BUYERS

Relationships

Environmental Forces

CompetitiveRivalrySuppliers

SocialRegulatory

TechnologicalEconomic Special Interest

OtherOrganizations

Alliances

Partnerships

Ownership

MARKETING “BIG PICTURE”

PRICEPRODUCT

PROMOTION

DISTRIBUTION SERVICE

Target Customer

Intl.

Trends

CONVENIENCE

Internal Forces

Substitutes

Forces Driving International Competition

Industrycompetitors

Rivalry amongexisting firms

Potentialentrants

Potentialentrants

SubstitutesSubstitutes

SuppliersSuppliersBuyersBuyers

Capabilities & Ability to MeetNeeds

Number and Economic Ability

Threat ofnew entrants

Threat ofSubstitute Productsor Services; Currentand PotentialDevelopments

ComplementorsComplementors

EVOLUTION OF MARKETING CONCEPT

PRODUCTION ORIENTATION

PRODUCT ORIENTATION

SELLING ORIENTATION

MARKET ORIENTATION

SOCIETAL ORIENTATION

The Marketing Concept The Marketing Concept

ProfitProfit

CustomerSatisfaction

CustomerSatisfaction

Total CompanyEffort

Total CompanyEffort

TheMarketingConcept

FOCUS MEANS ENDS

Products Selling and Promotion

Profits Through Sales Volume

THE SELLING CONCEPT

Products Integrated Marketing

Profits Through Customer Satisfaction

THE MARKETING CONCEPT

BECOMING MARKET DRIVEN Internal Orientation

Persuade customer to have what company has

Generic product, production process and delivery system

Lowest delivered cost

Volume, costs profit margins

Short term, reactive

Market Focus

Product Focus

Competitive Advantage

Objectives

Time Horizon

Market OrientationPersuade company to have what customer wants

Augmented product, customer value and market niches

Quality and service superiority

Profitable use of resources, market position, customer satisfaction

Medium and long run view of threats and opportunities

Market-oriented ActionMarket-oriented Action Market and customer feedback Focus on target market Customer satisfaction orientation Quality obsession Innovation Interfunctional teamwork Trade partnership Strong communications program Green consciousness Globalization

Customer Orientation

Competitor Orientation

Interfunctional Coordination

LONG-TERMFOCUS

PROFITABILITY

MARKET ORIENTATION

Customer Orientation: 3 Types of Marketing

Employees INTERACTIVE Customers

INTERNAL EXTERNAL

Company

Value

Designing a Customer-Oriented Organization

Implement the marketing conceptBuild a customer-driven organizationEstablish a good marketing info systemMarketing plans should be based on segmentation analysisHire the best talentStress operational efficiencyDevelop customer-centered programsContinually measure and fine-tune your customer focus

KOHLI/JAWORSKI MARKET ORIENTATION MODEL Top Mgt.

- Emphasis

- Risk Aversion

Interdepartmental Dynamics

- Conflict

- Connectedness

Organizational Systems

- Formalization

- Centralization

- Departmentalization

- Reward Systems

MARKET ORIENTATION

- Intelligence Generation

- Intelligence Dissemination

- Responsiveness

Employees

- Organizational Commitment

- Esprit de Corps

Environment

- Market Turbulence

- Competitive Intensity

- Technological Turbulence

Business Performance

Source: Jaworski, B. and Kohli, A. Journal of Marketing July, 1993

Key Marketing Trends1) END OF INDUSTRIAL AGE

2) NEW EMERGING MARKETS

3) GROWTH OF MATURE MARKET

4) REENGINEERING THE HOME

5) END TO THE “REIGN OF QUANTITY”

6) REINVENTING THE STORE

7) THE DEATH OF “Product Marketing”

Source: Celente, G.Trends 2000 ; Popcorn, F Clicking

10 BIG EMERGING MARKETS

1. ARGENTINA2. BRAZIL3. CHINA4. INDIA5. INDONESIA6. MEXICO7. POLAND8. SOUTH AFRICA9. SOUTH KOREA10. TURKEY

Source:: Garten, J. The Big Ten: Big Emerging Markets and How They Will Change Our Lives, BasicBooks, 1997

Key Marketing Trends (cont.)

