studiengang wirtschaftsinformatik: marketing - andrea · pdf file- 7 - prof. dr. andrea e....

Studiengang Wirtschaftsinformatik: Marketing

Fachhochschule Ingolstadt: Prof. Dr. Andrea E. Raab

- 2 -Prof. Dr. Andrea E. RaabFachhochschule Ingolstadt

What is marketing not ?????


What is marketing ?????

FUTURE

CUSTOMER

CUSTOMER

CUSTOMER

CUSTOMER

CUSTOMER

CUSTOMER

Marketing

Marketing


• Nature and function of marketing

• The marketing management process

• Market / Competition

• Customer

• Market-oriented strategic planning

• Marketing program: the marketing mix

Aim

• Introduction; gives an overview on different marketing

definitions, tasks and concepts

• Focuses on marketing as a market driven philosophy; shows

the importance of the marketing management process to

understand and solve business problems

• Shows what role market/competition plays in the marketing

management process and how market/competition is

analyzed

• Shows what role the customer plays in the marketing

management process and how target markets are analyzed

and occupied

• Adresses the management challenge of designing and

implementing the best combination of marketing variables to

carry out a firm‘s strategy in its target markets

• Shows variety of decision areas in product offering,

distribution channels, pricing, communication program s

Agenda


� Learning objectives

� What are the tasks of marketing?

� What is the marketing management process all about?

� What are the major concepts and tools of marketing?


� What are the tasks of marketing?

� What is the marketing management process all about?

� What are the major concepts and tools of marketing?

Nature and function of marketing: Learning objectives


Nature and function of marketing: Some historical perspectives on marketing

The aim of marketing has to change; today’s focus m ust be: price for value

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.”

Peter Drucker:

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 posession 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

Convincing bygulling selling

Convincing bycreating

customervalue

Convincing bycreating

customervalue

“There will always, one can assume, be need for some selling. But the aim of marketing is to make selling superflous. 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.”


Official definition (see Kotler, p. 8 [American Marketing Association])

Marketing (management) is the process of planning and executing the• conception,

• pricing and

• distribution ofideas, goods, services to create exchanges that satisfy individual and

organizational goals

Official definition (see Kotler, p. 8 [American Marketing Association])

Marketing (management) is the process of planning and executing the• conception,

• pricing and

• distribution ofideas, goods, services to create exchanges that satisfy individual and

organizational goals

Nature and function of marketing: What is marketing???

Brainstorming


Nature and function of marketing: The three aspects of marketing

�Marketing as a philosophymarketdriven corporate management, „to live with the customer“, customer oriented corporate

style

�Marketing as a medium to organize the marketplace / -spac e

Industry(sellers)Industry(sellers)

Market(buyers)Market

(buyers)

Communication

Information

Goods / services

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)

� business market(place)

�manufacturer

� intermediary

� (resource, nonprofit, governmental market(place))

� global marketplace

�Marketspace: digital market

Industry(sellers)Industry(sellers)

Market(buyers)Market

(buyers)

Information

Goods / services

Money

Communication


Strategic marketing

Taskenvironment

Broad marketingenvironment

The marketing management process

CustomerCustomer

EconomicEconomic

TechnologicalTechnological

Socio-culturalSocio-culturalLegal

Legal

CompanyCompanyCompetitionCompetition

SWOT (Strenghts/Weaknesses/Opportunities/Threats) analysisMarketingreview+forecast

Corporate/businessstrategy

corporate mission

strategic business units

product portfolio

Tactical marketingMarketingprogram

product price place promotion

Implementation & measuring resultsImplementation+controlling organization implementation controlling

growth plan

bus. mission f.SBU’s

business goalsbusinessstrategy

competitive advantage


Nature and function of marketing: core marketing concepts - broad marketing environment

� Broad marketing environment� The broad market environment consists of for main long term factors which can have major impact

on a company

CompanyCompany

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

EconomicEconomic


Socio-culturalSocio-cultural

LegalLegal

Short term controllable

factors

Short term controllable

factors

Long term factors

Long term factors


Nature and function of marketing: core marketing concepts - task marketing environment

� Task marketing environment� The task market environment consists of customer, competition and the company itself.

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.

Customer

CompetitionOur Company

„ value“

CompetitiveAdvantage

„ value“


� Customer needs� Customer needs

Nature and function of marketing: core marketing concepts - customer needs (1)

needs1 wants demands purchase

transaction

Marketers do not create needs: Needs preexist markete rs (Kotler, 1999, p. 11)

basicrequirement

directed to aspecific object

purchasedisposition

3 goods, services, experiences, information etc.1 see classification of needs: stated needs, real needs, unstated needs, delight needs,secret needs (Kotler, p. 21)

2 five conditions are prerequisite (Kotler, p. 12)

pre sales phase:target market / prospects (prospective customers)

are the focus

sales phase:exchange2 of any offering3

between marketer and customer


� Customer needs� Customer needs

Nature and function of marketing: core marketing concepts - customer needs (2)

needs1 wants demands purchase

transaction

Marketers do not create needs: Needs preexist markete rs (Kotler, 1999, p. 11);the marketer delivers value to the customer if the benefits of the offering are higher than the costs it causes

basicrequirement

directed to aspecific object

purchasedisposition

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

satisfaction

value4 delivery

after sales phase:succesful transaction

if offering deliversvalue to the customer

1 see classification of needs: stated needs, real needs, unstated needs, delight needs,secret needs (Kotler, p. 21)

