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MARKETING MANAGEMENT
UNIT II
MARKETING STRATEGY
Marketing strategy formulations – key drivers of marketing strategies - strategies for industrial
Marketing – consumer marketing –– services marketing – competitor analysis - analysis of
Consumer and industrial markets – strategic marketing mix components.
Table of contents
2.1 Introduction............................................................................................................................................. 3
2.1.2 Definition ......................................................................................................................................... 3
Strategic planning and strategy ..................................................................................................................... 4
2.2 Approaches to formulating and implementing strategy .......................................................................... 4
2.3 What is strategic management planning?............................................................................................... 4
2.4 Market-scope strategy ............................................................................................................................. 7
Market-geography strategy ........................................................................................................................... 7
2.5 The role of strategy ...............................................................................................................................10
Example of contrasting mission / vision ..................................................................................................... 10
2.6 Strategies based on firms share............................................................................................................. 11
2.7 Elements of a marketing strategy.......................................................................................................... 12
Products ............................................................................................................................................ 13
2.8 Strategy formulation vs. Implementation..............................................................................................14
Formulation of marketing strategy consists of four major steps:................................................................14
2.9 Key drivers of marketing strategy......................................................................................................... 15
2.10 Factors affecting overall marketing strategies ....................................................................................15
2.11 Industrial marketing (business marketing ).........................................................................................16
Nature of the business market.....................................................................................................................17
Components of the business market............................................................................................................ 18
2.12 Segmenting b2b markets.....................................................................................................................18
2.13 Characteristics of the b2b market........................................................................................................ 19
Business market demand.............................................................................................................................19
Volatile demand .......................................................................................................................................... 20
Joint demand ...............................................................................................................................................20
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Inelastic demand ......................................................................................................................................... 20
Inventory adjustments................................................................................................................................. 20
Developing effective business-to-business marketing strategies................................................................21
2.13.1 The needs and objectives of industrial buyers are satisfied through the following exchange
processes .................................................................................................................................................21
2.14 Difference between industrial market and consumer market..............................................................22
2.15 Consumer market ................................................................................................................................23
Consumer market ........................................................................................................................................ 24
2.16 Factors influencing consumer behavior .............................................................................................24
Characteristics affecting consumer behavior ..............................................................................................24
2.17 What is services?................................................................................................................................. 26
2.18 Difference between physical goods and services................................................................................27
The various sectors that combine together to constitute service industry in india are:...............................28
2.19 Competition......................................................................................................................................... 29
2.20 Competitive analysis...........................................................................................................................29
Analysis of direct and indirect competition ...............................................................................................29
2.20.1 Nike competitive analysis ............................................................................................................ 29
Swot analysis .............................................................................................................................................. 30
2.20.2 Steps in analyzing competitors: ...............................................................................................32
Identifying competitors...............................................................................................................................32
Selecting competitors to attack or avoid ..................................................................................................... 33
2.21 Competitive strategies.........................................................................................................................33
Basic winning competitive strategies: porter ..............................................................................................33
Basic competitive strategies: value disciplines...........................................................................................33
Market leader .............................................................................................................................................. 33
Market challenger ....................................................................................................................................... 34
Market follower .......................................................................................................................................... 34
Market nicher .............................................................................................................................................. 34
2.22 Porter's five forces model of competition ...........................................................................................34
Threat of new entry..................................................................................................................................... 35
Competitive rivalry ..................................................................................................................................... 35
Supplier power ............................................................................................................................................ 36
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Buyer power................................................................................................................................................36
Threat of substitution .................................................................................................................................. 36
2.23 Strategic marketing mix ......................................................................................................................37
4 p's .............................................................................................................................................................37
Product ........................................................................................................................................................37
Price ............................................................................................................................................................38
Place (placement)........................................................................................................................................ 39
Promotion....................................................................................................................................................40
2.1 Introduction
MARKETING strategy is a long-term course of action designed to optimize allocation of
the scarce resources at the disposal of a firm in delivering superior customer experiences and
promote the interests of other stakeholders. Scarce resources include monetary capital, human
capital, technology, time, hausman marketing letter
Marketing strategy is the link between corporate goals and operational tactics
primary considerations in marketing strategy
•
•
there are two
Where are we?
Where do we want to go?
Marketing strategy is intimately tied with strategic planning – the process of creating a
firm’s strategy. Marketing strategy should be linked with the firms’ mission, and values
Strategy is the first level of planning for an organization, making the big decisions that
shape the lower-level detail. It takes account of resources available and makes broad decisions
about how these are to be allocated.
Medium-term strategy takes account of the longer-term strategic intent of the firm,
including its vision, mission and values.
Strategic planning is the process of identifying and formalizing strategy, including
writing the strategic plan.
Strategic planning usually looks at least a year ahead and possibly up to ten years or
more. How far you can practically plan for depends on the rate and depth of change.
2.1.2 Definition
An organization's strategy that combines all of its marketing goals into one
comprehensive plan. A good marketing strategy should be drawn from market research and focus
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on the right product mix in order to achieve the maximum profit potential and sustain the
business. The marketing strategy is the foundation of a marketing plan.
Strategic planning and strategy
•
The process by which a firm’s managers evaluate the future prospects of the firm and
decide on appropriate strategies to achieve long-term objectives is called strategic
planning.
• The basic means by which the company competes – its choice of business or businesses
in which to operate and the ways in which it differentiates itself from its competitors – is
its strategy.
Strategic planning
o Process of determining an organization’s basic mission and long-term objectives,
then implementing a plan of action for attaining these goals
o Process takes on added dimensions when companies go international
o Growing need for strategic planning
 Mnc must keep track of diversified operations
 Continually changing international environment
 Fdi has grown faster than both trade and world gross domestic product
o Benefits of strategic planning
 Evidence is mixed
2.2 Approaches to formulating and implementing strategy
o Economic imperative
 A worldwide's strategy based on cost leadership, differentiation, and
segmentation
o Political imperative
 Strategy formulation and implementation utilizing strategies that are
country-responsive and designed to protect local market niches
o Quality imperative
• Strategy formulation and implementation utilizing strategies of total
quality management to meet or exceed customers’ expectations and
continuously improve products and/or services
– Administrative coordination
• Strategic formulation and implementation in which the mnc makes
strategic decisions based on the merits of the individual situation rather
than using a predetermined economically or politically driven strategy
– Large mncs try to combine the economic, political, quality, and administrative
approaches to strategic planning
2.3 What is strategic management planning?
Strategic management
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 Set of decisions and actions used to implement strategies that will provide a
competitively superior fit between the organization and its environment so as to achieve
organizational goals
 Responsibility = top managers & chief executive
Purpose of strategy
 The plan of action that prescribes resource allocation and other activities for dealing with
the environment, achieving a competitive advantage, that help the organization attain its
goals
Strategies focus on:
● Core competencies
● Developing synergy
● Creating value for customers
Three levels of strategy in organizations
What is strategic planning?
 It is the managerial process that helps to develop a strategic and viable fit between the
firm’s objectives, skills, resources with the market opportunities available. It helps the
firm deliver its targeted profits and growth through its businesses and products.
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How to go about it?
 Defining the corporate mission
 Establishing sbus
 Allocating resources for sbus
 Planning for new business
What is a strategic business unit? (sbu)