8) TURBO MARKETING

9) ANCHORING

10) FEMALE-THINK

11) 99 lives

12) MARKET SURPUS VS MARKET SHARE

13) RESPONSE MARKETING

14) EFFICIENT CONSUMER RESPONSE

15) ELECTRONIC COMMERCE

THE QUESTION

Home Furnishings (94 percent)

Holidays (92 percent)

Homes (91 percent)

Bank Account - New (89 percent)

Medical Insurance (88 percent)

Automobiles (80 percent)

and the answer is..

RESPONSE MARKETING B

ases

of

Com

mu

nic

atio

n

Present State of Database Marketing

Traditional Promotion (TV adv.)

Area of Opportunity Addressable

Non-addressable

Mode of Promotion

Ave. (mass) Differential

MEASURING SHARE OF TOTAL MARKET SURPLUS

($ Millions)

surplus

cost

Suppliers Retailers Manufacturers

Total Market Surplus

Consumer Price

Net Price to Retailers

Raw Materials price to Manufacturers

Key Marketing Trends (cont.)

16) THE “VALUE” IMPERATIVE

17) TRANSPARANCY OF THE CORPORATION

18) CULTURAL, HISTORICAL TOURISM

19) EATING SCARED

20) INTEGRATED MARKETING

CUSTOMER VALUE TRIAD

Value-Based Prices

Service

Quality

Product Quality

CUSTOMER VALUE MAP: LUXURY CARS

Higher

Relative

Price

Lower

Relative Performance: overall score

1.25

1.25

.75

60 80 100

Inferior CustomerValue

Superior CustomerValue

BMW5-Series

LexusLS 400

*

*

LincolnContinental

*

AcuraLegend

*

CUSTOMER VALUE BASICS

The customer defines the appropriate quality, service, and price

Value expectations are relative to the competition

Value expectations are dynamicQuality and service delivery are the

responsibility of the whole channelMaximizing customer value requires

total organizational commitment

THE VALUE MATRIX

Process

Pu

rpose

High

Low

Low High

Well-Intentioned

Adversarial

Value-Creating

Bureaucratic

Integrated Marketing Communications

The concept of designing marketing activities –advertising, personal selling, sales promotion,and public relations -- to provide a consistentmessage across all audiences is referred to as integrated marketing communications (IMC).

Integrated Marketing Communications

IRWIN©Times Mirror Higher Education Group, Inc.

Corporate Strategy

Business Strategy

Functional Strategy

THE HIERARCHY OF STRATEGY

Executive

Summary

Current marketing situation

objectives and Issues (M.S.A.F.)

Marketing Strategies(S.T.P.)

Action Programs(5 W’s)

Budgets Controls

“PLAN IS NOTHING PLANNING IS EVERYTHING”

Threats and Opportunities

MISSION - Why are we here?

GOALS - What should we do?

STRATEGIES - How should we do it?

VISION LONG-TERM SOMETHING TO BE PURSUED A MOTIVATING STATEMENT PROVIDES GUIDANCE/INSPIRATION

SONY: Sony is a pioneer and never intends to follow others. It shall always be a seeker of the unknown...Sony has a principle of respecting and encouraging one’s ability... and always tries to bring out the best in a person

COCA- To put a Coke within an arm’s reach of every COLA : consumer in the world

JAPANESE AUTO CO. “Beat Benz!”

BELLSOUTH: Be Customer’s Best Connection to Communications, Information, and Entertainment

VISION STATEMENTS

MISSION OVERALL DIRECTION FIRMS WANT

TO GO SOMETHING TO BE ACCOMPLISHED A BUSINESS PHILOSOPHY FIRM’S CORE PURPOSE FOR BEING

MISSION STATEMENTS

SEARS: Sell a broad range of general merchandise and services through various types of retail facilities and direct response marketing channels in the U.S. , Canada, & Puerto Rico

BAXTER : We shall be the leading healthcare company by HEALTH- providing the best services and products for CARE our customers, emphasizing innovation,

operational excellence, personal and business ethics, & the highest quality in everything we do

CLASSIFYING CAPABILITIES

Extern

al Em

ph

asis

Intern

al Em

ph

asis

Outside-in Process

Inside-out Process

Spanning Processes

• market sensing• customer linking• channel bonding• tech. monitoring

• cust. order fulfill.• pricing• cust serv. delivery• new product dev.• purchasing