2 five conditions are prerequisite (Kotler, p. 12)


Nature and function of marketing: core marketing concepts - competition

� Competition� Competition includes all the actual and potential rival offerings and substitutes that a buyer might

consider� Five forces model determining segment structural attractiveness

� Competition� Competition includes all the actual and potential rival offerings and substitutes that a buyer might

consider� Five forces model determining segment structural attractiveness

Potentialentrants (threat of mobility)


Suppliers(supplierpower)


Industrycompetitors(segment

rivalry)


rivalry)

Buyers(buyerpower)

Buyers(buyerpower)

Substitutes(threat of

substitutes)


substitutes)

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.


Nature and function of marketing: core marketing concepts - a company‘s value chain

Firm Infrastructure(e,g, Finance, Controlling)

Human resource management

Research & Development

Procurement

Profit

Pro

fit

Choose the value Provide the value Communicate the value

Marketsegmen-tation

Marketsegmen-tation

Market targetingMarket targeting

Product/service

positioning

Product/service

positioning

Productdevelop-

ment

Productdevelop-

ment

Servicedevelop-

ment

Servicedevelop-

mentPricingPricing

Sourcing

Making

Sourcing

Making

Distri-buting

Ser-vicing

Distri-buting

Ser-vicing

SalesForceSalesForce

Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

Primary activities

Support activities


Nature and function of marketing: core marketing concepts - marketing mix (1)

� Marketing mix:� 4 P‘s: set of marketing tools that the firm uses to pursue its market objectives in the target market

Marketing mixMarketing mix

Product

product varietyqualitydesign

featuresbrand namepackaging

sizesservices

warrantiesreturns

Product

product varietyqualitydesign

featuresbrand namepackaging

sizesservices

warrantiesreturns

Price

list pricediscounts

(cash discount =Skonto)

allowances(“Boni”)

payment periodcredit terms

Price

list pricediscounts

(cash discount =Skonto)

allowances(“Boni”)

payment periodcredit terms

Promotion

sales promotionadvertisingsales force

public relationsdirect marketing

Promotion

sales promotionadvertisingsales force

public relationsdirect marketing

Place

channelscoverage

assortments(“Auswahl,Sortiment”)locationsinventorytransport

Place

channelscoverage

assortments(“Auswahl,Sortiment”)locationsinventorytransport

Design of 4 P‘s is result of marketing strategy implem entation


The selling concept:traditional physical process sequence

The selling concept:traditional physical process sequence

Nature and function of marketing: the selling versus the marketing concept

The marketing concept:value creation and delivery sequence


Marketsegmen-tation

Marketsegmen-tation


Product/service

positioning

Product/service

positioning

Productdevelop-

ment

Productdevelop-

ment

Servicedevelop-

ment

Servicedevelop-

mentPricingPricing

Sourcing

Making

Sourcing

Making

Distri-buting

Ser-vicing

Distri-buting

Ser-vicing

Salesforce

Salesforce

Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

Make the product Sell the product

DesignproductDesignproduct ProcureProcure MakeMake PricePrice SellSell Advertise/

PromoteAdvertise/Promote DistributeDistribute ServiceService



� How can demand be more accurately measured and forecasted?

� methods and concepts

� examples to become trained

� How to measure segment structural attractiveness?

� What does a company need to know about the existing competitive

forces within its industry??

� Who are our competitors??

� Which competitive strategies do exist?


� How can demand be more accurately measured and forecasted?

� methods and concepts

� examples to become trained

� How to measure segment structural attractiveness?

� What does a company need to know about the existing competitive

forces within its industry??


� Which competitive strategies do exist?

Analyzing market opportunities: Learning objectives


Analyzing market opportunities - the market

� 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 the market offer

� Available market: set of consumers who have interest, income, and access to a specific 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

� 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 the market offer

� Available market: set of consumers who have interest, income, and access to a specific 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


Analyzing market opportunities - the market (2)

� 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; differentdemand 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 marketingplan and an assumed marketing environment;

� Company sales potential: sales limit approached by company demand as company marketing effort increases relative to competitors

� 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; differentdemand 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 marketingplan and an assumed marketing environment;

� Company sales potential: sales limit approached by company demand as company marketing effort increases relative to competitors

� 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; differentmarket functions under different marketing environments

� 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 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; differentmarket functions under different marketing environments

� 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 prosperty versus in a period of recession



� Practical method for estimating current market dema nd: 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

� Practical method for estimating current market dema nd: Estimation of total market potential ( potential number of buyers x average quantity purchased by a buyer x price)






do calculation

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)



� Practical method for estimating current market dema nd






do calculation

� Practical method for estimating current market dema nd






do calculation

Take worldwide mobile phone market and estimate

total market potential per anno of medium price

mobile phones (e.g. Nokia 8210, Siemens S??) and

the estimated sales potential of Nokia medium

price mobile phone (8210)


Strategic marketing

Taskenvironment



CustomerCustomer

EconomicEconomic



Legal




corporate mission


product portfolio




growth plan





� Competition� Five forces model determining segment structural attractiveness

� Competition� Five forces model determining segment structural attractiveness






rivalry)


rivalry)

Buyers(buyerpower)

Buyers(buyerpower)


substitutes)


substitutes)

Taskenvironment Customer

CustomerCompany

CompanyCompetition / Industry

Competition / Industry

Analyzing market opportunities - the competition (1)


� 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 strenghts and weaknesses?

