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TOPICS • Developing a Marketing Plan Relationship between marketing a scientific product and a scientific service Pricing Strategies Distribution alternatives • Quality control and Marketing Strategies Q = QUALITY P = PRICE A = AVAILABILITY • New Quality initiatives for Drugs, Biotech products and Medical Devices that have been recently introduced. 1 Marketing as Science Marketing is viewed as an inexact science Marketing is based on social sciences economics psychology Results are probabilistic, not predictable Typically don’t have recommended marketing practices Marketing may be frustrating, but is crucial to success What are the strengths and weaknesses in an entrepreneur in terms of producing the product (s) or service (s). 2 Marketing • Definition: Marketing consists of the strategies and tactics used to identify, create and maintain satisfying relationships with customers that result in value for both the customer and the marketer. • Strategies and Tactics - Strategies are best explained as the direction the marketing effort takes over some period of time while tactics are actionable steps or decisions made in order to follow the strategies established. For instance, if a company’s strategy is to begin selling its products in a new country, the tactics may involve the marketing decisions made to carry this out. Performing strategic and tactical planning activities in advance of taking action is considered critical for long-term marketing success. • Identify - Arguably the most important marketing function involves efforts needed to gain knowledge of customers, competitors, and markets (i.e., where marketers do business). We will see throughout this tutorial how marketing research is utilized in all decision areas. 3 Marketing • Create - Competition forces marketers to be creative people. When marketers begin new ventures, such as building a new company, it is often based around something that is new (e.g., a new product, a new way of getting products to customers, a new advertising approach, etc.). But once something new is launched innovation does not end. Competitive pressure is continually felt by the marketer, who must respond by again devising new strategies and tactics that help the organization remain successful. For marketers, the cycle of creating something new never ends. • Maintain - Today’s marketers work hard to insure their customers return to purchase from them again and again. Long gone are the days when success for a marketer was measured simply in how many sales they made each day. Now, in most marketing situations, marketing success is evaluated not only in terms of sales figures but also by how long a marketer retains good customers. Consequently, marketers’ efforts to attract customers do not end when a customer makes a purchase. It continues in various ways for, hopefully, a long time after the initial purchase. 4 Marketing • Satisfying Relationships - A key objective of marketing is to provide products and services that customers really want AND to make customers feel their contact with the marketer is helping build a good relationship between the two. In this way the customer becomes a partner in the transaction, not just a source of revenue for the marketer. • Value for Both Customer and Marketer - Value refers to the perception of benefits received for what someone must give up. For customers, value is most often measured by how much benefit they feel they are getting for their money, though the value one customer feels may differ from what another customer feels even though they purchase the same product. On the other side of the transaction, the marketer for a for-profit organization may measure value in terms of how much profit they make for the marketing efforts and resources expended. For a successful marketing effort to take place both the customer and the marketer must feel they are receiving something worth while in return for their efforts. Without a strong perception of value it is unlikely a strong relationship can be built. Throughout this tutorial we will emphasize value and show ways marketers build value into the products they offer. 5 Business plan • Matching Products and Services with Markets • Competitive Analysis • Financial Analysis: Using Financial Statements for Management • Financial Analysis: Using Ratio Analysis for Management • Strategy & Business Model • Marketing and Sales Strategies • Management & Ownership 6 Marketing offers significant benefits to society • • • • • At a broader level these benefits include: Developing products that satisfy needs, including products that enhance society’s quality of life. Creating a competitive environment that helps lower product prices. Developing product distribution systems that offer access to products to a large number of customers and many geographic regions. Building demand for products that require organizations to expand their labour force. Offering techniques that have the ability to convey messages that change societal behaviour in a positive way (e.g., anti-smoking advertising). Criticisms of Marketing While marketing is viewed as offering significant benefits to organizations and to society, the fact that marketing is a business function operating in close contact with the public opens this functional area to extensive criticism. Notable criticisms include: 1. 2. 3. 4. 