• financial mgt.• cost control• technology dev.• integrated logist.• mfg/transform• HRM

Source: Day, G. (1994) J. of Marketing (58) October 37-52

Generic Strategies

Overall Cost Leadership Differentiation Focus

Differentiation

ModerateIncongruencies

Strong Incongruencies

3 Product Augmenting Strategies

LEADER

EXPAND TOTAL MARKETEXPAND TOTAL MARKET create create new usersnew users create create new usesnew uses create create more usagemore usage

FLANKING FLANKING BLOCKINGBLOCKING PRE-EMPTIVE STRIKESPRE-EMPTIVE STRIKES BUNDLE/UNBUNDLEBUNDLE/UNBUNDLE

CHALLENGER

FRONTAL ATTACKFRONTAL ATTACK need 3 : 1 advantage in resourcesneed 3 : 1 advantage in resources find weakness in leader’s strengthfind weakness in leader’s strength

FLANK ATTACK FLANK ATTACK BYPASSBYPASS GUERILLAGUERILLA REDEFINE COMPETITIVE SCOPEREDEFINE COMPETITIVE SCOPE

MARKET NICHER

BY END USEBY END USE BY CUSTOMER SIZE BY CUSTOMER SIZE BY PRODUCT LINEBY PRODUCT LINE BY CHANNEL OF DISTRIBUTIONBY CHANNEL OF DISTRIBUTION BY GEOGRAPHYBY GEOGRAPHY BY SPECIFIC CUSTOMERBY SPECIFIC CUSTOMER

MILES & SNOW 4 BUSINESS STRATEGIES

Emphasis on New Product Growth

Risk Taking

No E

mph

asis

Heavy E

mphasis

A G

reat Deal

Very L

ittle;

Prospector

Analyzer

Defender

Reactor

Structure

StyleSkills

Shared Values

Systems

Staff

Strategy

McKinsey 7-S Framework

GE’s “SHARED VALUES”

RULE OF NO. 1 OR NO. 2 INTEGRITY - MANAGER IS RESPONSIBLE

FOR HIS/HER ACTIONS ONLY STATISFIED CUSTOMERS CAN

PROVIDE JOB SECURITY LEADERS SHOULD SHARE KNOWLEDGE

RATHER THAN WITHHOLD IT FUNCTION COLLECTIVELY AS ONE FIRM

AND INDIVIDUALLY AS MANY BUSINESSES

VALUE CHAIN AND GENERIC STRATEGIES

VALUE CHAIN

Primary

Activities

Support

Activities

Inbound Logistics Marketing & Sales

Operations Outbound Logistics

Service

Procurement Firm Infrastructure

Technology Human Resource

Management Development

GENERIC STRATEGY

Cost Leadership

Differentiation

Focus

Marketing Mix

Target Market

Place

Channels Coverage Locations Inventory Transport

Promotion Advertising Personal selling Sales promotion Public Relations

Product

Quality Features Options Style Brand name Packaging Sizes Services Warranties Returns

Price List price Discounts Allowances Payment Period Credit terms

Marketing Mix for the 90s

MARKETING ELEMENT RANKCustomer Sensitivity 1

Product 2Customer Convenience 3

Service 4Price 5Place 6

Promotion 7

WHAT IS RELATIONSHIP MARKETING?

The creation and retention of profitable customers through ongoing collaborative business and partnering activities between a supplier and a customer on a one-to-one basis for the purpose of creating superior customer value

Question: What 3 Factors Lead to Overall Customer Satisfaction in Industrial Buyer-Seller Relationships?