� What are other factors that could influence the intensity of competitive actions?

� Strategies / Actions 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?

� 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 strenghts and weaknesses?

� What are other factors that could influence the intensity of competitive actions?

� Strategies / Actions 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?

Analyzing market opportunities - the competition (1a)

The more competitive forces exist and the more powe r they have, the less attractive the market (segment) is!!!


CustomerCompany





� 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

� Three 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


� 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

� Three 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

analyzing market opportunities -the competition (2)

A detailed knowledge of number and type of competit ion in all categories is necessary in order to build up a competitive advantage

Mar

ket

com

petit

ion

Indu

stry

com

petit

ion


CustomerCompany




� 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)

� Capacity augmented in large increments

--> (threat of) overcapacity in the industry

� High exit barriers

� 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)

� Capacity augmented in large increments

--> (threat of) overcapacity in the industry

� High exit barriers

analyzing market opportunities -the competition (3)

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


CustomerCompany




� Barriers to enter

� Economies of scale

� Experience curve (learning curve)

� Cost advantages independent of scale

--> partnerships to suppliers

� Capital requirements

� 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 margins

� Barriers to enter


� Experience curve (learning curve)

� Cost advantages independent of scale

--> partnerships to suppliers

� Capital requirements

� 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 margins

Analyzing market opportunities -the competition (4)

The more barriers to enter exist, the easier profit able market penetration is for existing competitors


CustomerCompany




� Competitive strategy & strategic groups� Strategic group: group of firms in an industry following the same or similar strategic dimensions

� Dimensions for mapping: mobility barriers or factors that deter movement of firms from one strategic position to another in the industry

� Competitive strategy & strategic groups� Strategic group: group of firms in an industry following the same or similar strategic dimensions

� Dimensions for mapping: mobility barriers or factors that deter movement of firms from one strategic position to another in the industry

Analyzing market opportunities - the competition (5)

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

Challenger

Follower

Leader

Nicher / Visionary

GeminiCoopers &Lybrand

ATKearney

Price Waterhouse

McKinsey

Bain

AndersenConsulting

Ernst &YoungCSC

Deloitte & Touche

EDS

Booz Allen

Mercer Mgt.

KPMG

AMS

DMR

SHLSystemhouse

Arthur D Little

Integration (completeness of consulting capability)

Quelle: GartnerGroup 1998

Implementation capability

BCG

Example: Top Management Consulting Companies


CustomerCompany




� Competitive strategy & strategic groups: Automotive industry� Competitive strategy & strategic groups: Automotive industry

Analyzing market opportunities - the competition (5a)Taskenvironment Customer

CustomerCompany



1. Established Niche Player

Volum

e

3. “Commodity”- Player 2. Dominant Player

Illustrative

4. Endangered Player

Competitive advantages


� For buyers� For buyers

Analyzing market opportunities -the competition (6)

Bargaining power is high when ...

� For suppliers� For suppliers

supplier “my” company:buyer of my supplier /supplier of my buyer

Choose the value Provide the value Communicatethe value

Choosethe value

Providethe value

Communicatethe value

Choosethe value

Providethe value

Communicatethe value

buyer

A detailed knowledge of buyers and suppliers positi on in the industry is necessary in order to strenghten the own bargaining power of a com pany


CustomerCompany



? ?



� Market segmentation - why and how?

� What kind of marketing strategies do exist? Which patterns of target

market selection do exist?

� How to position a product / service in the competitive landscape?

� What concepts of differentiation do exist?

� How does a consistent positioning strategy look like?


� Market segmentation - why and how?

� What kind of marketing strategies do exist? Which patterns of target

market selection do exist?

� How to position a product / service in the competitive landscape?

� What concepts of differentiation do exist?

� How does a consistent positioning strategy look like?

