Module 7
Marketing I
2010
WHERE ARE WE NOW?
A GREAT
BUSINESS PLAN
III. CONSTRUCTING THE BUSINESS
Management
Marketing Strategy
Operations
Financial Plan
Expansion
Appendix
II. ASSESING THE MARKET
Product/Service Development
Industry Analysis
Market Analysis
Competition
I. ANALYZING THE FOUNDATION
Company Description
Business Concept*
Self Assessment*
Net Worth Statement*
Adapted from: Wanda Fullner Washington CASH * Not included in Final Business Plan
COURSE CONTENTS
• Role of market research in business plan development
• Market Research
o Importance
o Types of research
o The process
• Branding
• Marketing Strategy
o Definition
o Concepts
oThe 4 Ps
USING MARKET RESEARCH
• To determine how to market your product
• Basing your marketing strategy and your business strategy
overall on sound market research will help minimize risk
• Early market research that shows that your business has a lot
of potential should be used in your business plan
• A number of things should be researched before you start up
your business to ensure that your business model is feasible
• Minimize risks by treating business concepts and market
receptivity
• Test if your unique selling proposition is attractive to your target
customers
MARKET RESEARCH FOR BIZ PLANNING
• Market information
– Includes data on the prices of products and services in the
market as well as consumer information
– Examples of market information questions include
• Who are the customers?
• Where are they located and how can they be contacted?
• What quantity and quality do they want?
• What is the best time to sell?
• What is the long-term or historical price data over a number
of years?
• What is the expected production in the country?
• Is there more demand for one product or another?
MARKET RESEARCH FOR BIZ PLANNING
• Market segmentation
– The division of the market or population into subgroups with
similar motivations
– Widely used factors for segmentation include geography,
personality differences, demographics, uses of product,
behaviour and psychographics
• Market size and trends
– The upward or downward movements of a market, during a
period of time
– Market size is more difficult to estimate in the case of a brand
new product or service. In this case, you will have to derive
the figures from the number of potential customers or customer
segments or look at history for similar types of products or
services
MARKET RESEARCH FOR BIZ PLANNING
• Other information required for business planning includes
– Competitor analysis
– Industry analysis
– Product/service research and development
– Risk analysis (business risk, product risk, economic risk)
RESEARCH PROCESS
Basic steps in obtaining information:
• Determine what information you need to know
• Identify from who and where you will get the information
• Design the research
• Decide on how best to take a sample
• Collect the data
• Analyze the data
• Draw conclusions and make strategic decisions
• Take action
Collect supporting documentation
for your Appendix
TECHNIQUES FOR GATHERING DATA
Both qualitative and quantitative data can be gathered through:
•Surveys and questionnaires
•Key informant interviews
•Informal discussions with 2 or more people
•Focus groups (see handout)
COURSE CONTENTS
• Role of market research in business plan development
• Marketing concepts
• Marketing Mix - The 4 Ps)
• Customer profiling (see handout)
B2C
Activities
• Product • Market research/
Segmentation/ targeting
• Placement • Channels
• Price • Price
• Promotion • Communication
• Sales team
• Advertising
MARKETING DEFINED
• "Marketing is human activity directed at satisfying needs and
wants through exchange processes." - Philip Kotler
• "Marketing is to establish, maintain and enhance long-term
customer relationships at a profit, so that the objectives of
the parties involved are met. This is done by mutual
exchange and fulfilment of promises." - Christian Grönroos
• “Marketing is the management process of anticipating,
identifying and satisfying customer requirements
profitably." - Chartered Institute of Marketing (CIM)
MARKETING MANAGEMENT
• Process of the practical application of marketing techniques
• The analysis, planning, implementation, and control of
programs designed to create, build, and maintain mutually
beneficial exchanges with target markets
• The marketing manager has the task of influencing the level,
timing, and composition of demand for products and/or
services in way that will achieve organizational objectives
MARKETING ACTIVITIES
• Includes
– Market research
– Product development
– Product life cycle management
– Pricing
– Channel management
– Promotion
MARKETING STRATEGY
• Serve as the foundation for the marketing plan
• Partially derived from broader corporate strategies,
corporate missions, and corporate goals. They should flow
from the firm's mission statement
• Dynamic and interactive - partially planned and partially
unplanned
• A good marketing strategy should integrate your
organization's marketing goals, policies, and activities
(tactics) into a cohesive whole
• Marketing strategy influences management, operations,
and financial plan
• How you plan to sell and deliver your product to your
customer
TWO MAJOR ASPECTS OF MARKETING
• Acquisition – recruitment of new customers
• Base management – retention and expansion of
relationships with existing customers
• During acquisition, marketers first convert a prospective
buyer to a customer
• During base management, the marketer focuses on building
a relationship, nurturing the links, enhancing the benefits
that sold the buyer in the first place, and improving the
product/service continuously to protect her business from
competitive encroachments.
