Studiengang Betriebswirtschaftslehre: Marketing
Grundlagenstudium Marketing, Hochschule Ingolstadt, Prof. Dr. Andrea E. Raab
What is marketing not ?????
- 2 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
What is marketing ?????
FUTURE
CUSTOMER
CUSTOMER
CUSTOMER
CUSTOMER
CUSTOMER
- 3 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
CUSTOMER
CUSTOMER
CUSTOMER
• Nature and function of marketing
• Strategic planning processes
• Corporate and business unit strategic planning
• Analyzing Macro-Environment, Conducting market research, Forecasting and Demand Measurement
• Dealing with the competition
• Introduction; gives an overview on different marketing definitions and concepts
• Demonstrates that strategic planning in a company is carried out on corporate level , on business unit level and within the marketing .
• Explains the steps of strategic planning (on corporate and business unit level) necessary to understand and solve business problems.
• Demonstrates basic research methods and analyzing tools for analysis of marketing situations and for measuring of market demand.
• Identifies competitors as well as competitive forces and explains
Agenda Aim
Aims of selected Agenda points
- 4 -Prof. Dr. Andrea E. RaabFachhochschule Ingolstadt
• Dealing with the competition
• Identifying market segments and selectingtarget markets (market targeting)
• Designing marketing strategies
• Developing marketing programs
• Designing and managing channels andintegrated marketing communications
• Identifies competitors as well as competitive forces and explainspossible competitive strategies .
• Shows possibilities to identify segments that make up a market and describes criteria useful to choose the most attractive target segments .
• Shows the major available differentiating attributes and describes the contents of a consistent positioning strategy .
• Shows variety of decision areas in product offering and pricing.
• Shows variety of decision areas in channel management and communications.
Table of content
Content Page
► Nature and function of marketing 6
► Strategic planning processes 13
► Corporate strategic planning 22
► Business unit strategic planning 30
► Marketing process 38
� Analyzing market opportunities
− Conducting market research 40
− Forecasting and Demand measurement 51
− Dealing with the competition 57
− Identifying market segments 70
- 5 -Prof. Dr. Andrea E. RaabFachhochschule Ingolstadt
− Selecting target markets (Market targeting) 75
� Designing marketing strategies
− Positioning strategies 78
− Differentiation strategies 83
� Developing marketing programs
− Setting the product and branding strategy 87
− Developing pricing strategies and programs 103
� Managing the marketing effort
− Designing and managing marketing channels 118
− Designing and managing integrated marketing communications 128
� Learning objectives: Nature and function of marketi ng*
� What are the tasks of marketing?
� What are customer needs?
� What are the strategic planning processes within a company all about?
Nature and function of marketing: Learning objectives
- 6 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
* see also Kotler, Ph. (2009), a.a.O., Chapter 1: p. 44-49 ; p. 52-55; p. 81 f.
Nature and function of marketing: Some historical perspectives on marketing
Plato: “In well-ordered states, the storekeepers and salesmen are commonly those who are weakest in bodily strength and therefore of little use for any other purpose.”
Cicero: “Merchants are those who are to be accounted vulgar; therefore they can make no profit except by a certain amount of falsehood.”
Karl Marx: “To believe that a coat is worth less than $ 5 as long as it remains in the hands of the tailor, but that its value rises to $ 5 when I take possession of it is ridiculous. Already in the minute when the commodity is finished, it must be worth as much as the consumer pays for it in the end.”
Convincing bygulling selling
- 7 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
The aim of marketing has to change; today’s focus m ust be: price for value
Peter Drucker:
Convincing bycreating
customervalue
“There will always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.”
Nature and function of marketing: What is marketing???
- 8 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
delivering value to customers and for managing customer relationships in ways that benefit the organization
Official definition according to the American Marketing Association (see Kotler, p. 45)
“Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stake holders.“
Generally accepted doctrine (Marketing News, March 1, 1985, Vol. 19, No. 5, S. 1)
“Marketing (management) is the process of planning and executing the• conception,• pricing and• distribution of
ideas, goods, services to create exchanges that satisfy individual and organizational goals.”
Nature and function of marketing: The three aspects of marketing
�Marketing as a philosophymarket-driven corporate management, „to live with the customer“, customer oriented corporate
style
�Marketing as a medium to organize the marketplace / -space
Industry(sellers)
Market
Communication
Goods / services
- 9 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Industry(sellers)
Market(buyers)
Information
Money
�Marketing as a method to serve customer needs ���� Marketing Mix: 4 P‘s: set of marketing
tools that the firm uses to pursue its market objectives in the target market
Nature and function of marketing: A classification of markets
�Market: various groupings of customers
� need markets
� product markets
� demographic markets
� geographic markets
� basic economic markets
�Marketplace: physical market
� consumer market (place)
Industry(sellers)
Market(buyers)
Goods / services
Money
Communication
- 10 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� business market (place)
�manufacturer
� intermediary
� (resource, nonprofit, governmental market (place))
� global marketplace
�Market space: digital market
Information
� Customer needs
Nature and function of marketing: customer needs (1)
needs1 wants demands purchase
transactionbasicrequirement
directed to aspecific object
purchasedisposition
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Marketers do not create needs: Needs pre-exist mark eters (Kotler, 2009, p. 52)
3 goods, services, experiences, information etc.1 see classification of needs: stated needs, real needs, unstated needs, delight needs,secret needs (Kotler, p. 52)
2 five conditions are prerequisite (Kotler, p. 44 f.)
pre sales phase:target market / prospects (prospective customers)
are the focus
sales phase:exchange2 of any offering3
between marketer and customer
� Customer needs
Nature and function of marketing: customer needs (2)
needs1 wants demands purchase
transactionbasicrequirement
directed to aspecific object
purchasedisposition
satisfaction
value4 delivery
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Marketers do not create needs: Needs pre-exist mark eters (Kotler, 2009, p. 52);the marketer delivers value to the customer if the benefits of the offering are higher than the costs it causes
pre sales phase:target market / prospects (prospective customers)
are the focus
sales phase:exchange2 of any offering3
between marketer and customer
3 goods, services, experiences, information etc.4 value: benefits/costs
after sales phase:successful transaction
if offering deliversvalue to the customer
1 see classification of needs: stated needs, real needs, unstated needs, delight needs,secret needs (Kotler, p. 52)
2 five conditions are prerequisite (Kotler, p. 44 f.)
Broad environment
Task environment
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Assessing growth opportunities
PLANNING
Overview - Strategic planning processes
- 13 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Business unit strategic planning
Business mission SWOT analysis Goal formulationStrategic
formulation
Marketing process
Analyzing market opportunities
Designing mar-keting strategies
Developing mar-keting programs
Managing the marketing effort
Broad environment
Task environment
PLANNING
Economic Technological Socio-culturalLegal
Overview - Strategic planning processes – „Broad environment“
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Assessing growth opportunities
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Broad marketing environment consists of key macro e nvironment forces
Business unit strategic planning
Business mission SWOT analysis Goal formulationStrategic
formulation
Marketing process
Analyzing market opportunities
Designing mar-keting strategies
Developing mar-keting programs
Managing the marketing effort
� Broad environment� The broad environment consists of for main long term factors which can have major impact on a
company
CompanyEconomic
Technological
Legal
Short term controllable
factors
Long term factors –non-controllable
Broad Environment
- 15 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Market actors must pay close attention to the trend s and developments in the broad environment and make timely adjustments to their ma rketing strategies
Socio-cultural
Broad environment
Task environment
PLANNING
Customer CompanyIndustry
Competition / Industry
Overview - Strategic planning processes – „Task environment“
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Assessing growth opportunities
- 16 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Task marketing environment consists of significant micro environment actors (competitors, suppliers, customers etc.)
Business unit strategic planning
Business mission SWOT analysis Goal formulationStrategic
formulation
Marketing process
Analyzing market opportunities
Designing mar-keting strategies
Developing mar-keting programs
Managing the marketing effort
� Task marketing environment
� The task environment consists of customer, competition and the company itself
Customer
Task Environment
- 17 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Our company has to deliver at least the same value to the customer in order to stay competitive. Delivering higher value would result i n competitive advantage over the competition
CompetitionOur CompanyCompetitiveAdvantage
� The corporate strategic planning process consists o f 4 components:
Corporate strategic planning
Defining the Assigning Assessing
Overview - Strategic planning processes – Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Assessing growth opportunities
PLANNING IMP
LEMEN
TING
CO
NTR
OLLIN
G
IMPLEM
ENTIN
G
CO
NTR
OLLIN
G
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business unit
Assigning resources to SBU
Business unit strategic planning
Business mission SWOT Analysis Goal formulation Strategic formulation
Marketing process
Analyzing market opportunities
Designing mar-keting strategies
Developing mar-keting programs
Managing the marketing effort
Assessing growth opportunities
PLANNING
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business unit
Assigning resources to SBU
Business unit strategic planning
Business mission SWOT Analysis Goal formulation Strategic formulation
Marketing process
Analyzing market opportunities
Designing mar-ketingstrategies
Developing mar-keting programs
Managing the marketing effort
Assessing growth opportunities
Establishing
- 18 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Defining the corporate mission
Assigning resources to
each SBU
Assessing growth
opportunities
Focus on: • Criteria for thedefinition ofSBUs
• Growth-sharematrix (BCG)
• SBU life cycle
• SBU strategies
• Ansoff’s product/market expansion grid
• Growth strategies
• Elements andcharacteristicsof a corporatemission
Establishingstrategicbusiness units
� The business unit strategic planning process consis ts of 4 components:
Business unit strategic planning
Overview - Strategic planning processes – Business unit strategic planning
Business mission SWOT analysis Goal formulationStrategic
formulation
PLANNING
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Business unit strategic planning
Business mission SWOT Analysis Goal formulation Strategic formulation
Marketing process
Analyzing market opportunities
Designing mar-ketingstrategies
Developing mar-keting programs
Managing the marketing effort
Assessing growth opportunities
- 19 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
The business mission
SWOT analysis
Goal formulation
Strategic formulation
Focus on: • External environmentanalysis
• Internal environmentanalysis
• Types of goals
• Management byobjectives
• Criteria for objectives
• Three generictypes ofstrategies
• Specific missionwithin the broader company mission
� The marketing process consists of 4 components:
Analyzing Designing Developing Managing
Marketing process
Overview - Strategic planning processes – Marketing process
Analyzing market opportunities
Designing mar-keting strategies
Developing mar-keting programs
Managing the marketing effort
PLANNING
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Business unit strategic planning
Business mission SWOT Analysis Goal formulation Strategic formulation
Marketing process
Analyzing market opportunities
Designing mar-ketingstrategies
Developing mar-keting programs
Managing the marketing effort
Assessing growth opportunities
- 20 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Analyzingmarket
opportunities
Designing marketing strategies
Developing marketing programs
Managing the marketing
effort
Focus on: • Analyzing the Macro-environment
• Conducting market research• Forecasting and Demand
Measurement• Dealing with competition• Identifying market segments• Market targeting
• Positioning Strategies
• Differentiation Strategies
• Devising a branding strategy
• Setting productstrategy
• Developing pricing strategies and programs
• Designing and managing channels
• Designing and managing integrated marketing communications
• Managing the marketing effort
� Marketing plan*
Overview - Strategic planning processes – Results are documented in a Marketing plan
• Executive summary and table of contents: Marketing plan should open with a brief summary of the main goals and recommendations. The executive summary permits senior management to grasp the plans major thrust. A table of contents should follow the executive summary.
