanic, African American, Asian, Mature, etc.).

Social Classes are society’s relatively permanent and ordered divisions whose members share similar values, interests, and

behaviors. Social class is measured by a combination of occupation, income, education, wealth, and other variables.


Social Factors

Membership Groups have a direct influence and to which a person belongs.

Aspirational Groups are groups to which an individual wishes to belong.

Reference Groups are groups that form a comparison or reference in forming attitudes or behavior.

Opinion Leaders are people within a reference group with special skills, knowledge, personality, or other characteristics

that can exert social influence on others. Buzz Marketing & Social Marketing.


Social Factors

Family is the most important consumer-buying organization in society.

Social Roles and Status are the groups, family, clubs, and organizations to which a person belongs that can define role

and social status.


Personal Factors

Age and life-cycle stage•Youth: younger than 18•Getting started: 18-35•Builders: 35-50•Accumulators: 50-60•Preservers: over 60

Occupation affects the goods and services bought by consumers.

Economic situation (trends in):•Personal income•Savings•Interest rates

Lifestyle is a person’s pattern of living as expressed in his or her psychographics. Measures a consumer’s AIOs (activities, interests, and opinions) to capture information about a person’s pattern of

acting and interacting in the environment.


Personal Factors

Personality refers to the unique psychological characteristics that lead to consistent and lasting responses to the consumer’s

environment.

Brand Personality refers to the specific mix of human traits that may be attributed to a particular brand (Sincerity,

Excitement, Competence, Sophistication, Ruggedness).

Self-Concept refers to people’s possessions that contribute to and reflect their identities.


Psychological Factors

Motive is a need that is sufficiently pressing to direct the person to seek satisfaction.

Motivation Research refers to qualitative research designed to probe consumers’ hidden, subconscious motivations.

Freud’sTheory

Behavioris guided by

subconsciousmotivations

Maslow’sHierarchyof Needs

Behavioris driven by

lowest, unmet need

Herzberg’sTwo-Factor

Theory

Behavior isguided by motivating

and hygienefactors



Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the

world from three perceptual processes.

Selective Attention is the tendency for people to screen out most of the information to which they are exposed.

Selective Distortion is the tendency for people to interpret information in a way that will support what they already believe.

Selective Retention is the tendency to remember good points made about a brand they favor and to forget good points about

competing brands.



Learning is the changes in an individual’s behavior arising from experience and occurs through interplay of: Drives,

Stimuli, Cues, Responses, Reinforcement.

Belief is a descriptive thought that a person has about something based on: Knowledge, Opinion, Faith.

Attitudes describe a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea.


Types of Buying Decision Behavior

• Complex buying behavior• Dissonance-reducing buying behavior• Habitual buying behavior• Variety-seeking buying behavior



• Purchasers are highly motivated when:• Product is expensive• Product is risky• Product is purchased infrequently• Product is highly self-expressive

Complex Buying Behaviour: Consumers are highly motivated in a purchase and perceive significant differences among

brands.



Dissonance-reducing Buying Behavior occurs when consumers are highly involved with an expensive, infrequent,

or risky purchase, but see little difference among brands.

Post-purchase Dissonance occurs when the consumer notices certain disadvantages of the product purchased or hears

favorable things about a product not purchased.



Habitual Buying Behavior occurs when consumers have low involvement and there is little significant brand difference.

Variety-seeking Buying Behavior occurs when consumers have low involvement and there are significant brand

differences.

Market Segmentation


Segmenting Consumer Markets

Geographic Segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities.

Demographic Segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality.

Age and Life-Cycle Stage Segmentation is the process of offering different products or using different marketing approaches for different

age and life-cycle groups.

Gender Segmentation divides the market based on sex (male or female).



Income Segmentation divides the market into affluent or low-income consumers.

Psychographic Segmentation divides buyers into different groups based on social class, lifestyle, or personality traits.

Behavioral Segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.

Occasion Segmentation divides buyers into groups according to occasions when they get the idea to buy, actually make

purchases, or respond to a product.



Benefit Segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each

benefit.

User Status divides buyers into ex-users, potential users, first-time users, and regular users of a product.

Usage Rate divides buyers into light, medium, and heavy product users.

Loyalty Status divides buyers into groups according to their degree of loyalty.



Multiple Segmentation Bases are used to identify smaller, better-defined target groups.

Geodemographic Segmentation is an example of multivariable segmentation that divides groups into consumer

lifestyle patterns.


Market - Product Grid


Requirements for Effective Segmentation

Measurable in terms of size, purchasing power, and profiles of the segments.

Accessible refers to the fact that the market can be effectively reached and served.

Substantial refers to the fact that the markets are large and profitable enough to serve.

Differentiable refers to the fact that the markets are conceptually distinguishable and respond differently to marketing mix elements and programs.

Actionable refers to the fact that effective programs can be designed for attracting and serving the segments.