A set of products or product lines

With clear independence from other products or product lines

For which a business or marketing strategy should be designed
Characteristics of a viable sbu

Unique business mission

Definable sets of competitors

Integrative planning done independently

Responsible for resource management in all areas

Large enough but not so large as to become bureaucratic
Marketing strategy
•
Is the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods and services to create exchanges that satisfies individual and
organizational objectives
•
The critical management process that enables the company to pragmatically sketch out
plans and programs to achieve organizational short term and long term objectives through
the satisfaction of needs and wants of consumers better than the competition with
constant consideration of external variables.
•
Marketing strategy: a firm’s overall program for selecting and satisfying a target market
•
A marketing strategy is aimed at satisfying consumers in the selected target market
through a careful balance of the elements of the marketing mix – each of which
represents a subset of the overall marketing strategy
•
2 key elements in marketing strategy
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•
Target market
•
Marketing mix variables
2.4 Market-scope strategy
Single-market strategy
–
Definition: concentration of efforts in a single segment.
–
Objective: to find a segment currently being ignored or served inadequately and
meet its needs.
–
Requirements: a) serve the market wholeheartedly despite initial difficulties. B)
avoid competition with established firms.
–
Expected results: low costs; higher profits
Multimarket strategy
–
Definition: serving several distinct markets.
–
Objective: to diversify the risk of serving only one market.
–
Requirements: a) careful selection of segments to serve. B) avoid confrontation
with companies serving the entire market.
–
Expected results: higher sales; higher market share
Total-market strategy
–
Definition: serving the entire spectrum of the market by selling differentiated
products to different segments in the market.
–
Objective: to compete across the board in the entire market.
–
Requirements: a) employ different combinations of price, product, promotion and
distribution strategies in different segments. B) top management commitment.
C) strong financial position.
–
Expected results: increased growth; higher market share
Market-geography strategy
Local-market strategy
7
–
Definition: concentrate efforts in immediate vicinity.
–
Objective: to maintain control of the business.
–
Requirements: a) good reputation in the geographic area. B) good hold on
requirements of the market.
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–
Expected results: short term success--need to expand
Regional-market strategy
–
Definition: operate in a region.
–
Objective: to diversify risk of dependence on one part of a region and to keep
control centralized.
–
Requirements: a) management commitment to expansion. B) adequate resources.
C) logistical ability to serve a regional area.
–
Expected results:
competitors.
increased growth; increased market share; keep up with
National-market strategy
–
Definition: operate nationally.
–
Objective: to seek growth.
–
Requirements: a) management commitment. B) capital resources. C) willingness
to take risks.
–
Expected results: increased growth, market share and profitability
International-market strategy
–
Definition: operate outside national boundaries.
–
Objective: to seek opportunities beyond domestic business.
–
Requirements: a) management commitment.
understanding of international markets.
–
Expected results: increased growth, market share and profitability
B) capital resources.
C)
First-in strategy
8
–
Definition: first to enter the market.
–
Objective: to create an insurmountable lead.
–
Requirements: a) willingness & ability to take risks.
B) technological
competence. C) strive to stay ahead. D) heavy promotion. E) create primary
demand. F) carefully evaluate strengths.
–
Expected results: reduced costs via experience; increased growth, market share
and profits
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Early-entry strategy
–
Definition: enter shortly after the leader.
–
Objective: stop the first entrant from creating a stronghold in the market.
–
Requirements: a) superior marketing strategy. B) ample resources. C) strong
commitment to challenge the market leader.
–
Expected results: increased growth, market share and profits
Laggard-entry strategy
–
Definition: enter during the tail end of growth stage or during the maturity stage
as an imitator or initiator
–
Objective: imitator - capture that part of the market that is not brand loyal.
Initiator - serve the needs of the market better than present firms.
–
Requirements: imitator: a) market research ability. B) production capability.
Initiator: a) market research ability. B) ability to generate creative marketing
strategies.
–
Expected results: imitator - increased short term profits; initiator - put market on
a new growth path; increased profits; some growth opportunities.
Market-commitment strategy
–
–
–
Deals with the level of financial and or management resources a firm is willing to
commit to a market.
May be strong average or light
Intentional, or a matter of circumstances and competitive forces?
Market-dilution strategy
-
-
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De marketing strategy
Definition: discouraging customers from seeking the product.
Objective:
to maintain customer goodwill during periods of shortages.
Requirements: a) monitor customer time requirements. B) ration product
supplies. C) divert customers with an immediate need to customers who have a
supply but no immediate need. E) find out and suggest alternative products for
meeting customer needs.
Expected results: increased long term profits; strong customer goodwill and
loyalty
Pruning-of-marginal-markets strategy
Definition: weeding out markets with unacceptable rates of return.
Objective: to divert investments in growth markets.
Requirements: a) gain good knowledge of the chosen markets. B) concentrate all
energies on these markets. C) develop unique strategies to severe the chosen
markets.
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-
Expected results: long-term growth; improved roi; decrease in market share.
Key-markets strategy
– Definition: focus on selected markets.
– Objective: to serve the selected markets extremely well.
– Requirements: a) gain good knowledge of the chosen markets. B) concentrate all
energies on these markets. C) develop unique strategies to severe the chosen
markets.
– Expected results: increased profits; increased market share in the selected
markets
– Harvesting strategy
– Definition: deliberate effort to let market share slide.
– Objective: to generate additional cash flow, increase short-term earnings or avoid
antitrust action.
– Requirements: high market share.
Expected results: sales decline but useful revenues still occur.
2.5 The role of strategy
Example of contrasting mission / vision
Mcdonalds
– To be the number 1 hamburger chain in the world
Jollibee
– To be the number 1 fast food chain in the philippines
Corporate mission
 This seeks to embody the entire goals of the organization and the objective of its
existence.
 It seeks to provide a sense of purpose, direction and opportunity
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5 questions that the firm must ask itself
 What is our business?
 Who is our customer?
 What does our customer need?
 What will our business be?
 What should our business be?
A good mission statements have three characteristics
 They focus on a limited number of goals
 It stresses the major values and policies the firm desires
 It defines the major competitive scope of operation
Good mission statements
Mission statements are at their best when they reflect a vision, an almost "impossible
dream" that provides a direction for the company for the next 10 to 20 years.
Motorola
“the purpose of motorola is to honorabl serve the needs of the community by providing
products and services of superior quality at a fair price to our customers; to do this so as to earn
