Download APPLICATION OF BPD (Build Primary Demand) MODEL OF

Neven Šerić, Ph. D., Assistant Professor
University of Split, Faculty of Economics
Matice hrvatske 31
21 000 Split
[email protected]
16th January 2006
5th International Conference: An Enterprise Odyssey:
Integration or Disintegration
Graduate School of Economics & Business
University of Zagreb
Zagreb, Croatia
Neven ŠERIĆ, Ph. D., Assistant Professor
University of Split, Faculty of Economics, Matice hrvatske 31, 21 000 Split,
[email protected]
Srećko FAVRO dipl.ing,
Sworn court marine expert and assessor – Adriatic Expert, Jobova 28, Split
[email protected]
APPLICATION OF BPD (Build Primary Demand) MODEL OF
DEVELOPING MARKETING STRATEGY IN THE MARKET
IN TRANSITION
Split, 2006
APPLICATION OF BPD (Build Primary Demand) MODEL OF
DEVELOPING MARKETING STRATEGY IN THE MARKET
IN TRANSITION
Neven ŠERIĆ, Ph. D., Assistant Professor,
University of Split, Faculty of Economics, Matice hrvatske 31, 21 000 Split,
[email protected]
Srećko FAVRO, dipl.ing.
Sworn court marine expert and assessor – Adriatic Expert, Jobova 28, Split
[email protected]
Abstract:
Abstract:
BPD model is an original way of modelling marketing strategies in the market in transition.
BPD’s task is to evolve with the evolution of the present market in Croatia. Conditions in
Croatia’s market are characterised by the growth of global offer while the global demand is
stagnating. Prices are decreasing, although the quality should remain high. Recession and
tremendous competition are conditioning the spreading of doing business as necessaries for
everyone in the market. Modelling a successful marketing strategy means understanding the
strategy to be designed and the selected tactics of its implementation in practice. In such
markets companies need to adapt their marketing strategies to the laws and behaviour of the
specific market’s demand. Today, modelling a sustainable marketing strategy in the market in
transition requires special consideration for differences between national and global market.
BPD model of modelling marketing strategies is just one way towards the success in the
market in transition. In the transition market companies need to adapt their marketing
strategies to the laws and behaviour of the specific market’s demand. A successful strategy
needs to build primary demand by making potential customers aware of the new product and
by stimulating their willingness and ability to buy. The process of building a new strategy in
the market in transition needs to accomplish two important tasks: to preserve the market
recognisability aimed at maintaining the existing buyers, and also to improve the marketing
approach aimed at attracting new buyers who will encounter out products for the first time. It
is important to understand the nature of demand in the market in transition, and all its main
variables. Our BPD model is just one possibility how to do it.
Keywords: model, marketing, strategy, market, transition.
Introduction
Market regularities and interrelations of subjects of offer and demand in the transition
countries markets are specific in comparison with the developed markets of large economic
integration. Complex interrelations of offer and demand in transition countries markets are
frequently dominated by almost unpredictable consequences for the future business of an
enterprise. Repercussions of interrelations of offer and demand here result in extraordinary,
and sometimes hardly explicable market successes, but also in unexpected losses of market
share. On the other hand, in relation to high growth rates which are possible in transition
countries markets, business challenge is obvious. Which attitude to take in competitive
surroundings in the markets of transition countries? Empirical perceptions of marketing
strategists of those specific markets frequently leave the impression of being at expert level,
although the success is a relative matter.
The fact is that the offer, in those specific markets too, has nowadays exceeded the demand,
and motivational factors which motivate target consumers are not always transparent or
understandable. Changes in market environment are fast, while standards of samples of
demand behaviour often follow trends of the developed markets of large economic
integration. Complexity of the facts in business environment opens numerous business
dilemmas. How, and in which method to approach adequately to the potential demand in a
transition country market? How to recognise key motivational factors at targeted market
segments? Finally, how to create a sustainable marketing strategy in the markets of transition
countries?
A transition country market is developing at a particular rate. Its rate of development depends
to a large extent on the prevailing market trends in wider surroundings of the transition
country, in the global market. Awareness of regularities and guidelines which determine
development directions of a particular transition country market is the basis on which the
market approach should be built. Interactive monitoring of events in the environment should
be used as a link with the existing market platforms and in such association create principled
strategic approach to the targeted market segments. Interaction of such approach presents the
power and the opportunity to fully recognise motivational factors as well. Motivational factors
are often atypical in comparison to their counterparts in the global market. Once they are
determined, it is necessary to implement them into the general strategic approach, and
eventually the targeted market segments implicitly direct to what the enterprise offers to the
market.
In practice the aim is to create a marketing strategy which could be formulated in the form of
several different tactics. Such approach creates a competitive advantage, because, if
necessary, it is possible to redesign and adapt the marketing strategy to new market
conditions. However, one practical problem is that each long-term marketing strategy is
gradually becoming more general, so that a greater number of tactics may be applied. In this
way the future business activities may easily be predicted by competitors.
In the markets of transition countries battles are as a rule won at technical levels, due to which
fact the sustainability of the strategy depends on the delicate links of tactical operation
programmes with the market. How to recognise which tactics are most suitable for
