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BCOM HONOURS: STRATEGIC MARKETING © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-1 LECTURE OUTLINE 1.THEORETICAL DISCUSSION ON STARTEGIC MARKETING 2. ASSIGNMENT DISCUSSION 3.EXAMINATION DISCUSSION © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-2 CHAPTER 1 Foundations of Strategic Marketing Management © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-3 PURPOSE OF MARKETING To create long-term and mutually beneficial exchange relationships between an entity and the publics (individuals and organizations) with which it interacts. © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-4 STRATEGIC MARKETING MANAGEMENT PROCESSES Define business, mission, and goals Identify/frame growth opportunities Formulate product-market strategies Budget resources Develop reformulation and recovery strategies © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-5 BUSINESS MISSION: written statement that Underscores the scope of an organization’s operations Reflects management’s vision of the organization Describes an organization’s purpose Crystallizes the organization’s long-term direction and character Helps identify and evaluate product-market opportunities Inspires employees Provides direction for goal-setting Applies to not-for-profit organizations as well © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-6 BUSINESS MISSION American Red Cross XEROX “Do great work” © 2010 Pearson Education, Inc. publishing as Prentice Hall “Provide for victims of disaster” Slide 1-7 BUSINESS GOALS OR OBJECTIVES Convert the mission into tangible actions and results to be achieved by a specified time frame Are divided into three categories: Production Objectives Financial Objectives © 2010 Pearson Education, Inc. publishing as Prentice Hall Marketing Objectives Slide 1-8 CONVERTING ENVIRONMENTAL OPPORTUNITIES INTO ORGANIZATIONAL OPPORTUNITIES Ask three questions: What might we do? Environmental Opportunities What do we do best? Distinctive Competencies What must we do? Success Requirements © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-9 SWOT ANALYSIS SWOT analysis is a formal framework for identifying and framing organizational growth opportunities. - Type of Factor Organization Favorable Unfavorable Internal Capabilities Strengths Weaknesses External Environment Opportunities Threats © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-10 PRODUCT-MARKET STRATEGIES A product-market strategy involves selecting specific markets and profitably reaching them through an integrated program called a marketing mix. Markets Existing Existing New Market Penetration Market Development New Offering Development Diversification Offerings New © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-11 STRATEGY SELECTION Strategies are chosen based on: Costs and benefits of a strategy Probabilities of success for a strategy Competitive structure, market dynamics, and opportunity costs The offering itself © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-12 THE MARKETING MIX Communication Aggressive Strategy competition Product Strategy Customer Aggressive competition Channel Strategy Passive competition Price Strategy © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-13 DEVELOPING REFORMULATION AND RECOVERY STRATEGIES: MARKETING AUDIT Addresses the following questions: Strategic Operational Are we doing the right things? Are we doing things right? Allows for contingency plans, preplanning of reformulation and recovery strategies that lead to faster reaction time in implementing remedial action © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-14 MARKETING PLAN A marketing plan is a formal, written document that describes the context and scope of an organization’s marketing effort to achieve defined goals or objectives within a specific future time period. Consists of: Business Plan Marketing Plan Product Plan Each has these time dimensions: Short-term Focus: 1-year period Long-term Focus: 3- to 5-year period © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-15 CHAPTER 2 Financial Aspects of Marketing © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-16 TYPES OF COSTS Variable Costs Variable/ Fixed Costs Fixed Costs Cost of Goods Sold Other Variable Costs Programmed Costs Committed Costs Selling Expenses Materials Sales Commissions Advertising Rent Salary Labor Discounts Sales Promotion Administrative/ Clerical Commissions/ Bonus Overhead Delivery Sales Salaries © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-17 RELEVANT AND SUNK COSTS Relevant Costs Are expenditures that: Are expected to occur in the future as a result of some marketing action Differ among marketing alternatives being considered Include opportunity costs, the forgone benefits from an alternative not chosen © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-18 RELEVANT AND SUNK COSTS Sunk Costs Are past expenditures for a given activity that are typically irrelevant in whole or in part to future decisions Are the opposite of relevant costs Include past R&D, test marketing, and advertising expenses Sunk cost fallacy: Recouping spent dollars by spending still more dollars in the future © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-19 MARGINS Margin Is the difference between the selling price and the “cost” of an offering Is expressed on a total volume or individual basis, dollar terms, or percentages Consists of three types: Gross Margin Trade Margin © 2010 Pearson Education, Inc. publishing as Prentice Hall Profit Margin Slide 1-20 CONTRIBUTION ANALYSIS Contribution Is the difference between total sales revenue and total variable costs Or on a per-unit basis, is the difference between unit selling price and unit variable cost Is used to analyze the relationship between costs, prices, volume, and profit © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-21 CONTRIBUTION ANALYSIS Break-Even Analysis Identifies the unit or dollar sales volume at which an organization neither makes a profit nor incurs a loss Break-even is shown by this equation: Total Revenue = Total Variable Costs © 2010 Pearson Education, Inc. publishing as Prentice Hall + Total Fixed Costs Slide 1-22 EXHIBIT 2.1: BREAK-EVEN ANALYSIS CHART © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-23 CONTRIBUTION ANALYSIS Sensitivity Analysis Break-even points can change if there are changes in selling price, variable costs, and/or fixed costs Unit Selling Price (P) Unit Variable Costs (UVC) Contribution Per Unit CU = (P - UVC) Unit Break-Even Volume (FC / CU) Dollar Break-Even Volume (FC / CM*) Total Fixed Costs (FC) Scenario #1 $5.00 $2.00 $40,000 $3.00 13,333 units $66,667 Scenario #2 $4.00 $2.00 $30,000 $2.00 15,000 units $60,000 Scenario #3 $5.00 $1.50 $30,000 $3.50 8,571 units $42,857 * Contribution margin (CM) = [(P – UVC) ÷ P] © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-24 LIQUIDITY AND WORKING CAPITAL Liquidity Working Capital Current Assets Current Liabilities A firm’s ability to meet short-term financial obligations within a budget year = Current Assets – Current Liabilities Consists of cash, accounts receivable, prepaid expenses, inventory, etc. Consists