Practicing Relationship Marketing

Share Information with Customer Look for opportunities to “Add Value” Respond Quickly to Customer Needs Apply “Mass Customization” Involve Customer in

product/Service/Process Design Organize Processes Around Customer Track Each Relationship - Est. L.T.V. Deliver Differentiated Messages Based on

Customer Characteristics/Preferences

Reasons for Relationships

Efficiency

Needs and Wants

Customer Retention

Relationship Variables

Trust

Cooperation

Commitment

Dependence

Information Exchange

Continuum of Relationships

Industry Relationship Bandwidth

Pu

re

Tra

nsa

ctio

nal

Exc

han

ge

Pu

reC

olla

bor

ativ

e E

xch

ange

Flaring - OutUnbundlingStrategy

Added AugmentationStrategy

Core Product

Augmented Product

Transactions vs. Relationships

• SHORT TERM• LIMITED INTERNAL

MARKETING• MARKETING MIX

EMPHASIZED• BUYER PRICE SENITIVE• TECHNICAL QUALITY• FOCUS ON MARKET SHARE• RESEARCH IS AD-HOC

• LIMITED INTERACTION AMONG FUNCTIONAL AREAS

• LONG TERM

• SUBSTANTIAL INTERNAL MARKETING

• INTERACTIVE MARKETING EMPHASIS

• BUYER LESS PRICE SENSITIVE

• FUNCTIONAL QUALITY

• FOCUS ON “SHARE OF CUSTOMER”

• RESEARCH IS REAL-TIME

• SUBTANTIAL INTERACTION AMONG FUNCTIONAL

• AREAS

BUILDING CUSTOMER CENTERED ADVANTAGEBUILDING CUSTOMER CENTERED ADVANTAGE

Potential to

CustomerLoyalty

Potential to

CustomerLoyalty

RelationalExchanges

RelationalExchanges

MarketingMix

Elements

MarketingMix

Elements

Customer Centered

Advantage

Customer Centered

Advantage

TransactionalExchanges

TransactionalExchanges

Trust Commitment Dependence Communication Trust Commitment Dependence Communication

CULTURAL/PROCESS CHANGES REQUIRED FOR PARTNERING

The Relationship Marketing Concept

The Marketing Concept

Continuous Business Processes

Customer Retention

Customer Satisfaction

Ad-Hoc Marketing Programs

TRANSACTIONS

REPEATED TRANSACTIONS

LONG-TERM TELATIONSHIPS

BUYER-SELLER PARTNERSHIPS

STRATEGIC ALLIANCES

CHANGING MARKETING PARADIGM

Key Factors of SuccessfulCustomer-Supplier Relationships

1) Business Expertise (29 %)

2) Dedication to Customer (25 %)

3) Account Sensitivity and Guidance (23 %)

4) Product Performance & Quality (10 %)

5) Service Dept. Excellence (9 %)

6) Confirmation of Capabilities (4%)

OPERATIONALEXCELLENCE

CUSTOMER INTIMACY

PRODUCTLEADERSHIP

VALUE DISCIPLINES

PRODUCT/MARKET OPPORTUNITY MATRIX

Stages of value Forward Integration

added Present

PRODUCTS Backward Integration

New

Related

Present

Present Related New Segments

New Product DiversificationDevelopment

Product improvement, line extension

Market MarketPenetration Development

Market Segmentation,Targeting, and Positioning

Dividing market into distinct customer subsetsWhich buyers to targetDesigning the fit between product offer and needs of

the target mkt.

Criteria for SegmentationCriteria for Segmentation

Responsiveness Identification Ability Profitability Stability

BASES FOR MARKET SEGMENTATION C

onsu

mer

pred

isposition

s

Con

sum

ption

p

atterns

Beh

avior P

atterns

Psych

ograph

ic

Socioecon

omic

Dem

ograph

ic

Geograp

hic

PositioningPositioningApproachesApproaches

Price/Quality

Price/Quality

Use orApplication

Use orApplication

AttributeAttribute ProductClass

ProductClass

CompetitionCompetition

ProductUser

ProductUser

High Involvement vs. Low Involvement Purchasing

Think Feel

HighInvolvement

Low Involvement

Learn-Feel-Do Feel-Learn-Do

Informative

(Economic)

Affective

(Psychological)

Habitual

(Responsive)

Satisfaction

(Social)