Market segmentation / target market selection / customer analysis: Learning objectives


Strategic marketing

Taskenvironment



CustomerCustomer

EconomicEconomic



Legal




corporate mission


product portfolio




growth plan





� Target markets (“target marketing”)� Target markets (“target marketing”)

� Identify segmentation

variables and segment

the market

� Develop profiles of

resulting segments

� Identify segmentation

variables and segment

the market

� Develop profiles of

resulting segments

� Evaluate the

attractiveness of each

segment

� Select the target

segment(s)

� Evaluate the

attractiveness of each

segment

� Select the target

segment(s)

� Identify possible

positioning concepts for

each target segment

Select, develop and

signal the chosen

positioning concept

� Identify possible

positioning concepts for

each target segment

Select, develop and

signal the chosen

positioning concept

Market segmentationMarket segmentation Product/servicepositioning

Product/servicepositioningMarket targetingMarket targeting


Marketsegmen-tation

Marketsegmen-tation


Product/service

positioning

Product/service

positioning

Productdevelop-

ment

Productdevelop-

ment

Servicedevelop-

ment

Servicedevelop-

mentPricingPricing

Sourcing

Making

Sourcing

Making

Distri-buting

Ser-vicing

Distri-buting

Ser-vicing

Salesforce

Salesforce

Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

Market segmentation / target market selection / customer analysisTaskenvironment Customer

CustomerCompany




� 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

� 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

� 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

� 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 / target market selection /customer analysis (2)


CustomerCompany




� 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

� 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

� Whey do they selecet 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

� 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

� 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

� Whey do they selecet 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





CustomerCompany




� Market targeting - evaluate market segments� Market targeting - evaluate market segments



Opportunities for profit • size• growth potential

Opportunities for profit • size• growth potential

Customer

Competitive intensity • unmet needs• entry barriers

Competitive intensity • unmet needs• entry barriers

Competition

• firm’s objectives• firm’s capabilities

• firm’s objectives• firm’s capabilities

CompanyTargetmarket

selection

Targetmarket

selection



CustomerCompany




� 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 undifferenciated marketing

� Market specialization: rather differenciated marketing

� Full market coverage

- undifferentiated marketing

- differentiated marketing

� 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 undifferenciated marketing

� Market specialization: rather differenciated marketing

� Full market coverage

- undifferentiated marketing

- differentiated marketing



Because differenciated marketing leads to both higher sales and higher costs, there isno general statement concerning this strategy’s pro fitability



CustomerCompany




� Product/service positioning

� Def. Positioning: act of designing the company’s offering and image to occupy a

distinctive place in the target market’s mind

� Product/service positioning involves formulating a competitive position for the product

and developing an appropriate marketing mix

� Determine unique differentiating benefits (unique selling proposition; unique advertising

proposition

� 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)

� Product/service positioning

� Def. Positioning: act of designing the company’s offering and image to occupy a

distinctive place in the target market’s mind

� Product/service positioning involves formulating a competitive position for the product

and developing an appropriate marketing mix

� Determine unique differentiating benefits (unique selling proposition; unique advertising

proposition

� 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



CustomerCompany




� Perceptual maps: a major tool in positioning resear ch� Perceptual maps: a major tool in positioning resear ch



The closer two products are, the more similar they are in customers’ minds; the furthest a product is on the imaginery line, the best the produc t is perceived concerning this attribute

Low calorie

For adults

Picks me upFor teens

Sweet

Natural

Diet Pepsi

Diet Coke

Coke

Pepsi

Sprite

Seven up

Fanta

Orange Crush



CustomerCompany




� Example of positioning: beers as people� 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

Michelob Smoke a pipe Philately,philosophy, classicmusic

Free lancer

Becks Charming guy Sailing CEO

Paulaner Cozy type of guy Beergarden Governmentemployed

Miller Good guy, friendly Golf, tennis Junior executives

Eder Drunk Guns Laborer



CustomerCompany




� 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?

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: 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?

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?)



Market segmentation / target market selection / customer analysis: summary (2)


CustomerCompany




� 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

� Distribution: mail-order, serviced by highly trained phone reps.

� Promotions: policy on returned clothing that no longer fits; 20% of original price credited

towars next purchase; donates returned clothes to charity

�Product/Services + Channel differentiation; benefit + user positioning

� 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

� Distribution: mail-order, serviced by highly trained phone reps.

� Promotions: policy on returned clothing that no longer fits; 20% of original price credited

towars next purchase; donates returned clothes to charity

�Product/Services + Channel differentiation; benefit + user positioning



Market segmentation / target market selection /customer analysis: summary (3)


CustomerCompany





� Corporate strategy

� What are the processes towards an effective corporate strategy?

� Why and how to define strategic business units (SBU’s)? Which

strategies to pursue for which SBU’s?

� How to develop a corporate growth plan?

� Business strategy

� What are the processes towards an effective business strategy?

� How to do a SWOT analysis?

� Why and how to develop competitive advantages

� Why and how to develop core competencies

� How to formulate goals?

� How to define a business strategy?


� Corporate strategy

� What are the processes towards an effective corporate strategy?

� Why and how to define strategic business units (SBU’s)? Which

strategies to pursue for which SBU’s?

� How to develop a corporate growth plan?

� Business strategy

� What are the processes towards an effective business strategy?

� How to do a SWOT analysis?

� Why and how to develop competitive advantages

� Why and how to develop core competencies

� How to formulate goals?

� How to define a business strategy?

Market oriented strategic planning (corporate / business level): Learning objectives


Strategic marketing

Taskenvironment


Market oriented strategic planning: company analysis

CustomerCustomer

EconomicEconomic



Legal




corporate mission


product portfolio




growth plan

bus. misssionf. SBU’s




Strategic marketing

Market oriented strategic planning: corporate strategic planning

Corporatestrategy/businessstrategy

corporate mission


product portfolio growth plan

target markets business goalsbusinessstrategy


...