of short-term accounts payable, income taxes, etc. Managers must be aware of the impact of marketing actions on working capital © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-25 OPERATING LEVERAGE Operating leverage refers to the extent to which fixed costs and variable costs are used in the production and marketing of products and services High Operating Leverage High total fixed costs relative to total variable costs Low Operating Leverage Low total fixed costs relative to total variable costs The higher the operating leverage, the faster total profits will rise or fall once sales volume rises or falls below break-even volume © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-26 DISCOUNTED CASH FLOW Discounted cash flows are future cash flows expressed in terms of their present value Incorporates the theory of the time value of money or present-value analysis Premise: A dollar received next year is worth less than a dollar received today because its future value is affected by risk, inflation, and opportunity cost © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-27 CUSTOMER LIFETIME VALUE Customer Lifetime Value (CLV) The present value of future cash flows from a customer relationship The CLV calculation requires this information: $M = Sales Revenue Retention Rate = (r) Interest Rate = (i) – ( Variable Costs © 2010 Pearson Education, Inc. publishing as Prentice Hall + Other Customer Acquisition Costs ) Slide 1-28 PRO FORMA INCOME STATEMENT Displays projected revenues, budgeted expenses, and estimated net profit for an organization, product, or service during a specific planning period, usually a year Includes a sales forecast and a listing of variable and fixed costs that can be programmed or committed Reflects a marketer’s expectations (sales) given certain inputs (costs) © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-29 EXHIBIT 2.4: PRO FORMA INCOME STATEMENT FOR THE 12-MONTH PERIOD ENDED DECEMBER 31, 2006 Sales Cost of goods sold Gross margin Marketing expenses Sales expenses Advertising expenses Freight or delivery expenses General and administrative expenses Administrative salaries Depreciation on buildings/equipment Interest expense Property taxes and insurance Other administrative expenses Net profit before (income) taxes $1,000,000 $500,000 $500,000 $170,000 $90,000 $40,000 $120,000 $20,000 $5,000 $5,000 $5,000 © 2010 Pearson Education, Inc. publishing as Prentice Hall $300,000 $155,000 $45,000 Slide 1-30 CHAPTER 3 Marketing Decision Making and Case Analysis © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-31 DECISION-MAKING PROCESS: DECIDE Define the problem Evaluate the decision factors Consider relevant information Identify the best alternative Develop a plan for implementing the chosen alternative Evaluate the decision and the decision process © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-32 DECISION-MAKING PROCESS: DECIDE Step 1: Define the Problem “A problem well defined is half solved.” — John Dewey Problem definition framework includes: Objectives Constraints © 2010 Pearson Education, Inc. publishing as Prentice Hall Success Measures Slide 1-33 DECISION-MAKING PROCESS: DECIDE Step 2: Enumerate the Decision Factors Two decision factors to be enumerated and related to each other: Alternative Courses of Action Uncertainties Controllable by the decision maker such as the marketing mix Uncontrollable factors that the manager cannot influence © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-34 DECISION-MAKING PROCESS: DECIDE Step 3: Consider Relevant Information Relevant information consists of information that relates to the alternatives identified by the manager as being likely to affect future events. Includes characteristics of the following: Industry Consumers Competitors Organization (competitive strengths and position) © 2010 Pearson Education, Inc. publishing as Prentice Hall Alternatives Slide 1-35 DECISION-MAKING PROCESS: DECIDE Step 3: Consider Relevant Information Identifying relevant information is difficult: • There is often too much info and viewpoints • Determining what does and does not matter is a skill learned through experience • Don’t consider everything as factual info • Sometimes relevant info must be created A manager has performed a situation analysis when steps 1 through 3 are completed © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-36 DECISION-MAKING PROCESS: DECIDE Step 4: Identify the Best Alternative Decision analysis: • Matches each alternative with the uncertainties in the environment • Assigns a quantitative value to the outcome associated with each match Uses a decision tree and a payoff table to show the relationship among alternatives, uncertainties, and potential outcomes © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-37 DECISION-MAKING PROCESS: DECIDE Step 4: Identify the Best Alternative A payoff table: Displays the alternatives, uncertainties, and outcomes facing a firm Includes management’s determination of the probability of an uncertainty’s occurrence © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-38 DECISION-MAKING PROCESS: DECIDE Step 5: Develop a Plan for Implementing the Chosen Alternative An implementation plan involves: Allocating marketing, financial, and manufacturing resources The time needed to develop a marketing plan © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-39 DECISION-MAKING PROCESS: DECIDE Step 6: Evaluate the Decision and the Decision Process With respect to the decision itself, ask: Was a decision made? Was the decision proper given the situation? • Insufficient information present? • Failure to consider and interpret relevant information? • Logical assumptions made regarding data gaps? © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-40 DECISION-MAKING PROCESS: DECIDE Step 6: Evaluate the Decision and the Decision Process Ask 5 questions of the decision-making process: 1. Was the problem defined adequately? 2. Were all the pertinent alternatives and uncertainties identified? Were the assumptions realistic? 3. Was all the relevant information considered? 4. Was an appropriate course of action recommended? Was the logic consistent? Was any important piece of information overlooked? 