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ACCAPaper P3
MARKETINGAND THE VALUE
OF GOODS & SERVICES
Customers &
Markets
Value chain analysis
Critical SuccessFactors
Benchmarking
Customers & markets
Market analysis
Customer analysis
Markets & segmentation
Marketing mix strategies
Customers & markets
Market analysis
A key aspect of strategy development is the identification of, and then meeting of, customer needs
Market analysis helps identify the appropriate marketing strategy – this analysis will include the
following
Appraisal & understanding of the present situation
Definition of objective of profit, turnover, product image, market share & market position by segmentEvaluation of the marketing strategies available to meet these objectives Definition of control methods to check progress against objectives & provide early warning
There are two purposes of the analysis
To identify gaps in the market where consumer needs are not being satisfied
To look for opportunities that the organization can benefit from, in terms of sales or development of new products & services
Customers & markets
Customer analysis
A customer may be an organization, a business firm or an individual consumer
Segmentation – sets of strategic questions
include the following: -
Who are the biggest, most profitable existing customers & who are the most attractive potential customers?
There are three sets of strategic questions that are used to analyze customers – segmentation, motivation & unmet needs
Do the customers fall into any logical groups on the basis of characteristics, needs or motivations?Can the market be segmented into groups requiring a unique business strategy?
Motivation – concerns the customers’ selection & use of their favorite brands, the elements of the product of service that they value most, the customers’ objectives & the changes that are occurring in the customer motivation
Unmet needs – considers why some customers are dissatisfied & some are changing brands or suppliers The analysis looks at the needs not being met that the customer is aware of
Customers & markets
Markets & segmentation One aim of segmentation is to identify groups of customers who share similar needs
for targeting
Traditional segmentation focuses
on identifying customer groups based on a
number of variable that include: -
Geographic variables Demographic variables
Psychographic variables Behavioral variables
Value based segmentation
looks at groups of customers in terms of the revenue they generate & the costs of establishing and maintaining relationships with them
Customers & markets
Marketing mix strategies
Each market segment can become a target market & would required a unique marketing mix for the organization to exploit it properly
The marketing mix is the set of controllable variables that the firm can use to influence the buyers’ responses (Kotler)
Brand name Product
The variables are commonly grouped into four classes the McCarthy refers to as ‘the four Ps’ – product, price, promotion & place
Packaging Features Options
Quality Warranty Service Style appeal
Level Price Discounts Allowances Payment terms
Delivery options
Contd.
Customers & markets
Marketing mix strategies
Sales promotion Promotion Personal
selling Publicity Advertising
Distribution channels Place Distribution
coverage Outlet locations
Inventory levels
Sales territories
Inventory locations
Critical success factors
What are critical success factors?
Developing suitable critical success
factors
Critical success factors
What are critical success factors?
Critical success factors (CSFs) are performance requirements that are fundamental to an organization’s success
In this context CSGs should thus be viewed as those product features that are particularly valued by customers
This is where the organization must outperform competition
Measured targets for CSFs are called key performance indicators (KPIs)
Critical success factors Developing suitable critical success factors
In developing CSFs from customer needs, the following issues should be borne in mind: -
CSFs need to focus on the most important factors that ultimately determine the buying decision
Many factors are taken for granted by customers – these give rise to threshold features, i.e. all products must have these simply to enter the market
CSFs will vary from segment to segment The organization will need to assess its strategic capabilities to identify which segments it should regret
Customers’ understanding of value can vary over time, so the organization needs to be open to changing the monitored CSFs
Value chain analysis
The value chain
Applying the value chain in a scenario
Value networks
Value chain analysis
The value chain
Porter developed the value chain to help identify which activities within the firm were contributing to a competitive advantage & which were not
The approach involves breaking down the firm into five ‘primary’ and four ‘support’ activities, & then looking at each to see if they give a cost advantage or quality advantage
Contd.