• Current market situation: Presents the relevant background data on sales, costs, profits, the market, competitors, channels, and the forces in the macro environment. This information is used to carry out on a SWOT analysis.
• Opportunity and issue analysis: Review of the main opportunities found in the SWOT analysis and identification of the key issues likely to affect the organization's attainment of its objectives.
• Objectives: The product manager outlines the plan's major financial and marketing goals, expressed in sales volume, market share, profit and other relevant terms.
• Marketing strategy: The product managers defines the target segments and establishes the product line's competitive positioning (“game plan”).
• Action programs: Each marketing strategy element must be elaborated to answer these questions: What will be done? When will
- 21 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
The marketing plan is one of the most important out puts of the marketing process and summarizes among others, the results of the externa l and internal analysis, marketing objectives / strategy and concrete action programs
• Action programs: Each marketing strategy element must be elaborated to answer these questions: What will be done? When will it be done? Who will do it? How much will it cost? How will progress be measured?
• Financial projections: Action plans allow the product manager to build a supporting budget. On the revenue side, this budget shows the forecasted sales volume in units and average price. On the expense side, it shows the expected costs of production,distribution, and marketing, broken down into finer categories. The difference between revenues and sales is projected profit. Once approved, the budget is the basis for developing plans and schedules for material procurement, production scheduling, employee recruitment, and marketing operations.
• Implementation controls: The last section outlines the controls for monitoring and adjusting implementation of the plan. Typically, the goals and budget are spelled out for each month or quarter so management can review each period's results and take corrective action as needed.
* see also Kotler, Ph. (2009), p. 97 f.
Broad environment
Task environment
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Assessing growth opportunities
PLANNING
Overview - Strategic planning processes – Corporate strategic planning
- 22 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Business unit strategic planning
Business mission SWOT analysis Goal formulationStrategic
formulation
Marketing process
Analyzing market opportunities
Designing mar-keting strategies
Developing mar-keting programs
Managing the marketing effort
� Learning objectives: Corporate strategic planning*
� What are the processes towards an effective corporate strategy?
� Why and how to define strategic business units (SBU’s)?
� How to assign resources to each SBU (BCG matrix)?
� How to develop a corporate growth plan (Ansoff’s product/market
Corporate strategic planning – Learning objectives
- 23 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� How to develop a corporate growth plan (Ansoff’s product/market
expansion grid)?
* see also Kotler, Ph. (2009), a.a.O., Chapter 2: p. 74-88
...� The corporate strategic planning process consists o f 4 components:
Corporate strategic planning
Defining corporate mission
Establishing strategic business units
Assigning resources to SBU
Assessing growth opportunities ...
Corporate strategic planning (1)
- 24 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
By doing the corporate planning process, a company establishes the framework in which the business units prepare their plans
Defining corporate mission
Establishing strategic business units
Assigning resources to each SBU
Assessing growth opportunities
� The corporate mission
� What is our business? Who is our customer? What customer benefits do we provide?
� Firms must avoid marketing myopia (not only short term oriented)
� The corporate mission should reflect 3 elements:� limited number of objectives
- market share, innovation, productivity, quality, profitability
- be visionary
major policies and values
Corporate strategic planning (2) – Defining the corporate mission
Defining corporate mission
Establishing strategic business units
Assigning resources to each SBU
Assessing growth opportunities
- 25 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� major policies and values- customers, stakeholders, employees, suppliers, distributors
� major competitive scopes- industry scope
- products and applications scope
- competence scope
- market-segment scope
- vertical scope
- geographical scope
A mission statement should be guided by a vision th at provides a direction for the company for the next 10 to 20 years; it should give directi on to the company itself and to the external environment
� The strategic business unit
� Def.: a SBU is a single business or group of related businesses that can be planned independently from other company businesses (distinct mission, customers, competitors, resources or technologies, responsibility for profitability)
� Criteria for definition:� common consumer need or similar consumer characteri stics (target markets)
Corporate strategic planning (3) – Establishing strategic business units
Defining corporate mission
Establishing strategic business units
Assigning resources to each SBU
Assessing growth opportunities
- 26 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� common consumer need or similar consumer characteri stics (target markets)
� common technology or manufacturing process
� same channels of distribution
� etc.
� Guided by the corporate mission and objectives, the firm must select a collection of businesses or products, known as business portfolio
Companies should define their business units in ter ms of customer needs, not products or technology
� Portfolio analysis: The BCG matrix (growth-share ma trix)Market growth rate
Starshigh > 10% ?
? ?Question marks
reinvest
no
invest SBU’s businessvolume
market growth rate: annual growthrate of the market
relative market share: SBU’s market sharerelative to that of itslargest competitorin the segment
Corporate strategic planning (4) – Assigning resources to each SBU
Defining corporate mission
Establishing strategic business units
Assigning resources to each SBU
Assessing growth opportunities
- 27 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
A healthy portfolio is a balanced one; an unbalance d portfolio has too many dogs and/or question marks
low < 10%
Relative market share
Market growth rate
10 1 0,1
Cash cows Poor dogs
cash flow
divest
noinvest
in the segment
� Portfolio analysis: The BCG Matrix - strategies to p ursue� Portfolio analysis: The BCG Matrix - strategies to p ursueM
arke
t gro
wth
rate
high
� Stars
� market leaders
� fast growing
� require investment to grow
� Strategy
� protect share
� reinvest earnings through price cuts, product improvement, more efficiency
� Question marks
� rapid growth
� poor profit margins
� enormous demand for cash
� Strategy
� invest to aggressively build share
� buy existing shares by acquiring
Corporate strategic planning (5) – Assigning resources to each SBU
Defining corporate mission
Establishing strategic business units
Assigning resources to each SBU
Assessing growth opportunities
- 28 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
low
Relative market share
Mar
ket g
row
th ra
te
high low
� obtain large share of new users
� Cash cows
� profitable products
� generate more cash than needed for share maintenance
� slow sales growth
� Strategy
� maintain market dominance
� invest in process technology improvement and price leadership, R&D in other product markets
� Dogs� many products may fall in this
category� cost disadvantage - few growth
opportunities at reasonable cost� markets not growing
� Strategy� focus on a specialized, defendable
segment� harvest: cut back all support to
maintenance� divest (sell); abandon (delete f. line)
� Corporate growth plan: Ansoff’s product/market expa nsion grid
currentmarkets
� Market penetration� increase market share
� increase product usage- frequency of usage
- more usage
current products new products
� Product development� product line extensions
� new products for same market
Corporate strategic planning (6) – Assessing growth opportunities
Defining corporate mission
Establishing strategic business units
Assigning resources to each SBU
Assessing growth opportunities
- 29 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
markets - more usage
- new uses
newmarkets
� Market development� expand markets for existing products
- geographical expansion
- target new segments
� Diversification� vertical integration
- forward integration
- backward integration
� diversify into related businesses
� diversify into unrelated businesses
Broad environment
Task environment
PLANNING
Overview - Strategic planning processes – Business unit strategic planning
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Assessing growth opportunities
- 30 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Business unit strategic planning
Business mission SWOT analysis Goal formulationStrategic
formulation
Marketing process
Analyzing market opportunities
Designing mar-keting strategies
Developing mar-keting programs
Managing the marketing effort
� Learning objectives: Business unit strategic planni ng*
� What are the processes towards an effective business strategy?
� How to do a SWOT analysis?
� How to formulate goals?
� How to define a business strategy?
Business unit strategic planning – Learning objectives
- 31 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� How to define a business strategy?
* see also Kotler, Ph. (2009), a.a.O., Chapter 2: p. 88-96
� SWOT analysis: overall evaluation of strengths, wea knesses, opportunities and threats of a business
� External environment analysis (opportunity and threat analysis)
� opportunity analysis:
purpose: discern new marketing opportunities (area of buyer need in which a business can
perform profitability) out of key macro environment forces and key microenvironment actors
Business mission
SWOT analysis
Goal formulation
Strategic formulation
Business unit strategic planning (1) – SWOT analysis
- 32 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
The competencies of a company must fit with the mar keting opportunities the company seeks
perform profitability) out of key macro environment forces and key microenvironment actors
� threat analysis:
purpose: identify environmental threats (challenge posed by an unfavorable trend or development
that would lead to deterioration in sales or profit)
� Characterize business‘s overall attractiveness
� Internal environment analysis (strengths/weaknesses analysis)
� evaluate internal strengths and weaknesses of different competencies periodically by using a
„checklist for performing strengths/weaknesses“
� Core competencies of a company:
� Characteristics of a core competence
� source of competitive advantage in that it makes a significant contribution to perceived
customer benefits
� provides potential access to a wide variety of markets
� difficult for competitors to imitate
Business mission
SWOT analysis
Goal formulation
Strategic formulation
Business unit strategic planning (2) – SWOT analysis
- 33 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Core competencies often go through the whole compan y and range over several businesses
� difficult for competitors to imitate
� Core competencies are the collective learning in the organization, especially how to
coordinate diverse production skills and integrate multiple streams of technology
� Examples:
� Honda has a core competence in engine design and manufacturing of cars, motorcycles and lawn
mowers
� Sony has a core competence in miniaturization (walkman, video camera, camcorder)
� Additional sources of strengths:� Distinctive capabilities: describe excellence in broader business processes than
technical and production processes (core competencies)
� Capabilities
� specialized knowledge of segmented needs
� Resources
� distribution coverage
Business mission
SWOT analysis
Goal formulation
Strategic formulation
Business unit strategic planning (3) – SWOT analysis
- 34 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Market driven organizations often have distinctive capabilities in market sensing, customer linking and channel bonding
needs
� customer service orientation
� design expertise
� trade relationships
� ability to utilize relevant technologies and transform them into products with clear benefits
� systems design capabilities
� financial structure and access to capital
� shared experience with related businesses
� low cost manufacturing and/or distribution systems
� production capacity
� control of raw material sources
� Goal formulation:
� Def.: Defining financial objectives (profits, target profit margin, ROI, cash flow etc.) and
marketing objectives (sales, volume, market share, in addition: consumer awareness,
number of dealers, average cost per unit etc.) with respect to magnitude and time period
� Question: What does a business want to achieve?