5. How can the recommendation be implemented? © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-41 CHAPTER 4 Opportunity Analysis, Market Segmentation, and Market Targeting © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-42 MARKETING STRATEGY FRAMEWORK Marketing Strategy Market Selection Marketing Programs Target Markets Realized Organization Objectives Satisfied Customers © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-43 OPPORTUNITY ANALYSIS Opportunity analysis consists of three interrelated activities: Opportunity Identification OpportunityOrganization Matching Opportunity Evaluation © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-44 OPPORTUNITY ANALYSIS Opportunity Identification Opportunities arise from: • Identifying new types of buyers • Uncovering unsatisfied needs of buyers • Creating new ways or means for satisfying buyer needs Opportunity analysis focuses on finding markets that an organization can profitably serve © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-45 OPPORTUNITY ANALYSIS Opportunity-Organization Matching Determines whether an identified market opportunity is consistent with the definition of the firm’s business, mission statement, and distinctive competencies Assesses strengths and weaknesses via a SWOT Identifies the success requirements Rejects those that do not conform to a firm’s character even if they offer sizable sales and profit © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-46 OPPORTUNITY ANALYSIS Opportunity Evaluation Qualitative Quantitative Matches the attractiveness of an opportunity with the potential for uncovering a market niche, which depends on: • Competitive activity • Buyer requirements • Market demand • Supplier sources • Environmental forces Consists of: • Market sales potential estimates • Sales forecasts • Budgets • Organizational capabilities © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-47 WHAT IS A MARKET? A market consists of the prospective buyers (individuals or organizations) willing and able to purchase the existing or potential offering (product or service) of an organization. Implications for marketers: Buyers Focus on buyers, not products or services Effective Demand Exchanges cannot occur unless buyers are able and willing to purchase a product or service Offerings Purchases consist of offerings, not products or services, due to the values or benefits that buyers derive from them © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-48 WHAT IS A MARKET? Market Share A served market is one in which a company, offering, or brand competes for targeted customers Marketing managers often look closely at served market share when considering strategic options “High” Served Market Share Use a market development strategy “Low” Served Market Share Use either a product development or market penetration strategy © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-49 WHAT IS A MARKET? Market Share Market share is the sales dollars ($) or units(#) of a firm, offering, or brand divided by the sales of the “market,” expressed as a percentage (%): Firm, Offering, or Brand Sales ($ or #) Market Share = = X% Market Sales ($ or #) © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-50 MARKET SEGMENTATION Market Segmentation A technique that involves breaking down or building up of potential buyers into groups, which are called market segments Each segment possesses a homogeneous characteristic that relates to its purchasing behavior and response to a marketing program “Cannot be all things to all people” Information technology and flexible manufacturing and service delivery systems can create “segments of one” © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-51 MARKET SEGMENTATION Mass Customization Tailors products and services to the tastes and preferences of individual buyers in high volumes and at a relatively low cost Combines the efficiencies of mass production and the effectiveness of designing offerings to a single buyer’s unique wants © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-52 MARKET SEGMENTATION Benefits of Market Segmentation Identifies opportunities for new product development Helps in the design of marketing programs that are most effective for reaching homogeneous groups of consumers Improves the allocation of marketing resources © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-53 MARKET SEGMENTATION Bases for Market Segmentation Consumers Socioeconomic Characteristics Industrial Buyers Behavioral Variables Socioeconomic Characteristics • Gender • Benefits Sought • Company Size • Age • Usage • Location • Occupation • Income • Family Life Cycle • Industry Psychographic Variables • Education • Lifestyle • Location • Attitudes Behavioral Variables • Purchasing Objectives • Product Benefits • Customers Served © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-54 MARKET SEGMENTATION Requirements for Effective Market Segmentation Need to answer six buyer-related questions: Who are they? What do they want to buy? How do they want to buy? When do they want to buy? Where do they want to buy? Why do they want to buy? © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-55 MARKET SEGMENTATION Requirements for Effective Market Segmentation Measurable Differentiable Accessible Substantial © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-56 MARKET TARGETING Marketers ask three questions after a market has been segmented: Where to Compete? How to Compete? When to Compete? © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-57 MARKET TARGETING How to Compete? Differentiated Marketing Simultaneously pursues several different market segments with a unique marketing strategy for each segment Manages multiple products across multiple market segments, which increases marketing-related expenditures © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-58 MARKET TARGETING How to Compete? Concentrated Marketing Focuses on a single market segment, sometimes marketing one product to one segment More commonly, offers one or more product lines to a single market segment Provides operating economies Limits growth opportunities if the segment size declines © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-59 MARKET SALES POTENTIAL AND PROFITABILITY Market Sales Potential Estimating a market’s sales potential for an offering is a difficult task Markets and offerings can be defined in ways that can lead to different estimates of market size and dollar sales potential For new offerings or markets, marketers may rely entirely on judgment and creativity when estimating market sales potential © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-60 MARKET SALES POTENTIAL AND PROFITABILITY Market Sales Potential Is the maximum sales level that might be available to all organizations serving a defined market in a specific time period given: The marketing-mix activities and related expenditures of all organizations and A set of environmental conditions © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-61 SALES AND PROFIT FORECASTING Sales Forecast Is the level of sales a single organization expects to achieve based on a chosen marketing strategy and an assumed competitive environment Is some fraction of estimated market sales potential Reflects the size of the target market(s) chosen by the organization and the marketing mix chosen for the target market(s) Reflects the assumed number of competitors and competitive intensity in the chosen target market(s) © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-62 CHAPTER 5 Product and Service Strategy and Brand Management © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-63 OFFERING STRATEGY DECISIONS An organization’s profitability depends on its product or service offering(s) and the strength of its brand(s) Marketers face three offering-related strategy decisions: Modifying the Offering Mix Positioning Offerings © 2010 Pearson Education, Inc. publishing as Prentice Hall Branding Offerings Slide 1-64 THE OFFERING PORTFOLIO The Offering Concept An offering consists of the benefits or satisfaction provided to target markets by an organization