market strategy
Content
Marketing Strategy Notes for Cravens/Piercy Book Chapters 1-5
Chapter 1- Market Driven Strategy Know the what and why on all of these: Market driven Strategy = the market and the customers that form the market should be the starting point in business strategy formulation. See page 3. What does this mean for the auto business, a restaurant, a college or university, what would they do? Related topics foundational for a market driven strategy: Marketing Concept or Orientation – says that the key to success in business is to identify and satisfy needs and wants of the buyer. The customer is king. This contrast to the production orientation/concept which focuses on how to make the product at low cost, and the selling concept/orientation which focuses on promoting what you want to sell. In the production and selling orientations the company makes what it wants to make and tries to get the consumer to buy it. With the marketing orientation the company first figures out what people want to buy, then makes it, and then tells them about it. Market Oriented/ Market Orientation – see page 4. Means: Customer is focal point of company’s total operations Customer Focus Cross Functional Coordination Competitor Intelligence Result – superior performance Creating Value – must deliver benefits in excess of costs (value), the greater the excess the better. (Auto and college as examples) Note that we can’t do all things for all people:
Thus: We use Segmentation and target marketing based on core competencies/distinctive capabilities Basically what we want to do is identify and target those markets and segments of markets where our /competencies/capabilities offer the most benefit compared to competition Desired distinctive capabilities will be applicable to multiple competitive situations, difficult to duplicate, and superior to the competition.
Why should we be market driven? Change in the marketplace and competition force us + quest for superior performance, especially financial. Note the changes going on right now per technology, globalization, increased competition, new modes of business, increased sophistication/information/power of consumer Why would some companies not be market driven? (trouble, costs, pride, laziness, and short term orientation – this takes time to pay off) Chapter 2 – Markets and Competitive Space Marketing Strategy should focus on the needs of the customer and changes in the marketplace, especially as these changes relate to competition. Strategy needs to be forward looking – per the challenges that will be faced in the future. See book page for the key challenges of disruptive innovation, commoditization, creation of new market space, and fast changing markets. Note how generic needs give rise to product categories and then specific product markets with product variants per pages 53-55. Generic product market is for basic need like transportation = indirect competition = buses, airplanes, cars etc. Product type product market – general product class like pickup trucks – fairly direct Product variant – exact product type – most direct competition – like midsize pickup trucks – Ford Ranger, Dodge Dakota, Nissan Frontier, and Toyota Tacoma One reason for these product variants is that different end user will have different needs and wants – see cereals on page 57. Know the consumer buying process on page 59
Know the general idea of analyzing competition per page 61 and in particular the levels of forms of competition on page 62. The inner two circles involve direct competition (same basic product), generic competition is indirect competition, and budget competition is general purchase power competition. Estimating market size and sales potential – know the sales forecasting methods on page 69.
Chapter 3 - Strategic Market Segmentation Note the basic ideas of segmentation: dividing the market up into groups that have similar needs and wants but whose needs and wants are different from other groups. Why do it? To better satisfy needs of customers, thus more sales, higher priced sales, and superior marketing and financial performance. Note how this relates to simulation. Target marketing involves choosing markets and segments to go after – note how this relates to the simulation. Positioning has to do with how you will try to place your product in the minds of the consumer (for women, easy to use, convenient, the most powerful etc.). Note that with undifferentiated strategy we ignore segment differences and simply shoot for the middle with a one size fits all approach. With a differentiated strategy we incorporate segmentation by offering different marketing programs for different segments. With a concentrated strategy we recognize the different segments but choose only one or a few to develop a specific marketing program for. Why not segment - why would someone use the undifferentiated strategy - why not just have one model/product/program? Is there an argument for this and against really using segmentation per the differentiated strategy? YES – per trouble and expense and dilution of resources – can you be all things to all people.
THE FACT IS THERE IS A LIMIT TO HOW MANY SEGMENTS SHOULD BE IDENTIFIED AND TARGETED This brings us to the idea of the requirements (criteria) for effective segmentation per below and page 96+ which you should/must know! Criteria for effective segmentation – in other words determining if it makes sense to do it. Response differences – needs and wants must vary between segments and be similar within so that there is a real difference in how the segments respond to any given marketing mix. Identifiable – can you determine who is in the segments Reachable/ actionable – is there an efficient way to reach and act on the variations – for example, how hard would it be to alter the product for man vs. women Cost effective – ie. Benefit greater than cost – for example would the benefit of marketing/segmenting based on gender be greater than the extra cost from doing it. How do we segment – how can we identify segments? Basically look for variables that account for differences in needs and wants. Know the methods (variables) for segmentation pp. 90-95. These would include variables such as: Product use situation Buyers needs and preferences Demographics Purchasing variables such as size and frequency of purchase Note that there are three things that have been discussed and that you should know: 1. What segmentation, positioning, and target marketing are, 2. Why to or not to segment including requirements/criteria for effective segmentation, and 3. How to segment (variables), THESE ARE RELATED BUT DIFFERENT. STUDENTS OFTEN GET THESE CONFUSED – BE SURE THAT YOU DON’T
See segmentation examples per Exhibits on pages 99, 101, 104 and 109. Know what a perceptual map is per some of these examples Note idea of mass customization (cite Levis example in book where they measure you and get or make pair just for you) and niche marketing. In order to be successful in using segmentation it is critical to match your goals, strategies, and capabilities with various segments that you target. Opportunities constantly open up as markets change in terms of what people want and need as well as new technology that enables us to do something that could not be done before. Also keep in mind the small firm vs. big firm advantage whereby opportunities for smaller segments are often passed up by larger companies which opens the door for the small, nimble entrepreneur to go after the segment. Chapter 4 – Strategic Relationship Management Historically marketing has focused on satisfying the needs and wants of the customer on a transaction by transaction basis. In recent years, there has been increasing emphasis on thinking about marketing on an ongoing or relationship basis. That is, you just don’t stay in a Hampton Inn once, or buy groceries for a particular occasion. In most instances, Kroger becomes our grocery supplier and we go there on a regular basis, and likewise whenever we plan a trip we might see if there is an Hampton Inn we can stay in. When this happens the customer and the seller have an ongoing relationship which brings us to the idea or relationship marketing and in particular, as reflected in the title of this chapter customer relationship management. CRM involves a specific program to manage the relationship between the organization and its customers on an ongoing basis. A familiar example of this is customer loyalty cards such as a Kroger card, or a frequent flyer program. These are tools by which the marketer can manage the relationship with the customer for years to come. Note the idea of CRM and database marketing per page 114. When you interact with most large companies today they know who you are and whether you are the kind of customer they really want which could well impact the treatment you get. In other words, if you call a motel about a reservation they can see on the computer screen that you rarely stay and always take the light bulbs and towels – therefore they quote you a high rate and hope you don’t come. Another customer calls and they see that this person if a frequent stay member and never leaves a mess or takes anything with them, and therefore get excellent treatment from the customer rep. See page 125 Ethics Feature Know the idea of customer lifetime value per page 115. When there is a problem and you create a dissatisfied customer you don’t just lose that sales but lose all the sales they
would have made from that point on. If you create a satisfied customer on the other hand, you don’t just gain that sale, you also gain all the future sales as well. Chapter 5 – Capabilities for Learning about Customers and Markets A market driven strategy will focus on the needs and wants of consumers (marketing orientation), the extent to which needs vary or are the same (segmentation), which markets and segments best meet our capabilities and should have a marketing mix (targeting), and what the nature of the overall market is in terms of competition and economic conditions. Companies that do this best will have superior financial performance and will help make the world a better place. To do this requires work, time, and money. Also to be effective, it requires good information. According to the textbook, market-driven companies have superior skills in gathering, interpreting, and using information to guide their strategies. You can have good information and still have a bad strategy, but it is almost impossible to have a good strategy if you have bad information. Note that book says in today’s information age the critical link is shifting to interpretation instead of acquisition. In other words., we have increasing access to data and information but when we get it what does it mean? What is the implication? That is the hard question that we must answer. In regard to being information focused note two things – First, you have to humble yourself and admit that you don’t already know (men and directions). Second, you have to be willing to invest the time and money. Some organizations are basically hostile to information and learning, others embrace it. Note what the book says about a “learning organization” at the bottom of page 131. A learning organization will be doing the kinds of things that listed at top of page 131. Note the example in the Global Feature on page 132. Information gathering (sensing) and learning take time, effort, and money which are all scarce resources. Therefore, we need to concentrate our efforts where they will do the
most good. One way to help direct our efforts is to classify per the effect on the company and the probability of occurrence as seen at the bottom of page 137. Getting Information: Marketing Research – is a process that has a beginning and an end. It is a series of actions per problem definition, research plan or design, data collection, data analysis, reporting results. See pages 138-146. Know internal information data vs. external information/data Know primary data (what we actually originate/ collect ourselves) and secondary data (has already been collect by someone else, we are not the first time user). Information systems are not a process but rather a computerized database system that is in place 24/7 whether anybody uses it or not.