an adequate profit which is required for the total enterprise to grow; and by doing so, provide
the opportunity for our employees and shareholders to achieve their personal objectives.”
Good mission statements
1. Focus on a limited number of goals. The statement, "we want to produce the highestquality products, offer the most service, achieve the widest distribution, and sell at the
lowest prices" claims too much.
2. Stress the company's major policies and values.
3. Define the major competitive spheres within which the company will operate
2.6 Strategies based on firms share
Market leader
•
The one with the biggest market share in units and value
Defensive strategy
Types
•
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Kill the competition at all cost
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•
•
Preemptive strategy
•
Occupying market segments and securing them
•
Flanking strategy
Expansion of category should be the focus – market expansion / development
Market challenger
•
2nd and 3rd running brand
•
Usually emulates the market leader strategy
•
May conform to the strategy or change focus on the market to gain headway
Market follower
•
Lowest in profitability
•
Only one of the many minor players in the industry
•
Usually is price driven
•
Their prices are squeezed by distribution channels
Market nicher
•
Very small player
•
Choose to focus on one category and one target segment
•
Specializes with premium quality
•
Prices at premium too
•
Limited volume but high profitability
2.7 Elements of a marketing strategy
There are many elements of marketing and, if a marketing-led view of the firm is taken,
they touch all aspects of the company.
Although these elements are discussed separately below, they are all interlinked and can have
bi-directional influence on one another.
Segments
The first big decision is who should be our customers and who should not. In other
words, what customer segments will be addressed.
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This is based first on the overall strategic intent of the firm, for example to be a high-end
exclusive and low-volume provider, or to compete in mass markets where price is critical.
The decision is also based on research that indicates the profitability of different customers
groups and how well the company is able to compete in each segment.
Brand
The brand is the overall intended message of the company, its products and services. It
describes what customers and others should think and feel whenever they encounter the
company or its products and services.
Brand is influenced by and influences the strategic intent of the firm and helps focus all other
communications, products and interactions.
Brand is fragile in that it is what customers think and feel rather than what the company
communicates. This makes shaping decisions about brand critical.
Competition
An important marketing decision is the nature of competition, for example whether to
compete on quality, price, service, etc.
Decisions here will be affected by brand and will shape further activity such as the approach
towards promotion, the use of advertising, the response to competitive action, and so on.
Products
Having understood and selected customers, marketing strategy should have a significant
influence on the products created.
This not only includes the overall functionality but also the focus on quality, features, price
points and so on, in order to produce products that align with the brand and complete
effectively in the marketplace.
Price
While the exact price may not decided in strategic planning, the price ranges should be
understood particularly in terms of what the target customers are willing and able to pay, and
also what price breaks are important to be able to compete in the markets being addressed.
Promotion
Promotional strategy includes decisions about what approaches to promotion will be
used, for example tv advertising, direct marketing and so on.
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Promotion can be extremely expensive, so a key part of the strategic decision here is in the
amount of budget that is being allocated.
Communication
Related to brand and promotion, the way that communications with customers and other
stakeholders (such as the media) needs to be decided.
This includes broadcast information about products, one-to-one and things in between. It also
includes how service conversations will be conducted, for example using web interfaces or
direct phone conversation.
Outsourcing
A big decision that can be applied within any of the above is the 'make or buy' choice of
whether to do things in-house, bring in external experts or pass on the work to third party
suppliers.
Two key factors in the outsourcing decisions are first the ability of the company to do the work
in comparison with suppliers, and secondly the costs of doing this.
The impact on brand should be a key consideration also. Many companies who outsource such
as service calls have suffered huge brand damage from suppliers who do not deliver brand
values.
2.8 Strategy formulation vs. Implementation
Strategy formulation = stage of strategic management that involves planning and decision
making that lead to the establishment of the organization’s goals and of a specific strategic plan
Strategy implementation = stage of strategic management that involves the use of
managerial and organizational tools to direct resources toward achieving strategic outcomes
Formulation of marketing strategy consists of four major steps:
1. Segmenting the market : there are likely to be broad categories of people in this
market, who have similar needs or wants, and who behave similarly. Segmentation divides
a large market into smaller and more manageable sub- markets in order to identify
homogeneous markets.
2. Selecting the target market : the process of market segmentation throws up not one
but several market segments with varying degrees of potential, profitability and risks. The
firm may not be interested in all these segments.
3. Positioning the offer : the next major dimension of marketing strategy relates to the
positioning of the offer. The firm has already selected the target market and decided its
basic offer. The firm has to clarify what its purpose to do with its offering, how its wants
the offer to be perceived by customers, what position its seeks and what image it proposes
to build for its offer.
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4. Assembling the marketing mix: assembling the marketing mix simply means
assembling the 4ps of marketing in the right combination. Involved in this process is the
choice of the appropriate marketing activities and allocation of the appropriate marketing
effort to each one of them. Taking the product where the consumer wants it and delivering
the product to him in a manner that is most convenient to him is the essence of the
distribution strategy.
2.9 Key drivers of marketing strategy
1.
Competition : in most industries customer have choices and preferences in terms of
goods and services that they can purchase. Thus, when a firm defines the target markets it
will serve, it simultaneously selects a set of competing firms. The current and future actions
of these competitors must be constantly monitored and hopefully, even anticipated.
Anticipating competitors’ actions and reactions to your moves may be the key determinant
of success for any marketing strategy. One competitor cuts prices, undermining your
pricing strategy. Another may decide to offer new products and services, possibly over the
internet that have the potential to completely undermine your existing strategy.
Most firms face four basic types of competition
–
–
–
–
2.
3.
4.
5.
6.
Brand competitors – products with similar features and benefits to the same customers at
similar price.
Product competitors-compete in same product class but with products that are different in
features, benefits, and price.
Generic competitors –market very different products that solve the same problem or satisfy
the same basic customer need.
Total budget competitors – compete for limited financial resources of same customers
Economic growth and stability : if there is one truism about any economy, it is that
it will inevitably change. Therefore, current and expected conditions in the economy can