...

� The corporate strategic planning process consists o f 4 components:� The corporate strategic planning process consists o f 4 components:

By doing the corporate planning process, a company establishes the framework within the business units prepare their plans

Define the corporate mission

Define the corporate mission

Identify the strategic business units


Analyze the current portfolio


Develop a corporate plan for new

business growth

Develop a corporate plan for new

business growth


� 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- customers, stakeholders, employes, suppliers, distributors

� major competitive scopes- industry scope

- products and applications scope

- competence scope- market-segment scope

- vertical scope

- geographical scope

� 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- customers, stakeholders, employes, suppliers, distributors

� major competitive scopes- industry scope

- products and applications scope

- competence scope- market-segment scope

- vertical scope

- geographical scope

Define the corp. missionDefine the corp. mission Analyze the current portfolio




Develop a corp. plan f. new business growth


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

Market oriented strategic planning: corporate strategic planning (2)


� The strategic business unit

� Def.: a SBU is a single business or group of related businesses that can be planned idependently 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)

� 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

� The strategic business unit

� Def.: a SBU is a single business or group of related businesses that can be planned idependently 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)

� 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)� Portfolio analysis: The BCG matrix (growth-share ma trix)







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

Starshigh > 10%

10 1 0,1

? ? ?

Question marks

Cash cows Poor dogs

cash flow

divest

cash flowreinvest

noinvest

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


� Portfolio analysis: The BCG Matrix - strategies to p ursue� Portfolio analysis: The BCG Matrix - strategies to p ursue








low

Relative market share

Market growth rate

high

high low

� Stars

� market leaders

� fast growing

� require investment to grow

� Strategy

� protect share

� reinvest earnings through price cuts,product improvement, more efficiency

� obtain large share of new users

� Question marks

� rapid growth

� poor profit margins

� enormous demand for cash

� Strategy

� invest to aggressively build share

� buy existing shares by acquiring

� 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 expans ion grid� Corporate growth plan: Ansoff’s product-market expans ion grid





Develop a corp. plan f. new business

growth

Develop a corp. plan f. new business

growth


currentmarkets

� Market penetration� increase market share

� increase product usage� frequency of usage

� more usage

� new uses

newmarkets

current products new products

� Product development� product line extensions

� new products for same market

� 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


Strategic marketing

Taskenvironment

Market oriented strategic planning: business strategic planning

CustomerCustomer CompanyCompanyCompetitionCompetition



corporate mission


product portfolio growth plan




...

� The core business strategic planning process consis ts of 4 components:� The core business strategic planning process consis ts of 4 components:

Define the business mission


SWOT analysisSWOT

analysisGoal

formulationGoal

formulationStrategy

formulationStrategy

formulation

Broad marketingenvironment Economic

EconomicTechnological

TechnologicalSocio-cultural

Socio-culturalLegalLegal


Market oriented strategic planning: business strategic planning (2)

The core competencies of a company must fit with th e marketing opportunities the company seeks

� SWOT analysis: overall evaluation of strenghts, weak nesses, 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 wich a business can perform

profitability) out of key macroenvironment 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 (strenghts/weaknesses analysis)

� evaluate internal strenghts and weaknesses of different competencies periodically by using a

„checklist for performing strenghts/weknesses“)

� SWOT analysis: overall evaluation of strenghts, weak nesses, 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 wich a business can perform

profitability) out of key macroenvironment 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 (strenghts/weaknesses analysis)

� evaluate internal strenghts and weaknesses of different competencies periodically by using a

„checklist for performing strenghts/weknesses“)



SWOT analysisSWOT

analysisGoal

formulationGoal

formulationStrategy

formulationStrategy

formulation



Core competencies often go through the whole compan y and range over several SBU’s

� 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

� 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)

� 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

� 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)



SWOT analysisSWOT

analysisGoal

formulationGoal

formulationStrategy

formulationStrategy

formulation

* Def. Competitive advantage: a company‘s ability to perform in one ore more ways that competitors cannot or will not match



Market driven organizations often have distinctive ca pabilities in market sensing, customerlinking and channel bonding

� Additional sources of competitive advantage:� Distinctive capabilities: describe excellence in broader business processes than

technical and production processes (core competencies)

� Additional sources of competitive advantage:� Distinctive capabilities: describe excellence in broader business processes than

technical and production processes (core competencies)



SWOT analysisSWOT

analysisGoal

formulationGoal

formulationStrategy

formulationStrategy

formulation

� Capabilities

� specialized knowledge of segmented needs

� customer service orientation

� design expertise

� trade relationships

� ability to utilize relevant technologies and transform them into products with clear benefits

� systems design capabilities

� Capabilities

� specialized knowledge of segmented needs

� customer service orientation

� design expertise

� trade relationships

� ability to utilize relevant technologies and transform them into products with clear benefits

� systems design capabilities

� Resources

� distribution coverage

� financial structure and access tocapital

� shared experience with related businesses

� low cost manufacturing and/or distribution systems

� production capacity

� control of raw material sources

� Resources

� distribution coverage

� financial structure and access tocapital

� shared experience with related businesses

� low cost manufacturing and/or distribution systems

� production capacity

� control of raw material sources



The more consequent a business is managed by object ives, the better the results will be; “you always get what you measure”

� 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?