Value chain analysis
The value chain
Primary activities Inbound logistics – receiving, storing & handling raw material inputs Operations – transformation of the raw materials into finished goods & services Outbound logistics – storing, distributing & delivering finished goods to customers Marketing & sales – e.g. sponsorship of a sports celebrity could enhance the image of the product Service – all activities that occur after the point of sale, such as installation, training and repair
Support activities Firm infrastructure – how the firm is organized
Technology development – how the firm uses technologyHuman resources development – how people contribute to competitive advantage Procurement – purchasing, but not just limited to materials
Contd.
Value chain analysis
The value chain
All organizations in a particular industry will
have a similar value chain, which will include
activities such as:
Obtaining raw materials
Designing products
Building manufacturing facilities
Developing co-operative agreements
Providing customer service
It is vital that the linkages between the different elements of a value chain are considered Firstly this is to ensure consistency Secondly it may be that through linking separate activities more effectively than competitors, a firm can gain a competitive advantage
Value chain analysis
Apply the value chain in a scenario
To gain a competitive advantage over its rivals a company must either
Perform value creation function at a lower cost than its rivals ORPerform them in a way that leads to differentiation & a premium price
Value chain analysis looks at each of the
processes that make up the chain of activity and:
Rates how important it is in a given company’s production or service activity
Rates how the company compares to its competitors
Helps to decide how individual activities might be changed to reduce costs of operation Helps to improve the value of the organization’s offerings
Value chain analysis
Value networks
The organization’s value chain does not exist in isolation. There will be direct links between the inbound logistics of the firm and the outbound logistics of its suppliers, for example. An understanding of the value system & how the organization’s value
chain fits in to it will therefore aid in the strategic planning process
A value network is a web of relationships
that generate economic value & other benefits
through complex dynamic exchanges
between two or more individuals, groups or
organizations
Tangible value exchanges – involve all exchanges of goods, services or revenue, including all transactions involving contracts & invoices, return receipt of orders, request for proposals, confirmations or payment
Intangible knowledge exchanges – include strategic information, planning knowledge, process knowledge, technical know-how, collaborative design, policy development, etc.
Benchmarking
Why benchmarking?
Types of benchmarking
Benchmarking
Why benchmark?
Benchmarking is the process of systematic comparison of a service, practice or process
Its use is to provide a target for action in order to improve competitive position
The main benefits include:
Improved performance & added value
Improved understanding of environmental pressures
Improved competitive position
A creative process of change
A target to motivate & improve operations
Increased rate of organizational learning
Contd.
Benchmarking
Why benchmark?
Assign responsibilities •Structure team•Clarify roles & authority•Collect internal, information
Select processes to be benchmarked
•Critical •Significant
Review•Appropriateness of measures/objectives •Benchmarking process
Identify potential partners •Benchmarking club•Successful partners•Known leaders
Implement •Establish new standards •Define objectives & time scale•Assign responsibility
Analysis •Performance gap•Target future performances
Interaction •Visit •De-brief •Document
Benchmarking
Types of benchmarking
Managers compare the performance of their products or processes externally with those of competitors & best-in-class companies and internally with other operations
within their own firms that perform similar activities
Strategic benchmarking Involves considering high-level aspects such as core competencies, developed new products & services and improving capabilities for dealing with changes
Historical benchmarking Internal benchmarking involves seeking partners from within the same organization
Industry/sector benchmarking
Performance benchmarking is used where organizations consider their positions in relation to performance characteristics of key products or services
Functional benchmarking is used when organizations look to benchmark with partners drawn from different business sectors or areas of activity to find ways to improving similar functions or work processes Contd.
Benchmarking
Types of benchmarking
Best-in-class benchmarking
External benchmarking involves seeking outside organizations that are known to be best-in-class
Process benchmarking is used when the focus is on improving specific critical processes and operations
International benchmarking
Used where partners are sought from other countries because best practitioners are located elsewhere in the world and/or there are too few benchmarking partners within the same country to produce valid results
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