Do-Learn-Feel Do-Feel-Learn

Organizational Buying DecisionsD

ecis

ion

tim

e an

d p

rob

lem

def

init

ion

Shor

t/w

ell d

efin

ed

Few Many

Number of people in buying centerand number of suppliers considered

Straightrebuy

Straightrebuy

Modifiedbuy

Modifiedbuy

Newbuy

Newbuy

Lon

g/un

cert

ain

Organizational Buying Center

DecisionDecisionMakerMaker

InitiatorInitiator UserUser

InfluencerInfluencer GatekeeperGatekeeper

BuyerBuyer

Comparison of Research Methods

Exploratory

Descriptive

Causal

Comparison of mail, telephone,and personal interview surveys

Basis of Comparison

Cost per completed survey

Ability to probe and ask complex questions

Opportunity for interviewer to bias results

Anonymity given respondent

Mail Surveys

Usually the least expensive, assuming adequate return rate

Little, since self-administered format must be short and simple

None, since form is completed without interviewer

Complete, since no signature is needed

Telephone Surveys

Moderately ex- pensive, assuming reasonable completion rate

Some, since interviewer can probe and elaborate on questions

Some, because of voice inflection of interviewer

Some, because of telephone contact

Personal Interview Surveys

Most expensive because of interviewer’s time and travel expenses

Much, since interviewer can show visuals, probe, establish rapport

Significant, because of voice and facial expressions of interviewer

Little, because of face-to-face contact

WHAT’S WRONG WITH THESE QUESTIONS?

1. What is your income in the nearest hundred dollars?

2. Are you an occasional or frequent flyer?

3. Do you like this airline?

4. How many ads did you see on television last April? This April?

5. What are the most salient and determinant attributes in your evaluation of air carriers?

6. Do you think it is right for the government to tax airline tickets and deprive a lot of people the chance to fly?

Kinds of samples used inKinds of samples used inmarketing researchmarketing research

Simple randomsamples

Simple randomsamples

ProbabilitySamples

ProbabilitySamples

NonprobabilitySamples

NonprobabilitySamples

Stratified randomsamples

Stratified randomsamples

ClustersamplesClustersamples

Conveniencesamples

Conveniencesamples

Judgmentsamples

Judgmentsamples

QuotasamplesQuota

samples

All SamplesAll Samples

Probability Samples

Conditions– List of Population– Equiprobability of

Selection Types

Sample Random Stratified Random Systematic Random Area

A SHORT TABLE OF RANDOM NUMBERS

1986 3254 0230 8751 0344 4598

6507 0089 6621 2655 0790 4404

7203 0045 1792 0636 2301 5556

1119 0010 3876 5904 4122 0926

1497 9452 0771 6501 8934 1039

1643 5588 0050 1270 4610 7629

1. Number each item in the universe serially2. Begin at a preselected place in the table and proceed systematically utilizing as many rows as are needed; if the universe is between 10-99, take two digits; if universe is between 100-999, take three digits at a time

SYSTEMATIC SYSTEMATIC (EXAMPLE)(EXAMPLE)

Determine Determine Sampling IntervalSampling Interval

Population: 500 MBA StudentsPopulation: 500 MBA Students

Sample: 50 MBA StudentsSample: 50 MBA Students

N/n 500/50 = 10N/n 500/50 = 10

Draw a Random Number Between 1 - 10Draw a Random Number Between 1 - 10

(say the Number is 3)(say the Number is 3)

Include students numbered: 3, 13, 23 . . . .Include students numbered: 3, 13, 23 . . . .

11

22

33

(N/n)

STRATIFIED SAMPLE (EXAMPLE)

Miami PopulationHispanic 65%Anglo 25%Black 10%

Need to Draw a Sample of 1,000Hispanic 650Anglo 250Black 100 1,000

Sample Size/Sampling Error Sampling error diminishes in inverse

proportion to the square root of the sample size.

EXAMPLE:

Sampling error is reduced by half if the sample size is QUADRUPLED.

A sample of 100 produces a sampling error of 5 percent. To reduce the sampling error to 2.5 percent, we must increase the sample size to 400.

Example of “Error Potential” Question 6: Does this firm purchase Widgets?