Business mission
SWOT analysis
Goal formulation
Strategic formulation
Business unit strategic planning (4) – Goal formulation
- 35 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
The more consequent a business is managed by object ives, the better the results will be; “you always get what you measure”
� SBU sets these objectives and manages by objectives (MBO)
� Objectives must meet four criteria:
� objectives must be arranged hierarchically
� objectives should be stated quantitatively
� objectives should be realistic
� objectives must be consistent
� Strategy formulation:
� Def.: Strategy is a game plan for achieving the set of goals
� Question: How does a business want to achieve its goals?
� Three generic types of marketing strategies (Michael Porter):
� overall cost leadership: lowest production and distribution costs --> price cheaper than
Business mission
SWOT analysis
Goal formulation
Strategic formulation
Business unit strategic planning (5) – Strategic formulation
- 36 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Successful companies pursue distinctive strategies consisting of many different but consistent and synergistic activities that would be hard for competitors to imitate as a whole
competitors --> large market share
� differentiation: achieving superior performance over the competition in an customer benefit area
(service leader, quality leader, style leader, technology leader etc.)
� focus: business focuses on one or more narrow market segments; in the segment the firm
pursues either cost leadership or differentiation
� Porter defines strategy „as the creation of a unique and valuable position involving a
different set of activities“
� Example Southwest Airline’s marketing strategy: fit and sustainable
15-minute gate turnaround
no connection with other airlines
no meals
Business mission
SWOT analysis
Goal formulation
Strategic formulation
frequentreliable
departure
limitedpass-enger
service
Short haul,Short haul,
no seat assignment
Business unit strategic planning (6) – Strategic formulation
transfersno baggage
transfers
- 37 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
flexible unioncontracts
turnaround
standardized fleetof 737 aircrafts
Short haul,point-to-point
route betweenmiddle-of-nowhere airports
very lowticket
pricesHigh
aircraft utilization
lean,highly
productivecrew
limited use oftravel agents
Automatic ticke-ting machineshigh level of high level of
employee stock ownership
Broad environment
Task environment
PLANNING
Overview - Strategic planning processes – Marketing process
Corporate strategic planning
Defining corporate mission
Establishing strate-gic business units
Assigning resources to SBU
Assessing growth opportunities
- 38 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Business unit strategic planning
Business mission SWOT analysis Goal formulationStrategic
formulation
Marketing process
Analyzing market opportunities
Designing mar-keting strategies
Developing mar-keting programs
Managing the marketing effort
...
Marketing process
Marketing process
Analyzing market opportunities
Designing marketing strategies
Developing marketing programs
Managing the marketing effort
� The marketing process consists of 4 components:
Analyzingmarket
opportunities
Designing marketing strategies
Developing marketing programs
Managing the marketing
effort
- 39 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
• Analyzing the Macro-environment
• Conducting market research
• Forecasting and Demand Measurement
• Dealing with competition• Identifying market
segments• Market targeting
Focus on: • Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy• Setting product
strategy• Developing pricing
strategies and programs
• Designing and managing channels
• Designing and managing integrated marketing communications
Marketing process - Analyzing market opportunities
� The marketing process consists of 4 components:
Analyzingmarket
opportunities
Designing marketing strategies
Developing market
programs
Managing the marketing
effort
• Analyzing the Macro-environment
• Conducting market research
Focus on: • Positioning Strategies
• Differentiation Strategies
• Devising a branding strategy• Setting product
strategy• Developing pricing
• Designing andmanaging marketingchannels
• Managing integrated
- 40 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with competition• Identifying market segments• Market targeting
Strategies • Developing pricing strategies and programs
• Managing integratedmarketing communications
� Learning objectives: Marketing research*
� Why is information becoming more and more important nowadays?
� What is marketing research all about?
� Which process steps are necessary for achieving good marketing
research results (marketing research process)?
Analyzing market opportunities - Marketing research - Learning objectives
- 41 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research results (marketing research process)?
* see also Kotler, Ph. (2009), a.a.O., Chapter 4: p. 128-157
� The need for real-time market information is greate r than at any time!!! Why
� Brainstorming
� from local to national to global marketing
� from buyer needs to buyer wants
� from price to non-price competition
Analyzing market opportunities - Marketing research (1) - Introduction
- 42 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
P. Kotler: Marketing is becoming more of a battle b ased on information than one based on sales power
� Why marketing research?
� To get answers to the following questions:
� How high is the actual market potential and the market growth rate? Is there any saturation of the market
visible?
� Who are the potential customers? How, when, where, why do they buy what? Which opinions do they have
towards certain products / services / brands?
� Which are the profitable market segments?
� How do markets react on certain sales promotion activities?
� Is there any threat of substitutes or threat of mobility going on? And so on.........
Analyzing market opportunities - Marketing research (2) - Why and how
- 43 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Marketing research (oft übersetzt als “Absatzforschung”)
following Def. see Kotler, p. 130
Marketing research is the systematic
• design,
• collection,
• analysis, and
reporting of data and findings relevant to a specific marketing situation facing the company
� The marketing research process
Define the problem and
research objectives
Developthe research
plan
Collect the information
Analyze the information
Present the findings
� Define nature of problem
� exploratory research
� descriptive
� Decide on� data
sources
� research approach
� Realize survey
� 4 major problems of surveying
� Extract findings � tabulate data
� develop frequency distribution
� Present major findings relevant to the marketing decisions
Analyzing market opportunities - Marketing research (3) - Marketing research process
- 44 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Successful marketing research has to take a couple of decisions and to overcome several barriers to finally identify marke t opportunities
� descriptive research
� causal research
approach
� research instruments
� sampling plan
� contact methods
surveying distribution
� compute averages/ measures of dispersion
� apply advanced statistical techniques
decisions facing management
� The marketing research process
� Define nature of problem
� exploratory research
� descriptive
� Decide on� data
sources
� research approach
� Realize survey
� 4 major problems of surveying
� Extract findings � tabulate data
� develop frequency distribution
� Present major findings relevant to the marketing decisions
Analyzing market opportunities - Marketing research (4) - Marketing research process
Define the problem and
research objectives
Developthe research
plan
Collect the information
Analyze the information
Present the findings
- 45 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� descriptive research
� causal research
approach
� research instruments
� sampling plan
� contact methods
surveying distribution
� compute averages/ measures of dispersion
� apply advanced statistical techniques
decisions facing management
� The marketing research process
� Define nature of problem
� exploratory research
� descriptive
� Decide on� data
sources
� research approach
� Realize survey
� 4 major problems of surveying
� Extract findings � tabulate data
� develop frequency distribution
� Present major findings relevant to the marketing decisions
Analyzing market opportunities - Marketing research (5) - Marketing research process
Define the problem and
research objectives
Developthe research
plan
Collect the information
Analyze the information
Present the findings
- 46 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� descriptive research
� causal research
approach
� research instruments
� sampling plan
� contact methods
surveying distribution
� compute averages/ measures of dispersion
� apply advanced statistical techniques
decisions facing management
Developthe research
plan
Primary research
Market analysis (once)
Survey research
Focus-group research
Observation (participatory,
nonparticipating
Experimental research (field,
Sampling procedure• probability sample• nonprobability
sample
Contact method• personal• telephone• mail• online
Type of questionnaire• direct/indirect• standardized/struc-
tured/unstructured• open-end questions• closed-end questions
Analyzing market opportunities - Marketing research (6) - Marketing research process - Summary research plan
- 47 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Secondary research
Market observation (continuous)
Behavioral data (“Panels”)
• Internal sources• government
publications• Periodicals /
books• Commercial data
research (field, laboratory)
Type of test• market test• product test• advert. test• storetest
Arrangement• number of
experimental groups
• date of measurement
� The marketing research process
� Define nature of problem
� exploratory research
� descriptive
� Decide on� data
sources
� research approach
� Realize survey
� 4 major problems of surveying
� Extract findings � tabulate data
� develop frequency distribution
� Present major findings relevant to the marketing decisions
Analyzing market opportunities - Marketing research (5) - Marketing research process
Define the problem and
research objectives
Developthe research
plan
Collect the information
Analyze the information
Present the findings
- 48 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� descriptive research
� causal research
approach
� research instruments
� sampling plan
� contact methods
surveying distribution
� compute averages/ measures of dispersion
� apply advanced statistical techniques
decisions facing management
� The marketing research process
� Define nature of problem
� exploratory research
� descriptive
� Decide on� data
sources
� research approach
� Realize survey
� 4 major problems of surveying
� Extract findings � tabulate data
� develop frequency distribution
� Present major findings relevant to the marketing decisions
Analyzing market opportunities - Marketing research (5) - Marketing research process
Define the problem and
research objectives
Developthe research
plan
Collect the information
Analyze the information
Present the findings
- 49 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� descriptive research
� causal research
approach
� research instruments
� sampling plan
� contact methods
surveying distribution
� compute averages/ measures of dispersion
� apply advanced statistical techniques
decisions facing management
� The marketing research process
� Define nature of problem
� exploratory research
� descriptive
� Decide on� data
sources
� research approach
� Realize survey
� 4 major problems of surveying
� Extract findings � tabulate data
� develop frequency distribution
� Present major findings relevant to the marketing decisions
Analyzing market opportunities - Marketing research (5) - Marketing research process
Define the problem and
research objectives
Developthe research
plan
Collect the information
Analyze the information
Present the findings
- 50 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� descriptive research
� causal research
approach
� research instruments
� sampling plan
� contact methods
surveying distribution
� compute averages/ measures of dispersion
� apply advanced statistical techniques
decisions facing management
Marketing process - Analyzing market opportunities
� The marketing process consists of 4 components:
Analyzingmarket
opportunities
Designing marketing strategies
Developing market
programs
Managing the marketing
effort
• Analyzing the Macro-environment
• Conducting market research
Focus on: • Positioning Strategies
• Differentiation
• Devising a branding strategy• Setting product
strategy
• Designing andmanaging marketingchannels
- 51 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
• Conducting market research• Forecasting and Demand
Measurement• Dealing with competition• Identifying market segments• Market targeting
• Differentiation Strategies
strategy• Developing pricing
strategies and programs
channels• Managing integrated
marketing communications
� Learning objectives: Forecasting and demand measure ment*
� What are the major concepts in demand measurement?
