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Business Policy & Strategy
Chapter Seven
Marketing
Murdick, Moor, Babson & Tomlinson, Sixth
Edition, 2000
Marketing Concept
Concern of every area of the business
Foundation for overall strategy and
policies of the business
Customer-oriented business approach
Tells what business(es) to start,
products/service to introduce or
discontinue and basic culture of the
organization
Marketing Concept Begins With
Potential Customers’ Needs-Four P’s
Product
Price
Place
Promotion
An organization’s existence depends on
satisfying the customer.
S.W.O.T. Analysis
SWOT: strengths, weaknesses,
(INTERNAL)
Opportunities, Threats (EXTERNAL)
• Analysis used to develop corporate
strategy
Forecasting
Short Term VS. Long Term
• Short term (now-next year) provides info on:
# Of units that should be produced
# Of employees needed
What revenue and expenses to expect
• Long term provides info on:
Need for productive capacity
Industry prospects and resource
allocation
Forecasting Techniques
Quantitative techniques
Past trends
Surveys
Qualitative techniques
Interviews
Focus Groups
Delphi Technique
Impact of Benefits
Consumer spending not necessarily correlated
with price of products
Company cannot rely on word of mouth to
promote products benefits in short run, so
Promotional techniques
Advertising
Personal selling
• Key to successful promotion involves
stressing benefits.
Product
Product can be considered a service
Product brand and packaging affects
the sale
Products can include convenience,
impulse, shopping and specialty goods
Product life cycle
The Role of Price
A lower price(penetration price) may
generate more volume and profit or
lower volume and profit
Analysis of customer to find best price
how much they buy
what value do they perceive
losing customers to a competitor
The Role of Price
Pricing Techniques
cost-oriented pricing (contractors)
demand-oriented pricing (athletic events)
competition-oriented pricing (gas)
• Price varies due to
seasonal changes
inventory adjustment
Trends
age of product
Lowering prices may increase or
decrease profits
Shaft examples:
Ex. 1
$20
x 2
$40
- 20 @$10each
$20
•Complementary product
Ex. 2
$15
x 6
$90
- 60 @$10each
$30
Basic Elements of Promotional Mix
Advertising
Personal selling
All others
publicity
public relations
trade fairs
exhibits
entertainers
contests
authors signing books
coupons
displays
Techniques to use:
1)
2)
3)
4)
5)
6)
Concentration of consumers
Extent of demonstration required
Customizing to consumers’ needs
Degree of benefits offered
Complexity of technique
Funds available
Relationship to elements in
Marketing Mix
Product
State how product
satisfies needs
State how products
satisfies needs better
than competition
Price
Assist customers in
seeing the benefits are
more important than
price
Place
State added
benefits/value of
superior distribution
Place
Intermediaries
Additional benefits
Target market
Design channel
Relationship to Marketing Mix
Intermediaries
Wholesalers
Merchants
Buy from producer
Sell to retailers or industrial buyers
Agent/Brokers
Assist in moving goods from producer to
consumer or industrial markets
Intermediaries
Retailers
Convenience
Quality
Store excitement
Price
Breadth/Depth
Service
Target Market
Industrial
Consumer
Design Channel
Coverage
Requirements
Profitable
Relationship to other elements
in Marketing Mix
Product
Select appropriate
distribution channel
May need to use
different channels
Price
Should be
consistent with
distribution channel
Promotion
Superior
distribution in
comparison to
competition
Provide how
distribution
provides additional
benefits
Product Policy Analysis
Designed to indicate the direction the
firm will grow in the future.
Designed to keep the company from
running off in all directions.
Marketing Policy Analysis
Designed to clarify the geographic,
customer, and other characteristics of
the market as appropriate for the firm.
Profit Policy Analysis
Sales volume to provide a sizable dollar
amount.
Minimum profit as a percentage of
sales.
Personal-Selling Policy
Analysis
Guiding the structure of the sales
organization.
Behavior of sales representatives on the
job.
Customer Relations Policy
Analysis
Relations with customers, often
unwritten
Advertising Policy Analysis
Broad company wide promotion policies
are not usually written.
Reveal underlying philosophy of
management.
The policies must be examined relative to
strategic marketing plans of the company.
Product Policy
Market Category
Policy
Profit Policy
Personal-Selling
Policy
Customer Relations
Policy
Advertising Policy
Three Policy Choices
Expand sales into new categories of
customers
Increase penetration into existing
market segments
Hold present market share by
concentrating on product design and
manufacturing innovations; no
marketing innovations
Expand Sales to New
Categories
May be a good approach depending on
the situation
Research and cost/benefit analysis will
determine if this is a good choice
“what to do” and “how to do” plans
must be developed
A firm may:
Expand geographically
Develop additional related products or
models within product line to enter new
market area
Develop new products unrelated to its
present line
Develop customized products
Increased penetration
Most difficult marketing task
Product/Brand differences are small or
non-existent
Major way to sell more
products/services is to take customers
away from existing competitors
Increased penetration
accomplished by:
Superior marketing efforts
Promotional techniques to drown out
competitors’ advertising
Total market can be expanded
Pricing/Service mix to give a
competitive advantage
Non-Marketing Innovations
Adopt current marketing practices
Works well with small firms where their
core competency is in another area.
Rather than wasting money developing
new marketing strategies, the firm will
concentrate on quality and service
What To Consider When
Determining A Marketing Mix
Do all activities share the same goals
and objectives?
Can additional costs in individual
divisions be justified?
Budgets and schedules should be
formally prepared on a regular basis
Marketing Pitfalls
Sales grow at a rate where
manufacturing can not keep up
Focus too much on large customers
may fall into the trap of maintaining a large
number of unprofitable small customers
80/20 Rule
Not enough research
Demand
Elastic is when the customers are price
sensitive. Increased prices may lower
sales and therefore, lower total
revenue.
With inelastic demand, customers will
generally purchase the product
regardless of the price (food, gas, etc)