( ) Yes( ) No

Sample Size: 200

Population Size: 10,000

Results: Yes - 50%

No - 50%Error Potential + 7%

True Population Figure: Yes 43% - 57%

No 57% - 43%

Sample Size Error Potential

50 14%

100 10%

200 7%

300 6%

400 5%

600 4%

800 3.5%

2,500 2%

Percent of Error for Various Samples Sizes Assume: - “Infinite” Population

- 95% Confidence Level

Product Life Cycle and Strategic Marketing DecisionsProduct Life Cycle and Strategic Marketing Decisions

Marketing objective

Marketing objective

Gain Awareness

Gain Awareness

Stress differentiation

Stress differentiation

Maintain brand loyalty

Maintain brand loyalty

Harvesting, deletion

Harvesting, deletion

CompetitionCompetition NoneNone GrowingGrowing ManyMany ReducedReduced

ProductProduct OneOne More versionsMore versions Full product line

Full product line Best sellersBest sellers

PricePrice Skimming or penetration

Skimming or penetration Gain share, dealGain share, deal Defend share,

profitDefend share, profit Stay profitableStay profitable

PromotionPromotion Inform, educateInform, educate Stress competitive differences

Stress competitive differences

Reminder oriented

Reminder oriented Minimal

promotionMinimal promotion

Place(distribution)

Place(distribution) LimitedLimited More outletsMore outlets Maximum

outletsMaximum outlets Fewer outletsFewer outlets

Stage of the product life cycleSa

les

reve

nue

or p

rofi

t Introduction Growth Maturity Decline

+0–

Total industrysales revenue

Total industry profit

Growing Your Existing Business

KEEP IN TOUCHKEEP IN TOUCH REORGANIZE YOUR SALESFORCE REORGANIZE YOUR SALESFORCE

(“Farmers” & “Hunters”) (“Farmers” & “Hunters”) ADD VALUE FOR CUSTOMERSADD VALUE FOR CUSTOMERS CONDUCT SEMINARSCONDUCT SEMINARS THINK AND ACT LIKE A PARTNERTHINK AND ACT LIKE A PARTNER

THE FOUR

PRODUCT LEVELS

CORE BENEFIT

EXPECTED PRODUCT

AUGMENTED PRODUCT

POTENTIAL PRODUCT

Determinants of Service Quality

ReliabilityResponsivenessCompetenceAssuranceCourtesyCommunicationCredibilityEmpathyKnow the customerTangibles

PREFERENCE BUILDING MODES

NEED ASSOCIATION

MOOD ASSOCIATION

SUBCONSCIOUS MOTIVATION

BEHAVIOR MODIFICATION

COGNITIVE PROCESSING

MODEL EMULATION

BRAND EQUITY

Name Awareness Brand Associations

Brand Loyalty

Perceived Quality

Other ProprietaryBrand Assets

BRAND EQUITY

Name Symbol

Stages in the new product process

Idea generationIdea generation

Screening and evaluationScreening and evaluation

Concept DevelopmentConcept Development

Product DevelopmentProduct Development

Business AnalysisBusiness Analysis

Market Testingand

Commercialization

Market Testingand

Commercialization

Strategy developmentStrategy development

Interest

Awareness

Evaluation

Trial

Adoption

New Product Adoption Process

•Relative Advantage•Compatibility•Complexity

•Divisibility•Communicability

Diffusion Process and Profiles of Product Adopters

Laggards:Fear of debt, neighbors and friends are information sources

Laggards:Fear of debt, neighbors and friends are information sources

Early adopters:Leaders in social setting, slightly above average education

Early adopters:Leaders in social setting, slightly above average education

Late majority:Skeptical, below average social status

Late majority:Skeptical, below average social status

Innovators:Venturesome, higher educated, use multiple information sources

Innovators:Venturesome, higher educated, use multiple information sources

Early majority:Deliberate, many informal social contacts

Early majority:Deliberate, many informal social contacts

Time

Innovators2.5%

Early adopters13.5%

Early majority34%

Late majority34%

Laggards16%

REASONS NEW PRODUCTS FAIL

1. TOO SMALL A TARGET MARKET

2. TARGET WRONG DEMOGRAPHIC

3. INSIGNIFICANT POINT OF DIFFERENCE

4. NO ACCESS TO MARKET

5. BAD TIMING

6. POOR EXECUTION

7. OFFENDS SPECIAL INTEREST

8. NO SUPERIOR PRODUCT ADVANTAGE

The communication process

Source

Channel of

Message

CommunicationEncode Receiver Decode

Noise

Noise

Feedback loop

Noise

Fields of experience

Steps in Developing Effective Steps in Developing Effective CommunicationsCommunications