Know the difference between these: Marketing information system, Management Information System, Decision Support, Expert systems. These are covered in book pages 146-147 but the following may be helpful: Marketing and Management Information systems help us manage by giving us easy access to information as to what has happened and what is happening, they do not tell us what is going to happen. A decision support system recognized that to make decision we need information about the future so it adds forecasting and what-if analysis to aid in decision relating to future events. An expert system uses artificial intelligence to actually make the decision for us.
Chapter 6 – Market Targeting and Strategic Positioning Most companies operate in a number of markets with different products appealing to different groups of buyers. In short we use segmentation, targeting, and positioning to carry out the marketing orientation with a market driven strategy. We previously talked about how and why to segment, now we will do the same for targeting and positioning. Note the opening examples in the book about how Whole Foods and Intel have used target marketing and positioning. Another example would be Costco who has targeted more affluent and sophisticated buyers primarily in urban areas, to position themselves as similar to but up-market from Sam’s. Likewise, Target has targeted upscale females for competing up-market from Wal-mart. In order to actually do this you must do more than just promote the position – you must actually be different in all areas of the marketing mix. Target Marketing: A basic principle of economics and life is scarcity of resources – we can’t appeal to everybody. Thus a business must choose those markets and segments of markets to go after. This is an extremely important strategic decision. Why? Huge impact on success, drives almost all other decisions, and cannot be easily changed. Note how this relates to autos, retailing, and the simulation. Basically what we must do is 1. identify markets and segments, 2. choose the ones to target, and 3. position different marketing offerings for the chosen segments. Again, note how this relates to the simulation. What makes a market attractive – what do we want to target – what do we look at? (not exactly what is in the book) Suppose you are strategic analyst for Honda Outdoor equipment – how would you decide what new markets to target? You would probably want to look at target market selection factors such as: Size Competition Ease of entry and exit Distinctive capabilities and competitive advantage of the organization Goals, objectives, vision Market environment /Stage in product life cycle – note the discussion which begins on page 187 about how targeting changes over lifecycle
Positioning Strategy: Read starting on page 193. The basic idea of positioning is that we need a deliberate strategy for determine how we will be seen in the eyes and minds of the consumer? A classic example is Gatorade which was positioned as thirst quencher appropriate for situations involving heat and athletics. This positioning strategy was very innovative at the time Gatorade was launched and created a whole new category of sports drinks. Note how this contrasts to positioning of breakfast drinks and soft drinks as snacks. Positioning Concept is the desired position in the consumers mind that we want to create and the positioning strategy is the plan for the marketing mix elements that we will use to carry this out. What we want is to create a relevant, distinctive, and enduring position that is relevant to and desired by the target market. To the extent that we are successful we have created a MOAT or competitive advantage. See chart on top of page 194. How to position per concept, methods, and strategy Positioning Concepts include functional, symbolic, or experiential positioning (details follow) Functional – linking to specific needs and wants, as a way to solve specific problem, linking to practical, rational reasons to buy. Involves positioning by use and situation As a way to save money, protect your family, kill germs, protect data, maintain health. Symbolic – linking to self image and ego, group identity, role identification. Basically will link to type of person and situation per rich person going to party, executive in business meeting. This is about style and who you are. Experiential – relates to experiencing something via pleasure and excitement. When you want to have fun, for the time of your life etc. Specific methods for positioning:
Point of difference vs. point of parity By attribute, benefit, user, use, situation/occasion, segment, competitor, product class or category, price/quality segment Key is to be clear, relevant and desired or valued The positioning strategy will include coordination of all marketing mix elements to carry out the proceeding, see pages 196+ Chapter 7 – Strategic Relationships In today’s global marketplace it is increasingly common for companies to work together to best satisfy needs and wants. For example in the automobile business companies like Ford and Honda have to partner with suppliers and dealers in order to give consumers the vehicles they want where and when they want to them. In order to work together over the long term we often form strategic relationships. Why? Note the reasons or rationale for interorganizational relationships per Exhibit 7.2 and discussed on pages 207 – 211. How does it work – what types of relationships could be formed? Note the types of relationships per Exhibit 7.1 and discussed on pages 210 – 222. Chapter 8 – Innovation and New Product Strategy We live in a constantly changing world. In order to remain successful we must continuously come up with new products and service to cope with ever changing needs and wants, not to mention the actions of competitors. In other words, we need to innovate. Note the types of innovations on page 239. Well run market-driven companies will have an ongoing deliberate strategy for coming up with new product and service innovations. This will be carried out through the new product planning process.
Know the new product planning process per pages 247-264. You should be able to name and explain each step and including what would be done and how. Chapter 9 – Strategic Brand Management For large companies, a significant part of the marketing effort will focus on the creation and development of brands. Know what a brand is. Branding has a strategic role in marketing as there are benefits to both the buyer and seller as note pages 291-292. The extra value that is built up in a brand is called brand equity – thus a Polo shirt or Rolex watch has very high brand equity as measured by the variables listed under measuring brand equity on page 301. Know basic brand terminology per brand, brand positioning, brand equity, line extension, brand extension, co-branding, licensing.