have a profound impact on marketing strategy . A thorough examination of economic
factors requires a marketing manager to gauge and anticipate the general economic
conditions of the nation, region, state, and local area in which they operate.
Political trend : organization should track political trends and attempt to maintain good
relations with officials.eg. Production plant of tata nano in singur, west bengal, because
local farmers began protesting forced acquisition of their land for their new factory.
Legal regulatory issues : numerous laws and regulations have the potential to
influence marketing decisions and activities.
Technological advanced : technology refers to the way that anyone accomplishes
specific tasks or the process that others uses to create the things consider as a new.
Socio- cultural trends : social and cultural influences that cause changes in attitude,
beliefs, norms, customs, and lifestyles.these forces profoundly affect the way that people
live and help determine what, where, how and when customers buy a firm’s products.
2.10 Factors affecting overall marketing strategies
1. Competitors counter moves: this differ with the various marketing inputs. Most
competitors can easily and quickly match or otherwise adjust to price changes. However they
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often find it difficult to follow or to retaliate against product innovations. The explains why
many marketers seek to gain differential advantage over their competitors by varying product
characteristics as alternating promotion than prices.
2. Synergistic potential: marketing inputs are capable of being mutually reinforcing or
having synergistic potential and marketer should consider those working towards and optimum
overall marketing strategy. Displays and advertisements can be made mutually reinforcing since
the displays repeats the advertising efforts message at a time when the consumer is an outlet
where the product is one sale. Product inputs and marketing channel inputs can be mutually
reinforcing depending upon the effectiveness with which they are integrated.
3. Substitutability: the selection of marketing inputs is also affected by their degree of
substitutability. It is important to know the extent to which one type of input can be substituted
for another type in as much as the nature of marketing objectives such as that of returning a
certain level of profit presents a decision maker from making unlimited use of all inputs. A
marketing strategist must ask himself. Consideration of such substitutability helps in determining
which inputs to include and which to emphasize in the overall marketing strategy.
4. Diversity in the productivity levels of various marketing inputs: the marketers
should recognize that not all inputs have equal productivity some inputs need a minimum level
of use before they begin to have measurable effects. An advertising message must often be
repeated several times before the consumer becomes aware of it. The low cost per consumer
contact of ratio magazines and billboards often makes it possible with a limited budget to present
a much stronger impact on consumers.
5. Elasticity of marketing inputs: different marketing inputs are elastic and they influence
the demand the product. The marketing manager must recognize that effect on the product. For
example a manufacture determines different prices for different customers or for different areas
only on the basis of varying elasticity of demand. More often the prices for wholesaler's retailers
and consumers are different in almost all the markets. The marketing manager must consider all
the above factors in mind while formulating the overall marketing strategy. The strategy must
also be elastic so as to incorporate all the strategic factors of the competitors as and when
required.
2.11 Industrial marketing (business marketing )
The fundamentals of consumer marketing are equally applicable to the industrial marketing.
The work of the industrial market is exclusively different, as all the forces of market that affect
industrial demand. The managers of industrial market must react in a different way to change the
markets, develop products to meet these changes, and market them in exclusively different ways to
the target and sophisticate customers while maintaining corporate policies. Therefore,industrial
marketers face many distinctive marketing situations not normally encountered in the consumer
market. Further, the industrial market has been the backbone of the high standard of living
enjoyed by consumers in past or since the industrial revolution at global level. It is dynamic and
challenging in any nation‘s economic growth and development. As and when the principles,
knowledge, and practice of marketing cut across all industries, to market effectively in the
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industrial market than it becomes compulsory for the policy makers to study the industrial
marketing differently and to understand the industrial marketing problems.
The word industrial marketing is also treated as business-to-businessmarketing, or
business marketing, or organizational marketing. Industrial marketing/business marketing is to
market the products and services to business organizations: manufacturing companies,
government undertakings, private sector organisations, educational institutions, hospitals,
distributors, and dealers.
The business organizations, buy products and services to satisfy many objectives
Like production of goods and services, making profits, reducing costs, and, so on. Industrial
marketing consists of all activities involved in the marketing of products and services to
organizations that use the products and services in the production of consumer or industrial
goods and services, and to facilitate the operation of their enterprises.
Business-to-business (b2b) market is significantly larger than the consumer market.
• example: u.s. Companies spend
for office and maintenance supplies.
more
than
$300
billion
annually
just
Business-to-business (b2b) marketing organizational sales and purchases of goods and
services to support production of other products, to facilitate daily company operations, or for
resale.
Nature of the business market
CHAPTER 6 Business-to-Business (B2B) Marketing
NATURE OF THE BUSINESS MARKET
Companies also buy services, such as legal, accounting, office-cleaning, and other services.
• some firms focus entirely on business markets.
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Diverse market, everything from a box of paper clips to thousands of parts for an automobile
manufacturer.
Components of the business market
Four main components:
• commercial market individuals and firms that acquire products to support,
directly or indirectly, production of other goods and services.
• largest segment of the business market.
• trade industries retailers or wholesalers that purchase products for resale to
others.
• also called resellers, marketing intermediaries that operate in the trade
sector.
• government—all domestic levels (federal, state, local) and foreign governments;
also act as sellers—e.g., confiscated goods.
• public and private institutions, such as hospitals, churches, colleges and
universities, and museums.
2.12 Segmenting b2b markets
Segmentation helps marketers develop the most appropriate strategy.
Segmentation by demographic characteristics
Grouping by size based on sales revenues or number of employees.
Segmentation by customer type
• grouping in broad categories, such as by industry.
• customer-based segmentation dividing a business-to-business market into
homogeneous groups based on buyers’ product specifications.
Segmentation by end-use application
• end-use application segmentation segmenting a business-to-business market
based on how industrial purchasers will use the product.
• example: a supplier of industrial gases that sells hydrogen to some companies and
carbon dioxide to others.
Segmentation by purchase categories
• segmenting according to organizational buyer characteristics.
• example: whether a company has a designated central purchasing department or
each unit within the company handles its own purchasing.