5. Marketing Encourages People to Purchase What is They Do Not Need Marketers Embellish Product Claims Marketing Discriminates in Customer Selection Marketing Contributes to Environmental Waste Marketing Encroaches on Customers’ Right to Privacy 7 Marketing Plan • A marketing plan identifies a producer’s specific price objectives as the production and/or storage season progresses. • It then identifies strategies available to achieve the price objectives. Definition: Marketing consists of the strategies and tactics used to identify, create and maintain satisfying relationships with customers that result in value for both the customer and the marketer. • What Marketers Do • In order to reach the goal of creating a relationship that holds value for customers and for the organization, marketers use a diverse toolkit that includes (but is not limited to) making decisions regarding: • Target Markets – Market consist of customers identified as possessing needs the marketer believes can be addressed by its marketing efforts • Products – consists of tangible (e.g., goods) or intangible (e.g., services) solution to the market’s needs • Promotion – a means for communicating information about the marketing organization’s products to the market • Distribution – the methods used by the marketer that enable the market to obtain products • Pricing – ways for the marketer to set and adjust the cost paid by the market to obtain products • Services – additional options that enhance a product’s value 8 A Marketing Plan Should Answer Four Questions When to sell? Where to sell? What to sell? How to sell? Time of year Location Product form Compare alternatives A marketing plan must be flexible. A producer must be able to adapt to market conditions if it becomes clear that an earlier price or quality or availability objective is not likely to be achieved. 9 Assessing Marketing’s Critical Role in Organizational Performance • Marketing is so basic that it cannot be considered a separate function. It is the whole business seen from the point of view of it’s final result, that is, from the customer’s point of view.…..Business success is not determined by the producer but by the customer. - Peter Drucker • Marketing consists of all activities by which a company adapts itself to its environment – creatively and profitably. - Ray Corey • Marketing’s job is to convert societal needs into profitable opportunities. - Anonymous 10 Marketing • Marketing can be described as “the creation and delivery of a standard of living.” • Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others. • Marketing starts with human needs and wants. 11 Core concepts of Marketing Needs and Wants Products (goods, services and ideas) Value, Cost and Satisfaction A Market consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want. Exchange and Transactions Relationships and networks Markets Marketers and prospects 12 Main actors and Forces in a Modern Marketing System Environment Company (Marketer) Suppliers Competitors Marketing Intermediaries End User Market Marketing Management is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals. Marketing management has the task of influencing the level, timing, and composition of demand in a way that will help the organization 13 achieve its objectives. Marketing Plan • The Marketing Plan is a highly detailed, heavily researched and, hopefully, well written report that many inside and possibly outside the organization will evaluate. It is an essential document for both large corporate marketing departments and for startup companies. Essentially the Marketing Plan: • Forces the marketing personnel to look internally in order to fully understand the results of past marketing decisions. • Forces the marketing personnel to look externally in order to fully understand the market in which they operate. • Sets future goals and provides direction for future marketing efforts that everyone within the organization should understand and support. • Is a key component in obtaining funding to pursue new initiatives? 14 Need for a Marketing Plan The Marketing Plan is generally undertaken for one of the following reasons: • Needed as part of the yearly planning process within the marketing functional area. • Needed for a specialized strategy to introduce something new, such as new product planning, entering new markets, or trying a new strategy to fix an existing problem. • Is a component within an overall business plan, such as a new business proposal to the financial community? Steps in Marketing Plan There are many ways to develop and format a marketing plan. The approach taken here is to present a 6-Part plan that includes: 1. Purpose and Mission 2. Situational Analysis 3. Marketing Strategy and Objectives 4. Tactical Programs 5. Budgets, Performance Analysis and Implementation 6. Additional Consideration 15 Why is marketing planning necessary? The overall purpose of marketing and its principal focus is the identification and creation of competitive advantage. Marketing planning is necessary because of: 1. Increasing turbulence, complexity and competitiveness. 2. The speed of technological change. 3. The need for you – – – 4. To help identify sources of competitive advantage To force an organized approach To develop specificity to ensure consistent relationships The need for superiors To inform 5. The need for non – marketing functions To get support 6. The need for subordinates 1. 2. 3. To get resources To gain commitment To set objectives and strategies 16 THE SCOPE OF THE MARKETING PLAN The scope of the Marketing Plan depends on the company and industry. A small technology startup company may, for instance, have a less elaborate plan that is highly flexible (e.g., does not identify exactly where advertising money is spent) to meet the needs of a rapidly changing market. A more established marketing organization, such a large consumer products firm, may create a very structured plan that clearly identifies all activities that take place over a 12-month period. 