Chapter 10 – Value-Chain Strategy The channel of distribution performs the functions that are necessary to connect goods and services with end-users. Distribution involves getting the product or service from the point of manufacture to the point of consumption. Value chain strategy is a newer more comprehensive approach to distribution. The term value chain refers to the distribution activities that must be undertaken to make a product available when and where it is needed. Value chain basically means distribution, but reflects a new emphasis that is two fold. First, there is an emphasis on a team of participants – ie a chain, what the book calls “vertically aligned organizations” which means that a number of organizations work together to perform distribution activities. Second, there is also a new emphasis on the value component – the purpose of the chain is to add value – by doing what they do more benefits are created and customer value is enhanced. Note that distribution has a very important, long-term, strategic role in that it can be an important source of competitive advantage and create a deep wide moat that competitors cannot easily cross. This is due to the fact that it is very difficult and expensive to set up or change your channel of distribution. For example it takes
significant time and money to set up a dealer net work such as you would have with autos, motorcycles, or appliances. Likewise it is difficult and expensive to obtain shelf space in retailers such as Kroger and Walmart, or to establish relationships with suppliers and wholesalers. Distribution innovations such as the direct order of computers per Dell or company owned stores such as Radio Shack cannot easily be duplicated. How does the distribution strategy create value? By providing time, place, and service utitlity. In other words, value is created by making the products available where and when they are needed plus providing auxiliary services that are desired and needed. These are termed distribution functions and are discussed in the book on page 319 to 320 and include buying and selling, assembly/accumulation, transportation, processing and storage, promotion (advertising, sales promotion, and personal selling), pricing, servicing and repairs. The overall reason to use intermediaries or middleman to handle distribution is reduction of risk. To the extent that you let others handle these functions you reduce your investment, work load, and risk. The basic choices for value chain or distribution structures are shown in Exhibit 10.1. Note that this particular textbook includes supply chains in addition to the manufacturer/producer. In other words, if the producers and other suppliers which constitute the supply chain sell directly to the consumer or organization without using a middleman/intermediary such as the wholesaler or retailer it is direct distribution/channel. If the producer or supply chain does use middlemen/intermediaries then it is indirect. In terms of advantages and advantages, if a producer uses a direct channel then the producer along with the consumer must assume responsibility for carrying out all of these functions, however they will not have to share the final value of the product. If an indirect channel using retailers and others is used then the intermediaries will fulfill some or all of these functions. This is what is usually done, however it must be kept in mind that the intermediaries must be paid by receiving some of the final value. This will be usually done through a markup. That is the intermediary will buy from the producer or other supplier and add on a markup for the next party in the value chain. The following summarizes the pros and cons of using middlemen (indirect) versus not using (direct). Indirect spreads the risk, enables you to capitalize on the expertise and capital of others, and reduce risk, effort, and investment requirements. Direct gives you total control, all the profit is yours, but all of the value enhancing activities are your responsibility along with the associated costs and risk. With a conventional distribution channel each intermediary is an independently owned and operated organization. With a vertical marketing system (VMS) more than one level of the channel is owned by the same organization. For example in the oil business, companies like Exxon and BP are vertically integrated and produce, refine, wholesale, and retail oil. Others like Morris Petroleum strictly retail (Sprint Marts) and others strictly refine/wholesale (Valero) and other just drill/produce (Denbury).
The intensity of distribution must also be settled per intensive, selective, and exclusive strategies as discussed on pages 327 to 328. In some case more than one channel (multi-channeling) may be used. For example many producers will sell direct to large retailers, but use wholesalers for selling to smaller companies. Likewise a company may sell direct in the same country but use wholesalers when going to foreign countries. Be able to relate the preceding to the simulation? Chapter 11 – Pricing Strategy The following points about price should be noted: 1. The total cost to the buyer includes more than just money: it is everything the buyer gives up to obtain the good or service. In addition to the monetary price the buyer also gives up time, inconvenience, waiting, travel, and risk. Price is the simplest and most visible element of the marketing mix. 3. Price is the most difficult element of the marketing mix in the sense that we rarely know what the optimal price is, and as a result, don't know whether we should be charging more or less. 4. Price is the only element of the marketing mix that generates revenues. Thus, the price charged must be greater than the cost of making the product plus the cost of distribution and the cost of promotion
2.
In order to develop an effective pricing for the goods and services that are being sold there are a number of factors that should be considered and activities that should be undertaken. These are delineated in Exhibit 11.1 on page 351. The basic challenge is to set prices in accordance with objectives and in light of particular target market. In regard to product positioning and determining customer price sensitivity, it is important to note that we we generally have three price segments in any market. These are: High Quality/Prestige – In this segment customers seek quality and status. They want the best and are willing to pay for it. A high price actually makes it more desirable since
that is where the snob appeal comes from. Examples include Rolex watches, Ritz-Carlton Hotels, and Mercedes automobiles.
Value – In this segment customers seek a good product at a reasonable price. This is probably the biggest segment of the auto market and features some of the top sellers such as Honda Accord, Toyota Camry, and Ford Fusion. In the motel industry this would include brands such as Hampton and Courtyard Mariot. Price conscious/Economy – In this segment customers seek a low price. Saving money is a key motivation. The Toyota Corolla used to be in this segment and was advertised as the lowest priced car in America. With a retail price in 1974 of $2,250 it certainly was. In the motel business Motel Six and Days Inn have appealed to this segment. One of the best examples of these segments is contained in the simulation. How are these segments demonstrated in the simulation, which ones have you targeted, and how has that affected your pricing? You should know the concept of price elasticity, the key measure of consumer sensitivity to price. If consumers are sensitive to price then demand will be elastic, and if they are not sensitive to price then demand will be inelastic. Suppose that a restaurant is considering raising the price of a cup of coffee from $1.00 to $1.25. If they are currently selling fifty cups at lunch and it falls to forty seven cups when the price is raised then demand is inelastic. This is because the percentage change in price ((1.25-1.00)/1.00)) of 25%, is larger than the percentage change in demand ((47-50)/50), of 6%. This is also reflected in total sales revenue which is the reason that we care. Specifically, with inelastic demand an increase in price will cause total sales revenue to go up – in this case from 50 x 1.00 = 50, to 47 x 1.25 = 58.75. On the other hand suppose that demand is inelastic and that demand falls to 35 cups when the price is increased. In this case we still have the 25% increase in price but now have a 30% decrease in sales ((35-50)/50). Since the percentage decrease in sales is larger than the percentage increase in price demand is elastic. Unlike the inelastic situation, the increase in price now causes total revenue (sales$) to go down since the loss of revenue from the decline in volume more than offsets the gain in revenue from the increase in price. Selling 50 cups for $1 produces total sales revenue of $50 whereas selling 35 cups for $1.25 only produces total sales revenue of $43.75. Thus with elastic demand, an increase in the sales price will result in a lowering of total revenue. Price, Costs, and Profit
In order to make a truly informed decision about the best price to charge we would need to look at more than the effect on revenue. We would also want to consider related costs and ultimate profit. There are three types of costs: Fixed – do not vary with the quantity sold. For example rent and insurance. Variable – vary with the amount sold. For example packaging costs and sales commissions. Mixed – are somewhat fixed and somewhat variable. For example some rent contracts called for a fixed amount based on time plus an extra amount based on sales. Thus total rent is a combination of both and is mixed. Likewise, some sales people are paid a salary (fixed), some are paid a commission (variable), and some are paid a base salary plus commission (mixed). Legal and Ethical Considerations – see page 364 per price fixing, price discrimination, deceptive pricing, bait and switch, and predatory pricing. Negotiated pricing vs fixed pricing This is not in the book but is an important strategic choice. Should your prices be set with no room or negotiation or should they be adjustable for the situation and customer? With negotiated prices we can adjust the price to the situation. For example if I am selling treadmills that cost me $700 each and customer one comes in and says “How much is that treadmill” and I say “$1,500”, and he says “that is a little more than I want to spend”, then I could then say “Well let me see if the manager will let me knock one hundred dollars off,” and then come back with a price and sale for $1,400. Then customer two comes in and says that the treadmill is way too much, and I tell him that today is his luck day that, we are just getting ready to have a close out sale, and that I can let him have it for $1,200, which he agrees. Note that this negotiation takes time, requires a higher level of skill on the part of the salesperson, and can cause resentment with customers who don’t want to negotiate or who learn that someone else got a better price. As an alternative, I could have a fixed price of $1,250, in which case I would make the sale to customer one but at a $250 lower price, and would lose the sale to customer two who will not spend more than $1,200. Chapter 12 – Promotion, Advertising, and Sales Promotion Strategies Note what promotion is and it’s ultimate purpose – to alter people’s behavior. That is to get them to do something they would not have done otherwise, or not to something they would have done otherwise. Many times this behavior will involve a sales transaction but not always. For example we might want have an objective of getting people to call, visit, or stop smoking.
