mktg 442 market development lars perner, instructor 1 market development, information, and...
TRANSCRIPT
Market Development, Information, and Bargaining Power
• Reasons for market development
• Strategy in market development
• Tools and outcomes• Participation in
commodities market development
• Bargaining power and market “stabilization”
• Market information
Promotion: Strategic and Tactical Objectives
• Awareness• Trial• Attitude toward the
product– Beliefs– Preference
• Temporary sales increases
EmergingMarkets/New Products
Mature markets/establishedproducts
Marketing Strategy
MARKETINGOBJECTIVESWhat we want to
accomplish
TOOLSUse resources such
as distribution, advertising, sales
promotion, demonstrations
TACTICSAND
ADAPTATIONImplementing strategy
as things change.More tough choices!
CONSUMER/MARKET
RESPONSEConsumers or intermediaries
respond
STRATEGYHow to best use
available resourcesto accomplish objectives
under circumstances.Make tough choices!
OUTCOMESales are influenced
(e.g., volume, frequency, switching,
price sensitivity)
ASSESS AND RE-EVALUATE
ASSESS AND RE-EVALUATE
Market Development Issues
INCREASEDSALES OFPRODUCT
DECREASECONSUMER
PRICE SENSITIVITYGET MORE PEOPLETO BUY PRODUCT
GET CURRENTUSERS TO USE
MORE
GET PRODUCTUSED FOR
NEW PURPOSES
DEVELOP PREFERENCE
RELATIVE TO OTHERPRODUCTS OR BRANDS
DISTRIBUTIONENHANCE-
MENT
ADVERTISING
SALESPROMOTION
JOINTVENTURES/
CO-BRANDING
TRIAL
AWARE-NESS
BUYINGCON-
VENIENCE
.“Big picture only”—details not important!
Market Development: The Objectives
DECREASE CONSUMER PRICE SENSITIVITY“Costs a little more, but it’s worth it” ● Zachy farms chicken ads ● Campbell’s soup ads
GET MORE PEOPLE TO BUY PRODUCTHungry Man dinners ● Hot Pockets ads ● Variety seeking advertising ● Spam luncheon meets advertising
GET PRODUCT USED FOR NEW PURPOSES“Orange juice—it isn’t just for dinner anymore” ● “Beef—it’s what’s for dinner”
● Spam luncheon meets advertising ● Baking soda ads
DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDSKraft cheese ads suggesting that Kraft has more calcium ● Total cereal ads suggesting vitamins ● “Coke is the real thing” ● “The Pepsi generation” ● “The night belongs toMichelob” ● Florida orange juice “Maxwell—it’s good to the last drop”● Progresso and Campbell’s soup ads
GET CURRENT USERS TO USE MORE“Snickers satisfies you!” ● “Ask for A-1 Steak Sauce” ● “A sandwich just isn’t a sandwich without miracle whip” ● “Beef—it’s what’s for dinner” ● “The Incredible, Edible Egg” ●Fast food restaurant advertising
Strategy Issues
• Deciding on objectives – Realism– Suitability for
• Company strengths• Competitor positions• Market structure and change
• How much to spend on objectives– Cost of advertising and/or other promotion relative to gains– Most appropriate ways of achieving objectives based on
• Cost• Effectiveness• Synergy
• Consistency of objectives
Some Tools
• Advertising– Awareness– Trial– Preference– Reminder– New uses
• Distribution– Availability in
retail stores– Quality of
placement within retail stores
• Price/sales promotion– Coupons– Sales– Value– Premium
• Joint ventures/co-branding
• Demonstrations• Product investment
– Quality– Differentiation– Packaging– Usability convenience
Consumer Adoptions of New Foods or New Food Uses
ADOPTION BYLIMITED GROUP
MEDIACOVERAGE
INCREASINGADOPTION/
ADAPTATION
PROMOTION
WORD OF MOUTH
OBSERVATION
TRIAL
TRIAL
Effects and Outcomes
SALES VolumesPrices
AWARENESS
PREFERENCE
USED INMORE
SITUATIONS
REDUCEDPRICE
SENSITIVITY
USEDMORE
FREQUENTLY
USE BYMORE
PEOPLE
REPEATPURCHASES
TRIAL
Market Development
• Levels– Commodity
• Differentiation from competing commodities• Increase in demand for commodity
– Corporate product category (e.g., Coca Cola drinks, including Dasani)
– Product category brand—e.g., Kraft American cheese slices
– Brand (product line)—e.g., Kraft foods
Commodities Market Development Programs
• Typically regional—e.g., Florida orange juice; Idaho potatoes; Hawaiian sugar cane; Washington Apples; Texas beef
• Intention is to differentiate• Compulsory participation in advertising
programs– Development is not worthwhile for the individual
farmer– The individual farmer is assumed to benefit from
overall campaign
Definitions
Innovation: “An idea, practice, or product perceived to be new by the relevant individual or group.”