� How can demand be more accurately measured and forecasted?
- methods and concepts
- examples to become trained
Analyzing market opportunities - Forecasting and demand measurement - Learning objectives
- 52 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
* see also Kotler, Ph. (2009), a.a.O., Chapter 3: p. 111-127; Chapter 4: p. 149-157
� What to do after identifying market opportunities?
� Measure and forecast the� size (sales potential)
� growth potential
� profit potential
of each market opportunity to� determine the needed cash for investments
� establish capacity
� acquire supplies
� hire the needed number of workers
Marketing is responsible for preparing the sales fo recasts which are based on estimates of
Analyzing market opportunities - Forecasting and demand measurement (1)
- 53 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� What market (demand) do we talk about???� Market: set of all actual and potential buyers of a market offer
� Potential market (not equal to market potential): set of consumers who profess a sufficient level of interest in a market offer
� Available market : set of consumers who have interest, income, and access to a particular offer
� Target (served) market : part of the available market the company decides to pursue
� Penetrated market: set of consumers who are buying the company‘s product
Marketing is responsible for preparing the sales fo recasts which are based on estimates of market demand
� Market demand� Market demand: total volume that would be bought by a defined customer group in a defined geographical
area in a defined time period in a defined marketing environment under a defined marketing program �Market demand is a function dependent on industry marketing expenditure under the precondition of a particular marketing environment , not a fixed number � market demand function; different market functions under different marketing environments
� Market forecast: is the market demand corresponding to the level of industry marketing expenditures which actually occur.
� Market potential: limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment; maximum amount of sales that might be available to all the firms in an industry under the given marketing environment
Market potential and market demand (in dependence o f industry marketing expenditure) is higher in a period of prosperity versus in a period of recession
Analyzing market opportunities - Forecasting and demand measurement (2)
- 54 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Company demand� Company demand: the company‘s estimated share of market demand at alternative levels of company
marketing effort in a given period of time � company demand function; different demand functions under different marketing environments; different positions on the demand function in dependence on company‘s performance perceived relative to the competitors
� Company sales forecast: is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment;
� Company sales potential: sales limit approached by company demand as company marketing effort increases relative to that of competitors
higher in a period of prosperity versus in a period of recession
� Practical methods for estimating current market dem and
� Estimation of total market potential: potential number of buyers x average quantity purchased
by a buyer x price ;
� often start with total population in the nation
� eliminate groups that would not buy the product --> suspect pool
� again eliminate groups that would not buy the product (after further research) ---> prospect pool
estimate average quantity purchased by average customer per year
estimate average price
� do calculation
Analyzing market opportunities - Forecasting and demand measurement (3)
- 55 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Estimation of area market potential: market potential of a city, state, nation
� market-buildup method: North American Industry Classification System (NAICS) (classifies all manufacturing
into 20 major industry sectors and further breaks each sector into a six digit, hierarchical structure, for
business markets)
� multiple-factor index method (top down estimation via index building for consumer markets)
Business marketers typically have a harder time est imating their market potential and market share (own sales / total industry sales) because th ey have no shared data to rely on (Nielsen)
� The marketing process consists of 4 components:
Analyzingmarket
opportunities
Designingmarketing strategies
Developing marketing programs
Managing the marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on: • Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy
• Setting productstrategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process - Analyzing market opportunities
- 56 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
strategy• Developing pricing
strategies and programs
integrated marketing communications
� Learning objectives: Dealing with competition *
� What does a company need to know about the existing competitive
forces within its industry?
� How do we identify our competitors?
� How should we analyze our competitors?
Analyzing market opportunities - Dealing with the competition - Learning objectives
- 57 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Which competitive strategies do exist?
* see also Kotler, Ph. (2009), a.a.O., Chapter 11: p. 332-355
� Dealing with competition:
Competitive Forces
Analyzing market opportunities-Dealing with competition
• Identify the forces
that determine the
intrinsic long-run
• Examine competition
from both an industry
and a marketing point
• Ascertain competitors’
strategies, objectives,
strengths, and
• Classify companies
by the roles they play
in the target markets
Identifying Competitors
Analyzing Competitors
Competitive Strategies
- 58 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
intrinsic long-run
attractiveness of a
market or a market
segment
and a marketing point
of view
strengths, and
weaknesses
in the target markets
� What does a company need to know about the existing competitive forces within
its industry?
� How much power do our competitors have in comparison to us?
� Who are our competitors? How many are they?
� What are their strategies?
� What are their strengths and weaknesses?
Analyzing market opportunities - Dealing with competition – Relevant questions
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
- 59 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� What are other factors that could influence the intensity of competitive actions?
� Existence / Strategies of new competition?
- industry related
- unrelated to particular industry
� How much power do we have elsewhere in the channel?
� What is the market power of our suppliers?
� What is the market power of our buyers?
The more competitive forces exist and the more powe r they have, the less attractive the market (segment) is!!! (see five forces model)
� Competitive Forces
● Five forces model determining
long-term segment structural
attractiveness
● Competition includes all the actual
and potential rival offerings and
Potentialentrants (threat of mobility)
Suppliers(supplier
Industrycompetitors(segment
Buyers(buyer
Analyzing market opportunities - Dealing with competition – Five forces
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
- 60 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
substitutes that a buyer might consider
Because markets have become so competitive (global markets), understanding customers is no longer enough. “Competitive intelligence systems ” are necessary to permanently know competitors’ strategy and actions.
(supplierpower) (segment
rivalry)
(buyerpower)
Substitutes(threat of
substitutes)
� Factors affecting rivalry among existing competitor s
� Numerous or equally balanced competitors
� Slow industry growth
� High fixed or storage costs
� need to operate at capacity and to cut costs
� Lack of product differentiation (in the eyes of the customers)
Analyzing market opportunities - Dealing with competition – Industry competitors
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
PotentialentrantsPotentialentrants
SuppliersSuppliers Industrycompetitors
Industrycompetitors
BuyersBuyers
SubstitutesSubstitutes
- 61 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Capacity augmented in large increments
� (threat of) overcapacity in the industry
� High strategic stakes
� High exit barriers
The more investment is involved and the slower the pay back comes, the more aggressive competitors fight against each other and the more difficult profitable market penetration is
� Barriers to enter
� Economies of scale
� Experience curve (learning curve)
� Cost advantages independent of scale
� partnerships to suppliers
� Capital requirements
Analyzing market opportunities - Dealing with competition – Potential entrants
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
PotentialentrantsPotentialentrants
SuppliersSuppliers Industrycompetitors
Industrycompetitors
BuyersBuyers
SubstitutesSubstitutes
- 62 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Switching costs of customers
� Access to existing distribution channels
� partnerships to intermediaries
� Strong existing customer relationships
� Government policy
� Expected retaliation from existing competitors
� price battle, decreasing industry marginsThe more barriers to enter exist, the easier profit able market penetration is for existing competitors
� Segment structural attractiveness is higher when
� There are no substitute products
� Product function can not be replaced
Examples for substitute products:
� Book vs. movie
Analyzing market opportunities - Dealing with competition - Substitutes
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
PotentialentrantsPotentialentrants
SuppliersSuppliers Industrycompetitors
Industrycompetitors
BuyersBuyers
SubstitutesSubstitutes
- 63 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Steel vs. new materials
� Records vs. CD´s vs. mp3 vs. ipod
Be aware when:
� Technology advances in substitute industries
� Substitute industries seeking for new applications
Competition between industries must be recognized b ut offers new opportunities
� Bargaining power for buyers is high when
� Purchasing is concentrated or is in large
volumes relative to seller‘s sales
� The product represents a large proportion
of buyer‘s costs
Analyzing market opportunities - Dealing with competition- Buyer power
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
PotentialentrantsPotentialentrants
SuppliersSuppliers Industrycompetitors
Industrycompetitors
BuyersBuyers
SubstitutesSubstitutes
- 64 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� There is little differentiation or there are
low switching costs
� Backward integration is a credible threat
� Product performance / quality is relatively unimportant
to buyer‘s performance
A detailed knowledge of buyers position in the indu stry is necessary in order to strengthen the own bargaining power of a company
� Bargaining power for suppliers is high when
� Suppliers industry is dominated by a few firms
and is more concentrated than the customer industry
� The product has few substitutes
� The customer industry is not important to the supplier
Analyzing market opportunities - Dealing with competition – Supplier power
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
PotentialentrantsPotentialentrants
SuppliersSuppliers Industrycompetitors
Industrycompetitors
BuyersBuyers
SubstitutesSubstitutes
- 65 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� The supplier product is an important input, is differenciated,
or has high switching costs
� The supplier group poses a credible threat of forward integration
A detailed knowledge of suppliers position in the i ndustry is necessary in order to strengthen the own bargaining power of a company
� Identifying Competitors
� Def.: competition: a group of firms that offer products / solutions that are close substitutes for
one another
� Characteristics
� cross-elasticity
� brand switching
� similarity in use
Analyzing market opportunities - Dealing with the competition (7) – Identifying competitors
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
- 66 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Four levels of competition
� Brand level: suppliers of similar products to similar customers at similar prices --> cross elasticity very
high
� Industry level: suppliers of the same class of products
� Form level: suppliers which offer the same service
� Generic level: suppliers that compete for the same consumer dollars
A detailed knowledge of number and type of competit ion in all categories is necessary in order to build up a competitive advant age
Mar
ket
com
petit
ion
Indu
stry
com
petit
ion
� Analyzing Competitors
� Strategic group: a group of firms following the same strategy in a given target market
� What are the competitors’ objectives?