Evaluating Market Segments

• Segment size and growth • Smaller versus larger segments• Growth potential

• Segment structural attractiveness• Competition• Substitute products• Power of buyers• Power of suppliers

• Company objectives and resources• Competitive advantage• Availability of resources• Consistent with company objectives


Target Marketing Strategies

Undifferentiated Marketing targets the whole market with one offer. (Mass marketing. Focuses on common needs rather

than what’s different).

Differentiated Marketing targets several different market segments and designs separate offers for each one. (Goal is to achieve higher sales and stronger position. More expensive

than Undifferentiated Marketing).

Concentrated Marketing targets a small share of a large market. (Limited company resources. Knowledge of the

market. More effective and efficient).


Target Marketing Strategies

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.

(Local marketing. Individual marketing).

• Local Marketing involves tailoring brands and promotion to the needs and wants of local customer groups (Cities, Neighborhoods, Stores).• Benefits:

• Increased marketing effectiveness in competitive markets• More customer-specific offerings

• Challenges:• Increased manufacturing and marketing costs• Less economy of scale• Logistics • Dilution of company image

• Individual Marketing involves tailoring products and marketing programs to the needs and preferences of individual customers (One-to-one marketing, Mass customization, Markets-of-one marketing)


Choosing a Targeting Strategy

• Depends on:• Company resources• Product variability• Product life-cycle stage• Market variability• Competitor’s marketing strategies

Differentiation & Positioning


Differentiation & Positioning

Product Position is the way the product is defined by consumers on important attributes - the place the product

occupies in consumers’ minds relative to competing products. (Perceptions, Impressions, Feelings)

Positioning Maps show consumer perceptions of their brands versus competing products on important buying dimensions.

(Price and Orientation)


Chocolate Milk for Adults?


Chocolate Milk for Adults?


Differentiation and Positioning

• Choosing a Differentiation and Positioning Strategy

1. Identifying a set of possible competitive advantages

2. Choosing the right competitive advantages

3. Selecting an overall positioning strategy

4. Developing a Positioning Statement



1. Identifying a set of possible competitive advantages to build a position by providing superior value from:• Product differentiation• Service differentiation• Channels• People• Image

Competitive Advantage is the advantage over competitors gained by offering greater value either through lower prices or

by providing more benefits that justify higher prices.



2. Choosing the Right Competitive Advantages. A difference is worth establishing to the extent that it satisfies the following criteria:• Important• Distinctive• Superior• Communicable• Preemptive• Affordable



Points-of-difference (PODs) are attributes or benefits consumers strongly associate with a brand, positively

evaluate, and believe they could not find to the same extent with a competitive brand.

Points-of-parity (POPs)are associations that are not necessarily unique to the brand but may be shared with other

brands.



PODs examples

• Product form

• Features

• Performance

• Conformance

• Durability

• Reliability

• Reparability

• Style

• Design

• Ordering ease

• Delivery

• Installation

• Customer training

• Customer consulting

• Maintenance



3. Selecting an Overall Strategy• More for more• More for the same• Same for less• Less for much less• More for less

Value Proposition is the full mix of benefits upon which a brand is positioned.



4. Developing a Positioning Statement

Positioning Statement states the product’s membership in a category and then shows its point-of-difference from other

members of the category.

Products, Services & Brands


Product and Service Decisions

• Individual Product and Service Decisions

• Product attributes (Quality, Features, Style & Design)

• Branding

• Packaging

• Labeling

• Product support services

• Product Line Decisions

• Length (number of items: Stretching, Filling)


Branding

• Advantages of Strong Brands• Improved perceptions of product performance• Greater loyalty• Less vulnerability to competitive marketing actions• Less vulnerability to crises• Larger margins• More inelastic consumer response• Greater trade cooperation• Increased marketing communications effectiveness• Possible licensing opportunities

Brand represents the consumer’s perceptions and feelings about a product and its performance. It is the company’s promise to deliver

a specific set of features, benefits, services, and experiences consistently to the buyers.


Branding

Brand Equity is the positive differential effect that knowing the brand name has on customer response to the product or service.

Brand equity provides competitive advantage (Consumer awareness and loyalty, Benefits, Beliefs and Value).

Customer Equity is the value of the customer relationships that the brand creates.

Brand Valuation is the process of estimating the total financial value of the brand.


Customer-based Brand Equity pyramid

Pricing Strategies


Pricing Strategies

New Product Pricing Strategies• Skimming• Penetration

Price Adjustment Strategies• Discount and allowance

pricing• Segmented pricing• Psychological pricing• Promotional pricing• Geographical pricing• Dynamic pricing• International pricing

Product Mix Pricing Strategies• Product line pricing• Optional product pricing• Captive product pricing• By-product pricing• Product bundle pricing Price Change

• Price cuts• Price increases


Pricing Strategies


New Product Pricing Strategies

• Product quality and image must support the price

• Buyers must want the product at the price

• Costs of producing the product in small volume should not cancel the advantage of higher prices

• Competitors should not be able to enter the market easily

Market Skimming Pricing is a strategy with high initial prices to “skim” revenue layers from the market.