17 Marketing Plan • The Marketing Plan is a highly detailed, heavily researched and, hopefully, well written report that many inside and possibly outside the organization will evaluate. • It is an essential document for both large corporate marketing departments and for startup companies. • Essentially the Marketing Plan: – Forces the marketing personnel to look internally in order to fully understand the results of past marketing decisions. – Forces the marketing personnel to look externally in order to fully understand the market in which they operate. – Sets future goals and provides direction for future marketing efforts that everyone within the organization should understand and support. – Is a key component in obtaining funding to pursue new initiatives? 18 Marketing Planning Principle 1: Strategy before tactics Develop the strategic marketing plan first. This entails greater emphasis on scanning the external environment, the early identification of forces emanating from it, and developing appropriate strategic responses, involving all levels of management in the process. A Strategic plan should cover a period of between three and five years, and only when this has been developed and agreed should the one – year operational marketing plan be developed. Never write the one year plan first and extrapolate it. Principle 2: Situate marketing within operations For the purpose of marketing planning, put marketing as close as possible to the customer. Where practicable, have both marketing and sales report to the same person, who should not normally be 19 the chief executive officer. Marketing Planning Principle 3: Shared values about marketing Marketing is a management process whereby the resources of the whole organization are utilized to satisfy the needs of selected customer groups in order to achieve the objectives of both parties. Marketing, then, is first and foremost an attitude of mind rather than a series of functional activities confined to the marketing department. However, use of expression ‘market - led’ or ‘customer – driven’ to describe the philosophy, not ‘marketing – driven’. Principle 4: Structure around markets Organize company activities around customer groups if possible rather than around products or functional activities and get marketing planning done in these strategic business units. Without excellent marketing planning in SBUs, corporate marketing planning will be of limited value. 20 Ten principal barriers to marketing planning 1. 2. 3. Confusion between marketing tactics and strategy Isolating the marketing function from operations Confusion between the marketing function and the marketing concept 4. Organizational barriers – the tribal mentality, for example the failure to define strategic business units (SBUs) correctly 5. Lack of in-depth analysis 6. Confusion between process and output 7. Lack of knowledge and skills 8. Lack of systematic approach to marketing planning 9. Failure to prioritize objectives 10. Hostile corporate cultures. 21 The ‘Ten S’ approach to overcoming these barriers 1. Strategy before tactics 2. Situate marketing within operations 10. Style and culture 9. Sequence objectives 3. Shared values about marketing Superior Performance 4. Structure around markets 5. Scan the environment thoroughly 8. Systematize the process 7. Skills and Knowledge 6. Summarize information on SWOT analysis 22 General Marketing Strategies • Market Expansion – This strategy looks to grow overall sales in one of two ways: Grow Sales with Existing Products: With this approach the marketer seeks to actively increase the overall sales of products the company currently markets. This can be accomplished by: 1) getting existing customers to buy more; 2) getting potential customers to buy (i.e., those who have yet to buy); or 3) selling current products in new markets. Grow Sales with New Products: With this approach the marketer seeks to achieve objectives through the introduction of new products. This can be accomplished by: 1) introducing updated versions or refinements to existing products; 2) introducing products that are extensions of current products; or 3) introducing new products not previously marketed. 23 General Marketing Strategies • Market Share Growth – This strategy looks to increase the marketer’s overall percentage or share of market. In many cases this can only be accomplished by taking sales away from competitors. Consequently, this strategy often relies on aggressive marketing tactics. • Niche Market – This strategy looks to obtain a commanding position within a certain segment of the overall market. Usually the niche market is much smaller in terms of total customers and sales volume than the overall market. Ideally this strategy looks to have the product viewed as being different from companies targeting the larger market. • Status Quo – This strategy looks to maintain the marketer’s current position in the market, such as maintaining the same level of market share. • Market Exit – This strategy looks to remove the product from the organization’s product mix. This can be accomplished by: 1) selling the product to another organization, or 2) 24 eliminating the product. Criticisms of marketing planning • Formal plans can be quickly overtaken by unforeseen events • Lack of proper implementation • Elements of the plan may be kept secret for no reason • Difference of opinion between senior managers and implementing managers • The plan needs a sub-scheme of actions • Essential marketing information may have been missing or be ignored as part of plan process • If implementation is not carefully controlled by managers, the plan is worthless! 