It contains the following elements: Tangible Product/Service Warranties/ Guarantees Related Services Packaging © 2010 Pearson Education, Inc. publishing as Prentice Hall Brand Name(s) Other Features Slide 1-65 THE OFFERING PORTFOLIO The Offering Concept Focusing on an offering’s benefits or satisfaction establishes a conceptual framework for marketers This framework is useful in: • Analyzing competing offerings • Identifying target market unmet needs and wants • Developing new products or services © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-66 THE OFFERING PORTFOLIO Offering Mix/ Portfolio The totality of an organization’s offerings Groups of offerings similar in terms of usage, buyers marketed to, or technical characteristics Offering Lines Offering Items © 2010 Pearson Education, Inc. publishing as Prentice Hall A specific product or service noted by a brand, size, or price Slide 1-67 THE OFFERING PORTFOLIO Offering Mix/Portfolio Decisions Width (Breadth) The number of offering lines Depth The number of items in each line Consistency The extent to which offerings satisfy similar needs, appeal to similar buyer groups, or use similar technologies © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-68 THE OFFERING PORTFOLIO Offering Mix/Portfolio Decisions Based on: Organizational Resources Competitive Situation Marketing Strategy One Offering High-Profit or High-Volume Offerings © 2010 Pearson Education, Inc. publishing as Prentice Hall Complete Lines Slide 1-69 THE OFFERING PORTFOLIO Bundling Is the marketing of two or more items in a single “package” that creates a new offering Is valued by consumers more than the individual items sold separately Has the following benefits: • Don’t have to make separate purchases • Satisfaction from one item given the presence of another Provides a lower total cost to buyers and lower marketing costs to sellers © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-70 MODIFYING THE OFFERING MIX Offering Mix Decisions Adding to the Offering Mix Modifying the Offering New Offering Development Single Offering Entire Line Trading Up Trading Down Harvesting the Offering Eliminating the Offering © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-71 ADDITIONS TO THE OFFERING MIX Additions to the Offering Mix Additions take the form of: Single Offering Entire Line Questions to ask: Consistency How consistent is the new offering with existing offerings? Resources Does the organization have the resources to introduce and sustain the offering? Market Is there a viable market for the offering? © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-72 STAGES IN THE NEW-OFFERING DEVELOPMENT PROCESS Idea Generation Idea Screening Business Analysis Market Testing Commercialization © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-73 LIFE-CYCLE CONCEPT A life cycle plots the sales curve of an offering or a product class over a period of time Life cycles are divided into 4 stages: Introduction Growth MaturitySaturation © 2010 Pearson Education, Inc. publishing as Prentice Hall Decline Slide 1-74 POSITIONING OFFERINGS Positioning is the act of designing an organization’s offering and image so that it occupies a distinct and valued place in the target customer’s mind relative to competitive offerings. Positioning Approaches Strategies include positioning by: Attribute or Benefit Product or Service Class Use or Application Competitors Product or Brand User Price and Quality Marketers often combine two or more of these strategies when positioning a product, service, or brand © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-75 BRAND EQUITY AND BRAND MANAGEMENT Brand Brand Equity A brand name is any word, “device” (design, sound, shape, or color), or combination of these that are used to identify an offering and set it apart from competing offerings. Brand equity is the added value a brand name bestows on a product or service beyond the functional benefits provided. © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-76 BRAND EQUITY AND BRAND MANAGEMENT Brand Equity Has two marketing advantages: Provides a competitive advantage, such as signifying quality, retailer acceptance, higher ROI and intangible value Can charge a higher price since consumers are often willing to pay for the brand’s equity premium © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-77 BRAND EQUITY AND BRAND MANAGEMENT Brand Equity Arises from a four-step process: 1. Develop positive brand awareness and link it with a product class or create brand identity 2. Establish a brand’s meaning in the minds of consumers, consisting of: • Brand functional performance • Brand imagery © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-78 BRAND EQUITY AND BRAND MANAGEMENT Brand Equity Arises from a four-step process: 3. Elicit the proper consumer responses to a brand’s identity and meaning—how they think and feel 4. Create an intense, active loyalty relationship between consumers and the brand © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-79 BRAND EQUITY AND BRAND MANAGEMENT Branding Strategy Multiproduct Branding Multibranding Private Branding A firm uses one name for all its products in a product class A firm gives each product or product line a distinct name A firm supplies a reseller with a product bearing a brand name chosen by the reseller © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-80 BRAND EQUITY AND BRAND MANAGEMENT Brand Growth Strategies Line Extension Brand Extension Introducing additional offerings with the same brand in a product class that it currently serves Using a current brand name to enter a completely different product class New Brand Developing of a new brand and often a new offering for a product class not yet served by the firm Fighting/ Flanker Brand Creating a new brand to attract specific consumer segments not served by a firm’s existing brands to counteract competitors’ brands © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-81 BRAND EQUITY AND BRAND MANAGEMENT Brand Extension Strategy Allows for co-branding, which: Pairs the two brand names of two manufacturers (General Mills and Hershey’s) on a single product (Reese’s Puffs) Permits firms to enter a new product class (Hershey’s— cereal) and capitalize on an already established brand name (Hershey’s—Reese’s) © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-82 BRAND EQUITY AND BRAND MANAGEMENT Flanker/Fighting Brand Strategy Flanker Brand Adding new brands on the high or low end of a product line based on a price-quality continuum Fighting Brand Adding a new brand whose sole purpose is to confront competitive brands in a product class being served by an organization © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-83 BRAND EQUITY AND BRAND MANAGEMENT Fighting Brand Strategy Introduced when: An organization has a high relative market share of the sales in a product class Its dominant brand is susceptible to having its high market share reduced by competitors through aggressive pricing or promotion The organization wishes to preserve its profit margins on its existing brand © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-84 BRAND EQUITY AND BRAND