You should know the promotional mix or tools that we have for achieving this per the composition of promotion strategy beginning on page 373. You should know the definition for each element for matching purposes. Promotional strategy should always be driven by clear specification of the target market/audience (the who) and the objectives we are trying to accomplish (the why). You should know the methods of determining the promotional budget which starts on page 378. Be able to give some examples of advertising objectives per Exhibit 12.5 on page 383. Know examples or types of sales promotion (activities) per Exhibit 12.7 on page 391. Not in book but you should know; Valid reasons for sales promotion: Generate awareness and trial – a coupon plus free sample is very effective Clear out excess inventory – sales promotions are often used to clear out seasonal items. Shift purchase patterns – use sale promotions to get people to buy early or later. Limitations of Sales promotion: Will not correct fundamental problems that may exist with other elements of marketing stragtegy. Can erode value of brand. Can train buyers to wait for promotions. Why buy at regular price if a sales promotion will be coming?
Chapter 13 Sales Force, Internet, and Direct Marketing. Sales force strategy involves the role of personal selling in the overall promotional strategy. What is personal selling? Personal selling is providing information to existing and potential customer through personal conversation in order to alter behavior.
Some organizations have extensive sales forces, others have little or none. Personal selling is most likely to be used where the purchase amounts are large and the purchase is high involvement (extended problem solving) or business oriented. In these situations there is a lot at stake (high risk) and the buyer will want more information and perhaps demonstration in order to make a decision. Thus personal selling is often used for autos, computers, boats, and insurance. Personal selling is often used where there is not an efficient way to communicate with mass media. This is the main reason we use personal selling and not advertising in B2B selling. There is no radio or television station that car dealers, doctors, or computer store owners watch, therefore we use personal selling to reach these people. Why would you use personal selling – why not? There are advantages and disadvantages to using personal selling. Advantages of using personal selling. It is more persuasive. It is hard to ignore a real person whereas you can easily flip a magazine page or change the channel. You can incorporate feedback and adjust message for the situation and the person when using personal selling. You can demonstrate the product. Why would you use it Disadvantages of using personal selling. Time inefficient – it would take forever to contact 50,000 people using sales people, would take only a few seconds using mass media. Expensive – average outside sales call cost about 300$ when you figure salary, trasportation, lodging, and benefits. Inside sales cost be a few dollars to several hundred dollars per transaction . Most Transactions do not involve personal selling – it is too time consuming and expensive. What percent of the items that you have purchase involved a sales person? From a marketing strategy perspective how do we decide whether or not to use personal selling and if so how? See page 398
Types of sales jobs (not exactly same as book): Order taking (fast food), sales assisting (shoe store or high end restaurant), and persuasive (insurance, cars, college recruiting). Cold call (no prior contact) vs. Responsive (have requested information of sales visit0 Inside (don’t travel) vs. Outside (go visit customers) Consumer (selling to regular people) vs. B2B per trade (selling to retailers and wholesalers), industry (manufacturers), organization/institutions (churches, schools), government (state, local, federal). New account vs. existing account Organizing the sales force: Can be organized by product, category, type of customer, market, or geographic, application, or some combinatiion. Hiring Salespeople – made or born, can you tell in advance? Some say yes, some say no. What type of person would you want to hire – what makes for a successful sales person Characteristics relating to success in personal selling include: Good social skills – able to get along with others, likable Competitive drive – wants or even driven to succeed Self motivated – gets going without supervision from others Hard working – does what ever it takes to do the job Reliable – follows through on what is promised. Ethical/honest – tells the truth and puts the customers needs and wants above his/her own – often called “Golden Rule Selling.” Motivating Sales People – Sales people must believe that putting forth extra effort will produce extra sales and profits and that these will in turn translate into a reward that they care about. Motivation leads to effort which leads to results which leads to reward. This linkage is called Expectancy Theory and is widely used to explain why or why not motivation exists.
Direct marketing as opposed to traditional marketing. Traditional Marketing: The organization advertises through mass media now and later customers go to the store and buy. Direct Marketing: The organization promotes with a variety of tools directly to the customer now and asks the customer to buy now. This is actually not new, as years ago peddlers were very common. They would go directly to houses and sell out of a wagon, truck, or car. With the growth of mass media and retail stores direct selling declined, but in recent years with changes in communication and transportation direct marketing has become very common. What has changed: Cable Tv and infomercials, bulk mail with computerized databases and credit cards and UPS and Fed Ex. The Internet. Chapter 14 Designing Market Driven Organizations Per pages 445-449: Know what is meant by traditional structures for organizing businesses and the problems or weaknesses that are associated with it. Know in general terms how and why organizational structures have changed. Per pages 452-344 Know the general idea of organizing for market-driven strategy, marketing functions versus marketing processes, and especially marketing as cross-functional process. Per page 456 know centralization versus. decentralization. Know product-focused versus market-focused designs. Chapter 15 Implementation and Control Review the overall planning process: Analyze situation, develop a strategy and plan for implementing, implement, and analyze results. Most our attention thus far has been on strategic choice, not implementation and follow up. That is where we are now though.
In business things often go wrong, just like in the simulation. Why? 1. Bad plan – poor strategy 2. Plans don’t match actions – there is a performance gap, why? A. What was supposed to be done wasn’t B. External factors like the economy, competition, energy prices, the weather and so on. Implementation and control are crucial so that performance gaps can be identified and corrected – ultimate results will depend on this. One tool for doing this is to prepare a written marketing plan to guide the implementation of our marketing strategy. Benefits/functions of a written marketing plan Forces us to analyze and plan for the areas ordinarily addressed by a marketing plan Communicates to all parties what is to be done Documents the goals and objectives that are to be achieved Specifies the actions that are to be taken, when, and by whom. Serves as proof that we have done our homework on the proposed project The truth is, whether you like it or not, market planning and the development of actual marketing plans is an important point of a career in marketing. Note exhibits 15.2 and 15.3 Note that there are structural and behavioral issues in implementing a plan. Structure has to do with resources available and the actual structure of the organization. Behavior has to do with peoples buying into and supporting the plan. Incentives and communication are key. Note 3M feature on page 476. Note the idea of internal marketing per page 479 and the Nucor example per page 480. Discuss the idea of a strategic marketing audit – see page 484-486. Performance criteria, marketing metrics and a dashboard – see page 441.