� What are the competitors’ strengths and weaknesses?
- share of market :the competitors’ share of the target market
- share of mind: the percentage of customers who named the competitor as the first
Analyzing market opportunities - Dealing with the competition (8) - Analyzing Competitors
� Analyzing Competitors
� Strategic group: a group of firms following the same strategy in a given target market
� What are the competitors’ objectives?
� What are the competitors’ strengths and weaknesses?� share of market: the competitors’ share of the target market
� share of mind: the percentage of customers who named the competitor as the first company in the industry that comes to
their mind
� share of heart: the percentage of customers who named the competitor as the company from which they prefer to buy the
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
- 67 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
company in the industry that comes to their mind
- share of heart: the percentage of customers who named the competitor as the company from
which they prefer to buy the product
� Selecting Competitors:
-strong vs. weak
-close vs. distant
-”good” vs. “bad”
� share of heart: the percentage of customers who named the competitor as the company from which they prefer to buy the
product
� Selecting Competitors:� strong vs. weak
� close vs. distant
� ”good” vs. “bad”
� Competitive strategies� Dimensions for mapping: mobility barriers or factors that deter movement of firms from one
strategic position to another in the industry
Challenger LeaderExample: Brands in Automotive Industry
Analyzing market opportunities - Dealing with the competition (9) - Competitive strategies
3. “Commodity”
Player
2. Dominant PlayerVolum
e
CompetitiveForces
Identifying Competitors
AnalyzingCompetitors
Competitive Strategies
Worldwide Production (2007)
General Motors (Opel, Vauxhall, GM, Daewoo) 9,349,818
Toyota 8,534,690
Volkswagen Group 6,267,891
- 68 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
A company must carefully decide which strategic gro up to compete in and then closely watch its key competitors which are in the same strategic group
Follower Nicher / Visionary
1. Established Niche Player
Player
4. Endangered Player
Volum
e
Differentiation
Volkswagen Group 6,267,891
Ford(Ford, Jaguar, Volvo) 6,247,506
Fiat(Iveco, Irisbus) 2,679,451
Chrysler 2,538,624
Daimler 2,096,977
BMW 1,541,503
Porsche 107,170Source: OICA (http://oica.net/wp-content/uploads/world-ranking-2007.pdf)
� The marketing process consists of 4 components:
Analyzingmarket
opportunities
Designingmarketing strategies
Developing marketing programs
Managing the marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on: • Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy
• Setting productstrategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process - Analyzing market opportunities
- 69 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
strategy• Developing pricing
strategies and programs
integrated marketing communications
� Learning objectives: Identifying market segments / Selecting target markets*
� Market segmentation - why and how?
� What kind of marketing strategies do exist?
� Which patterns of target market selection do exist?
Analyzing market opportunities - Identifying market segments - Learning objectives
- 70 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
* see also Kotler, Ph. (2009), a.a.O., Chapter 8: p. 246-253; p. 267-273
� Target markets (“target marketing”)
Analyzing market opportunities - Identifying market segments (1)
� Identify segmentation
variables and segment
� Evaluate the
attractiveness of each
Identify possible
positioning concepts for
Marketsegmentation
Product/ServicePositioning
Markettargeting
- 71 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
the market
� Develop profiles of
resulting segments
segment
Select the target
segment(s)
each target segment
� Select, develop and
signal the chosen
positioning concept
� Consumer Market and Business Market segmentation
� Market segmentation is the process of identifying homogeneous groups of buyers
requiring different marketing strategies to influence their consumption
� Organizations have limited resources
� Consumers may be too numerous, widely scattered and varied in their needs
Analyzing market opportunities - Identifying market segments (2)
Marketsegmentation
Product/ServicePositioning
Markettargeting
- 72 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Consumers may be too numerous, widely scattered and varied in their needs
� Competing organizations my be better able to attract certain groups of customers
(segments) in the market
� Each organization should, therefore identify the most attractive parts of the market that it
could effectively serve (--> target market)
� Market segmentation - questions to ask
� Who are our customers? Purchaser / User
� What do our customers buy? Amount, brand, features, price
� What do our customers do with the products? Usage situation
Where do they buy? Retailer, factory shop, Internet
Marketsegmentation
Product/ServicePositioning
Markettargeting
Analyzing market opportunities - Identifying market segments (3)
- 73 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Where do they buy? Retailer, factory shop, Internet
� When do they buy? Time of year, week, day; on sale versus full price
� How do they choose? Decision participants‘ roles, decision process, information sources
� Why do they select a product? Functional attributes, service, image, brand equity
� Will they buy it again? Degree of satisfaction, intentions
� Sensitivity to marketing mix: product/service, price, distribution, advertising/promotion
� The marketing process consists of 4 components:
Analyzingmarket
opportunities
Designingmarketing strategies
Developing marketing programs
Managing the marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on: • Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy
• Setting productstrategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process - Analyzing market opportunities
- 74 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
strategy• Developing pricing
strategies and programs
integrated marketing communications
� Market targeting - evaluate market segments
Opportunities for profit Opportunities for profit • size• growth potential
Customer
Analyzing market opportunities – Market targeting (1)
Marketsegmentation
Product/ServicePositioning
Markettargeting
- 75 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Competitive intensity • unmet needs• entry barriers
Competition
• firm’s objectives• firm’s capabilities
CompanyTargetmarket
selection
� Market targeting - select the target segment(s)
� Five patterns of target market selection
� Single segment concentration: concentrated marketing
� Selective specialization: differentiated marketing
Product specialization: rather undifferentiated marketing
Marketsegmentation
Product/ServicePositioning
Markettargeting
Analyzing market opportunities – Market targeting (2)
- 76 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Product specialization: rather undifferentiated marketing
� Market specialization: rather differentiated marketing
� Full market coverage
- undifferentiated marketing
- differentiated marketing
Because differentiated marketing leads to both high er sales and higher costs, there is no general statement concerning this strategy’s pro fitability
� The marketing process consists of 4 components:
Designingmarketing strategies
Developing marketing programs
Managing the marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on: • Positioning Strategies
• Differentiation
• Devising a branding strategy
• Setting product strategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process – Designing marketing strategies
Analyzing market
opportunities
- 77 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
Strategies strategy• Developing pricing
strategies and programs
integrated marketingcommunications
� Learning objectives: Positioning and Differentiatio n*
� How to position a product / service in the competitive landscape?
� What concepts of differentiation do exist?
� How does a consistent positioning strategy look like?
Designing marketing strategies – Positioning and Differentiation - Learning objectives
- 78 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
* see also Kotler, Ph. (2009), a.a.O., Chapter 10: p. 308-309; p. 316-318
� Product/service positioning
� Product/service is the act of designing the company’s offering and image to occupy a
distinctive place in the mind of the target market
� Determine unique differentiating benefits (unique selling proposition; positioning concept)
Marketsegmentation
Product/ServicePositioning
Markettargeting
Designing marketing strategies - Positioning and Differentiation (1)
- 79 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Design the marketing mix that will establish appropriate perceptions of the brand among
customers
� Positioning statement: To Y (target audience), X is the brand of (frame of reference) that
delivers a benefit Z (point of difference) because of ... (supporting claim)
Positioning is not what you do to the product, but how the product is perceived in the mind of the consumer
� Product/Service Positioning: Types of Positioning � Attribute Positioning: a company position itself on an attribute such as size (Andersen,
Siemens)
� Benefit Positioning: product is positioned as the leader in a certain benefit; e.g. BMW and Daimler Chrysler are fighting for technology leadership/great engineering; Volvo: safest and most durable
� Use / Application Positioning: position the product as best for some use (e.g. utiliy cars
Designing marketing strategies - Positioning and Differentiation (2) -Types of positioning
Marketsegmentation
Product/ServicePositioning
Markettargeting
- 80 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
for people who are doing sports and need to transport heavy and bulky sports equipment)
� User Positioning: position the product as best for some user group (basketball players take Nike shoes)
� Competitor Positioning: the product claims to be better in some way than a named competitor (Coke and Pepsi)
� Product category Positioning: product is positioned as the leader in a certain product category (aspirin in the segment of pain relief)
� Quality/Price Positioning: product is positioned as offering the best value (Aldi)
� Example of Positioning: beers as people
Beer Brand At a party As his hobbies As his occupation
Budweiser Older guy Watch ball games, rake leaves
Businessman
Heineken Gentleman Polo Rich guy
Marketsegmentation
Product/ServicePositioning
Markettargeting
Designing marketing strategies - Positioning and Differentiation (3)
- 81 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Heineken Gentleman Polo Rich guy
Michelob Smoke a pipe Philately, philosophy, classic music
Free lancer
Becks Charming guy Sailing CEO
Paulaner Cozy type of guy Beergarden Government employed
Miller Good guy, friendly Golf, tennis Junior executives
� The marketing process consists of 4 components:
Designingmarketing strategies
Developing Developing marketing programs
Managing the marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on: • Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy
• Setting product strategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process – Designing marketing strategies
Analyzing market opportunities
- 82 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
strategy• Developing pricing
strategies and programs
integrated marketingcommunications
� Differentiation Strategies
� Product Differentiation:
� product form, features, performance, conformance, durability, style, design, etc
� Services Differentiation:
� ordering ease, delivery, installation, customer training, customer consulting,
maintenance and repair
� Personnel Differentiation:
Designing market strategies - Positioning and Differentiation (4)
- 83 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Personnel Differentiation:
� competence, courtesy, credibility, reliability, responsiveness, communication
� Channel Differentiation:
� coverage, expertise, performance
� Image Differentiation:
� identity : the way a company aims to identify or position itself
� image: the way the public perceives the company or its products
� Summary: towards an effective Positioning Strategy
� Who (which customer segments) should we serve?