remodelling a marketing strategy? Market practice has already shown that most often it is not
the system of tactics, but just one of them. More precisely, it is the tactics which is unique and
different in its distinctiveness. The operational tactical programme whose remodelling is most
readily accepted by the market is the direction towards the tactics which should be applied for
remodelling the strategy.
Studied in principle, the conceptual approach assumes active performance towards the
demand in the manner that the reaction of target market segments is also indirectly
encouraged by what is offered. The application of BPD model, which the authors developed
and applied in their own business practice in the Republic of Croatia, for the purpose of
modelling and developing general marketing strategies, has frequently supported realisation
of the set business goals.
Marketing strategy in the market in transition
In the markets of transition countries marketing strategies evolve in one of the two current
typical ways. The indirect way is automatism which encourages the development of the
market. The development of the market requires changes in marketing approach, or in
remodelling the existing marketing strategy. The direct approach is the approach which uses a
particular model of designing a marketing strategy. The aim and the purpose of both methods
are adapting marketing strategy to the modern demand, which in recent decades has been used
to decreasing prices and increasing quality standards of products and services offered in the
market. BDP model is a practical model of modelling a marketing strategy which starts from
the nature of the need to which a product or service that a company offers are designed.
Observing marketing strategy aimed at the demand in the market of a particular transition
country is specific due to historical discontinuity which resulted in changed reactions of the
demand for satisfying the needs.1 The necessity of continuous adapting of marketing strategy
to changeable attitudes of demand, because of development processes in these markets, has
become standard. Routine approach which is empirically based on business cases from the
same business branch can rarely be a guarantee for the success. The variable of time in a
transition country market is changeable. Because of that, due to divergence of particularity of
business concept with changed demand position, it often occurs that the selected marketing
strategy realises inadequate growth of market share in relation to the invested effort and
means.2
Transition markets are characterised by numerous unsettled basic economic problems on the
one side, and by the challenges of searching for optimal solutions on the other side. It is
exactly in the solutions of those collisions that BPD model, primarily oriented towards the
1
2
Drucker, F. P., (1994), Post Capitalist Society, Harper & Row, New York
Burns, A.C., Bush, R.F, (2000), Marketing Research, Prentice Hall, Upper Saddle River
focus of interest3 of the target consumer, offers the method which may provide long-term
market acceptance of a product or service.
The needs and models of demand behaviour in transition country markets are rapidly
changing.4 Not respecting the dynamics of those changes is one of the reasons of decreasing
of the market share and of weakening of general market position of a company. BPD model
requires changes in considerations about marketing strategy of the company, and about
standardised marketing approaches to the transition country markets.
Staring points of BPD - model
BPD mode is an original method of creating marketing strategy in a transition country market.
It approximates dynamic development of a transition country market from the aspect of
response of demand to the continuous growth of the offer. Dynamic growth of offer and
competition in such markets is frequent because of high profit rates which may be achieved.
At the level of developing a marketing strategy BPD model presents approximation of the
observed trends of behaviour by recognising the causes which led to it.
It is important to emphasise that in a transition country market the observed trends of
behaviour have their origins in the historical model of market development of a particular
country. Observing the trends beyond that frame may often lead to wrong conclusions. It is
also not desirable to compare experience of markets of other transition countries because
causalities of similar behaviour are different. The same refers to motivational factors, which
also have to be included in the platform of a marketing strategy by applying the BPD model.
Developing a successful marketing strategy, which may ensure the leading market position, or
target market portion, assumes developing tactical operation programmes and tactics in the
platform of comprehending mind-set of demand in a transition country market. BPD model
3
Day, G. S., & Fahey, L., Putting Strategy into Shareholder Value Analysis, Harvard Business Review,
March-April 1990. str. 156-162
4
Šerić, N., (2003), Importance of remodeling of marketing strategies for the market in the countries in
transition, 5th Conference Enterprise in transition, Split May 2003. UDK 339(063); ISBN 953-6024-49-7
projects acceptable market targets and assumes an adequate marketing strategy which may
ensure their realisation.
Continuous growth of market share to the target share is a standard in such approach. Creating
sustainable marketing strategy in the market of a transition country presumes that special
attention is paid to accidental market variables which determine causality in a particular
market.
Conditions and relations of the existing demand and offer in transition country markets
determine the methods of developing a successful marketing strategy. Understanding
causality of a transition market is a presumption of creating an adequate marketing strategy.
Specific feature of transition markets is the evident dynamics of their growth and certain
skipped stages in their development. Imperfection and non-defined state of a transition market
may be observed only when considered from wider aspect.
A successful marketing strategy may be developed on the basis of exact data about the
demand, leading trends of behaviour and motivational factors.5 This does not mean that
competitive relations have to be excluded from the focus of attention, but the priority of
consideration are the needs of a target buyer and causality of the emergence of the need. With