ANALYSIS FEEDS
MARKETING STRATEGY
A GREAT
BUSINESS PLAN
III. CONSTRUCTING THE BUSINESS
Management
Marketing Strategy
Operations
Financial Plan
Expansion
Appendix
II. ASSESING THE MARKET
Product/Service Development
Industry Analysis
Market Analysis
Competition
I. ANALYZING THE FOUNDATION
Company Description
Business Concept*
Self Assessment*
Net Worth Statement*
Adapted from: Wanda Fullner Washington CASH * Not included in Final Business Plan
COURSE CONTENTS
• Market research
• Marketing concepts
- The 4 Ps of Marketing
MARKETING MIX – FOUR P‟s
• Your marketing mix is a combination of marketing tools that
are used to satisfy customers and company objectives
• Your offering to your customers is controlled by the following
variables – often called the 4 P‟s of marketing
– Product
– Price
– Promotion
– Placement (Place)
• By using variations of these four components you have the
ability to reach multiple consumers within your target market
MARKETING MIX – FOUR P‟s (CONTINUED)
• Product – The product management and product marketing
aspects deal with the specifications of the actual good or
service
• Pricing – Process of setting a price for a product, including
discounts
• Promotion – Includes advertising, sales promotion, publicity,
and personal selling, and refers to various methods of
promoting the product, brand, or company
• Placement or distribution – Refers to how the product gets
to customer, for example, point of sale placement or retailing
MARKETING MIX – FOUR P‟s (CONTINUED)
Product Individual, Features, accessories, installation,
goods, product instructions, service, warranty,
lines, or services packaging, and brand names
Placement Getting the Channels, distribution systems,
(distribution) product to the middlemen, warehousing,
customer transportation, fulfillment, and shipping
Promotion Communicating Personal selling, mass selling, sales
with the promotion, sales personnel,
customer advertising, media selection,
copywriting
Pricing Setting a price that Price flexibility, level pricing, introductory
serves the customer pricing, discounts, allowances,
well and maximizes geographic terms
profits
COURSE CONTENTS
• Role of market research in business plan development
• Marketing concepts
• Branding
• Marketing Mix - The 4 Ps
– Product
– Price
– Promotion
– Place
PRODUCT LIFE CYCLE
• Sequence of stages from introduction to growth, maturity, and
decline
• As a product moves through the lifecycle, the marketing situation
changes and therefore the marketing strategy and the marketing
mix must also be changed
Product
sales
Introduction Growth Maturity Decline
PRODUCT LIFE CYCLE - INTRODUCTION
• Firms seek to build product awareness and
develop a market for the product
• Impacts on the marketing mix
– Product branding and quality level is established, and
intellectual property protection such as patents and trademarks
are obtained
– Pricing may be low „penetration‟ pricing in order to gain market
share OR high „skim‟ pricing to recover development costs
– Distribution is selective until consumers demonstrate
acceptance of the product
– Promotion is aimed at innovators and early adopters.
Marketing communications seek to build product awareness
and inform potential customers about the product
PRODUCT LIFE CYCLE – GROWTH STAGE
• Firms seek to build brand preference and grow
market share
• Impacts on the marketing mix
– Product quality is maintained and additional features and
support services may be added
– Pricing is maintained as the firm enjoys increasing demand
with little competition
– Distribution channels are added as customers accept the
product and demand increases
– Promotion is aimed at a broader audience
PRODUCT LIFE CYCLE – MATURITY
• Strong growth in share decreases and similar
products may be offered by competition
• Primary objective is to defend market share while
maximizing profit
• Impacts on the marketing mix
– Product features may be enhanced to differentiate the product
from that of competitors
– Pricing may be lower because of the new competition
– Distribution becomes more intensive and incentives may be
offered to encourage preference over competitor products
– Promotion emphasizes product differentiation
PRODUCT LIFE CYCLE – DECLINE
• As sales decline, the firm has several options
– Maintain the product, possibly rejuvenating it by
adding new features and/or finding new users
– Harvest the product – reduce costs and continue
to offer it, possibly to a loyal customer segment
– Discontinue the product, liquidating remaining inventory or
selling it to another firm willing to continue the product
• Marketing mix decisions depend upon the strategy chosen e.g.,
– The product may be changed if it is rejuvenated
– The product may be left unchanged if it is going to be liquidated
or harvested
– The price may be maintained if it is being harvested or reduced
drastically if liquidated
PRODUCT MARKETING
• Addresses four important strategic questions
– What products will be offered (i.e., the breadth and depth of
the product line)?