Steps in Developing Effective Steps in Developing Effective CommunicationsCommunications

IDENTIFY TARGET MARKETDETERMINE COMMUNICATION

OBJECTIVESDESIGN MESSAGE

AIDA, HIERARCHY OF EFFECTS TYPES OF APPEALS HIGH IMPACT WORDS MESSAGE FORMAT

SELECT COMMUNICATION CHANNELESTABLISH BUDGET

% OF SALES COMPETITIVE PARITY OBJECTIVE TASK

DECIDE ON PROMOTIONAL MIXMEASURE RESULTSMANAGE & COORDINATE PROCESS

Hierarchy of EffectsHierarchy of Effects

AWARENESS

KNOWLEDGE

LIKING

PREFERENCE

CONVICTION

PURCHASE

Advantages and Disadvantagesof Major Advertising Media

Medium Advantages DisadvantagesTelevision Large audience High cost

Radio Low cost No visual component

Magazines High quality color Requires long lead time

Newspapers Coverage of local Short life spanmarket

Direct Mail Targeted audiences “Junk mail” image

Outdoor Repeat exposures Must be short, simple

Internet Interactive Keeping Site “Fresh”

Developing Effective Web Advertising

HAVE A REASON FOR BEING THERE PROVIDE ORIGINAL CONTENT USE “EYE-POPPING” GRAPHICS MAKE SITES “INTERACTIVE” SITES MUST BE DYNAMIC AND

CONSTANTLY “REFRESHED” OFFER “RESPONSE MECHANISMS”

+ + + + + + ++ + + + + + + + + + +

Distribution Intensity Illustrations

Trading area

A B C

Exclusive Selective Intensive distribution distribution distribution

Illustrations Cadillac automobiles Ethan Allen furniture Revlon cosmetics Caterpillar equipment Este Lauder cosmetics Timex watches

+

+

+

++

What Promotions Must Offer to Win with Retailers1. HELP DIFFERENTIATE RETAILER FROM COMPETITORS

2. BUILD CATEGORY SALES

3. BE EASY TO EXECUTE

4. FOLLOW LONG LEAD TIME TO SECURE POSITION ON

RETAILER’S PROMOTIONAL CALANDER

5. GIVE SHOPPERS VALUE WITHOUT TOO MUCH WORK

6. UNDERSTAND THE SPECIFIC RETAIL ENVIRONMENT

FACTORS INFLUENCING DEMAND ELASTICITY

UNIQUE VALUE EFFECT SUBSTITUTE AWARENESS EFFECT DIFFICULTY OF COMPARISON EFFECT TOTAL EXPENDITURE EFFECT SHARED COST EFFECT SUNK INVESTMENT EFFECT BUYERS ARE SLOW TO CHANGE

BUYING HABITS

PRICING TACTICS MATRIX

NOTE PRICE ELASTICITY OF DEMAND: INVERSELY RELATED TO THEACUTENESS OF NEED. WHEN THE NEED IS MARGINAL, PRICE ELASTICITY IS HIGH; WHERE NEED IS ACUTE, PRICE ELASTICITY IS LOW.

SELLERB

UY

ER

MARGINALNEED

MODERATE NEED

ACUTENEED

ACUTENEED

MODERATE NEED

MARGINALNEED

PERCEIVED VALUE(Caterpillar Example)

$ 90,000 - Price of Competitor’s Tractor+

$ 7,000 - Premium for Superior Quality+

$ 6,000 - Premium for Superior Reliability+

$ 5,000 - Premium for Superior Service+

$ 2,000 - Premium for Longer Parts Warranty $110,000 - Price to cover Value Package-

$ 10,000 - Discount $100,000 - FINAL PRICE

Equilibrium Price

Sources of Pricing Pressures

Changes in technology

Increase in the number of competitors

Increased internal expectations (forecast)

and sales force reactions

Customer experience

Price driven competition or

changes in competitive

management

Price deflectors(structural changes

Inflation FUDProduct extensions

Product enhancements

Major Challenges Facing International Marketers

Cultural Misunderstanding Political Unrest Barriers in Entering Foreign Markets Exchange/Ownership Restrictions Shifting Economic Conditions Selection of Local Partners Proper “Local” Positioning