� SBU sets these objectives and manages by objectives (MBO)

� Objectives must meet four criteria:

� objectives must be arranged hierachically

� objectives should be stated quantitatively

� objectives should be realistic

� objectives must be consistent

� 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?

� SBU sets these objectives and manages by objectives (MBO)

� Objectives must meet four criteria:

� objectives must be arranged hierachically

� objectives should be stated quantitatively

� objectives should be realistic

� objectives must be consistent



SWOT analysisSWOT

analysisGoal

formulationGoal

formulationStrategy

formulationStrategy

formulation



Succesfull companies pursue distinctive strategies c onsisting of many different but consistent and synergistic activities that would be hard for competitors to imitate as a whole

� Strategy formulation:

� Def.: Strategy is a game plane 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 chaeper than

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“

� Strategy formulation:

� Def.: Strategy is a game plane 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 chaeper than

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“



SWOT analysisSWOT

analysisGoal

formulationGoal

formulationStrategy

formulationStrategy

formulation


� Example Southwest Airline’ s marketing strategy: fi t and sustainable� Example Southwest Airline’ s marketing strategy: fi t and sustainable

flexible unioncontracts

flexible unioncontracts

15-minutegate turnaround

15-minutegate turnaround

standardized fleetof 737 aircraft

standardized fleetof 737 aircraft

no connection with other airlinesno connection

with other airlines

no mealsno meals




SWOT analysisSWOT

analysisGoal

formulationGoal

formulationStrategy

formulationStrategy

formulation

frequentreliable

departure

frequentreliable

departure

limitedpassenger

service

limitedpassenger

service

Short haul,point-to-point

route betweenmiddle-of-nowhere

airports

Short haul,point-to-point

route betweenmiddle-of-nowhere

airports

very lowticket pricesvery low

ticket pricesHigh air-craft utili-

zation

High air-craft utili-

zation

lean,highly

productivecrew

lean,highly

productivecrew

no baggagetransfers

no baggagetransfers

limited use oftravel agents

limited use oftravel agents

no seat assignment

no seat assignment

automatic ticke-ting machines

automatic ticke-ting machineshigh level

of employeestock ownership

high levelof employee

stock ownership



� 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”?


� 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”?

Marketing program summary / Marketing program - product: Learning objectives


Strategic marketing

Taskenvironment



CustomerCustomer

EconomicEconomic



Legal




corporate mission


product portfolio




growth plan





� The processes of tactical marketing� The processes of tactical marketing

Provide the value

Marketing program: Marketing mix

Tactical marketingMarketingprogramproduct price place promotion

...

...


Communicate the value

Productdevelop-

ment

Productdevelop-

ment

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ment

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mentPricingPricing

Sourcing

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Salesforce

Salesforce

Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

A company’s positioning strategy must change as the product (and the market) change over time

...


� Product management� Product management

Provide the value

Marketing program: Marketing mix - product management


...

...



Productdevelop-

ment

Productdevelop-

ment

Servicedevelop-

ment

Servicedevelop-

mentPricingPricing

Sourcing

Making

Sourcing

Making

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Distri-buting

Ser-vicing

Salesforce

Salesforce

Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

A company’s positioning strategy must change as the product (and the market) change over time

...


� 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

� Product life cycle curve is typically divided into four stages

� introduction

� growth

� maturity

� decline

� 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

� Product life cycle curve is typically divided into four stages

� introduction

� growth

� maturity

� decline

Marketing program: Marketing mix - product management (2)

Not all products exhibit a bell shaped product life cycle with the four typical stages

Provide the value

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� Characteristics of product life cycle stages� Characteristics of product life cycle stages


Each product stage has different objectives and req uires a different marketing strategy

Provide the value

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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(“Bummler”)

competitors few growing stable, begin todecline

declining

marketingobjectives

create productawareness,

induce producttrial

maximizemarket share

maximize profitwhile defending

share

reduceexpenditureand milk the

brand


� Marketing strategies for product life cycle stages� Marketing strategies for product life cycle stages


Each product stage has different objectives and req uires a different marketing strategy

Provide the value

Productdevelop-ment

Productdevelop-ment

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introduction growth maturity decline

product basic product productextensions

diversifybrands/models

phase out weakitems

price cost + marketpenetration

price to matchcompetition

cut price

distribution selective intensive more intensive selective

advertising awarenessamong early

adopers/dealers

awareness/interest i. mass

market

stress branddifference/

benefits

reduce to neededlevel to retain

hard-core loyals

salespromotion

heavy toinduce trial

reduce to exploitheavy demand

increase toencourage brand

switching

reduce tominimal level


� Product management: the market pioneer “advantage” (pioneer: to be first in the

market)

� Product management: the market pioneer “advantage” (pioneer: to be first in the

market)

Marketing program: Marketing mix - product management (5)Provide the value

Productdevelop-ment

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average market share

consumer goods industrial goods

pioneer ? ?

early follower ? ?

late entrant ? ?