– Who will be the target customers (i.e., the boundaries of the
market segments to be served)?
– How will the products reach those customers (i.e., the
distribution channels to be used)?
– Why will customers prefer our products to those of
competitors (i.e., the distinctive attributes and value to be
provided)?
3 LEVELS OF PRODUCT
• Core product – Define the core benefits of the product to the
customer
• Actual product – The actual product is built around the core
product and includes the following characteristics
– Level of quality
– Features
– Brand name
– Packaging
• Augmented product – Offer additional consumer benefits and
services (e.g., warranty, customer training, installation)
ACTIVITY: DESCRIBE A PRODUCT
• EXAMPLE : SONY CAMCORDER
• Core product – The ability to take video pictures conveniently
• Actual product – Sony Handycam (brand name), packaged,
convenient design so you can hold it, play back features etc. that
provide the desired benefits, high quality etc.
• Augmented product – Receive more than just the camcorder.
Give buyers a warranty on parts and workmanship, free lessons
on how to use the camcorder, quick repair service when needed
and toll free telephone number when needed.
WHY NEW PRODUCTS FAIL
• Lack of differentiating advantage
• Poor marketing plan
• Poor timing
• Target market too small
• Poor product quality
• No access to market
COURSE CONTENTS
• Role of market research in business plan development
• Marketing concepts
• Branding
• Marketing Mix - The 4 Ps
– Product
– Price
– Promotion
– Place
PRICING
• Price setting is one of the most difficult of all marketing decisions
• Pricing strategy
– Deliberate planning of the pricing structure in relations to
factors such as consumer wants product attributes and
competition in such a way as to ensure overall profitability
– The element of a firm‟s decision-making concerned with the
setting of prices that will attract the target market and allow
profit objectives to be met
– Should evolve as the product moves through the product
lifecycle
PRICING – WHAT LEADERS DO
• A survey of 73 companies found that those who were most
successful at using price to achieve business objectives exhibited :
–Very extensive use of competitive analysis
–Greater use of break-even analysis, economic value analysis and
price sensitivity measurement
–Understanding of strategic pricing and are attuned to factors (e.g.,
perceived value) that affect price sensitivity
–wider involvement of several departments in pricing decisions with
sales team members playing more significant role
–Reliance on evidence rather than hunch
–An attempt at selling value as opposed to price
–More likely to segment the market and take a long-term view (e.g.,
using „penetration pricing‟ to enter a new market)
PRICING – WHAT LEADERS DO
Sustaining higher prices
ought to be a top priority of
entrepreneurs. Yet often they
agonize over perfecting what
is sold and then take quick
pricing decisions based
largely on guesswork.
PRICING – WHAT LEADERS DO (CONTINUED)
Leaders Laggards
• Segment the market and • If they look ahead it is often
take a long-term view for defensive reasons (e.g.,
• Increase volume to achieve cutting price to maintain
economies of scale market share)
• The direct and indirect costs • Reduce product costs to
attributable to a particular allow price cuts or special
product or service discounts
• Strive to add value to their • Emphasize cost cutting
core offering
• Keep their pricing structures
simple and transparent
• Overall, put greater effort into
pricing
PRICING – QUESTIONS TO CONSIDER
• What is your overall pricing strategy (high-end, medium, low-
end)?
• What are the characteristics of your customers (do they shop for
low price, for convenience, for service)?
• Do you include all of your operating costs (including your salary)
when developing your price?
• Do you or one of more of your employees regularly check
competitors prices for comparison?
• How often will you change prices?
• How often will you run sales or offer discounts?
EXAMPLE PRICING STRATEGIES
• Competition-based pricing – setting the price based on prices
of similar competitors
• Cost plus pricing – calculates the cost of producing the product
and add a % (profit) to the price (simplest method)
• Creaming or skimming – selling at a high price and sacrificing
high sales to gain high profit (often used to target early adopters)
• Loss leader – selling a product at a loss to attract customers to
buy other full-priced products sold by the business
• Market-oriented – Setting a price based upon analysis and
research compiled from the targeted market
EXAMPLE PRICING STRATEGIES (CONTINUED)
• Penetration pricing – Setting an initial low price at product
launch to attract initial customers and likely increasing the price
later as the product gains market share
• Price discrimination – Setting a different price for the same
product in different market segments (e.g., different ages,
different times of day)
• Predatory pricing – Aggressive pricing designed or intended to
drive out competitors from a market
PRICING – STEPS TO FOLLOW
• Develop marketing strategy
• Make marketing mix decisions
• Estimate the demand curve
• Calculate cost
• Understand environmental factors
• Set pricing objectives
• Determine pricing
Why is it that some companies are able to charge more than their
competitors for essentially the same product?