Key is to identify problems or gaps and take corrective actions.
Chapter 1- Market Driven Strategy Know the what and why on all of these: Market driven Strategy = the market and the customers that form the market should be the starting point in business strategy formulation. See page 3. What does this mean for the auto business, a restaurant, a college or university, what would they do? Related topics foundational for a market driven strategy: Marketing Concept or Orientation – says that the key to success in business is to identify and satisfy needs and wants of the buyer. The customer is king. This contrast to the production orientation/concept which focuses on how to make the product at low cost, and the selling concept/orientation which focuses on promoting what you want to sell. In the production and selling orientations the company makes what it wants to make and tries to get the consumer to buy it. With the marketing orientation the company first figures out what people want to buy, then makes it, and then tells them about it. Market Oriented/ Market Orientation – see page 4. Means: Customer is focal point of company’s total operations Customer Focus Cross Functional Coordination Competitor Intelligence Result – superior performance Creating Value – must deliver benefits in excess of costs (value), the greater the excess the better. (Auto and college as examples) Note that we can’t do all things for all people:
Thus: We use Segmentation and target marketing based on core competencies/distinctive capabilities Basically what we want to do is identify and target those markets and segments of markets where our /competencies/capabilities offer the most benefit compared to competition Desired distinctive capabilities will be applicable to multiple competitive situations, difficult to duplicate, and superior to the competition.
Why should we be market driven? Change in the marketplace and competition force us + quest for superior performance, especially financial. Note the changes going on right now per technology, globalization, increased competition, new modes of business, increased sophistication/information/power of consumer Why would some companies not be market driven? (trouble, costs, pride, laziness, and short term orientation – this takes time to pay off) Chapter 2 – Markets and Competitive Space Marketing Strategy should focus on the needs of the customer and changes in the marketplace, especially as these changes relate to competition. Strategy needs to be forward looking – per the challenges that will be faced in the future. See book page for the key challenges of disruptive innovation, commoditization, creation of new market space, and fast changing markets. Note how generic needs give rise to product categories and then specific product markets with product variants per pages 53-55. Generic product market is for basic need like transportation = indirect competition = buses, airplanes, cars etc. Product type product market – general product class like pickup trucks – fairly direct Product variant – exact product type – most direct competition – like midsize pickup trucks – Ford Ranger, Dodge Dakota, Nissan Frontier, and Toyota Tacoma One reason for these product variants is that different end user will have different needs and wants – see cereals on page 57. Know the consumer buying process on page 59
Know the general idea of analyzing competition per page 61 and in particular the levels of forms of competition on page 62. The inner two circles involve direct competition (same basic product), generic competition is indirect competition, and budget competition is general purchase power competition. Estimating market size and sales potential – know the sales forecasting methods on page 69.
Chapter 3 - Strategic Market Segmentation Note the basic ideas of segmentation: dividing the market up into groups that have similar needs and wants but whose needs and wants are different from other groups. Why do it? To better satisfy needs of customers, thus more sales, higher priced sales, and superior marketing and financial performance. Note how this relates to simulation. Target marketing involves choosing markets and segments to go after – note how this relates to the simulation. Positioning has to do with how you will try to place your product in the minds of the consumer (for women, easy to use, convenient, the most powerful etc.). Note that with undifferentiated strategy we ignore segment differences and simply shoot for the middle with a one size fits all approach. With a differentiated strategy we incorporate segmentation by offering different marketing programs for different segments. With a concentrated strategy we recognize the different segments but choose only one or a few to develop a specific marketing program for. Why not segment - why would someone use the undifferentiated strategy - why not just have one model/product/program? Is there an argument for this and against really using segmentation per the differentiated strategy? YES – per trouble and expense and dilution of resources – can you be all things to all people.
THE FACT IS THERE IS A LIMIT TO HOW MANY SEGMENTS SHOULD BE IDENTIFIED AND TARGETED This brings us to the idea of the requirements (criteria) for effective segmentation per below and page 96+ which you should/must know! Criteria for effective segmentation – in other words determining if it makes sense to do it. Response differences – needs and wants must vary between segments and be similar within so that there is a real difference in how the segments respond to any given marketing mix. Identifiable – can you determine who is in the segments Reachable/ actionable – is there an efficient way to reach and act on the variations – for example, how hard would it be to alter the product for man vs. women Cost effective – ie. Benefit greater than cost – for example would the benefit of marketing/segmenting based on gender be greater than the extra cost from doing it. How do we segment – how can we identify segments? Basically look for variables that account for differences in needs and wants. Know the methods (variables) for segmentation pp. 90-95. These would include variables such as: Product use situation Buyers needs and preferences Demographics Purchasing variables such as size and frequency of purchase Note that there are three things that have been discussed and that you should know: 1. What segmentation, positioning, and target marketing are, 2. Why to or not to segment including requirements/criteria for effective segmentation, and 3. How to segment (variables), THESE ARE RELATED BUT DIFFERENT. STUDENTS OFTEN GET THESE CONFUSED – BE SURE THAT YOU DON’T
See segmentation examples per Exhibits on pages 99, 101, 104 and 109. Know what a perceptual map is per some of these examples Note idea of mass customization (cite Levis example in book where they measure you and get or make pair just for you) and niche marketing. In order to be successful in using segmentation it is critical to match your goals, strategies, and capabilities with various segments that you target. Opportunities constantly open up as markets change in terms of what people want and need as well as new technology that enables us to do something that could not be done before. Also keep in mind the small firm vs. big firm advantage whereby opportunities for smaller segments are often passed up by larger companies which opens the door for the small, nimble entrepreneur to go after the segment. Chapter 4 – Strategic Relationship Management Historically marketing has focused on satisfying the needs and wants of the customer on a transaction by transaction basis. In recent years, there has been increasing emphasis on thinking about marketing on an ongoing or relationship basis. That is, you just don’t stay in a Hampton Inn once, or buy groceries for a particular occasion. In most instances, Kroger becomes our grocery supplier and we go there on a regular basis, and likewise whenever we plan a trip we might see if there is an Hampton Inn we can stay in. When this happens the customer and the seller have an ongoing relationship which brings us to the idea or relationship marketing and in particular, as reflected in the title of this chapter customer relationship management. CRM involves a specific program to manage the relationship between the organization and its customers on an ongoing basis. A familiar example of this is customer loyalty cards such as a Kroger card, or a frequent flyer program. These are tools by which the marketer can manage the relationship with the customer for years to come. Note the idea of CRM and database marketing per page 114. When you interact with most large companies today they know who you are and whether you are the kind of customer they really want which could well impact the treatment you get. In other words, if you call a motel about a reservation they can see on the computer screen that you rarely stay and always take the light bulbs and towels – therefore they quote you a high rate and hope you don’t come. Another customer calls and they see that this person if a frequent stay member and never leaves a mess or takes anything with them, and therefore get excellent treatment from the customer rep. See page 125 Ethics Feature Know the idea of customer lifetime value per page 115. When there is a problem and you create a dissatisfied customer you don’t just lose that sales but lose all the sales they
would have made from that point on. If you create a satisfied customer on the other hand, you don’t just gain that sale, you also gain all the future sales as well. Chapter 5 – Capabilities for Learning about Customers and Markets A market driven strategy will focus on the needs and wants of consumers (marketing orientation), the extent to which needs vary or are the same (segmentation), which markets and segments best meet our capabilities and should have a marketing mix (targeting), and what the nature of the overall market is in terms of competition and economic conditions. Companies that do this best will have superior financial performance and will help make the world a better place. To do this requires work, time, and money. Also to be effective, it requires good information. According to the textbook, market-driven companies have superior skills in gathering, interpreting, and using information to guide their strategies. You can have good information and still have a bad strategy, but it is almost impossible to have a good strategy if you have bad information. Note that book says in today’s information age the critical link is shifting to interpretation instead of acquisition. In other words., we have increasing access to data and information but when we get it what does it mean? What is the implication? That is the hard question that we must answer. In regard to being information focused note two things – First, you have to humble yourself and admit that you don’t already know (men and directions). Second, you have to be willing to invest the time and money. Some organizations are basically hostile to information and learning, others embrace it. Note what the book says about a “learning organization” at the bottom of page 131. A learning organization will be doing the kinds of things that listed at top of page 131. Note the example in the Global Feature on page 132. Information gathering (sensing) and learning take time, effort, and money which are all scarce resources. Therefore, we need to concentrate our efforts where they will do the
most good. One way to help direct our efforts is to classify per the effect on the company and the probability of occurrence as seen at the bottom of page 137. Getting Information: Marketing Research – is a process that has a beginning and an end. It is a series of actions per problem definition, research plan or design, data collection, data analysis, reporting results. See pages 138-146. Know internal information data vs. external information/data Know primary data (what we actually originate/ collect ourselves) and secondary data (has already been collect by someone else, we are not the first time user). Information systems are not a process but rather a computerized database system that is in place 24/7 whether anybody uses it or not.