Diffusion process: “The manner in which innovations spread through the market.”
To Adopt or Not to Adopt: How Will Consumers Answer the Question?
• Some causes of resistance to adoption– Perceived risk--financial
and social– Self image– Effort to implement
and/or learn to use the product
– Incompatibility– Inertia/overwhelming
existing choices
Types of Innovations
• Fashions—tastes go back and forth over time—e.g., food fat content
• Fads—product is “in” for a short time and then fades (e.g., ostrich meat)
• Trends—consumption of a food product either increases or decreases consistently over time
0
10
20
30
40
Num
ber o
f new
adopto
rs
-2.50 -1.50 -0.50 0.50 1.50 2.50
Adoption of Innovations Over Time
Innovators2.5%
Laggards(13.5%)
Earlymajority34%
Earlyadoptors(13.5%)
Late majority34%
Innovators and Imitators: The Lifecycle of A Product
0
0.2
0.4
0.6
0.8
1
Percent diffu
sio
n
0 5 10 15 20 25 Time
The S-Shaped Diffusion Curve
100% adoptionor saturationpoint
One Diffusion Pattern--Nicely Balanced...
Implications for Foods
• Many substitutes and individual tastes• Trying new foods for variety is common• Social opportunities for trial• Food tastes tend to be “learned” early in life
– Best opportunities for spread are with younger consumers
Influences on the Speed of Diffusion
• Risk to expected benefit ratio (relative advantage)—usually not an issue for foods
• Observability—is the product consumed in public
• Product pricing—scarce foods are “rationed” through cost
• Trialability—usually easy for foods• Switching difficulties and learning
requirements/ ease of use—not a problem for foods eaten out but may be for foods to be produced at home
Pioneering Advantage
• Consumer expectations are usually shaped by the first encountered brand
• Satisficing and awareness by consumers• Order of entry vs. pioneering advantage• Positioning of existing pioneer vs. strategy of
first entry
Bargaining Power
• Impact– Price– Conditions
• Returns
• Time of payment
• Interest or finance charges
• Quality or other adjustments
• Transportation or other services
• Sources– Size, number, and
concentration of firms– Supply control– Unequal information– Diversification (?)– Product differentiation– Control of resources– Financial resources– Ratio of fixed to variable
costs
Marketing Orders and Agreements
• Mandates intended to “stabilize” markets• Types of issues
– Grades, size– Packaging– Market allocation (quotas)– Minimum prices– Contributions to research– Advertising (market development)
Market Information
• Some issues– Crop forecasts
– Demand forecasts—quantity and prices
• Government information programs
• Problems– Price specification
(comparability of location, time, and other factors)
– Net vs. gross prices (allowances and discounts)
– Cost vs. accuracy of information
– Changing market orientation and scope of market (proportion of buyers and sellers involved in open markets)
– Voluntary cooperation