MANAGEMENT Flanker/Fighting Brand Strategy Fighting and flanker brand strategies risk cannibalizing other lower-priced brands in a product line A preemptive cannibalism strategy is the practice of stealing sales from a firm’s existing products or brands to keep buyers from switching to competitors’ offerings so as to not lose sales © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-85 CHAPTER 6 Integrated Marketing Communication Strategy and Management © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-86 MARKETING COMMUNICATION Marketing communication is the process by which information about a firm and its offerings is disseminated to selected markets. Its goals are to: Induce Initial Trial Achieve Postpurchase Satisfaction © 2010 Pearson Education, Inc. publishing as Prentice Hall Generate Repeat Sales Slide 1-87 MARKETING COMMUNICATION Communication informs buyers of the: • Availability of an offering • Unique benefits of the offering • Where and how to obtain and use the offering The message should be: Desirable to the Target Market Exclusive to the Offering © 2010 Pearson Education, Inc. publishing as Prentice Hall Believable as to the Offering’s Benefits Slide 1-88 MARKETING COMMUNICATION Advertising Personal Selling Public Relations Marketing Communication Mix Sales Promotion Direct Marketing © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-89 INTEGRATED MARKETING COMMUNICATION STRATEGY DECISIONS 1. What are the info requirements of target markets? 2. What objectives must the communication strategy achieve? 3. How might the mix of communication activities be combined to convey information to target markets? 4. How much should be budgeted for communicating with target markets and how should resources be allocated among various communication activities? 5. How should the communication be timed and scheduled? 6. How should the communication process be evaluated? © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-90 INFORMATION REQUIREMENTS IN PURCHASE DECISIONS The purchase (or adoption) process model describes how buyers purchase a particular offering and defines the role of information Awareness Consideration Preference Purchase At any point in time: • Different buyers are in different stages of the model • Each stage requires a different communication strategy © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-91 INFORMATION REQUIREMENTS IN PURCHASE DECISIONS To communicate effectively, a marketer must know: What Information consumers think is necessary (price, location, size, etc.). Where Consumers will seek it (newspapers, the Internet, friends, etc.). When Consumers will seek it (how far in advance, on what days, etc.). How Consumers will apply the information obtained. © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-92 SETTING REASONABLE COMMUNICATION OJBECTIVES Communication objectives depend on: The offering-market strategies of the firm The stage of the offering life cycle © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-93 SETTING REASONABLE COMMUNICATION OJBECTIVES Communication goals for the offering life cycle: Primary Demand Selective Demand Demand for the offering class Demand for a brand or offering Occurs early in the life cycle Occurs later in the life cycle The message focuses on: Substitute offerings exist • Introducing the benefits of an offering • Overcoming the objections to the offering The message: • Focuses on the benefits of a specific brand or offering • Differentiates the offering from competitive ones © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-94 DEVELOPING AN INTEGRATED MARKETING COMMUNICATION MIX Factors to consider when designing the communication mix are: Information Requirements of Buyers Nature of the Target Markets Nature of the Offering Capacity of the Organization © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-95 PUSH VERSUS PULL COMMUNICATION STRATEGIES Push Strategy Pull Strategy Producer Producer Wholesalers Wholesalers Retailers Retailers Consumers Consumers The offering is pushed through a marketing channel to buyers in a sequential fashion Buyers demand the product from intermediaries, pulling the offering through a marketing channel © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-96 MARKETING WEBSITES AND IMC Is a place where a provider makes available information to Internet users Website Marketing Website Engages buyers/potential buyers in interactive communication to sell a firm’s offerings or move them closer to a purchase Transactional Website Is an electronic storefront that tries to convert online browsers into online buyers Promotional Website Promotes a firm’s offerings and provides information on how they are used and where they are purchased © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-97 COMMUNICATION MIX BUDGETING Budgeting Approaches Percentage of Sales • • • • • • Most widely used approach Past or anticipated sales are used as the basis When sales rise, communication expenses rise Simple to calculate Which comes first—sales or communication? Is not flexible or market-oriented Fixed Dollar Amount per Offering Unit • Budget equals the per-unit allocation multiplied by the number of units expected to be sold • Used by durable-goods manufacturers © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-98 COMMUNICATION MIX BUDGETING Budgeting Approaches Competitive Parity • Balances the firm’s and competitors’ communication expenses • Uses advertising share of voice • Expressed as a percentage of total advertising by all competitors in a market at a point in time All Available Funds • Employed in introducing a new offering for which maximum exposure is desired • Used by nonprofit organizations ObjectiveTask • Objectives are set for a communication program • Costs are based on the tasks to achieve the goals © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-99 COMMUNICATION BUDGET ALLOCATION Media selection is based on these factors: Cost Expressed as cost per thousand (CPM) readers or viewers to facilitate cross-vehicle comparisons Reach The number of buyers potentially exposed to an advertisement in a particular vehicle Frequency • The number of times buyers are actually exposed to an ad in a given time period • Total exposure Audience = Reach × Frequency The more closely target market’s characteristics match those of a vehicle’s audience, the more appropriate it is © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-100 COMMUNICATION BUDGET ALLOCATION Media timing strategies include: Blitz Strategy Concentrating advertising dollars in a relatively short time period when new products or services are introduced Continuity Strategy Spending advertising dollars over the long term to maintain continuity Pulse Strategy Concentrating its advertising but also attempts to maintain some semblance of continuity © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-101 EVALUATION AND CONTROL OF THE COMMUNICATION PROCESS Continuously monitor the execution of any communication plan or strategy to ensure that the communication objectives (sales, profits, etc.) are being met Use budgeting to add/delete funds for specific communication activities as a form of