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CHAPTER 2: THE MARKETING PLAN Overview Chapter 2 focuses on SWOT analysis and its place in the marketing plan. It then discusses the overall marketing plan and market segmentation. Chapter 2 Objectives 1. Conduct a SWOT analysis 2. List the three key areas of an internal company analysis 3. Identify the factors in an environment scan 4. Explain the basic elements of a marketing plan 5. Explain the concept of market segmentation 6. Analyze a target market 7. Differentiate between mass marketing and market segmentation Section 2.1 Marketing Planning Objectives: 1. Conduct a SWOT analysis 2. List the three key areas of an internal company analysis 3. Identify the factors in an environment scan 4. Explain the basic elements of a marketing plan Key Terms: SWOT analysis Environmental scan Executive summary Marketing plan Situation analysis Marketing strategy Sales forecasts Performance standard I. SWOT Analysis A. SWOT Analysis- Strength, Weaknesses, Opportunities, Threats. 1. Good marketing relies on good planning. 2. Companies must look at themselves, their business environment, and the market in which it operates. 3. Internal awareness looks at strengths and weaknesses. 4. External awareness looks at opportunities and threats. B. Internal Strengths and Weaknesses 1. Analysis centered around the 3 C’s: Company, Customer, and Competition. i. Company Analysis a. Staff related questions (management and other personnel) b. Financial questions c. Production capability questions d. Marketing Mix questions ii. Customer Analysis a. Study buying habits for product offering and pricing strategies b. Ask customers to complete questionnaires. 1. May pinpoint areas that need improvement c. Must monitor customer satisfaction to reveal strengths and weaknesses Unit 1 Chapter 2 The Marketing Plan 1 iii. Competitive Position a. Market share is a judge of strengths and weaknesses related to competitors b. Important questions: 1. Our market share 2. Our advantages over competitors 3. How is our reputation, do we own a patent, any special resources, better distribution 4. Are competitors taking business away from us? How? New products? Better products? C. External Opportunities and Threats 1. Competition i. What are our competitors doing at all times? ii. 2. Environmental Scan- analysis of outside influences that may have an impact on an organization. i. Looks at political, economic, socio-culture, and technological areas (PEST). ii. Understanding how each of these are changing or going to change can lead to better appreciation of opportunities and threats. 3. Political i. Centered around gov’t involvement in business. Changes in laws and regulations ii. Do Not Call Registry – passed in 2003, telemarketers not to call phone #’s iii. Downloading Music from Internet- opportunity for iTunes, Napster, and RealNetworks; threat to music stores. 4. Economic i. Economy robust = companies invest in new products and markets. ii. Economy down= Marketing programs may be altered or scrapped. iii. Factors to look at: unemployment rate, inflation, retail sales, productivity, consumer confidence, foreign currency values 5. Socio-Cultural i. Based on customer and potential customers. ii. Changes in attitudes, lifestyles, and opinions. 6. Technological i. Advance may be a threat for one industry or company, but an opportunity for others. II. Writing a Marketing Plan A. Marketing Plan- formal, written document that directs a company’s activities for a specific period of time. B. Elements of a Marketing Plan 1. Executive Summary- brief overview of the entire marketing plan. i. Addresses each topic in the plan and explains cost of implementation ii. Provide information to investors and outside people 2. Situation Analysis- study of the internal and external factors that affect the marketing strategies. i. SWOT analysis ii. Environmental scan Unit 1 Chapter 2 The Marketing Plan 2 3. Goals and Objectives i. Companies mission ii. Marketing objectives iii. Financial objectives 4. Marketing Strategies- identifies target market and sets marketing mix choices that focus on those markets. i. Positioning ii. Marketing Mix 5. Implementation: Make the Plan, Work the Plan i. Putting the marketing plan into action and managing it. ii. Obtaining financial resources, management, and staffing necessary to put the plan into action iii. Sales Forecast- projection of probable, future sales in units or dollars iv. Timetables and outlines for activities, job assignments, sales forecasts, budgets 6. Evaluation and Control i. How the marketing plan will be evaluated and what measures might be necessary if objectives are not met ii. Performance Standard- expectation for performance that reflects the plan’s objectives 7. Appendix i. Includes supplemental materials, such as financial statements, sample ads, etc. C. Conclusion 1. Marketing process is ongoing 2. Three phases: planning, implementing, and controlling Reviewing Key Terms and Concepts 1. What is SWOT analysis and why is it helpful? (Critical examination by a business of itself and its business environment. It enables a business to prepare for and deal with threats and weaknesses, as well as provide guidance and direction) 2. How can a business use a SWOT analysis and an environmental scan to create a marketing plan? (It can develop strategies to deal with its weaknesses and challenges and best use its strengths and opportunities) 3. Why are evaluation and control important elements of a marketing plan? (Evaluation and control assesses how well the company has met its objectives.) 