Know the difference between these: Marketing information system, Management Information System, Decision Support, Expert systems. These are covered in book pages 146-147 but the following may be helpful: Marketing and Management Information systems help us manage by giving us easy access to information as to what has happened and what is happening, they do not tell us what is going to happen. A decision support system recognized that to make decision we need information about the future so it adds forecasting and what-if analysis to aid in decision relating to future events. An expert system uses artificial intelligence to actually make the decision for us.
Chapter 6 – Market Targeting and Strategic Positioning Most companies operate in a number of markets with different products appealing to different groups of buyers. In short we use segmentation, targeting, and positioning to carry out the marketing orientation with a market driven strategy. We previously talked about how and why to segment, now we will do the same for targeting and positioning. Note the opening examples in the book about how Whole Foods and Intel have used target marketing and positioning. Another example would be Costco who has targeted more affluent and sophisticated buyers primarily in urban areas, to position themselves as similar to but up-market from Sam’s. Likewise, Target has targeted upscale females for competing up-market from Wal-mart. In order to actually do this you must do more than just promote the position – you must actually be different in all areas of the marketing mix. Target Marketing: A basic principle of economics and life is scarcity of resources – we can’t appeal to everybody. Thus a business must choose those markets and segments of markets to go after. This is an extremely important strategic decision. Why? Huge impact on success, drives almost all other decisions, and cannot be easily changed. Note how this relates to autos, retailing, and the simulation. Basically what we must do is 1. identify markets and segments, 2. choose the ones to target, and 3. position different marketing offerings for the chosen segments. Again, note how this relates to the simulation. What makes a market attractive – what do we want to target – what do we look at? (not exactly what is in the book) Suppose you are strategic analyst for Honda Outdoor equipment – how would you decide what new markets to target? You would probably want to look at target market selection factors such as: Size Competition Ease of entry and exit Distinctive capabilities and competitive advantage of the organization Goals, objectives, vision Market environment /Stage in product life cycle – note the discussion which begins on page 187 about how targeting changes over lifecycle
Positioning Strategy: Read starting on page 193. The basic idea of positioning is that we need a deliberate strategy for determine how we will be seen in the eyes and minds of the consumer? A classic example is Gatorade which was positioned as thirst quencher appropriate for situations involving heat and athletics. This positioning strategy was very innovative at the time Gatorade was launched and created a whole new category of sports drinks. Note how this contrasts to positioning of breakfast drinks and soft drinks as snacks. Positioning Concept is the desired position in the consumers mind that we want to create and the positioning strategy is the plan for the marketing mix elements that we will use to carry this out. What we want is to create a relevant, distinctive, and enduring position that is relevant to and desired by the target market. To the extent that we are successful we have created a MOAT or competitive advantage. See chart on top of page 194. How to position per concept, methods, and strategy Positioning Concepts include functional, symbolic, or experiential positioning (details follow) Functional – linking to specific needs and wants, as a way to solve specific problem, linking to practical, rational reasons to buy. Involves positioning by use and situation As a way to save money, protect your family, kill germs, protect data, maintain health. Symbolic – linking to self image and ego, group identity, role identification. Basically will link to type of person and situation per rich person going to party, executive in business meeting. This is about style and who you are. Experiential – relates to experiencing something via pleasure and excitement. When you want to have fun, for the time of your life etc. Specific methods for positioning:
Point of difference vs. point of parity By attribute, benefit, user, use, situation/occasion, segment, competitor, product class or category, price/quality segment Key is to be clear, relevant and desired or valued The positioning strategy will include coordination of all marketing mix elements to carry out the proceeding, see pages 196+ Chapter 7 – Strategic Relationships In today’s global marketplace it is increasingly common for companies to work together to best satisfy needs and wants. For example in the automobile business companies like Ford and Honda have to partner with suppliers and dealers in order to give consumers the vehicles they want where and when they want to them. In order to work together over the long term we often form strategic relationships. Why? Note the reasons or rationale for interorganizational relationships per Exhibit 7.2 and discussed on pages 207 – 211. How does it work – what types of relationships could be formed? Note the types of relationships per Exhibit 7.1 and discussed on pages 210 – 222. Chapter 8 – Innovation and New Product Strategy We live in a constantly changing world. In order to remain successful we must continuously come up with new products and service to cope with ever changing needs and wants, not to mention the actions of competitors. In other words, we need to innovate. Note the types of innovations on page 239. Well run market-driven companies will have an ongoing deliberate strategy for coming up with new product and service innovations. This will be carried out through the new product planning process.
Know the new product planning process per pages 247-264. You should be able to name and explain each step and including what would be done and how. Chapter 9 – Strategic Brand Management For large companies, a significant part of the marketing effort will focus on the creation and development of brands. Know what a brand is. Branding has a strategic role in marketing as there are benefits to both the buyer and seller as note pages 291-292. The extra value that is built up in a brand is called brand equity – thus a Polo shirt or Rolex watch has very high brand equity as measured by the variables listed under measuring brand equity on page 301. Know basic brand terminology per brand, brand positioning, brand equity, line extension, brand extension, co-branding, licensing.