� segmentation analysis
� What differentiates us from our competitors in meeting the needs of our target segment?
Marketsegmentation
Product/ServicePositioning
Markettargeting
Designing market strategies - Positioning and Differentiation (5)
- 84 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
How should we position our product so as to highlight our differential advantage over the
competitors?
� competition analysis (what benefits are currently offered?)
� customer analysis per segment (what benefits are most needed?)
� differentiation analysis (how can we differentiate our company?)
� positioning analysis (how can we translate our product characteristics into benefits sought?)
� Summary: internally consistent positioning strategy
Hanna Andersson, a $ 40 million clothing firm in Portland, Oregon, U.S.
� Target segment: Socially conscious, eco-sensitive parents, looking to save time
� Product : 100 % cotton clothing for kids, endlessly washable
Marketsegmentation
Product/ServicePositioning
Markettargeting
Designing market strategies - Positioning and Differentiation (6)
- 85 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Product : 100 % cotton clothing for kids, endlessly washable
� Distribution: mail-order, serviced by highly trained phone reps.
� Promotions: policy on returned clothing that no longer fits; 20% of original price credited
towards next purchase; donates returned clothes to charity
�Product/Services + Channel Differentiation; Benefit + User Positioning
� The marketing process consists of 4 components:
Designingmarketing strategies
Developing marketing programs
Managing he marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on:• Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy
• Setting product strategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process – Developing marketing programs
Analyzing market
opportunities
- 86 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
Strategies strategy• Developing pricing
strategies and programs
integrated marketing communications
� Learning objectives: Setting the product and brandi ng strategy*
� What is the marketing program all about?
� What is the concept of the product life cycle all about? Which marketing
strategies are appropriate at each stage of the product life cycle?
� What are the characteristics of products?
� Which decisions to take concerning the marketing mix element “product”?
Developing marketing programs - Setting the product and branding strategy - Learning objectives
- 87 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Which decisions to take concerning the marketing mix element “product”?
� How can a company build and manage its product mix and product lines?
� How can a company make better brand decisions?
* see also Kotler, Ph. (2009), a.a.O., Ch. 9: p. 273-276; p. 296-303; Ch.10: p. 318-331; Ch.12: p. 356-379
� Product management: the concept of the product life cycle
� Characteristics of the product life cycle concept
� products have a limited time
� product sales pass through distinct stages, each posing different challenges, opportunities,
and problems to seller
� profits rise and fall at different stages of the product life cycle
� products require different marketing, financial, manufacturing, purchasing, and human
resource strategies in each stage of their life cycle
Developing marketing programs - Setting the product and branding strategy (1) - Product management
- 88 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Not all products exhibit a bell shaped product life cycle with the four typical stages
� Product life cycle curve is typically divided into four stages
� introduction
� growth
� maturity
� decline
� Characteristics of product life cycle stages
Developing marketing programs - Setting the product and branding strategy (2) - Product management
introduction growth maturity decline
sales low rapidly rising peak declining
cost/customer high average low low
profits negative rising high declining
customers innovators early adopters middle majority laggards
- 89 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Each product stage has different objectives and req uires a different marketing strategy
customers innovators early adopters middle majority laggards (“Bummler”)
competitors few growing stable, begin to decline
declining
marketing objectives
create product awareness,
induce product trial
maximize market share
maximize profit while defending
share
reduce expenditure and milk the
brand
� Marketing strategies for product life cycle stages
Developing marketing programs - Setting the product and branding strategy (3) - Product management
introduction growth maturity decline
product basic product product extensions
diversify brands/models
phase out weak items
price cost + market penetration
price to match competition
cut price
distribution selective intensive more intensive selective
- 90 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Each product stage has different objectives and req uires a different marketing strategy
advertising awareness among early
adopers/ dealers
awareness/ interest i. mass
market
stress brand difference/
benefits
reduce to needed level to retain
hard-core loyals
sales promotion
heavy to induce trial
reduce to exploit heavy demand
increase to encourage brand
switching
reduce to minimal level
� Product management: the market pioneer “advantage” (pioneer: to be first in the
market)
average market share
consumer goods industrial goods
pioneer 29% 29%
early follower 17% 21%
late entrant 13% 15%
Developing marketing programs - Setting the product and branding strategy (4) - Product management
- 91 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Most studies indicate that the market pioneer gains the most advantage; but: there is not necessarily a correlation between market share and profitability
� What is a product??� Def. a product is anything that can be offered to a market to satisfy a want or need (including
physical objects, services, persons, places, organizations, ideas)
core
basic product
expected product
augmented product
potential product
the fundamental service or benefitthat the customer is really buying
a product’s parts, styling, features,brand name, packaging and otherattributes that support core benefits
a set of attribute and conditions buyers normally expect
core benefit:
basic product: :
expected product:
Developing marketing programs - Setting the product and branding strategy (5)
- 92 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Successful companies add benefits to their offering that not only satisfy customers but also surprise and delight them
corebenefit
buyers normally expect
additional services/benefits built around the basic/expected product
all the possible augmentations and transformations the product might undergo in the future
augmented product:
potential product:
� Product classifications� Classification of products according to durability and tangibility
� nondurable goods: tangible goods normally consumed in one or a few uses
� durable goods: tangible goods that normally survive many uses
� services: intangible, inseparable, variable, perishable; may or may not be tied to a physical product
� Classification of consumer goods according to shopping habits
� convenience goods: usually purchased frequently, immediately, and with a minimum of effort- staple goods: purchased on a regular basis
- impulse goods: purchased without any planning or search effort
- emergency goods: purchased when a need is urgent
� shopping goods: compared in the process of selection and purchase on such bases as suitability, quality, price and style
Developing marketing programs - Setting the product and branding strategy (6)
- 93 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� specialty goods: with unique characteristics/ brand identification for which a number of buyers makes a special purchasing effort
� unsought goods: the consumer does not know about or does not normally think of buying
� Classification of industrial goods according to production process phase and relative costliness
� materials and parts: goods that enter the manufacturer‘s product completely- raw materials
- manufactured materials and parts
� capital items: long-lasting goods that facilitate developing or managing the finished product- installations
- equipment
� supplies / services: short -lasting goods and services that facilitate developing or managing the finished product- supplies- business services
� Product and services decisions
� Product attribute decisions� product quality: ability to perform its function� product features� product design, process of designing a product‘s style and function
� Product mix decisions: how many products/product lines to carry?
� Branding decisions: to brand or not to brand a product?
� Packaging decisions� process of designing and producing the container or wrapper for a product� packaging concept: what should the package be or do for the product?
Developing marketing programs - Setting the product and branding strategy (7)
- 94 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� packaging concept: what should the package be or do for the product?� packaging has to support the product‘s positioning and marketing strategy
� Label decisions� label identifies the product/brand, grades the product, describes the product characteristics,
promotes product
� Product-support service decisions� Product-support services augment basic products� function: handle complaints and adjustments, credit service, maintenance, repair, technical service,
other service, consumer information� an active customer-service department coordinates all the company‘s services, creates consumer
satisfaction and loyalty and helps the company to differentiate itself from competitors
� Product mix decisions
� Definition: Product mix (also called product assortment) is the set of all products and items that a particular seller offers for sale
� Characteristics of a product mix
� width: refers to how many different product lines the company carries
� length: refers to the total number of items in the mix
Developing marketing programs - Setting the product and branding strategy (8)
- 95 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� depth: refers to how many variants are offered of each product in the mix
� consistency: refers to how closely related the various product lines are in end use,
production requirements, distribution channels, or some other way
Product managers need to know the sales and profits of each item in their mix in order to determine which item to build, maintain, h arvest, or divest
� Product mix: Example Procter & Gamble
Developing marketing programs - Setting the product and branding strategy (9)
Product mix width
detergents toothpaste bar soapdisposable diapers
paper tissue
Product
Ivory Snow 1930 Gleem 1952 Ivory 1879 Pampers 1961 Charmin 1928
Dreft 1933 Crest 1955 Kirk’s 1885 Luvs 1976 Puffs 1960
Tide 1946 Lava 1893 Banner 1982
Cheer 1950 Camay 1926 Summit 1100’s 1992
- 96 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Product
line
length
Cheer 1950 Camay 1926 Summit 1100’s 1992
Oxydol 1954 Zest 1952
Dash 1954 Safeguard 1963
Bold 1965 Coast 1974
Gain 1966 Oil of Olaz 1993
Era 1972
� Branding decisions
Richard Branson, CEO of Virgin:(companies: Virgin Radio, Virgin Cola, Virgin Clothing, Virgin Records,Virgin Atlantic Airways)
“Our brand name is incredibly important. It is preserved that if you have a good experience with one Virgin product, you will try / fly / eat / drink / buy another.”
Developing marketing programs - Setting the product and branding strategy (10)
- 97 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Jean-Nöel Kapferer: “Products are what the company makes; what the customer buys is a brand.”
� Branding decisions
Brand
Performance
CustomerCompany
Developing marketing programs - Setting the product and branding strategy (11)
- 98 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
The brand mediates between the customers, the perfo rmance (product + service) and the company.
Brand: A name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.
����
���� “Markenführung” / “corporate branding”: the consistent alignment of a company’s processes which refer to positioning the company in the market in order to achieve the desired image.
� Branding: new product introductions by a company
existing
brand name
category
line extensions /brand expansions
brand extensions
Developing marketing programs - Setting the product and branding strategy (12)
- 99 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
brand name
new to the company
existing new to the company
flankers new product
� Branding: new product introductions by a company
extension enhances the More good: the
extension enhances the brand name
The good:brand name aids the
extension
Developing marketing programs - Setting the product and branding strategy (13)
Effects of extending/expanding brand to a new product
- 100 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
The ugly:the brand name is
damaged
The bad:brand name fails to help
the extension
Brand extensions are not always successful; there i s quite a risk to fail!!!
