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UNIT – II MARKETING STRATEGY
Introduction (2)
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
considerations in marketing strategy
•
•
There are two primary
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.
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 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
1
Process of determining an organization’s basic mission and long-term objectives, then
implementing a plan of action for attaining these goals
o
o
o
Process takes on added dimensions when companies go international
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
Benefits of Strategic Planning
 Evidence is mixed
Approaches to Formulating and Implementing Strategy
o
o
o
–
–
Economic Imperative
 A worldwide's strategy based on cost leadership, differentiation, and
segmentation
Political Imperative
 Strategy formulation and implementation utilizing strategies that are countryresponsive and designed to protect local market niches
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
What is Strategic Management Planning?(2)
Strategic Management
 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
2
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.
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
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
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
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2 Key elements in marketing strategy
•
Target Market
•
Marketing Mix Variables
Market-Scope Strategy
Single-Market Strategy
–
Definition: concentration of efforts in a single segment.
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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.
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Expected results: low costs; higher profits
Multimarket Strategy
4
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Definition: Serving several distinct markets.
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Objective: To diversify the risk of serving only one market.
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Requirements: a) Careful selection of segments to serve. b) Avoid confrontation with
companies serving the entire market.
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Expected results: higher sales; higher market share
Total-Market Strategy
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Definition: Serving the entire spectrum of the market by selling differentiated products
to different segments in the market.
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Objective: To compete across the board in the entire market.
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Requirements: a) Employ different combinations of price, product, promotion and
distribution strategies in different segments. b) Top management commitment. c) Strong
financial position.
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Expected results: increased growth; higher market share
Market-Geography Strategy
Local-Market Strategy
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Definition: Concentrate efforts in immediate vicinity.
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Objective: To maintain control of the business.
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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
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Definition: Operate in a region.
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Objective: To diversify risk of dependence on one part of a region and to keep control
centralized.
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Requirements: a) Management commitment to expansion. b) Adequate resources. c)
Logistical ability to serve a regional area.
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Expected results: increased growth; increased market share; keep up with competitors.
National-Market Strategy
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Definition: Operate nationally.
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Objective: To seek growth.
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Requirements: a) Management commitment. b) Capital resources. c) Willingness to take
risks.
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Expected results: increased growth, market share and profitability
International-Market Strategy
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Definition: Operate outside national boundaries.
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Objective: To seek opportunities beyond domestic business.
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Requirements: a) Management commitment. b) Capital resources. c) Understanding of
international markets.
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Expected results: increased growth, market share and profitability
First-In Strategy
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Definition: First to enter the market.
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Objective: To create an insurmountable lead.
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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.
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Expected results: reduced costs via experience; increased growth, market share and
profits
Early-Entry Strategy
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Definition: Enter shortly after the leader.
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Objective: Stop the first entrant from creating a stronghold in the market.
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Requirements: a) Superior marketing strategy.
commitment to challenge the market leader.
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Expected results: increased growth, market share and profits
b) Ample resources.
c) Strong
Laggard-Entry Strategy
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Definition: Enter during the tail end of growth stage or during the maturity stage as an
imitator or initiator
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Objective: Imitator - capture that part of the market that is not brand loyal. Initiator serve the needs of the market better than present firms.
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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
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–
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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
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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.
Expected results: long-term growth; improved ROI; decrease in market share.
Key-Markets Strategy
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–
–
–
–
–
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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.
The Role of Strategy
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Example of contrasting Mission / Vision
McDonalds
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To be the number 1 hamburger chain in the world
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To be the number 1 fast food chain in the Philippines
Jollibee
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
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 highest-quality
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
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Strategies based on firms share
Market Leader
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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
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Occupying market segments and securing them
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Flanking strategy
Expansion of category should be the focus – market expansion / development
Market Challenger
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2nd and 3rd running brand
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Usually emulates the market leader strategy
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May conform to the strategy or change focus on the market to gain headway
Market Follower
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Lowest in profitability
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Only one of the many minor players in the industry
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Usually is price driven
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Their prices are squeezed by distribution channels
Market Nicher
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Very small player
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Choose to focus on one category and one target segment
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Specializes with premium quality
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Prices at premium too
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Limited volume but high profitability
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 bidirectional influence on one another.
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Segments
The first big decision is who should be our customers and who should not. In other words, what
customer segments will be addressed.
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
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Promotional strategy includes decisions about what approaches to promotion will be used, for
example TV advertising, direct marketing and so on.
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.
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.
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
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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.
Key drivers of marketing strategy(16)
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.
Factors affecting overall marketing strategies(16)
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 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
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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.
Industrial marketing (Business Marketing )(2)
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 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.
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• 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.
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.
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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
each unit within the company handles its own purchasing.
department
or
• Businesses increasingly segment customers according to the stage in their relationship.
• Example: Whether a customer is new or a long-term partner.
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
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• 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.
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
• 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.
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chips
is
derived
• 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.
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.
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• 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.
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
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.
Difference between industrial market and consumer market (16)
Sr.
No.
Bases
18
Industrial Markets
Consumer Markets
1
Market
characteristics
Geographically
concentrated,
Relatively fewer buyers
Geographically
disbursed,
Mass markets`
2
Product
Characteristics
Technical complexity,
Customized
3
Service
Characteristics
Service, timely delivery
and availability very
important
4
Buyer behavior
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
Relationship
5
Decision making
Observable stages,
Distinct
Unobservable,
Mental stages
6
Channel
Characteristics.
Shorter,
More direct,
Fewer
intermediaries/middlemen
Indirect,
Multiple layers of
intermediaries
7
Price
Characteristics
Competitive bidding and
negotiated prices,
List prices for standard
products
List prices or maximum
retail price (MRP)
8
Promotional
characteristics
Emphasis on personal selling
Emphasis on advertising
19
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
Marketing and
Other Stimuli
Product
Price
5-3
Economic
Technological
Place
Political
Promotion
Cultural
Buyer’s
Decision
Process
Buyer’s Black Box
Product Choice
Brand Choice
Dealer Choice
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
Consumer Market
• All individuals/households who buy products for personal consumption.
Factors Influencing Consumer Behavior
20
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 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

10 million consumers purchase $229 billion worth of goods and services.

Fastest growing, most affluent subculture.

Many nationalities comprise this group.

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
21
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
-
Sincerity
Ruggedness
Excitement
Competence
Sophistication
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
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.
22
 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.
Difference between physical goods and services(2)
Physical goods
Services
Tangible
Intangible
Homogeneous
Heterogeneous
Production and distribution are separated from
consumption
Production, distribution and
simultaneous processes
A thing
An activity or process
Core value processed in factory
Core value produced in the buyer-seller interaction
23
consumption are
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
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
 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
24
 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
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
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
25
 Rank
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 has been recognized as many of today's sports Images that
are associated with Nike .
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.
26
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.
 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.
27
Nike has shown that they are a true force to be reckoned with.
Figure 18-1:
Steps in Analyzing
Competitors
18- 5
Steps in the Process:
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
-
Assessing competitors’ strengths and weaknesses
-
Estimating competitors’ reactions
Strategic groups
Benchmarking
28
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
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
satisfying needs
Product leadership
 Superior value via product innovation
Market Leader
Expanding the total demand
29

Finding new users

Discovering and promoting new product uses
relationships with buyers and

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.
Porter's five forces model of competition
30
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
31
•
diversity of competitors
•
informational complexity and asymmetry
•
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
32
Strategic Marketing mix(16)
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?
 Brand name
33
 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
 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.
34
 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.
 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.
35
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 break-even
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.
36