25 Developing Marketing Strategies • • • • • • • Differentiation: Differentiation is the act of designing a set of meaningful differences to distinguish the company’s offering from competitor’s offerings. The differential variables are Product, Services, Personnel, Channel, and Image. The number of differentiation opportunities vary with the type of industry. The Boston Consulting Group has distinguished four types of industries based on the number of available competitive advantages and their size. The four types are Volume industry, Stalemated industry, Fragmented industry, Specialized industry. The volume industry is one which companies can gain only a few, but rather large, competitive advantages. An example is the pharmaceutical industry, where a company can strive for the low-cost position or the highly differentiated position and win big on either basis. Here profitability is correlated with company size and market share. Specialised industry is one in which companies face many differentiation opportunities, and each differentiation can have a higher payoff. 26 Marketing Mix Marketing Mix is the set of Marketing Tools that the firm uses to pursue its marketing objectives in the target market. Four P’s Four C’s 1. Product 1. Customer needs and wants 2. Price 2. Cost to the customer 3. Place (i.e. distribution) 3. Convenience 4. Promotion. 4. Communication Winning companies will be those who can meet customer needs economically and conveniently and with effective communication. Objectives of the marketing plan • Acts as a roadmap • Assist in management control and monitoring the implementation of strategy • Informs new participants in the plan of their role and function • To obtain resources for implementation • To stimulate thinking and make better use of resources • Assignment of responsibilities, tasks and timing 27 • Awareness of problems, opportunities and threats THE CONTENTS AND STRUCTURE OF THE MARKETING PLAN • • • • • • • • • The executive summary Table of contents Situational analysis and target market Marketing objectives Marketing strategies Marketing tactics Schedules and budgets Financial data and control Action Programme 28 KEY CONCEPTS • Organizational Mission – Represents the guiding force of an organization by identifying the long-run vision for what the organization hopes to achieve. The mission comes from the top leaders of the organization and often remains unchanged for many years. • Objectives – Reflects what the organization expects to achieve with its marketing efforts. As with the mission, objectives also flow from the top of the organization down to the marketing department. Objectives can be in the form of financial goals (i.e., profits) or marketing goals (e.g., achieve certain level of market share). • Marketing Strategy - Achieving objectives requires the marketer engage in marketing decision-making which indicates where resources (e.g., marketing funds) will be directed. However, before spending begins on individual marketing decisions (e.g., where to advertise) the marketer needs to establish a general plan of action that summarizes what will be done to reach the stated objectives. 29 KEY CONCEPTS • Tactical Programs – Marketing strategy sets the stage for specific actions that will take place. Marketing tactics are the day-to-day actions that marketers undertake and involve the major marketing decision areas. As would be expected, this is the key area of the Marketing Plan since it explains exactly what will be done to reach the organization’s objectives. • Marketing Budget – Carrying out marketing tactics almost always means that money must be spent. The marketing budget lays out the spending requirements needed to carry out marketing tactics. While the marketing department may request a certain level of funding they feel is required, in the end it is upper-management that will have final say on how much financial support will be offered. 30 Marketing Plan Requirements • • • • • • • • Customer Analysis Plan Marketing Strategies Other Provider / Competitor Analysis SWOT PEST Putting it all together on drawing board Implementation of Marketing Strategies Develop Strategies for Customer acquisition 31 Decision Area Strategies • • • • • These are used to achieve the General Marketing Strategies by guiding the decisions within important marketing areas (product, pricing, distribution, promotion, target marketing). For example, a General Marketing Strategy that centers on entering a new market with new products may be supported by Decision Area Strategies that include: Target Market Strategy – employ segmenting techniques Product Strategy – develop new product line Pricing Strategy – create price programs that offer lower pricing versus competitors Distribution Strategy – use methods to gain access to important distribution partners that service the target market Promotion Strategy – create a plan that can quickly build awareness of the product 32 Standard Planning Framework • • • • • Analysis - where are we now? Objectives - where do we want to be? Strategies - which way is best? Tactics - how do we ensure arrival? Control - are we on the right track? 