� Several different types and combinations of brand a rchitecture exist
Types Description
���� An existing brand that gives birth to a brand extension
���� If the parent brand is already associated with multiple products through brand extensions
Parent / Umbrella brand
Family brand
Examples
SiemensVirginMatsushita/PanasonicBeiersdorfFerrero
Virgin Records, Virgin Cola, Virgin Airlines,Nivea, Tesa (brands belong to Beiersdorf)
Developing marketing programs - Setting the product and branding strategy (14)
- 101 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
multiple products through brand extensionsFamily brand
Sub-brand
Channel brand
���� a new brand is established or combined with an existing brand
���� One brand per retail channel
belong to Beiersdorf)Kinder (brand belongs to Ferrero)
Hanuta, Duplo, Mon Cheri, Nutella (brands belong to Ferrero) Toyota Camry automobiles
Body ShopPlus, Tengelmann, Media Markt, Saturn Hansa (brands belong to Metro Group)
� The marketing process consists of 4 components:
Designingmarketing strategies
Developing marketing programs
Managing the marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on: • Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy
• Setting productstrategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process – Developing marketing programs
Analyzing market
opportunities
- 102 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
strategy• Developing pricing
strategies and programs
integrated marketing communications
� Learning objectives: Developing pricing strategies and programs*
� What are the essential questions concerning the marketing mix element
“price”?
� What are the process steps towards setting an appropriate pricing policy?
� How to estimate price elasticity of demand?
� What are the six possible methods for selecting a pricing method?
What are the components of a so called price playing field?
Developing marketing programs - Developing pricing strategies and programs - Learning objectives
- 103 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� What are the components of a so called price playing field?
� What other factors for selecting the final price does a company have to
determine?
� Additional factors in the practice to identify an optimal pricing strategy?
� Be able to do basic quantitative analysis in order to make product decisions!
* see also Kotler, Ph. (2009), a.a.O., Chapter 14: p. 414 - 447
� Essential questions concerning pricing
� How much can I charge and still make the sale?
� How should a price be set on a product or service for the first time?
� How should a product mix be priced?
� How should the price be adapted to meet varying circumstances and opportunities?
� When should the company initiate a price change, and how should it respond to a competitor‘s
price change?
� function of customers and competition
Developing marketing programs - Developing pricing strategies and programs (1)
- 104 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� How much money can I make?
� function of internal costs
The adequate price of a product should primarily be a function of customers and competition, secondly a function of internal costs
� Setting pricing policy: a six step procedure
Selecting the final price
Selecting a pricing method
Analyzing competitor's costs, prices,
and offers
Estimating costs
Determining demand
Selecting the price objective
� 5 possible objectives
� survival
� maximum
� Different types of costs accounting
3 possible � 3 possible cases
� firm’s offer is similar to comp.
� 6 possible methods
� markup pricing
� target-return
� Consider additional factors
� psychological pricing
� Measure demand curve for a product
Developing marketing programs - Developing pricing strategies and programs (2)
- 105 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� maximum current profit
� maximum market share
� maximum market skimming
� product-quality leadership
� Economies of scale
� Experience curve
� Target Costing
comp.
� firm’s offer is inferior to comp.
� firm’s offer is superior to comp.
� target-return pricing
� perceived-value pricing
� value pricing� going-rate
pricing� sealed-bid
pricing
pricing� influence of
other marketing-mix elements
� firm’s pricing policies
� impact of price o. other parties
� Estimate price elasticity of demand
� Setting pricing policy: a six step procedure
Developing marketing programs - Developing pricing strategies and programs (3)
� 5 possible objectives
� survival
� maximum
Selecting the final price
Selecting a pricing method
Analyzing competitor's costs, prices,
and offers
Estimating costs
Determining demand
Selecting the price objective
- 106 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� maximum current profit
� maximum market share
� maximum market skimming
� product-quality leadership
Developing marketing programs - Developing pricing strategies and programs (4)
� Setting pricing policy: a six step procedure
� 5 possible objectives
� survival
� maximum
� Measure demand curve for a product
Selecting the final price
Selecting a pricing method
Analyzing competitor's costs, prices,
and offers
Estimating costs
Determining demand
Selecting the price objective
- 107 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� maximum current profit
� maximum market share
� maximum market skimming
� product-quality leadership
� Estimate price elasticity of demand
� Setting pricing policy: a six step procedure
� Demand curve: shows the market’s probable purchase quantity at alternative prices
inelastic demand: price increase leads to relatively small decline in demand
elastic demand:price increase leads to a substantial drop in demand
Developing marketing programs - Developing pricing strategies and programs (5)
Determining demand
- 108 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
price
quantity demanded per period
price
quantity demanded per period
Developing marketing programs - Developing pricing strategies and programs (6)
� Setting pricing policy: a six step procedure
� 5 possible objectives
� survival
� maximum
� Different types of costs accounting
� Measure demand curve for a product
Selecting the final price
Selecting a pricing method
Analyzing competitor's costs, prices,
and offers
Estimating costs
Determining demand
Selecting the price objective
- 109 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� maximum current profit
� maximum market share
� maximum market skimming
� product-quality leadership
� Economies of scale
� Experience curve
� Target Costing
� Estimate price elasticity of demand
Developing marketing programs - Developing pricing strategies and programs (7)
� Setting pricing policy: a six step procedure
� 5 possible objectives
� survival
� maximum
� Different types of costs accounting
3 possible � 3 possible cases
� firm’s offer is similar to comp.
� Measure demand curve for a product
Selecting the final price
Selecting a pricing method
Analyzing competitor's costs, prices,
and offers
Estimating costs
Determining demand
Selecting the price objective
- 110 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� maximum current profit
� maximum market share
� maximum market skimming
� product-quality leadership
� Economies of scale
� Experience curve
� Target Costing
comp.
� firm’s offer is inferior to comp.
� firm’s offer is superior to comp.
� Estimate price elasticity of demand
Developing marketing programs - Developing pricing strategies and programs (8)
� Setting pricing policy: a six step procedure
� 5 possible objectives
� survival
� maximum
� Different types of costs accounting
3 possible � 3 possible cases
� firm’s offer is similar to comp.
� 6 possible methods
� markup pricing
� target-return
� Measure demand curve for a product
Selecting the final price
Selecting a pricing method
Analyzing competitor's costs, prices,
and offers
Estimating costs
Determining demand
Selecting the price objective
- 111 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� maximum current profit
� maximum market share
� maximum market skimming
� product-quality leadership
� Economies of scale
� Experience curve
� Target Costing
comp.
� firm’s offer is inferior to comp.
� firm’s offer is superior to comp.
� target-return pricing
� perceived-value pricing
� value pricing� going-rate
pricing� sealed-bid
pricing
� Estimate price elasticity of demand
� Setting pricing policy: a six step procedure
Selecting a pricing method
� 6 possible pricing methods
� markup pricing: add a standard markup to the product’s cost
--> works only if the marked-up price actually brings in the expected level of sales
cost
orie
nted
Developing marketing programs - Developing pricing strategies and programs (9)
- 112 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� target-return pricing: price is determined by target rate of ROI (return on investment)
--> works only if different prices and their probable impacts on sales volume (price sensitivity of customers) and
profits are estimated
cost
orie
nted
� Setting pricing policy: a six step procedure
Selecting a pricing method
� 6 possible pricing methods
� markup pricing: add a standard markup to the product’s cost--> works only if the marked-up price actually brings in the expected level of sales
� target-return pricing: price is determined by target rate of ROI (return on investment)--> works only if different prices and their probable impacts on sales volume (price sensitivity of customers) and
cost
orie
nted
Developing marketing programs - Developing pricing strategies and programs (10)
- 113 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
--> works only if different prices and their probable impacts on sales volume (price sensitivity of customers) and profits are estimated
� perceived-value pricing: price is based on the customer’s perceived value; other marketing mix elements are used to build up perceived value in buyers’ minds--> works only if the market’ perception of the offer’s value is determined accurately
� value pricing: fairly low price for a high-quality offering-> works only if company’s supply chain is reengineered towards a low-cost producer without sacrificing quality
� going-rate pricing: price based largely on competitors’ prices--> works only if there is industrial harmony in the market
� sealed-bid pricing: price is based on expectation how competitors will bid (contract business)--> works only for companies that make many bids
mar
ket o
rient
edco
st o
rient
ed
� Setting pricing policy: a six step procedure
Developing marketing programs - Developing pricing strategies and programs (11)
� 5 possible objectives
� survival
� maximum
� Different types of costs accounting
3 possible � 3 possible cases
� firm’s offer is similar to comp.
� 6 possible methods
� markup pricing
� target-return
� Consider additional factors
� psychological pricing
� Measure demand curve for a product
Selecting the final price
Selecting a pricing method
Analyzing competitor's costs, prices,
and offers
Estimating costs
Determining demand
Selecting the price objective
- 114 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� maximum current profit
� maximum market share
� maximum market skimming
� product-quality leadership
� Economies of scale
� Experience curve
� Target Costing
comp.
� firm’s offer is inferior to comp.
� firm’s offer is superior to comp.
� target-return pricing
� perceived-value pricing
� value pricing� going-rate
pricing� sealed-bid
pricing
pricing� influence of
other marketing-mix elements
� firm’s pricing policies
� impact of price o. other parties
� Estimate price elasticity of demand
� Setting pricing policy: a six step procedure
� Price playing fieldEconomic value = maximum pricecompetition
� customer
� price sensitivity
� fairness
� company
� goals
� image
� situation
� competition� situation
- market share- costs
� co-operation
� collaborators� trade� suppliers
Developing marketing programs - Developing pricing strategies and programs (12)
- 115 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Variable costs = minimum priceprofit goals
� situation- market share- costs
� co-operation� differentiation
� Adapting the price: identify an optimal pricing str ategy in the practice� geographical pricing
� countertrade- barter- compensation deal- buyback arrangement- offset
� discounts and allowances� cash discounts� quantity discounts� functional discounts� seasonal discounts� allowances
- trade-in allowances
Developing marketing programs - Developing pricing strategies and programs (13)
- 116 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
- trade-in allowances- promotional allowances
� two-part pricing� amusement parks: admission + per ride� car rentals: fixed fee + mileage
� product -bundling pricing� discriminatory pricing
� customer-segment pricing� product-form pricing� image pricing� location pricing� time pricing
� The marketing process consists of 4 components:
Designingmarketing strategies
Managing the marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on: • Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy
• Setting productstrategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process – Managing the marketing effort
Analyzing market
opportunities
Developing market
programs
- 117 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
strategy• Developing pricing
strategies and programs
integrated marketing communications
� Learning objectives: Designing and managing marketi ng channels*
� Which role does distribution play for manufacturers and buyers? What
work is performed by marketing channels?