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)

� 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)

Marketing program: Marketing mix - product (1)

Successful companies add benefits to their offering that not only satisfy customers but also surprise and delight them

Provide the value

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corebenefit

basic product

expected product

augmented product

potential product core benefit: the fundamental service or benefitthat the customer is really buying

basic product: a product’s parts, styling, features,brand name, packaging and otherattributes that support core benefits

expected product: a set of attribute and conditions buyersnormally expect

augmented product: additional services/benfits built aroundthe basic/expected product

potential product: all the possible augmentations and transformations the product might undergo in the future


� 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?

---> packaging has to support the product‘s positioning and marketing strategy

� Label decisions� label identifys 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 ccordinates all the company‘s services, creates consumer satisfaction and loyalty and helps the company to differentiate itself from competitors

� 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?

---> packaging has to support the product‘s positioning and marketing strategy

� Label decisions� label identifys 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 ccordinates all the company‘s services, creates consumer satisfaction and loyalty and helps the company to differentiate itself from competitors

Provide the value

Productdevelop-ment

Productdevelop-ment

Servicedevelop-ment

Servicedevelop-ment

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Marketing program: Marketing mix - product (2)



� 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 components of a so called price playing field?

� What are the six possible methods for selecting a pricing method?

� What other factors for selecting the final price does a company have to

determine?

� Additional factors in practice to identify an optimal pricing strategy?


� 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 components of a so called price playing field?

� What are the six possible methods for selecting a pricing method?

� What other factors for selecting the final price does a company have to

determine?

� Additional factors in practice to identify an optimal pricing strategy?

Marketing program: Marketing mix - Price / Learning objectives


� Pricing� Pricing

Provide the value

Marketing program: Marketing mix - pricing


...

...



Productdevelop-

ment

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ment

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mentPricingPricing

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Salesforce

Salesforce

Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

The price captures the customer value provided by p roduct, promotion and placement

...


� 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

� How much money can I make?

� function of internal costs

� 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

� How much money can I make?

� function of internal costs

The adaquate price of a product should primarily be a function of customers and competition, secondly a function of internal costs

Provide the value

Productdevelop-ment

Productdevelop-ment

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Servicedevelop-ment

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Marketing program: Marketing mix - pricing (2)


Provide the value

� Setting pricing policy: a six step procedure� Setting pricing policy: a six step procedure

Selecting the final price

Selecting the final price

Selecting a pricing method


Analyzingcompetitors’scosts, prices,

and offers

Analyzingcompetitors’scosts, prices,

and offers

Estimating costs

Estimating costs

Determining demand

Determining demand

Selecting the price objectiveSelecting the

price objective

� 5 possible objectives

� survival

� maximum current profit

� maximum market share

� maximum market skimming

� product-quality leadership

� 5 possible objectives

� survival

� maximum current profit

� maximum market share

� maximum market skimming

� product-quality leadership

� Different types of costs accounting


� Experience curve

� Target Costing

� Different types of costs accounting


� Experience curve

� Target Costing

� 3 possible cases

� firm’s offer is similar to comp.

� firm’s offer is inferior to comp.

� firm’s offer is superior to comp.

� 3 possible cases

� firm’s offer is similar to comp.

� firm’s offer is inferior to comp.

� firm’s offer is superior to comp.

� possible methods

� Cost-plus-Kalkulation

� RetrogradeKalkulation

� possible methods

� Cost-plus-Kalkulation

� RetrogradeKalkulation

� Consider additional factors

� psychological pricing

� influence of other marketing-mix elements

� firm’s pricing policies

� impact of price o. other parties

� Consider additional factors

� psychological pricing

� influence of other marketing-mix elements

� firm’s pricing policies

� impact of price o. other parties

� Measure demand curve for a product

� Estimate price elasticity of demand

� Measure demand curve for a product

� Estimate price elasticity of demand

Productdevelop-ment

Productdevelop-ment

Servicedevelop-ment

Servicedevelop-ment

PricingPricing

Sourcing

Making

Sourcing

Making

Distri-buting

Ser-vicing

Distri-buting

Ser-vicing




Determining demand

Determining demand

� Demand curve: shows the market’s probable purchase quantity at alternative prices� Demand curve: shows the market’s probable purchase quantity at alternative prices

price

quantity demanded per period

price

quantity demanded per period

inelastic demand: price increase leads to relatively small decline in demand

elastic demand:price increase leads to a substantial drop in demand

Provide the value

Productdevelop-ment

Productdevelop-ment

Servicedevelop-ment

Servicedevelop-ment

PricingPricing

Sourcing

Making

Sourcing

Making

Distri-buting

Ser-vicing

Distri-buting

Ser-vicing




� Price playing field� Price playing fieldEconomic value = maximum price



Variable costs = minimum priceprofit goals

competition

� customer

� price sensitivity

� fairness

� company

� goals

� image

� situation

�market share

�costs

� competition� situation

�market share�costs

� co-operation� differentiation

� collaborators� trade� suppliers

Provide the value

Productdevelop-ment

Productdevelop-ment

Servicedevelop-ment

Servicedevelop-ment

PricingPricing

Sourcing

Making

Sourcing

Making

Distri-buting

Ser-vicing

Distri-buting

Ser-vicing



Cost-Plus-Kalkulation

Was wird uns ein Produkt kosten?(Und wie können wir das auf den Kunden

überwälzen?)