• businesses increasingly segment customers according to the stage in their
relationship.
• example: whether a customer is new or a long-term partner.
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2.13 Characteristics of the b2b market
Geographic market concentration
• business market more concentrated than consumer market.
• example: companies that sell to the federal government are often
located near washington, d.c.
• businesses becoming less geographically concentrated as internet technology
improves.
Sizes and number of buyers
• business market has smaller number of buyers than consumer market.
• many buyers are large organizations, such as boeing, which buys jet engines.
The purchase decision process
• sellers must navigate organizational buying processes that often involve multiple
decision makers.
• purchasing process usually more formal than in consumer market.
• purchases may require bidding and negotiations.
Buyer-seller relationships
• often more complex than in consumer market.
• greater reliance on relationship marketing.
Evaluating international business markets
• business purchasing patterns differ from country to country.
• global sourcing purchasing goods and services from suppliers worldwide.
• can bring significant cost savings but requires adjustments.
Business market demand
CHAPTER 6 Business-to-Business (B2B) Marketing
BUSINESS MARKET DEMAND
• Demand characteristics vary from market to market.
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Derived demand
• The linkage between demand for a company’s output and its purchases of resources such as
machinery, components, supplies, and raw materials.
• example:
demand
for
computer
from demand for personal computers.
microprocessor
chips
is
derived
• organizational buyers purchase two types of items:
• capital items—long-lived business aspects that depreciate.
• expense items—items consumed within short time periods.
Volatile demand
• derived demand creates volatility.
• example: demand
gasoline slows.
for
gasoline
pumps
may
be
reduced
if
demand
for
Joint demand
• Results when the demand for one business product is related to the demand for another
business product used in combination with the first item.
• example: if lumber
affect concrete market.
supply
falls,
then
decrease
in
construction
will
Inelastic demand
• Demand throughout an industry will not change significantly due to a price change.
• example: construction firms will not necessarily
prices fall unless overall housing demand also increases.
buy
more
lumber
if
Inventory adjustments
• Just-in-time (jit) inventory policies boost efficiency by cutting inventory and requiring vendors
to deliver inputs as they are needed.
• often use sole sourcing, buying a firm’s entire stock of a product from just one supplier.
• latest inventory trend: jit ii, suppliers to place representatives at the customer’s facility to work
as part of an integrated, on-site customer–supplier team.
• Inventory adjustments are also vital to wholesalers and retailers.
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Developing effective business-to-business marketing strategies
Marketer must develop strategy based on particular organization’s buying behavior and
on the buying situation.
Challenges of government markets
• Government agencies make up the largest customer group in the u.s.
• More than 85,000 government units buy products.
• purchases typically involve dozens of interested parties.
• influenced by social goals, such as minority subcontracting programs.
• can have either fixed-price contracts or cost-reimbursement contracts
Challenges of institutional markets
• Institutional buyers include schools, hospitals, libraries, foundations, and others.
• Have widely diverse buying practices among, and even within, institutions.
• Multiple buying influences can affect buying decisions, such as conflicts between professional
staff and purchasing departments.
Challenges of international markets
• Marketers must consider buyers’ attitudes and cultural patterns.
• Local industries, economic conditions, geographic characteristics, and legal restrictions must
also be considered.
• Remanufacturing, or restoring worn-out products to like-new condition, can be an important
strategy in places that cannot afford new products.
• Foreign governments are also an important market.
2.13.1 The needs and objectives of industrial buyers are satisfied through the following
exchange processes
Product exchange
The features of a product or service involved have a significant impact on the industrial
exchange process. The ease of exchange depends upon the ability of the seller to ident ify the
buyer‘s needs and the product‘s potential to satisfy needs. If the exchange is good in terms of
price, quality, quantity, and after sale services then it will give a positive symbol for the
customer loyalty in terms
Of product/service loyalty.
Information exchange
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The information consists of technical, economic, and organisational questions: pre and
post sale maintenance and servicing must be exchanged to the participants of business
organisations. Products and services must be planned and designed to serve customers
efficiently. To achieve it, buyers and sellers tend to work together, exchanging product specific
information over long
Periods of time.
Financial exchange
The granting of credit or the need to exchange money from one currency to another at the
time of dealing with foreign buyers/customers are included in this exchange.
Societal exchange
Societal exchange is important to reduce uncertainty between buyer and seller, avoiding
short-term difficulties, and maintaining the long-term exchange relationship to one another. A
number of aspects of an agreement between buyers and sellers in the industrial market are based
on arbitration and mutual trust, not fully formalized or based on legal criteria until the end of the
Transaction period.
2.14 Difference between industrial market and consumer market
Sr.
No.
Bases
Industrial markets
Consumer markets
1
Market
Characteristics
Geographically
Concentrated,
Relatively fewer buyers
Geographically
Disbursed,
Mass markets`
2
Product
Characteristics
Service
Characteristics
Technical complexity,
Customized
3
4
Buyer behavior
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Service, timely delivery
And availability very
Important
Involvement of various
Functional areas in both
buyer
And supplier firms,
Purchase decisions are
Mainly made on
Rational/performance basis,
Technical expertise,
Stable interpersonal
Relationship between buyer
and seller.
Service, delivery, and
Availability somewhat
Important
Involvement of family
Members
Purchase decisions are
Mostly made on
Physiological/social/
Psychological needs,
Less technical expertise,
Non-personal
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Relationship
5
Decision making
6
Channel
Characteristics.
7
Price
Characteristics
8
Promotional
characteristics
Observable stages,
Distinct
Shorter,
More direct,
Fewer
Intermediaries/middlemen
Competitive bidding and
Negotiated prices,
List prices for standard
Products
Emphasis
on
personal
selling
Unobservable,
Mental stages
Indirect,
Multiple layers of
Intermediaries
List prices or maximum
Retail price (mrp)
Emphasis on advertising
2.15 Consumer market
Consumer buying behavior refers to the buying behavior of final consumers (individuals
& households) who buy goods and services for personal consumption.
Model of Consumer Behavior
Product
Price
Marketing and
Other Stimuli
5-3
Economic
Technological
Place
Political
Promotion
Cultural
Buyer’s
Decision
Process
Product Choice
Brand Choice
Dealer Choice
Buyer’s Black Box
Buyer’s Response
Characteristics
Affecting
Consumer
Behavior
Purchase
Timing
Purchase
Amount
Consumer buyer behavior refers to the buying behavior of final consumers—individuals and
households who buy goods and services for personal consumption
•
Consumer market refers to all of the personal consumption of final consumers
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Consumer market
• All individuals/households who buy products for personal consumption.
2.16 Factors influencing consumer behavior
Characteristics affecting consumer behavior
Cultural
 Subculture
 Hispanic consumers hispanics