� What are the essential questions concerning the marketing mix element
“place”?
� What decisions do companies face in designing, managing, evaluating,
Managing the marketing effort - Designing and managing marketing channels - Learning objectives
- 118 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
and modifying their channels?
� Which types of wholesalers and retailers do exist?
* only Script is relevant
� Some basics about distributing
� A distribution system ... is a key (external) resource. Normally it takes years to build, and it is not
easily changed. It ranks in importance with key internal resources such as manufacturing, research,
engineering, and field sales personnel and facilities. It represents a significant corporate
commitment to large number of independent companies (as a rule) whose business is distribution -
and to the particular markets they serve.
� Def. market channels: sets of interdependent organizations involved in the process of
making a product or service available for use or consumption
Managing the marketing effort - Designing and managing marketing channels (1)
- 119 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
� Why is a channel or intermediary needed?Intermediaries smooth the flow of goods and services ... This procedure is necessary in order to
bridge the discrepancy between the assortment of goods and services generated by the producer
and the assortment demanded by the customer. The discrepancy results from the fact that
manufacturers typically produce a large quantity of a limited variety of goods, whereas consumers
usually desire only a limited quantity of a wide variety of goods
A marketing channel performs the work of moving goo ds from producers to consumers and hereby overcomes the time, place and possession gaps
� Distributor’s economic role: sales and logistics
manufacturer distributor customertransferred business
coststransferred business
costs
� manufacturer to distributor
� inventory
� customer to distributor
� inventory
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� inventory
� transportation
� selling
� order handling
� credit
� communication
� information / market feedback
� inventory
� shrinkage
� freight
� technical support
� service
The distributor takes over costs from manufacturer as well as from customer in terms of sales and logistics
� Channel breadth: what degree of exposure does the f irm desire for the product?
� intensive distribution: placing the goods/service in as many outlets as possible
� selective distribution: use of more than a few but less than all of the intermediaries who are willing to carry a
particular product
� exclusive distribution: limiting the number of intermediaries severely
�When is selectivity a good choice?� product characteristics: shopping goods or specialty goods
� buyer behavior: - high perceived risk
Managing the marketing effort - Designing and managing marketing channels (3)
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- low frequency
- high brand loyalty
- high personal selling effort
� degree of control:- price maintenance
- sales assistance
- display standard
- product image
Selective distribution can be used as differentiati ng factor when a competitive strategy is pursued
� Channel length: should one sell directly or through intermediaries?
� direct distribution / direct-marketing channel / zero-level marketing channel: manufacturer selling directly to the final customer
� own sales force (consumer business: „Reisende“; industrial business: sales management)� Manufacturers’ owned stores� mail order� electronic commerce: Internet, TV selling
� indirect distribution / one-/two-level-marketing channel: selling through intermediaries� Merchants („Absatzmittler“): buy and sell products, live on margin
- OEM‘s („Original Equipment Manufacturers“)- industrial distributor
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- industrial distributor- wholesaler- retailer
� Agents („Absatzhelfer“): don‘t buy products, work for acquisition commission- sales representatives / manufacturer‘s representatives („Handelsvertreter“ § 84 HGB: in fremdem Namen
auf fremde Rechnung)- commission merchants („Kommissionär“ § 383 HGB: in eigenem Namen für fremde Rechnung)- broker („Makler“ § 93 HGB: gewerbsmäßige Vermittlung v. Vertragsabschlüssen f. Dritte)
The channel system evolves in response to local opp ortunities and conditions and may vary from location to location
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� Consumer and Industrial Marketing Channels
Managing the marketing effort - Designing and managing marketing channels (4)
Consumer Marketing Channels Industrial Marketing Channels
0-level 1-level 2-level 0-level 1-level 2-level 2-level
Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer
WholesalerManufacturer‘srepresentative
Manufacturer‘ssales branch
- 123 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
Retailer RetailerIndustrial distributor
Consumer Consumer ConsumerIndustrialcustomer
Industrialcustomer
Industrialcustomer
Industrialcustomer
� Retailing
� Def. retailing: includes all the activities involved in selling goods or services directly to final consumers for personal, non-business use
� Types of retailers� specialty store (“Fachgeschäft“): narrow product line with a deep assortment; super specialty store)
� department store (“Kaufhaus“): several product lines - with each line operated as a separate department managed by specialist buyers or merchandisers
� supermarket: relatively large, low-cost, low-margin, high-volume, self-service operation designed to serve total needs for food, laundry, and household maintenance products
� convenience store (“Tankstellengeschäft“): relatively small store located near residential area, open long hours seven days a week, carrying a limited line of high-turnover convenience products at slightly higher prices
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seven days a week, carrying a limited line of high-turnover convenience products at slightly higher prices
� discount store: standard merchandise sold at lower prices with lower margins and higher volumes (� specialty merchandise stores)
� off-price retailer: merchandise bought at less than regular wholesale price and sold at less than retail (� factory outlets)
� Superstore: huge selling space, routinely purchased food and household items, plus services (laundry, shoe repair). Category killer (deep assortment in one category) such as Home Depot; combination store, hypermarket (huge stores that combine supermarket, discount, and warehouse retailing) such as Carrefour.
� Catalog showroom: Broad selection of high-markup, fast-moving, brand-name goods sold by catalog at discount.
Any organization selling to final customers - whethe r a manufacturer, wholesaler, or retailer -is doing retailing
� Wholesaling
� Def. wholesaling: includes all the activities involved in selling goods or services to those who buy for resale or business use
� Types of wholesalers� merchant wholesalers: independently owned business that take title to the merchandise they handle
- full-service wholesalers
- limited-service wholesalers
� brokers: chief function is bringing buyers and sellers together and assisting in negotiation; paid on a commission base by the part who hired them; they do not carry inventory, get involved in financing, or assume risk
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assume risk
� agents: represent either buyers or sellers on a more permanent basis than broker
� manufacturers‘ and retailers‘ branches and offices: wholesaling operations conducted by sellers or buyers themselves rather than through independent wholesalers
� miscellaneous wholesalers: specialized types of wholesalers in certain sectors (agricultural assemblers, auction companies)
The trend towards vertical integration is strong; t his trend is especially affecting wholesale; successful wholesalers are aggressively increasing their effectivity and efficiency
� Channel choice: which criteria help to select the r ight channel???
� economic criteria� determine the sales output per channel� estimate the sales costs of selling different sales volumes, esp. compare sales costs through direct and
indirect selling
sellingcosts
($) company sales force
manufacturer’ssales agency
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� control criteria� sales agency: independent firm seeking to maximize its profits, direct control possibility does not exist� own sales force: direct control possibility
� adaptive criteria� sales agency: more adaptability, less continuity
level of sales ($)
� Modifying channel arrangements over the product lif e cycle - the PC market as an
example
marketgrowth
rate
value added by the channel
2. growing
low
1. introductory� PC‘s: hobbyist stores
� designer apparel:
boutiques
3. mature
4. declining� PC‘s: mail order
� designer apparel:
off-price stores
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high
rate 2. growing� PC‘s: specialty
retailers
� designer apparel: better department stores
high low
3. mature� PC‘s: mass
merchandisers
� designer apparel:
mass merchandisersorigin: Stern and Sturdivant
No marketing channel will remain effective over the whole product life cycle; successful companies adapt their channels according to product evolution
� The marketing process consists of 4 components:
Designingmarketing strategies
Managing the marketing
effort
• Analyzing the Macroenvironment
• Conducting market research
Focus on: • Positioning Strategies• Differentiation
Strategies
• Devising a branding strategy
• Setting productstrategy
• Designing and managingchannels
• Designing and managing integrated marketing
Marketing process – Managing the marketing effort
Analyzing market
opportunities
Developing market
programs
- 128 -Prof. Dr. Andrea E. RaabHochschule Ingolstadt
research• Forecasting and Demand
Measurement• Dealing with the
competition• Identifying market
segments• Market targeting
strategy• Developing pricing
strategies and programs
integrated marketing communications
� Learning objectives: Managing integrated marketing communications*
� What is communication / promotion all about? What major models of
communication do exist?
� What is Integrated Marketing Communications (IMC) all about?
Managing the marketing effort – Designing and managing integrated marketing communications - Learning objectives
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* only Script is relevant
� Marketing communications mix: five major models of communication
� Advertising: paid form of nonpersonal presentation and promotion of ideas, goods, or services
� Sales promotion: variety of short-term incentives to encourage trial or purchase of a product or
service
� Public relations and publicity: variety of programs to promote or protect a company‘ image or its
individual products
Personal selling: face-to-face interaction with prospective Public relations/
publicitySales promotion
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customer(s) for the purpose of making presentations,
answering questions, and procuring orders
Direct marketing: use of mail, telephone, fax, e-mail,
or Internet to communicate directly with specific customers
and prospects
Integrated marketing communications combine a varie ty of communication models or disciplines to provide clarity, consistency, and ma ximum communications’ impact through the seamless integration of discrete messages
Advertising
Personalselling
Directmarketing
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� Integrated Marketing Communications (IMC) is define d as following by the
American Association of Advertising Agencies:
IMC is a concept of marketing communications planning that recognizes the added value
of a comprehensive plan that evaluates the strategic roles of a variety of communications
IMC is a concept of marketing communications planning that recognizes the added value
of a comprehensive plan that evaluates the strategic roles of a variety of communications
disciplines - for example, general advertising, direct response, sales promotion and
public relations and combines these disciplines to provide clarity, consistency, and
maximum communications‘ impact through the seamless integration of discrete
Managing the marketing effort – Designing and managing integrated marketing communications (2)
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messages
IMC will improve the company’s ability to reach the right customers with the right messages at the right time and in the right place
Advertising
Public relations/publicity
Sales promotion
Personalselling
Directmarketing
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