4. Current sales revenue @ $1,386,000, mktg objective is to increase sales by 10%, what is dollar sales goal for the following year? (1,524,600 [1,386,00 * .1 = 138,000 + 1,386,000 = 1,524,600] 5. How can a country’s current economic situation impact a business’s marketing plan? (Healthy and robust economy = businesses invest in new markets and products. Recession or falling economy = marketing plans on hold, changed, or dismissed until economy improves.) Unit 1 Chapter 2 The Marketing Plan 3 Section 2.2 Market Segmentation Objectives: 1. Explain the concept of market segmentation 2. Analyze a target market 3. Differentiate between mass marketing and market segmentation I. Identifying and Analyzing Markets A. Market Segmentation- process of classifying people who form a given market into smaller groups. 1. Market for jeans could be segmented by age, price, and desired features. 2. Levi’s are available in relaxed fit, regular fit, 501, loose straight, loose boot cut, low rise straight, and low rise boot to connect with different markets. B. Demographics 1. Age i. Baby Boomers a. 76 million born in U.S. between 1946-1964. b. Boomers grow older, income and spending power increases. c. Prime target for all types of products. ii. Generation X a. Baby Bust generation that followed the Baby Boomers b. Most are children of dual-career households or divorced parents. c. Been bombarded with media from an early age d. Savvy purchasers and skeptical consumers. e. Reach this group with sharp images, music, a sense of humor, and meet them on their own terms. iii. Generation Y a. Sons and daughters of the Baby Boomers. b. Echo Boomers or Millennium Generation. c. More racially and ethnically diverse with a lot of spending power. d. Use Internet to reach this group, most have e-mail and surf the web. 2. Gender – Try to enter male and female markets. i. Jockey, men’s underwear, doubled sales when they entered the women’s market. 3. Income i. Disposable Income- the money left after taking out taxes. ii. Discretionary Income- the money left after paying for basic living necessities. iii. Marketers of luxury and premium products are interested in changes in consumers’ discretionary income. 4. Marital Status i. Married couples at 50.7 % a. People older when married for the 1st time. b. More divorce c. Living longer d. Remarrying less ii. Married couples with kids represent 25% of population 5. Ethnic Background i. Population becoming more diverse. Unit 1 Chapter 2 The Marketing Plan 4 C. Geographics- segmentation of the market based on where people live. 1. Local, regional, national, global 2. Major Latino markets: LA, NY, Miami, Chicago, Houston 3. 55% of African Americans live in the South. i. NY is the largest African American city with 2.3 million, Chicago has 1.1 million. 4. Utah and Alaska have the highest population of children ages 5-13. 5. Population 65 + greatest in CA, FL, NY, TX, and PA. 6. Median income of $50,000 are MD, AK, NH, MN, CT, DE, MA. i. Banks and financial institutions may be interested in this area. D. Psychographics- Grouping people with similar lifestyles, attitudes, values, and opinions. 1. Activities 2. Attitudes i. Healthy, risk takers, family oriented, ect. 3. Personality & Values E. Behavioral 1. Look at the benefits desired by the consumers, shopping patterns, and usage rate. 2. How Marketers Use Consumer’ Behavioral Patterns i. 80/20 rule- 80% of a company’s sales are generated by 20 percent of its loyal customers. F. Mass Marketing vs. Segmentation 1. Mass Marketing- using a single marketing strategy to reach all customers. i. Use when products have universal appeal and few differentiated features. 2. A New Marketing Trend i. Mass marketing not as popular as it once was due to segmentation. ii. Current trend is niche marketing, markets narrowed down and defined with extreme precision. iii. “Got Milk” uses one slogan, but different models and themes to reach different segments of the market. Reviewing Key Terms and Concepts 1. Which type of income, disposable or discretionary, is more important to businesses that sell expensive watches, second homes, and financial services? (discretionary- money left after necessities have been bought) 2. Of what significance are the combined African American, Hispanic, and Asian-American populations to marketers? (Each represent a potential market segment. By 2025, these groups will represent 37.2% of the U.S. population) 3. A recent study shows that teens are drinking more bottled water and reducing the amount of carbonated beverages they drink. Which psychographic or lifestyle trend does this study support? (Attitudes, taking responsibility for one’s health) 4. If 93% of the U.S. population of 290,890,777 snacks at least once a day, how large is the market for snack foods? (290,890,777 * .93 = 270,528,432.61) 5. Why does the U.S. conduct a census of its residents every ten years? (The census, mandated by the Constitution, gives the gov’t fairly up-to-date information about its citizens—where they live, age, etc. Unit 1 Chapter 2 The Marketing Plan 5 Chapter 2 Summary Section 2.1 SWOT analysis identifies a company’s internal strengths and weaknesses, as well as external opportunities and threats o Internal strengths and weaknesses involve analysis of the company, its customers, and its competitive position. o External opportunities and threats include political, economic, socio-culture, and technological factors. A marketing plan is a written document that directs the marketing activities of a company for a specific period of time Elements of a marketing plan are: Executive Summary, Situational Analysis, Marketing Goals/Objectives, Marketing Strategies, Implementation, Evaluation and Control, Appendix Section 2.2 Market segmentation classifies people in a given market into smaller groups. Four methods of market segmentation are: demographics, geographics, psychographics, and buying behavior Demographics can be broken down into: Age, Income, Marital Status, Ethnicity Geographics relates to similarities among people who live in a certain area. Psychographics groups people with similar lifestyles, attitudes, values, and opinions Unit 1 Chapter 2 The Marketing Plan 6