such approach motivational factors which encourage people to buy are clearer, and a
marketing strategy built on these grounds will be sustainable for a longer period.
Practical application of BPD – model aimed at marketing strategy
Developing a successful marketing strategy in the market of a transition country is a complex
procedure which starting point is evaluation and performance of target market segments, but
also projections of future behaviour of the demand. Understanding those relations and
5
Hooley, G.J., Saunders, J.A., Piercy, N.F., (2004), Marketing Strategy and Competitive Positioning,3th Ed,
Prentice Hall, Harlow
causality of the character of the need for which the product or the service are intended will
create the conditions to apply the BDP model of modelling a marketing strategy.6
BPD model treats the final marketing strategy as an open frame for final adjustment to market
surroundings during its application. The adjustment is made by using operational tactical
programmes which are a link between the strategy and market surroundings. The programmes
go deep under the market surface and by applying cognitive analysis it is possible to redesign
the tactics upon which a particular marketing strategy is produced. Modifications, if
necessary, will point to the guidelines how to create eventually the marketing strategy in
competitive environment.
Selection of tactics for reshaping of the set frame of the marketing strategy by applying the
BPD model is based on the competitive forces of the company. The optimal choice is areas in
which it is possible to reach high level of efficiency. By applying standard approach as an
alternative, long-term marketing strategy of the company will become more general, because
broader tactical instruments will be approximated. The aim is to determine the established
marketing position from the strategic aspect.
The fact is that in transition country markets duels between the competitors are often won at
tactical levels. Due to the fact, also confirmed by the practical experience of the author,
sustainability of long-term marketing strategy depends on suitability of tactical operation
programmes to the market environment.7 Final defining and modelling of marketing strategy
by using the BPD model is realised through partial adjustment of tactical operational
programmes and tactics. Only those which may be integrated with the set strategy and
adjusted to the conditions in the market environment will be selected.
BPD model applied in the practice of a national company in the market of a transition country
allows flexibility of the marketing strategy frame. Thus it is possible to make another,
sometimes crucial, step which may help to gain advantage over competitors. In practice it is
made by modifying operational tactical programmes of a selected tactics. Marketing strategy
based on the BPD model in practical application in the market of a transition country should
be focused on the possible increase of sale, but at the same time on operational models of
Šerić, N., (2003), Importance of remodeling of marketing strategies for the market in the countries in
transition, 5th Conference Enterprise in transition, Split May 2003. UDK 339(063); ISBN 953-6024-49-7
7
Aaker, D., (2001), Strategic Market Management, 6th ed., John Wiley & Sons, Inc. New York
6
leading tactical market operations. Sustainable marketing strategy in a transition country
market should primarily be oriented towards the product or service, instead of trying to adjust
the product or service to the selected standardised strategy. Consumers in the markets of
transition countries do not have a long tradition of available wide choice, because of which it
is useful to arouse interest in what is offered on such a market.
The efficacy of marketing strategy in a transition country market depends also on its
suitability to the surroundings. This primarily refers to the time variable. Besides, it is also
important that by way of simulation of planned tactics adequate guarantees for fulfilling the
designed market mission may be offered. Each marketing strategy is also a static model which
is developing in the dynamics of the environment. Occurrences in the surroundings should be
systematically monitored and analysed, so that the strategy may adjust to them in relation to
time and space. So a strategy established as a static model, implemented in practice,
transforms into an interactive dynamic model.
Developing an efficient marketing strategy assumes the sequence of synchronised activities
which occur according to the determined dynamics. The dynamics depends on the complexity
of competition relationships in the market environment. The more complex the situation is the
faster process of strategy application has to be. It is important to monitor constantly the target
market segment. After examining the needed extent of the marketing strategy range the tactics
are determined. When the target market segment is determined, and the desired and possible
position of the company in the market is evaluated and estimated by means of simulation, the
following activity is to elaborate the starting platforms of the marketing strategy.
Optimal marketing strategy is the result of approximation of key parameters in the market
environment.8 The problem is that in a transition country market such parameters are not
easily taken as constant. Their changes are affected by a number of factors which drastically
change the market image and all events which arise from it.
Basic components of a marketing strategy, the selection of a target segment and selected
forming of model of variables of marketing mixture in the market of a transition country, in
accordance to BPD model, should be realised simultaneously.
8
Schnaars, S.P., (1991), Marketing Strategy, The Free Press, New York,
It often happens that in the markets of transition countries companies frequently apply only
one or two types of analytical marketing strategy. While trying to maintain the strengthening
trend and proper position, inadequate attention is paid to the dynamics of changes of
marketing trends which may significantly complicate the reached market position of the
company.
Because of that risk the appropriate approach in practice presupposes the division of the
selected marketing strategy to its components. Such approach to the elaboration of marketing
strategy according to BPD model should be established on the bases of five basic components:

Level of activities,

Goals,

Available resources for the purpose,

Activities aimed at realising competitive advantage, and

Synergy.
Because of specific relations in the market of a transition country, it will be wrong if the
established strategy is primarily defined through competitive advantage. Such approach
neglects crucial and necessary differences in other important components of the marketing
strategy. The recommended differences in components of the marketing strategy guarantee
competitive advantage at the beginning, but also a better protection from the competitors
during the future development of the market.
BPD model is primarily focused on the consumer and the particular need. The practice
imposed certain rules which arise from current marketing regularities and typical reaction of
the competition, but also from customary behaviour of the demand in the market of a
transition country.9 The purpose is to adapt the efficient strategy to the company potentials, in
order to apply more adequate business activities to the given environment, not only in the
present, but also respecting the estimated changes in the marketing environment which are yet
to come.
BPD model applied in modelling a specific marketing strategy analyses the environment and
aspirations on the basis of three main questions:
9
Kerin, R.A., (2004), Strategic Marketing Problems, Upper Saddle River, New Jersey

What is the current position of the company among its competitors and who are the
most significant competitors?

What characterises the relevant events in the market environment?

What would the company want to achieve in the market?
Thus the final platform has been established, on which the company’s sustainable marketing
strategy in the market of a transition country will be developed. From that aspect the causes of
events in the market environment are more clearly observed, and it will be possible to
estimate the future position of the company in competitive environment.
Graphic presentation of BPD – model of modelling the marketing strategy
Table 1: BPD model of modelling the marketing strategy
APPLICATION OF
THE STRATEGY
T
A
C
T
I
C
S
PRODUCT
AS THE
RESULT
OF THE NEED
T
A
C
T
I
C
S
PLANNING
AND SELECTING
THE STRATEGY
1. POSTION OF THE COMPANY IN THE SURROUNDINGS
2. HISTORICAL DEVELOPMENT OF THE MARKET
1. TECHNOLOGY
2. GOVERNMENT
REGULATIONS
3. MARKET TRENDS
1. SWOT ANALYSIS
2. NECESSARY RESOURCES
NEED
MARKETING
OPPORTUNITY
CHALLENGE
Source: Author, 2004
The starting point of modelling a marketing strategy by BPD model applied in the market of a
transition country is primarily based on the need, and not only on the marketing opportunity.
Each unfulfilled need of the market includes in itself its business opportunity, while each
market opportunity need not necessarily be the consequence of a particular need. SWOT
analysis gives adequate directions about justifiability of remodelling the marketing strategy.
On the other hand, taking into consideration the technological level of the company in its
competitive surroundings, and the competent government regulations, but also the prevailing
behaviour of target market segments, the weaknesses of the existing marketing strategy may
be turned into strengths at competition level. This will establish a platform in which the
causes of the events in market environment will be clear, and it will be possible to assume the
position which the company will have in its competitive surroundings and in the future. The
development of marketing strategy and the preparation of its complete application are made
through the tactics which are selected according to defined principles. The principles, on the
one hand, need to act as a cover to hide the weaknesses of the company, while the strategy is
applied completely, and on the other hand, are a key for selecting the tactics aimed at the
product and service as the consequence of a particular need.
Conclusion
Complex interrelations between offer and demand in the markets of a transition country are
determined by unpredictable consequences for future business of the company. The
repercussions of interrelation between offer and demand result in peculiar, sometimes
inexplicable market successes, but also in sudden losses of market shares. Marketing strategy