35 million consumers purchase $425 billion worth of goods and services.

Expected to grow 64% in 20 years.

Spanish media makes group easy to reach.

Brand loyal group.
African Americans

35 million consumers purchase $527 billion worth of goods and services.

Growing more affluent / sophisticated.

Price and brand name conscious; quality and selection are important.

Certain media target this group.
Asian Americans
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
10 million consumers purchase $229 billion worth of goods and services.

Fastest growing, most affluent subculture.

Many nationalities comprise this group.
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
Consumer packaged goods firms now target this group more heavily.
Mature consumers

75 million consumers age 50+will grow to 115 million within 25 years.

Mature consumers control 50% of all discretionary income.

Attractive market for travel, restaurant, and cosmetics products, among others.
Social groups

Membership

Reference
 Aspirational groups

Opinion leaders
 Buzz marketing
Family

Kids can influence
Roles and status
Personal
•
Age and life-cycle
•
Occupation
•
Economic situation
•
Lifestyle

Activities, interests, and opinions

Lifestyle segmentation
Personality and self-concept

Brand personality
-
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Sincerity
Ruggedness
Excitement
Competence
Sophistication
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Psychological
Motivation

Needs provide motives

Motivation research

Maslow’s hierarchy of needs
Perception

Selective attention, selective distortion, selective retention

Drives, stimuli, cues, responses and reinforcement
Learning
2.17 What is services?
It is the part of the product or the full product for which the customer is willing to see value and
pay for it.
Service
 It is intangible.
 It does not result in ownership.
 It may or may not be attached to a physical product
Defining services
Services include all economic activities whose output is not a physical product or
construction, is generally consumed at the time it is produced, and provides added value in forms
(such as convenience, amusement, timeliness, comfort, or health) that are essentially intangible.
“service is an act or performance offered by one party to another that is essentially intangible
and does not result in the ownership of anything.”
Service marketers can influence
Make realistic accurate promises that reflect the service actually delivered rather than the
idealized version of the service
• ask contact people for feedback on the accuracy of promise made in advertising and selling
• ensure service tangibles accurately reflect the type and level of service provided.
• use market research to determine sources of derived customer expectation and their
requirement
• educate customers to understand their role and perform better.
• identify influencers and opinion leaders for the service and concentrate marketing efforts on
them.
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2.18 Difference between physical goods and services
Physical goods
Services
Tangible
Intangible
Homogeneous
Heterogeneous
Production and distribution are separated from
consumption
Production, distribution and consumption are
simultaneous processes
A thing
An activity or process
Core value processed in factory
Core value produced in the buyer-seller
interaction
Customers do not participate in the production
process
Customers participate in production
Can be kept in stock
Cannot be kept in stock
Transfer of ownership
No transfer of ownership
Services marketing concepts and strategies have developed in response to the tremendous growth
of service industries
Most new employment is provided by services
Strongest growth area for marketing
Services could meet
 Personal needs – haircuts, tution, massage parlours
 Business needs – courier services, office cleaning services, delivering fresh flowers
Managing service quality
 Gap between management perceptions and consumer expectations
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 Gap between management perceptions and service quality specifications
 Gap between service quality specifications and service delivery
 Gap between service delivery and external communication
 Gap between expected service and perceived service
Determinants of service quality
 Reliability – delivering on promises
 Responsiveness – willing to help
 Assurance – inspiring trust and confidence
 Empathy – individualizing customers
 Tangibles- physical representation
The various sectors that combine together to constitute service industry in india are:
 Trade
 Hotels and restaurants
 Railways
 Other transport & storage
 Communication (post, telecom)
 Banking
 Insurance
 Dwellings, real estate
 Business services
 Public administration; defence
 Personal services
 Community services
 Other services
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2.19 Competition
Competition, when used in a business sense, means a rivalry between
companies that sell similar products or services.
Competitive advantage