control Use incremental analysis to evaluate and control advertising, personal selling, and expenditures © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-102 CHAPTER 7 Marketing Channel Strategy and Management © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-103 MARKETING CHANNELS A marketing channel consists of individuals and firms involved in the process of making an offering available for consumption or use by consumers and industrial users. Channels link the producer and its buyers: Producer Marketing Channel Intermediaries © 2010 Pearson Education, Inc. publishing as Prentice Hall Consumers Slide 1-104 MARKETING CHANNELS Marketing channels affect an organization’s: Segmentation Strategy Communications Strategy Pricing Strategy Determines whether its chosen target markets are reached Dictates its advertising, sales promotion, direct marketing, etc. activities Influences its markup and discount policies Impacts its: Offering Strategy Branding policies Willingness to stock and customize offerings Ability to augment offerings © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-105 THE CHANNEL-SELECTION DECISION Marketers must make these marketing channel decisions regarding intermediaries: Type Location Density Functions Conduct a market analysis to identify the target markets served and their buying requirements that will be served by prospective marketing channels © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-106 EXHIBIT 7.1: TRADITIONAL MARKETING CHANNEL DESIGNS Producer Brokers or Agents Distributors or Wholesalers Retailers or Dealers Ultimate Buyers © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-107 THE CHANNEL-SELECTION DECISION Direct vs. Indirect Distribution Marketers must decide whether to use: Intermediaries to reach target markets Contact buyers directly via either channel strategy: Producer Own Sales Force Producer Own Distribution Outlets Ultimate Buyers © 2010 Pearson Education, Inc. publishing as Prentice Hall Own Marketing Website Ultimate Buyers Slide 1-108 THE CHANNEL-SELECTION DECISION Electronic Marketing Channels Employ some form of electronic communication, including the Internet, to make offerings available for consumption or use by consumers and industrial users Many services can be distributed through electronic marketing channels, while others still involve traditional intermediaries © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-109 THE CHANNEL-SELECTION DECISION Marketers ask three questions when selecting the type and location of retail outlets: Target Market Coverage Buyer Requirement Satisfaction Profitability Which retailers will provide the best coverage of the target market? Which retailers will best satisfy the target market’s buying requirements? Which retailers will be the most profitable? © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-110 DUAL DISTRIBUTION Dual distribution occurs when an organization distributes its offering through two or more different marketing channels that may or may not compete for similar buyers. A firm uses dual distribution because it: Produces its own brand (for resellers) as well as a private store brand (for a specific retailer) May distribute directly to a large-volume retailer and use wholesalers for small-volume retailers Considers geography: • Uses it own sale force in concentrated markets • Uses intermediaries elsewhere Employs a multibrand strategy © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-111 DUAL DISTRIBUTION The viability of dual distribution is situational and depends on the relative strengths of manufacturers and retailers If a manufacturer decides to distribute directly to ultimate buyers in a retailers territory: • The retailer may drop the firm’s offering lines or • May not drop them if they too important to it or • May not drop them if competitive offerings have a strong presence in the market If a retailer accounts for a significant sales volume, dropping the lines will negatively affect the firm © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-112 MULTI-CHANNEL MARKETING Multi-channel marketing involves the blending of an electronic marketing channel and a traditional channel in ways that are mutually reinforcing in attracting, retaining, and building customer relationships. Disintermediation is the practice whereby a traditional intermediary member is dropped from a marketing channel and replaced by an electronic storefront. A firm uses multi-channel marketing because: The addition of an electronic marketing channel can provide incremental revenue An electronic marketing channel can leverage the presence of a traditional channel It can satisfy buyer requirements © 2010 Pearson Education, Inc. publishing as Prentice Hall Electronic Marketing Channels Slide 1-113 MULTI-CHANNEL MARKETING Electronic Marketing Channels Multi-channel marketing is viable if an electronic marketing channel: Generates incremental revenue Doesn’t cannibalize sales from traditional intermediaries Reaches a different market segment than the traditional channel Reinforces with traditional channels in attracting, retaining, and building customer relationships © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-114 SATISFYING INTERMEDIARY REQUIREMENTS The following contribute to long-term exchange relationships between a manufacturer and their intermediaries: Trade Discounts Lead-Time Requirements Fill-Rate Standards Offering Exclusivity © 2010 Pearson Education, Inc. publishing as Prentice Hall Cooperative Advertising Profit Margins Slide 1-115 SATISFYING TRADE RELATIONS Channel Conflict Marketing managers recognize that conflicts often occur in trade relations Channel conflict arises when one channel member (such as a manufacturer or an intermediary) believes another channel member is engaged in behavior that is preventing it from achieving its goals © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-116 SATISFYING TRADE RELATIONS Channel Conflict Occurs when: A channel member bypasses another member and sells or buys direct There is a dispute over how profit margins are distributed among channel members Manufacturers believe wholesalers or retailers are not giving their offerings adequate attention A manufacturer engages in dual distribution—particularly when different retailers or dealers carry the same brands © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-117 CHANNEL-MODIFICATION DECISIONS: QUALITATIVE FACTORS When modifying existing or adding new channels, ask : 1. Will the change improve the effective coverage of the target markets sought? 2. How will the change improve the satisfaction of buyer needs? 3. Which marketing functions must be absorbed in order to make the change? 4. Does the firm have the resources to perform the new functions? 5. What effect will the change have on other channel members? 