Chapter 10 – Value-Chain Strategy The channel of distribution performs the functions that are necessary to connect goods and services with end-users. Distribution involves getting the product or service from the point of manufacture to the point of consumption. Value chain strategy is a newer more comprehensive approach to distribution. The term value chain refers to the distribution activities that must be undertaken to make a product available when and where it is needed. Value chain basically means distribution, but reflects a new emphasis that is two fold. First, there is an emphasis on a team of participants – ie a chain, what the book calls “vertically aligned organizations” which means that a number of organizations work together to perform distribution activities. Second, there is also a new emphasis on the value component – the purpose of the chain is to add value – by doing what they do more benefits are created and customer value is enhanced. Note that distribution has a very important, long-term, strategic role in that it can be an important source of competitive advantage and create a deep wide moat that competitors cannot easily cross. This is due to the fact that it is very difficult and expensive to set up or change your channel of distribution. For example it takes
significant time and money to set up a dealer net work such as you would have with autos, motorcycles, or appliances. Likewise it is difficult and expensive to obtain shelf space in retailers such as Kroger and Walmart, or to establish relationships with suppliers and wholesalers. Distribution innovations such as the direct order of computers per Dell or company owned stores such as Radio Shack cannot easily be duplicated. How does the distribution strategy create value? By providing time, place, and service utitlity. In other words, value is created by making the products available where and when they are needed plus providing auxiliary services that are desired and needed. These are termed distribution functions and are discussed in the book on page 319 to 320 and include buying and selling, assembly/accumulation, transportation, processing and storage, promotion (advertising, sales promotion, and personal selling), pricing, servicing and repairs. The overall reason to use intermediaries or middleman to handle distribution is reduction of risk. To the extent that you let others handle these functions you reduce your investment, work load, and risk. The basic choices for value chain or distribution structures are shown in Exhibit 10.1. Note that this particular textbook includes supply chains in addition to the manufacturer/producer. In other words, if the producers and other suppliers which constitute the supply chain sell directly to the consumer or organization without using a middleman/intermediary such as the wholesaler or retailer it is direct distribution/channel. If the producer or supply chain does use middlemen/intermediaries then it is indirect. In terms of advantages and advantages, if a producer uses a direct channel then the producer along with the consumer must assume responsibility for carrying out all of these functions, however they will not have to share the final value of the product. If an indirect channel using retailers and others is used then the intermediaries will fulfill some or all of these functions. This is what is usually done, however it must be kept in mind that the intermediaries must be paid by receiving some of the final value. This will be usually done through a markup. That is the intermediary will buy from the producer or other supplier and add on a markup for the next party in the value chain. The following summarizes the pros and cons of using middlemen (indirect) versus not using (direct). Indirect spreads the risk, enables you to capitalize on the expertise and capital of others, and reduce risk, effort, and investment requirements. Direct gives you total control, all the profit is yours, but all of the value enhancing activities are your responsibility along with the associated costs and risk. With a conventional distribution channel each intermediary is an independently owned and operated organization. With a vertical marketing system (VMS) more than one level of the channel is owned by the same organization. For example in the oil business, companies like Exxon and BP are vertically integrated and produce, refine, wholesale, and retail oil. Others like Morris Petroleum strictly retail (Sprint Marts) and others strictly refine/wholesale (Valero) and other just drill/produce (Denbury).
The intensity of distribution must also be settled per intensive, selective, and exclusive strategies as discussed on pages 327 to 328. In some case more than one channel (multi-channeling) may be used. For example many producers will sell direct to large retailers, but use wholesalers for selling to smaller companies. Likewise a company may sell direct in the same country but use wholesalers when going to foreign countries. Be able to relate the preceding to the simulation? Chapter 11 – Pricing Strategy The following points about price should be noted: 1. The total cost to the buyer includes more than just money: it is everything the buyer gives up to obtain the good or service. In addition to the monetary price the buyer also gives up time, inconvenience, waiting, travel, and risk. Price is the simplest and most visible element of the marketing mix. 3. Price is the most difficult element of the marketing mix in the sense that we rarely know what the optimal price is, and as a result, don't know whether we should be charging more or less. 4. Price is the only element of the marketing mix that generates revenues. Thus, the price charged must be greater than the cost of making the product plus the cost of distribution and the cost of promotion
2.
In order to develop an effective pricing for the goods and services that are being sold there are a number of factors that should be considered and activities that should be undertaken. These are delineated in Exhibit 11.1 on page 351. The basic challenge is to set prices in accordance with objectives and in light of particular target market. In regard to product positioning and determining customer price sensitivity, it is important to note that we we generally have three price segments in any market. These are: High Quality/Prestige – In this segment customers seek quality and status. They want the best and are willing to pay for it. A high price actually makes it more desirable since
that is where the snob appeal comes from. Examples include Rolex watches, Ritz-Carlton Hotels, and Mercedes automobiles.
Value – In this segment customers seek a good product at a reasonable price. This is probably the biggest segment of the auto market and features some of the top sellers such as Honda Accord, Toyota Camry, and Ford Fusion. In the motel industry this would include brands such as Hampton and Courtyard Mariot. Price conscious/Economy – In this segment customers seek a low price. Saving money is a key motivation. The Toyota Corolla used to be in this segment and was advertised as the lowest priced car in America. With a retail price in 1974 of $2,250 it certainly was. In the motel business Motel Six and Days Inn have appealed to this segment. One of the best examples of these segments is contained in the simulation. How are these segments demonstrated in the simulation, which ones have you targeted, and how has that affected your pricing? You should know the concept of price elasticity, the key measure of consumer sensitivity to price. If consumers are sensitive to price then demand will be elastic, and if they are not sensitive to price then demand will be inelastic. Suppose that a restaurant is considering raising the price of a cup of coffee from $1.00 to $1.25. If they are currently selling fifty cups at lunch and it falls to forty seven cups when the price is raised then demand is inelastic. This is because the percentage change in price ((1.25-1.00)/1.00)) of 25%, is larger than the percentage change in demand ((47-50)/50), of 6%. This is also reflected in total sales revenue which is the reason that we care. Specifically, with inelastic demand an increase in price will cause total sales revenue to go up – in this case from 50 x 1.00 = 50, to 47 x 1.25 = 58.75. On the other hand suppose that demand is inelastic and that demand falls to 35 cups when the price is increased. In this case we still have the 25% increase in price but now have a 30% decrease in sales ((35-50)/50). Since the percentage decrease in sales is larger than the percentage increase in price demand is elastic. Unlike the inelastic situation, the increase in price now causes total revenue (sales$) to go down since the loss of revenue from the decline in volume more than offsets the gain in revenue from the increase in price. Selling 50 cups for $1 produces total sales revenue of $50 whereas selling 35 cups for $1.25 only produces total sales revenue of $43.75. Thus with elastic demand, an increase in the sales price will result in a lowering of total revenue. Price, Costs, and Profit
In order to make a truly informed decision about the best price to charge we would need to look at more than the effect on revenue. We would also want to consider related costs and ultimate profit. There are three types of costs: Fixed – do not vary with the quantity sold. For example rent and insurance. Variable – vary with the amount sold. For example packaging costs and sales commissions. Mixed – are somewhat fixed and somewhat variable. For example some rent contracts called for a fixed amount based on time plus an extra amount based on sales. Thus total rent is a combination of both and is mixed. Likewise, some sales people are paid a salary (fixed), some are paid a commission (variable), and some are paid a base salary plus commission (mixed). Legal and Ethical Considerations – see page 364 per price fixing, price discrimination, deceptive pricing, bait and switch, and predatory pricing. Negotiated pricing vs fixed pricing This is not in the book but is an important strategic choice. Should your prices be set with no room or negotiation or should they be adjustable for the situation and customer? With negotiated prices we can adjust the price to the situation. For example if I am selling treadmills that cost me $700 each and customer one comes in and says “How much is that treadmill” and I say “$1,500”, and he says “that is a little more than I want to spend”, then I could then say “Well let me see if the manager will let me knock one hundred dollars off,” and then come back with a price and sale for $1,400. Then customer two comes in and says that the treadmill is way too much, and I tell him that today is his luck day that, we are just getting ready to have a close out sale, and that I can let him have it for $1,200, which he agrees. Note that this negotiation takes time, requires a higher level of skill on the part of the salesperson, and can cause resentment with customers who don’t want to negotiate or who learn that someone else got a better price. As an alternative, I could have a fixed price of $1,250, in which case I would make the sale to customer one but at a $250 lower price, and would lose the sale to customer two who will not spend more than $1,200. Chapter 12 – Promotion, Advertising, and Sales Promotion Strategies Note what promotion is and it’s ultimate purpose – to alter people’s behavior. That is to get them to do something they would not have done otherwise, or not to something they would have done otherwise. Many times this behavior will involve a sales transaction but not always. For example we might want have an objective of getting people to call, visit, or stop smoking.