of a company has to ensure competitiveness and recognisability in the market surroundings.
In practice what is aimed for is to model a marketing strategy which will be expressed in the
form of several various tactics. With such approach a competitive advantage is obtained,
because, if necessary, marketing strategy may be easily reshaped and adapted to new market
conditions. A practical problem is that each marketing strategy established for a longer period,
in the course of time becomes more general, so that it could apply more tactics. In this way
the future business actions become predictable for the competitors.
In the markets of transition countries marketing strategies evolve in two typical ways. Indirect
way refers to automatism with which market development imposes the need for the change in
market approach, or remodelling of the existing marketing strategy. Direct approach is the
approach which uses a particular model of designing a marketing strategy. The aim and the
purpose of both ways are to adjust the marketing strategy to the current demand. BPD model
is a practical model of designing a marketing strategy which starts from the character of the
need which requires the product or the service of the company.
Transition markets are characterised by numerous unsettled basic economic problems, and by
challenges to find optimal solutions. BPD model, primarily oriented towards the focus of
interest of the target consumer, is able to, after solving those collisions, provide market
acceptance of a product or service for a longer period. BPD model imposes changes in
considering a marketing strategy of the company, and also in standardised marketing
approaches to the market of transition countries. Besides, for modelling a marketing strategy
this model is approximation of observed trends of behaviour, based on recognising causes
which preceded them.
The efficacy of marketing strategy in the market of a transition country depends also on its
appropriateness to the environment. By simulating the planned tactics appropriate guarantees
about fulfilment of the desired marketing mission may be obtained. Each marketing strategy
is also a static model which occurs in the environment dynamics. Events in the environment
should be systematically monitored and analysed, so that the strategy may be adjusted in
relation to time and space.
The starting points for the development of a marketing strategy using the BPD model are
based upon five main items:

Level of activities,

Goals,

Available resources for the purpose,

Activities aimed at realising competitive advantage, and

Synergy.
BPD model is primarily focused on the consumer and the particular need. BPD model applied
in developing a particular marketing strategy also analyses the environment and aspirations on
the basis of three main questions:

What is the current position of the company within its competitors and who are they?

What are the characteristics of relevant events in market environment?

What would the company want to achieve in the market?
BPD model in practice adapts the marketing strategy so that its technical application ensures
the prospective competitive position of the company in the market of a transition country.
Starting from tactical operation programme, then using tactics for developing a marketing
strategy, BPD model is just another practical approach to developing of a marketing strategy,
and nothing more or less than that.
References
Aaker, D., (2001), Strategic Market Management, 6th ed., John Wiley & Sons, Inc. New York
Burns, A.C., Bush, R.F, (2000), Marketing Research, Prentice Hall, Upper Saddle River
Day, G. S., & Fahey, L., (1990), Putting Strategy into Shareholder Value Analysis, Harvard Business Review,
March-April. pp. 156-162
Drucker, F. P., (1994), Post Capitalist Society, Harper & Row, New York
Hooley, G.J., Saunders, J.A., Piercy, N.F., (2004), Marketing Strategy and Competitive Positioning, 3rd Ed,
Prentice Hall, Harlow
Kerin, R.A., Strategic Marketing Problems, (2004), Upper Saddle River, New Jersey
Schnaars, S.P., (1991), Marketing Strategy, The Free Press, New York,
Šerić, N., (2003), Importance of remodelling of marketing strategies for the market in the countries in
transition, 5th Conference Enterprise in transition, Split, May 2003. UDK 339(063); ISBN 953-6024-49-7