6. What will be the effect of the change on the achievement of long-range organizational objectives? © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-118 CHANNEL-MODIFICATION DECISIONS: QUANTITATIVE FACTORS Consider the financial impact of a channel modification decision If a firm eliminated its wholesalers, it would have to assume the costs of: • Sales to retail accounts • Sales administration • Carrying the inventory • Delivery and storage • Carrying the accounts receivable © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-119 CHAPTER 8 Pricing Strategy and Management © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-120 PRICING CONSIDERATIONS Pricing Objectives Be consistent with a firm’s overall marketing objectives Objectives include: • Enhancing brand image • Providing customer value • Obtaining an adequate ROI or cash flow • Maintaining price stability in an industry or market © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-121 PRICING CONSIDERATIONS Pricing Factors Demand for an offering sets the price ceiling Costs, particularly variable costs, determine the price floor Consumer value perceptions and price sensitivity determines the maximum price charged The price must at least cover unit variable costs; otherwise, a loss will result for each offering sold Government regulations, such as predatory pricing © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-122 PRICING CONSIDERATIONS Pricing Factors Life-cycle stage of the offering—greater price discretion exists earlier than later in the life cycle Profit margins of marketing channel members The price differentials of a firm’s offerings to maintain perceived value differences among buyers © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-123 PRICING CONSIDERATIONS Price as an Indicator of Value Consumers compare price with the perceived benefits derived from an offering to determine value Value is the ratio of perceived benefits to price: Perceived Benefits Value = Price This shows that for a given price, value increases as perceived benefits increase and vice versa © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-124 PRICING CONSIDERATIONS Price Elasticity of Demand (E) Measures how responsive consumer demand is to changes in an offering’s price Is the ratio of the percentage change in quantity demanded relative to a percentage change in price Price Elasticity of Demand Percentage Change in Quantity Demanded = E = Percentage Change in Price © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-125 PRICING CONSIDERATIONS Product-Line Pricing In most organizations, offerings are not priced in isolation: They may be sold at a loss to entice buyers They ensure that the organization can offer potential buyers complete product lines Thus, the price may bear little relationship to the actual cost of an offering © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-126 PRICING CONSIDERATIONS Product-Line Pricing Involves determining the: Lowest-Priced Product Price Highest-Priced Product & Price Price Differentials for All Other Products in the Line Is the traffic builder designed to capture the attention of the hesitant or first-time buyer Is typically positioned as the premium item in quality and features • Should reflect differences in their perceived value of the products offered • Should get larger from less to more expensive items as one moves up the product line © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-127 PRICING STRATEGIES Pricing strategies can be termed as either: Full-Cost Price Strategies Variable-Cost Price Strategies Those that consider both variable and fixed costs (also called direct and indirect costs) Those that take into account only the direct variable costs associated with an offering © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-128 PRICING STRATEGIES Full-Cost Price Strategies Mark-up Pricing Is determined simply by adding a fixed amount to the cost of the offering Break-Even Pricing Equals the per-unit fixed costs plus the per unit variable costs of an offering Rate-of-Return Pricing Obtain a pre-specified rate of return on investment (ROI) for the organization © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-129 PRICING STRATEGIES Variable-Cost Price Strategies A form of demand-oriented pricing that either: Stimulates Demand Since variable cost prices are lower than full-cost prices, the assumption is that they will increase demand Shifts Demand Shifts demand from one time period to another © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-130 NEW-OFFERING PRICING STRATEGIES Conceptual new-offering pricing strategies are: Skimming Pricing Strategy The price for a new offering is set very high initially and is typically reduced over time Penetration Pricing Strategy An offering is introduced at a low price Intermediate Pricing Strategy The price is set between the two extremes and is used in the vast majority of initial pricing decisions © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-131 PRICING AND COMPETITIVE INTERACTION Price War Marketers should consider price cutting only when one or more conditions exist: The firm has a cost or technological advantage over its competitors Primary demand for a product class will grow if prices are lowered The price cut is confined to specific products or customers and not across-the-board © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-132 CHAPTER 9 Marketing Strategy Reformulation: The Control Process © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-133 THE MARKETING STRATEGY CONTROL PROCESS The marketing control process serves as the mechanism for achieving: Strategic adaptation to environmental change Operational adaptation to productivity needs Strategic Control “Doing the right things” Operations Control “Doing things right” © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-134 THE MARKETING STRATEGY CONTROL PROCESS Strategic Control Assesses the direction of the organization as evidenced by its: • Implicit or explicit goals and strategies • Capacity to perform in the context of changing environments and competitive actions Defines the fit between an organization’s capabilities and objectives and environmental threats and opportunities © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-135 THE MARKETING STRATEGY CONTROL PROCESS Operations Control Assesses how well the firm performs marketing activities as it seeks to achieve planned outcomes Assumes that: • The direction of the firm is correct • Only the organization’s ability to perform specific tasks needs to be improved © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-136 THE MARKETING STRATEGY CONTROL PROCESS A “poorly executed plan can produce undesirable results just as easily as a poorly conceived plan.” Remedial efforts should focus on: Strategic Control Operations Control Improving effectiveness by: • Seeking opportunities • Mitigating environmental threats Improving efficiency by heightening the marketing effort © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-137 STRATEGIC CHANGE: SOURCES Market Evolution Technological Innovation Results from changes in primary demand for a product class Creates strategic change as newer technologies replace older ones Market Redefinition Results from changes in the offering demanded by buyers or promoted by competitors Marketing Channel Change • The increasing role of Internet technology • The focus on reducing distribution costs • The power shifts within marketing channels © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-138 OPTIONS FOR DEALING WITH STRATEGIC CHANGE Marshal the resources necessary to alter the firm’s technical and marketing capabilities to fit its market-success requirements Shift emphasis to product markets where the match between success requirements and the firm’s distinctive competency is clear Cut back efforts in those product markets where the firm has been outflanked Leave the industry © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-139 OPERATIONS CONTROL The goal of operations control is to improve the productivity of marketing efforts Ways to identify and allocate costs are: Marketing-Cost Analysis Marketing Channel Analysis Sales Analysis Customer Profitability Analysis Product-Service Mix Analysis © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-140 CONSIDERATIONS IN MARKETING CONTROL Problems vs. Symptoms Effectiveness vs. Efficiency Data vs. Information • Recognize the difference between root problems and surface symptoms • Must develop causal relationships between occurrences • Effectiveness assesses whether the firm is achieving its intended goals given its constraints, capabilities, and environmental opportunities • Efficiency relates to productivity—the levels of output given a specified unit of input • Data are essentially reports of activities, events, or performance • Information is the classification of activities, events, or performance designed to be interpreted and useful for decision making © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-141 CHAPTER 10 Global Marketing Strategy © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-142 GLOBAL MARKETING STRATEGY World trade is driven by: • Global competition among… • Global organizations for… • Global consumers Global marketing involves the performance of activities designed to plan, price, promote, and direct the flow of an organization’s offerings in more than one country for a profit © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-143 GLOBAL MARKETING STRATEGY Global marketing involves two related strategic decisions: Where to Compete How to Compete • Is global marketing right for the firm? • Which countries/markets should be pursued? • What mode? Different options for entering and competing in a foreign market. • What means? Choice regarding market targeting and the marketing mix within and between countries. © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-144 THE DECISION TO GO GLOBAL: REASONS Gain access to new buyers: • Potential for increased revenues, profits, and long-term growth • Attractive if home country’s markets are mature Spread business risk across a wider market base Capitalize on an firm’s distinctive competencies and capabilities Lower costs and achieve operating efficiencies, thereby enhancing a firm’s competitiveness © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-145 IDENTIFYING GLOBAL MARKETING OPPORTUNITIES The process for identifying global marketing opportunities involves: Developing Country Screening Criteria Assessing Market Attractiveness • Establishing and prioritizing country screening criteria • Gathering, summarizing, and interpreting data pertaining to the screening criteria for each country • Classifying countries based on screening criteria • Comparing countries based on the firm’s marketing competencies/practices © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-146 IDENTIFYING GLOBAL MARKETING OPPORTUNITIES Developing Country Screening Criteria Quantitative Criteria • Market and profit potential (chain ratio) • Variables: demographics and usage • Sociocultural factors that underlie behaviors Qualitative Criteria • Country income and technological infrastructure • Trade regulations or free-trade zones • Strength of competitors (local & foreign) © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-147 IDENTIFYING GLOBAL MARKETING OPPORTUNITIES Assessing Market Attractiveness Depends on the firm’s characteristics: • Strengths and weaknesses • Offerings • Marketing policies and practices • Financial resources Marketing adaptations increase as the differences between the firm’s home country and foreign markets increase © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-148 EXHIBIT 10.2: FOUR GENERAL MODES OF ENTRY INTO FOREIGN MARKETS Exporting Licensing Joint Venture Direct Investment Increasing financial commitment, risk, marketing control, and profit potential © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-149 CRAFTING A GLOBAL MARKETING STRATEGY Market Segmentation Variables Consumer Socioeconomic Behavioral Psychographic Industrial Buyers • Demographic • Firm size • Geographic • Geographic • Benefits sought • Purchasing goals • Usage • Benefits sought • Lifestyle • Attitudes © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-150 EXHIBIT 10.3: FIVE GLOBAL OFFERING AND COMMMUNICATION STRATEGIES Offering Emphasis Communication Message Same Offering Same Communication Adapt Communication Offering Extension Strategy Communication Adaptation Strategy Adapt Offering Offering Adaptation Strategy Dual Adaptation Strategy © 2010 Pearson Education, Inc. publishing as Prentice Hall Create New Offering Offering Invention Strategy Slide 1-151 CRAFTING A GLOBAL MARKETING STRATEGY Offering and Communication Strategies An offering may be sold globally in 1 of 3 ways: Offering Extension • Selling the same offering in other countries • Works best when the offering’s target market is alike across countries and cultures Offering Adaptation Changing an offering in some way to match a country’s climate or consumer preferences Offering Invention Inventing new offerings to satisfy common needs across countries © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-152 CRAFTING A GLOBAL MARKETING STRATEGY Marketing Channel and Pricing Strategies Standardization of marketing channel and pricing strategies is a challenge due to trade regulations and consumer buying preferences and practices of the various countries Competitive, political, tax, exchange rates, and legal constraints affect the pricing latitude and strategy of global marketers © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-153 CHAPTER 11 ASSIGNMENT © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-154 Criteria to consider: Assignment due You need to understand the theory very well Practical application of theory, critical discussions and evidence of research are NB Follow ‘Assignment format’ instructions © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-155 EXAMINATION PREPARATION Two sections: Section A: Case study (compulsory) & Section B: choose 3 out of 4 essay questions 3hr paper, closed book examination Please read the question correctly and only answer what the question requires. You are allowed to bring in other theories and models BUT you need to relate to the question and explain model/diagram Think critically, use examples to aid your discussion, apply theory to the question/case You will be provided with a exam guideline nearer to the exam: chapters to focus on BUT YOU HAVE TO HAVE A COMPLETE UNDERSTANDING AND KNOWLEDGE OF THE ENTIRE MODULE. © 2010 Pearson Education, Inc. publishing as Prentice Hall Slide 1-156