33 Behavioural planning problems • Planning recalcitrance: resistance and non – co - operation by managers in planning • Fear of uncertainty in planning: a lack of comfort in planning activities • Political interests in planning activities: resource bargaining, padding of requirements, and avoidance of consensus • Planning avoidance: compliance rather than commitment to planning 34 Customer Analysis • • • • • Who are the customers? How many? (potential ones, too) What do they have in common? Why do they or should they use your products? How do they use your products? Now….Segment your markets • Market Segmentation: Identify and profile distinct groups of buyers who might require separate products and/or marketing mixes. 35 Cautionary notes for effective planning • Don’t blindly rely on mathematical and statistical calculations. Use your judgement as well • Don’t ever assume that past trends can be exploited into the future forever • If drawing conclusions from statistical data, make sure the sample size is sufficiently large 36 Agriculture and Marketing Plan • Agriculture in India faces many Types of Uncertainty & Risk • Short shelf life and non availability of seeds for sowing. Uncertainty makes planning difficult Uncertainty also makes planning essential Planning changes reactive to proactive Commodity prices are a major source of uncertainty (price risk) A marketing plan helps manage but does not eliminate price risk 37 Price Price determines and reflects the amount of value customers perceive. – Value is a customer’s subjective estimate of a product’s ability to satisfy their needs or desires. • Issues: – List price (healthcare) – Discount policies (books) – Terms (printers) – Signals sent (Two-Ten) • Price setting: A make or break decision • Assess demand – How sensitive will customers be to price changes? • Analyze competition – What’s the going price? – Will competitors respond to a price cut? • Set pricing objectives – Target return, market share, long-term profits, quick investment recovery, etc. • Cover costs! – Including hidden ones. 38 Pricing strategies • General pricing strategies 1.) Mark-up pricing 3.) Perceived value • Entry pricing strategies 1.) Penetration – Low price • • • • • • 2.) Competitive pricing 4.) Psychological pricing 2.) Skimming – High price Promotion : “Any form of persuasive communication designed to inform consumers about a product or service and influence them to purchase these goods or services.” Direct selling – Letter (mail), internet, sales representatives Promotions -- try it, you’ll like it Advertising -- direct response, targeted, blanket Public relations -- word of mouth (events), media coverage, editorial content Marketing communications 39 Network Marketing. Sales promotions • • • • • Coupons & Discounts Free giveaways – Key chains, mugs, calendars etc. Trade Shows Samples Contests Advertising • Newspapers, magazines, radio, internet, television, mobile, yellow pages, direct mail • Analyze the strengths & weaknesses of the medium – Which medium will target your customers? – What is your advertising budget? – What is the cost per million (CPM)? 40 Marketing methods with respect to pricing mechanisms (Agriculture) 1. Cash sale at harvest 2. Store for later sale 3. Delayed pricing contract 4. Forward contract 5. Hedging with futures 6. Basis contract 7. Hedging with options 41 Services The service industry forms a backbone of social and economic development of a region. It has emerged as the largest and fastest-growing sectors in the world economy, making higher contributions to the global output and employment. Its growth rate has been higher than that of agriculture and manufacturing sectors. It is a large and most dynamic part of the Indian economy both in terms of employment potential and contribution to national income. It covers a wide range of activities, such as trading, transportation and communication, financial, real estate and business services, as well as community, social and personal services. In India, services sector, as a whole, contributed as much as 68.6 per cent of the overall average growth in gross domestic product (GDP) between the years 2002-03 and 2006-07. 42 Relationship between marketing a scientific product and a scientific service • A Service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. • A company’s offer to the marketplace often includes some services. • The service component can be a minor or major part of the total offer. • Services vary as to whether they are – – – – • Equipment Based (Scientific equipment, Instrumentation, Media etc) People based (Healthcare Testing eg. Blood, ECG, MRI reports) Contract Research and Drug discovery services Location based eg. stocking and supply of fine chemicals and biochemicals. Services have four major characteristics that greatly affect the design of marketing programs which are intangibility, inseparability, variability and perish ability. 43 Services • Services are intangible. • Unlike physical products, they cannot be seen, tasted, felt, heard, or smelled before they are bought. • In addition to differentiating its physical product, a firm can also differentiate its services. • When the physical product cannot be easily differentiated, the key to competitive success often lies in adding more value-adding services and improving their quality. • The main differentiators are ordering ease, delivery, installation, customer training, customer consulting, maintenance and repair, and a few others. • Companies can find many other ways to add value by differentiating their customer services. • They can offer a better product warranty or maintenance contract than their competitors. • They can establish patronage awards or bulk discounts, as the airlines have done with their frequent flyer programs or vaccine companies offer 44 subsidized flu shots. References Marketing Management – Prof. Philip Kotler 45