Retrograde Kalkulation

./. verbindliche Zielgewinnrate

VOM MARKT ERLAUBTE KOSTEN:

Ziel-Herstellkosten

Ziel-Entwicklungskosten

Ziel-Vertriebs- undVerwaltungskosten

Was darf uns ein Produkt kosten?(Und wie können wir das erreichen)

MATERIALKOSTENMaterialgemeinkosten

FertigungslöhneFertigungsgemeinkosten

HERSTELLKOSTEN

EntwicklungsgemeinkostenVerwaltungsgemeinkosten

Vertriebsgemeinkosten

SELBSTKOSTEN

Gewinnzuschlag

+++

+++

+

VerkaufspreisVerkaufspreis

ZielpreisZielpreis

Provide the value

Productdevelop-ment

Productdevelop-ment

Servicedevelop-ment

Servicedevelop-ment

PricingPricing

Sourcing

Making

Sourcing

Making

Distri-buting

Ser-vicing

Distri-buting

Ser-vicing



� Setting pricing policy: identify an optimal pricing strategy in the practice� discounts and allowances

� cash discounts� quantity discounts� functional discounts� seasonal discounts� allowances

- 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

� Setting pricing policy: identify an optimal pricing strategy in the practice� discounts and allowances

� cash discounts� quantity discounts� functional discounts� seasonal discounts� allowances

- 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

Provide the value

Productdevelop-ment

Productdevelop-ment

Servicedevelop-ment

Servicedevelop-ment

PricingPricing

Sourcing

Making

Sourcing

Making

Distri-buting

Ser-vicing

Distri-buting

Ser-vicing




� Which role does distribution play for manufacturers and buyers

� What work is performed by marketing channels?


� Which role does distribution play for manufacturers and buyers

� What work is performed by marketing channels?

Marketing program: Marketing mix - place / Learning objectives


� Distributing products� Distributing products

Provide the value

Marketing program: Marketing mix - place (1)


...

...



Productdevelop-

ment

Productdevelop-

ment

Servicedevelop-

ment

Servicedevelop-

mentPricingPricing

Sourcing

Making

Sourcing

Making

Salesforce

Salesforce

Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

The decision for a distribution system affects all other marketing mix elements and its crucial for a succesfull value creation and delivering proces s

...Distri-buting

Servicing

Distri-buting

ServicingServicing


� 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

� 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

� 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

� 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

Provide the value

Productdevelop-ment

Productdevelop-ment

Servicedevelop-ment

Servicedevelop-ment

PricingPricing

Sourcing

Making

Sourcing

Making


Distri-buting

Servicing

Distri-buting

ServicingServicing

A marketing channel performs the work of moving goo ds from producers to consumers and hereby overcomes the time, place and possession gap s


� Distributor’s economic role: sales and logistics� Distributor’s economic role: sales and logistics

Provide the value

Productdevelop-ment

Productdevelop-ment

Servicedevelop-ment

Servicedevelop-ment

PricingPricing

Sourcing

Making

Sourcing

Making


Distri-buting

Servicing

Distri-buting

ServicingServicing

manufacturermanufacturer distributordistributor customercustomertransferred business

coststransferred business

costs

� manufacturer todistributor

� inventory

� transportation

� selling

� order handling

� credit

� communication

� information /market feedback

� customer todistributor

� inventory

� shrinkage

� freight

� technical support

� service

The distributor takes over costs from manufacturer a ls well as from customer in terms of sales and logistics



� What is communication / promotion all about?

� What major models of communication do exist?

� What is integrated marketing communications all about?


� What is communication / promotion all about?

� What major models of communication do exist?

� What is integrated marketing communications all about?

Marketing program: Marketing Mix - communication / Learning objectives


� Communication of value through integrated marketing communication� Communication of value through integrated marketing communication

Provide the value

Marketing program: Marketing mix - promotion


...

...



Productdevelop-

ment

Productdevelop-

ment

Servicedevelop-

ment

Servicedevelop-

mentPricingPricing

Sourcing

Making

Sourcing

Making

Salesforce

Salesforce

Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

Companies must communicate with present and potenti al stakeholders and the public in order to acquaint themselves and their products

...Distri-buting

Servicing

Distri-buting

ServicingServicing


� 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 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

� 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 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

Marketing program: Marketing mix - promotion (2)

Integrated marketing communications combine a varity of communication models or disciplines to provide clarity, consistency, and ma ximum communications’ impact through the seamless integration of discrete messages


Salespro-

motion

Salespro-

motion

Adver-tising

Adver-tising

Salesforce

Salesforce

Advertising

Public relations/publicity

Sales promotion

Personalselling

Directmarketing

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