New Product Pricing Strategies

Market Penetration Pricing sets a low initial price in order to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share.

• Price sensitive market

• Inverse relationship of production and distribution cost to sales growth

• Low prices must keep competition out of the market


Product Mix Pricing Strategies

Product line pricing takes into account the cost differences between products in the line, customer

evaluation of their features, and competitors’ prices.

Optional product pricing takes into account optional or accessory products along with the main product.

Captive product pricing involves products that must be used along with the main product.


Product Mix Pricing Strategies

Two-part pricing is where the price is broken into Fixed fee & Variable usage fee.

By-product pricing refers to products with little or no value produced as a result of the main product. Producers

will seek little or no profit other than the cost to cover storage and delivery.

Product bundle pricing combines several products at a reduced price.

Marketing Channels and Supply Chain Management


Marketing Channels

Marketing Channel is a set of independent organizations that help make a product or service available for use or

consumption by the consumer or business users.

• Channel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who would use them.

• Producers use intermediaries because they create greater efficiency in making goods available to target markets.

• Intermediaries offer the firm more than it can achieve on its own through their contacts, experience, specialization, and scale of operations.

• From an economic view, intermediaries transform the assortment of products into assortments wanted by consumers


How Marketing Channels add Value

• Information (gathering and distributing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange).

• Promotion (developing and spreading persuasive communications about an offer).

• Contacts (finding and communicating with prospective buyers).

• Matching (shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging).


How Marketing Channels add Value

• Negotiation (reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred).

• Physical Distribution (transporting and storing goods).

• Financing (acquiring and using funds to cover the costs or carrying out the channel work).

• Risk Taking (assuming the risks of carrying out the channel work).


Channel Members

Indirect Marketing Channels contain one or more intermediaries.

Channel Level refers to each layer of marketing intermediaries that performs some work in bringing the

product and its ownership closer to the final buyer.

Direct Marketing Channel has no intermediary levels; the company sells directly to consumers.


Channel Design Decisions

• Designing a channel system requires:

• Analyzing consumer needs

• Setting channel objectives

• Identifying major channel alternatives

• Evaluation

Integrated Marketing Communications Strategy


The Promotion Mix

The Promotion Mix is the specific blend of advertising, public relations, personal selling, and direct-marketing

tools that the company uses to persuasively communicate customer value and build customer relationships.

• Major Promotion Tools• Advertising• Sales promotion• Public relations• Personal selling• Direct marketing


The Promotion Mix

Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified

sponsor. (Broadcast, Print, Internet, Outdoor)

Sales Promotion is the short-term incentives to encourage the purchase or sale of a product or service. (Discounts,

Coupons, Displays, Demonstrations)

Public Relations involves building good relations with the company’s various publics by obtaining favorable

publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and

events. (Press releases, Sponsorships, Special Events, Web)


The Promotion Mix

Personal Selling is the personal presentation by the firm’s sales force for the purpose of making sales and building

customer relationships. (Sales Presentations, Trade Shows, Incentive Programs)

Direct Marketing involves making direct connections with carefully targeted individual consumers to both obtain an

immediate response and cultivate lasting customer relationships—by using direct mail, telephone, direct-

response television, e-mail, and the Internet to communicate directly with specific consumers (Catalog,

Telemarketing, Kiosks)


Total Promotion Mix

Advertising reaches masses of geographically dispersed buyers at a low cost per exposure and enables the seller to repeat a message many times. But it is impersonal, cannot

be directly persuasive as personal selling, and can be expensive.

Personal Selling is the most effective method at certain stages of the buying process, particularly in building

buyers’ preferences, convictions, and actions and developing customer relationships.


Total Promotion Mix

Sales Promotion includes coupons, contests, cents-off deals, and premiums that attract consumer attention and

offer strong incentives to purchase. It can be used to dramatize product offers and to boost sagging sales.

Public Relations is a very believable form of promotion that includes new stories, features, sponsorships, and

events.

Direct Marketing is a non-public, immediate, customized, and interactive promotional tool that includes direct mail,

catalogs, telemarketing, and online marketing.


Total Promotion Mix

Push Strategy involves pushing the product to the consumers by inducing channel members to carry the

product and promote it to final consumers. Used by B2B companies.

Pull Strategy is when the producer directs its marketing activities toward the final consumers to induce them to

buy the product and create demand from channel members. Used by B2C companies.



Sources

• Ferrell, O.C. and Hartline, M. D. (2005). Marketing Strategy, 3rd ed. New York: Thomson Education.

• Kerin, R., Hartley, S. and Rudelius, W. (2007). Marketing The Core, 2nd ed. New York: MacGraw-Hill Irwin.

• Kotler, P. and Armstrong, G. (2006). Principles of Marketing, 11th ed. New Jersey: Pearson Education.

• Kotler, P. and Keller, K. L. (2009). Marketing Management, 13th ed. New Jersey: Pearson Education.