CALCULATING PRICE
• Selling price = (cost of goods sold/unit) + (operating costs/unit) +
(desired profit/unit)
• Operating costs to include
– Owner's earnings
– Family employees' earnings
– The portion of rent going for stockroom space
– Equipment and store repairs
– The costs of processing credit-card transactions
– The costs of business services (such as accounting and legal
services)
– Advertising costs, insurance premiums, etc.
KEY TAKEAWAYS:
MARKETING, SALES, & DIST I
Key Learning Business Plan Impact
Product
A brand can help you separate your product/ service from the
• Marketing Strategy
competition and making it readily identifiable to your
customers
Marketing Management
• Marketing Strategy
Marketing management is complex and challenging but • Management &
Organization
necessary to ensure business success.
Branding
A well developed brand can help you separate your product/ • Marketing Strategy
service from the competition.
Pricing
Setting price is a science, not an art. • Marketing Strategy
Marketing Strategy
The “Four P‟s” should always be considered when
• Marketing Strategy
developing your marketing strategy.
HOMEWORK:
RESEARCH AND WRITE
Continue researching your industry, market, competitors, and customers
with interviews, surveys, and focus groups. Use the data you have
gathered to:
1. Develop your company‟s brand identity. Think specifically about how
you want your customers and other stakeholders to think about your
company and its products/services
2. Develop your pricing strategy. How will you position yourself in the
market (high price/high quality, low price?) What will be the impact of
your pricing on revenue and profits? Gather evidence (cost structure,
competitor pricing, etc.) to support your decisions
APPENDIX
ADDITIONAL SLIDES
• Role of market research in business plan development
• Marketing concepts
• Branding
• Marketing Mix - The 4 Ps
COURSE CONTENTS
• Role of market research in business plan development
• Marketing concepts
• Branding
• Marketing Mix - The 4 Ps
– Product
– Price
– Promotion
– Place
PRODUCT MANAGEMENT
RESPONSIBILITIES
• Defining product business criteria including managing costs
• Securing internal resources for product team
• Translating feature requirements into engineering specifications
• Working across all functions to bring a product to launch
• Leading teams to ensure execution towards product objectives
• Defining supportability requirements
• Evangelizing the product internally across all functions
• Evangelizing the product with the press, customers, and partners
• Bringing new products to market
• Product differentiation
• Product positioning and outbound messaging
• Product Life Cycle considerations
• Product portfolio management
PRODUCT MANAGEMENT ACTIVITIES
Product Product Product Product Product
conception development launch maintenance close-out
Respon- • Target market • Market • Customer • Sales training • Ensure that
sibilities definition requirements presentations • Promotional customers
• Market research refinement • Forecast programs have
• Market • Focus groups refinement • Interim transition/
requirements • Trade-offs • Sales training product upgrade path
• Forecast schedule vs • Press relations releases
• Positioning features • Trade shows
• Competitive • Promotion/
analysis advertising
• Trade-offs • Inventory
schedule vs management
features
Interaction • Customers • Customers • Customers • Customers • Customers
• Market research • Engineering • Sales • Sales • Customer/ Tech
firms • Analysts • Engineering support
• Engineering • Press • Customer/ • Finance
• Finance • Engineering Tech support • Sales
• Sales • Finance
• Customer/
Infrasystems, LLC Tech support
DEMAND CURVE
• Demand is the quantity of a good that consumers are willing
and able to purchase at a given price.
• A demand schedule can be developed showing the quantity
demanded of a product and service at each given price
• Example – how many chocolates would you buy at each of the
prices shown below?
Quantity demanded
Price Quantity
60
$1 53
$2 38 40
Line 2
Line 3
$3 26 20
$4 17
0
$5 10 0 2 4 6
Price
COURSE CONTENTS
• Role of market research in business plan development
• Marketing concepts
• Branding
• Marketing Mix - The 4 Ps
– Product
– Price
– Promotion
– Place
SHIFTS IN DEMAND CURVE - SUMMARY
• Customer preference – tastes, attitudes about products or services
• Prices of related goods
• Complements – an increase in the price of a complementary
good reduces demand and shifts the demand curve downward
• Substitutes – an increase in the price of a substitute good
increases demand and shifts the demand curve upward
• Income – an increase in income shifts the demand curve of normal
goods (those that people actually want more of when their income
increases) upward (to the right)
• Number of potential buyers – an increase in the population or
market increases demand and shifts the demand curve upward
• Expectations of price change – a predication of higher prices can
increase demand and shift the demand curve upward