An advantage over competitors
value than competitors offer.
gained by offering consumers greater
2.20 Competitive analysis
 The process of identifying key competitors; assessing their objectives, strategies,
strengths and weaknesses, and reaction patterns; and selecting which competitors to
attack or avoid.
 A competitive analysis is defined as the identification and examination of the
characteristics of a specific competing firm.
 A business-specific competitive analysis provides you with the information you need to
pinpoint strengths and weaknesses, both yours and the competition’s.
Analysis of direct and indirect competition
Five factors should be analyzed:
 Price
 Location
 Facility
 Competition type
 Rank
2.20.1 Nike competitive analysis
Introduction
 Nike has become one of the most recognizable companies in the entire world
 Nike is now the most popular brand in, not just america, but through out the whole world.
 Nike offers all the athletic shoes, clothes, and other accessories one would need to wear
in their certain sport.
Nike’s target appeal
Lebron james, tiger woods, mia hamm
images that are associated with nike .
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has been recognized as many of today's sports
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Nike’s target strategy
 Nike’s target market for their shoes, clothes and other accessories are males and females
between 18 and 35 years old.
 Nike’s competitive market has expanded and dominated in the international market.
 Nike disburse tv ads during professional and college sports events, prime-time programs,
and late-night tv programs
Nike’s manufacturing and sales
The graph below indicates how nike manufacturing and sales compete with their closest
rivals in the early 2000’s worldwide.
The graph below indicates how Nike
manufacturing and sales compete with their
closest rivals in the early 2000’s worldwide.
Swot analysis
Strength
 The strengths that nike takes pride in is getting the top athletes to wear and sponsor their
products rather than events or competitions as much.
 The basis of this comes from the idea that people tend to remember the brand worn by
players and not the brand that sponsors the event that the players perform at.
Weakness
 The market that nike participates in is very price sensitive. Most of nike’s income comes
from the selling of its products to retailers.
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 This usually shows that margins tend to get squeezed as retailers try to get low price
competition on nike’s products.
Opportunities
 The technology is always changing in the retail market, as well as the sporting market.
 The ability to have the most recent fashion trends involved in their sporting equipment,
sunglasses, shoes, and clothing is crucial to generate more money.
 Nike has a large global market and a large acceptance of their product all over the globe.
Threats
 The retail sector is becoming substantially price competitive. Ultimately it means that
consumers are shopping around for a better deal.
 The consumer now maintains the control over the manufacture
 So if a consumer wanted to find the lowest price on the same exact product, then the
consumer could just walk from store to another
Key issues nike needs to face
 Nike's products are viewed as higher quality and command higher prices than its
competitors, sometimes though consumers do not agree with this line of thinking.
 To substantiate its high quality/high price lines, nike is placing emphasis on the latest
technology and applying innovation towards the development of new products,
particularly the nike alpha project which is a new line of athletic shoes. In the past, nike
has overlooked the mid to lower price point products, which could be a possible
weakness too.
Conclusion
 Formulating a strategic plan for the corporations’ future is key in determining the all
around goals of the company.
 Nike, with their marketing, innovation, technological advancements, and equitable
manufacturing departments, has created an all around dominant strategic plan
Nike has built there competitive advantage to the highest form possible.
Nike has shown that they are a true force to be reckoned with.
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Figure 18-1:
Steps in Analyzing
Competitors
18- 5
2.20.2 Steps in analyzing competitors:
Identifying competitors
– Firms face a wide range of competition
–
Be careful to avoid “competitor myopia”
–
Methods of identifying competitors:
Industry point-of-view
Market point-of-view
 Competitor maps can help
230-year-old encyclopedia britannica viewed itself as competing with your publishers of printed
encyclopedias. Big mistake! Its real competitors were software encyclopedias and the internet.
Assessing competitors
-
Determining competitors’ objectives
Identifying competitors’ strategies
Strategic groups
-
Assessing competitors’ strengths and weaknesses
-
Estimating competitors’ reactions
Benchmarking
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Selecting competitors to attack or avoid
Strong or weak competitors

Customer value analysis
Close or distant competitors

Most companies compete against close competitors
“good” or “bad” competitors

The existence of competitors offers several strategic benefits
2.21 Competitive strategies
Basic winning competitive strategies: porter
Overall cost leadership
 Lowest production and distribution costs
Differentiation
 Creating a highly differentiated product line and marketing program
Focus
 Effort is focused on serving a few market segments
Basic competitive strategies: value disciplines
Operational excellence
 Superior value via price and convenience
Customer intimacy
 Superior value by means of building strong
and satisfying needs
relationships with buyers
Product leadership
 Superior value via product innovation
Market leader
Expanding the total demand

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Finding new users
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
Discovering and promoting new product uses