You should know the promotional mix or tools that we have for achieving this per the composition of promotion strategy beginning on page 373. You should know the definition for each element for matching purposes. Promotional strategy should always be driven by clear specification of the target market/audience (the who) and the objectives we are trying to accomplish (the why). You should know the methods of determining the promotional budget which starts on page 378. Be able to give some examples of advertising objectives per Exhibit 12.5 on page 383. Know examples or types of sales promotion (activities) per Exhibit 12.7 on page 391. Not in book but you should know; Valid reasons for sales promotion: Generate awareness and trial – a coupon plus free sample is very effective Clear out excess inventory – sales promotions are often used to clear out seasonal items. Shift purchase patterns – use sale promotions to get people to buy early or later. Limitations of Sales promotion: Will not correct fundamental problems that may exist with other elements of marketing stragtegy. Can erode value of brand. Can train buyers to wait for promotions. Why buy at regular price if a sales promotion will be coming?
Chapter 13 Sales Force, Internet, and Direct Marketing. Sales force strategy involves the role of personal selling in the overall promotional strategy. What is personal selling? Personal selling is providing information to existing and potential customer through personal conversation in order to alter behavior.
Some organizations have extensive sales forces, others have little or none. Personal selling is most likely to be used where the purchase amounts are large and the purchase is high involvement (extended problem solving) or business oriented. In these situations there is a lot at stake (high risk) and the buyer will want more information and perhaps demonstration in order to make a decision. Thus personal selling is often used for autos, computers, boats, and insurance. Personal selling is often used where there is not an efficient way to communicate with mass media. This is the main reason we use personal selling and not advertising in B2B selling. There is no radio or television station that car dealers, doctors, or computer store owners watch, therefore we use personal selling to reach these people. Why would you use personal selling – why not? There are advantages and disadvantages to using personal selling. Advantages of using personal selling. It is more persuasive. It is hard to ignore a real person whereas you can easily flip a magazine page or change the channel. You can incorporate feedback and adjust message for the situation and the person when using personal selling. You can demonstrate the product. Why would you use it Disadvantages of using personal selling. Time inefficient – it would take forever to contact 50,000 people using sales people, would take only a few seconds using mass media. Expensive – average outside sales call cost about 300$ when you figure salary, trasportation, lodging, and benefits. Inside sales cost be a few dollars to several hundred dollars per transaction . Most Transactions do not involve personal selling – it is too time consuming and expensive. What percent of the items that you have purchase involved a sales person? From a marketing strategy perspective how do we decide whether or not to use personal selling and if so how? See page 398
Types of sales jobs (not exactly same as book): Order taking (fast food), sales assisting (shoe store or high end restaurant), and persuasive (insurance, cars, college recruiting). Cold call (no prior contact) vs. Responsive (have requested information of sales visit0 Inside (don’t travel) vs. Outside (go visit customers) Consumer (selling to regular people) vs. B2B per trade (selling to retailers and wholesalers), industry (manufacturers), organization/institutions (churches, schools), government (state, local, federal). New account vs. existing account Organizing the sales force: Can be organized by product, category, type of customer, market, or geographic, application, or some combinatiion. Hiring Salespeople – made or born, can you tell in advance? Some say yes, some say no. What type of person would you want to hire – what makes for a successful sales person Characteristics relating to success in personal selling include: Good social skills – able to get along with others, likable Competitive drive – wants or even driven to succeed Self motivated – gets going without supervision from others Hard working – does what ever it takes to do the job Reliable – follows through on what is promised. Ethical/honest – tells the truth and puts the customers needs and wants above his/her own – often called “Golden Rule Selling.” Motivating Sales People – Sales people must believe that putting forth extra effort will produce extra sales and profits and that these will in turn translate into a reward that they care about. Motivation leads to effort which leads to results which leads to reward. This linkage is called Expectancy Theory and is widely used to explain why or why not motivation exists.
Direct marketing as opposed to traditional marketing. Traditional Marketing: The organization advertises through mass media now and later customers go to the store and buy. Direct Marketing: The organization promotes with a variety of tools directly to the customer now and asks the customer to buy now. This is actually not new, as years ago peddlers were very common. They would go directly to houses and sell out of a wagon, truck, or car. With the growth of mass media and retail stores direct selling declined, but in recent years with changes in communication and transportation direct marketing has become very common. What has changed: Cable Tv and infomercials, bulk mail with computerized databases and credit cards and UPS and Fed Ex. The Internet. Chapter 14 Designing Market Driven Organizations Per pages 445-449: Know what is meant by traditional structures for organizing businesses and the problems or weaknesses that are associated with it. Know in general terms how and why organizational structures have changed. Per pages 452-344 Know the general idea of organizing for market-driven strategy, marketing functions versus marketing processes, and especially marketing as cross-functional process. Per page 456 know centralization versus. decentralization. Know product-focused versus market-focused designs. Chapter 15 Implementation and Control Review the overall planning process: Analyze situation, develop a strategy and plan for implementing, implement, and analyze results. Most our attention thus far has been on strategic choice, not implementation and follow up. That is where we are now though.
In business things often go wrong, just like in the simulation. Why? 1. Bad plan – poor strategy 2. Plans don’t match actions – there is a performance gap, why? A. What was supposed to be done wasn’t B. External factors like the economy, competition, energy prices, the weather and so on. Implementation and control are crucial so that performance gaps can be identified and corrected – ultimate results will depend on this. One tool for doing this is to prepare a written marketing plan to guide the implementation of our marketing strategy. Benefits/functions of a written marketing plan Forces us to analyze and plan for the areas ordinarily addressed by a marketing plan Communicates to all parties what is to be done Documents the goals and objectives that are to be achieved Specifies the actions that are to be taken, when, and by whom. Serves as proof that we have done our homework on the proposed project The truth is, whether you like it or not, market planning and the development of actual marketing plans is an important point of a career in marketing. Note exhibits 15.2 and 15.3 Note that there are structural and behavioral issues in implementing a plan. Structure has to do with resources available and the actual structure of the organization. Behavior has to do with peoples buying into and supporting the plan. Incentives and communication are key. Note 3M feature on page 476. Note the idea of internal marketing per page 479 and the Nucor example per page 480. Discuss the idea of a strategic marketing audit – see page 484-486. Performance criteria, marketing metrics and a dashboard – see page 441.
Key is to identify problems or gaps and take corrective actions.