Encouraging greater product usage
Protecting market share

Many considerations

Continuous innovation
Expanding market share

Profitability rises with market share
Market challenger
Option 1: challenge the market leader
High-risk but high-gain
Sustainable competitive advantage over the leader is key to success
Option 2: challenge firms of the same size, smaller size or challenge regional or local firms
Full frontal vs. Indirect attacks
Market follower
 Follow the market leader
 The focus is on improving profit instead of market share
Many advantages:
Learn from the market leader’s experience
Copy or improve on the leader’s offerings
Strong profitability
New challenger in the baby segment that threatened j&j’s position-zwilsal
Market nicher
Serving market niches means targeting subsegments good strategy for small firms with
limited resources offers high margin specialization is key by market, customer, product, or
marketing mix lines.
2.22 Porter's five forces model of competition
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18- 25
Threat of new entry
• The existence of barriers to entry
•
Economies of product differences
•
Brand equity
•
Switching costs
•
Capital requirements
•
Access to distribution
•
Absolute cost advantages
•
Learning curve advantages
•
Expected retaliation
•
Government policies
Competitive rivalry
• Number of competitors
•
Rate of industry growth
•
Intermittent industry overcapacity
•
Exit barriers
•
Diversity of competitors
•
Informational complexity and asymmetry
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•
Brand equity
•
Fixed cost allocation per value added
•
Level of advertising expense
Supplier power
• Supplier switching costs relative to firm switching costs
•
Degree of differentiation of inputs
•
Presence of substitute inputs
•
Supplier concentration to firm concentration ratio
•
Threat of forward integration by suppliers relative to the threat of backward
integration by firms
•
Cost of inputs relative to selling price of the product
Buyer power
• Buyer concentration to firm concentration ratio
•
Bargaining leverage
•
Buyer volume
•
Buyer switching costs relative to firm switching costs
•
Buyer information availability
•
Ability to backward integrate
•
Availability of existing substitute products
•
Buyer price sensitivity
•
Price of total purchase
Threat of substitution
• Buyer propensity to substitute
•
Relative price performance of substitutes
•
Buyer switching costs
•
Perceived level of product differentiation
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2.23 Strategic marketing mix
The term 'marketing mix' was first used in 1953 when neil borden, in his american
marketing association presidential address, took the recipe idea one step further and coined
the term "marketing-mix". A prominent marketer, e. Jerome mccarthy, proposed a 4 p’s
classification in 1960, which has seen wide use.
 Marketing mix is a combination of marketing tools that a company uses to satisfy their
target customers, and achieving organizational goals. Mccarthy classified all these
marketing tools under four broad categories:
 Product
 Price
 Place
 Promotion
 These four elements are the basic components of a marketing plan and are collectively
called 4 p’s of marketing.
4 p's
 All marketing decision-making can be classified into four strategy elements, sometimes
referred to as the marketing mix or the four p’s.
 Product: what are the benefits of this product and service to its customers?
 Price: should this product and service be free or funded by a grant? Should a price be
charged to cover costs only? Should the price allow for a profit?
 Place: what can be done to make this product and service more accessible and
available?
 Promotion: what can be done to increase the visibility of this product and service? What
can be done to increase its usage or exposure?
Product
 Product is the actually offering by the company to its targeted customers which also
includes value added stuff. Product may be tangible (goods) or intangible (services).
 For many a product is simply the tangible, physical entity that they may be buying or
selling.
 While formulating the marketing strategy, product decisions include:
 What to offer?
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 Brand name
 Packaging
 Quality
 Appearance
 Functionality
 Accessories
 Installation
 After sale services
 Warranty
 The core product is not the tangible, physical product. You can't touch it. That's because
the core product is the benefit of the product that makes it valuable to you. So with the
car example, the benefit is convenience i.e. The ease way at which you can go where you
like, when you want to. Another core benefit is speed since you can travel around
relatively quickly.
 The actual product is the tangible, physical product. You can get some use out of it.
Again with the car example, it is the vehicle that you test drive, buy and then collect.
 The product life cycle (plc) is based upon the biological life cycle. For example, a seed is
planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down
roots as it becomes an adult (maturity); after a long period as an adult the plant begins to
shrink and die out (decline).
Price
 Price includes the pricing strategy of the company for its products. How much customer
should pay for a product? Pricing strategy is not only related to the profit margins but
also helps in finding target customers. Pricing decision also influence the choice of
marketing channels.
 Price decisions include:
 Pricing strategy (penetration, skim, etc)
 List price
 Payment period
 Discounts
 Financing
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 Credit terms
 Using price as a weapon for rivals is as old as mankind, but it’s risky too. Consumers are
often sensitive for price, discounts and additional offers. Another aspect of pricing is that
expensive products are considered of good quality.
 Price is one of the most complex marketing decisions.
It plays a number of roles in most marketing strategies: it can be a key component in
product image (quality); a powerful sales promotion tool; or a versatile element in competition.
 Determining pricing strategy is a delicate task.
It requires that you assess customer demand and analyze cost in order to choose a price
that will create customer satisfaction and yield a satisfactory level of profit.
 Pricing is related to the goals and objectives of your organization. What are the objectives
for your library? Are you a profit making institution or is cost recovery your goal? One
thing is clear, nothing is free anymore, especially information.
 When thinking about pricing, you must consider all costs associated with any given
product.
 The final price is a marketing decision.
Place (placement)
 It not only includes the place where the product is placed, all those activities performed
by the company to ensure the availability of the product tot he targeted customers.
Availability of the product at the right place, at the right time and in the right quantity is
crucial in placement decisions.
 Placement decisions include:
 Placement
 Distribution channels
 Logistics
 Inventory
 Order processing
 Market coverage
 Selection of channel members
 There are many types of intermediaries such as wholesalers, agents, retailers, the internet,
overseas distributors, direct marketing (from manufacturer to user without an
intermediary), and many others.
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 Place decisions relate to distribution, how the library plans to make products and services
available and accessible to customers.
Place adds value by making services available at convenient times and locations; by
creating a pleasant environment in terms of location size, lighting, staff; by allowing for multiple
types of distribution: electronic, mail or walk-in. Place and distribution are ways to differentiate
your services, making them more responsive to your customers’ needs.
 With the arrival of newer telecommunications and electronic delivery mechanisms,
library channels of distribution must be looked at very closely.
Promotion
 Promotion includes all communication and selling activities to pursuade future prospects
to buy the product. Promotion decisions include:
 Advertising
 Media types
 Message
 Budgets
 Sales promotion
 Personal selling
 Public relations/publicity
 Direct marketing
 Sponsorship
 The elements of the promotions mix are integrated to form a coherent campaign. As with
all forms of communication.
 As these costs are huge as compared to product price, so it’s good to perform a breakeven analysis before allocating the budget. It helps in determining whether the new
customers are worth of promotion cost or not.
 Planning is the key to any promotional program.
A planned program can be accurately measured to evaluate its progress, and its success or
failure. Adequate planning also saves you money in the long run.
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This material is proprietary to KV Institute of Management, a Nationally Ranked BSchool in Coimbatore and cannot be copied or duplicated for use
outside of KV. Violators will face infringement proceedings of copyright laws..