Marketing Concepts 24t1l

Marketing concepts (focus on FMCG products )

Agenda Overall concepts of marketing Marketing mix concepts – – – –

Marketing mix -1 product Marketing mix -2 price Marketing mix -3 promotion Marketing mix -4 place

BEP concept ( Break even ) Case study brief 10 minutes Case study clarifications / assumptions – 15 minutes Case study analysis discussions – – – –

Team 1 presentation Team 2 Team 3 Team 4

Debate and discussions Final discussions and possible solutions

Strategic marketing planning What is the organization’s main activity? How will it reach its goals?

The Marketing Plan

The process of anticipating future events and determining strategies to achieve organizational objectives in the future.

Why Write a Marketing Plan? Provides a basis for comparison of actual and expected performance Provides clearly stated activities to work toward common goals Serves as a reference for the success of future activities

Marketing planning process Go back and revise

Start

Evaluate the economics

Competitor analysis

Develop marketing Mix

Consumer analysis

Distribution Channel

Market analysis

Steps to achieve objective Objective

Comp / market Analysis Situation or SWOT Analysis

Marketing Strategy Target Market Strategy

Marketing Mix Product

Distribution

Promotion

Price

Implementation Evaluation Control

Marketing Objectives Marketing Objectives Must Be: 

Realistic



Measurable



Time specific



Consistent with Organization’s Priorities

“Our objective is to increase market share by 40% and to obtain customer satisfaction ratings of at least 90% in 2001.”

Marketing Plan Objectives 

Communicate marketing management philosophies



Provide direction



Serve as motivators



Clarify thinking



Provide basis for control

SWOT Analysis Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T)

SWOT Analysis

S W O T

Things the company does well.

Internal

External

Things the company does not do well.

Conditions in the external environment that favor strengths. Conditions in the external environment that do not relate to existing strengths or favor areasCollege of current weakness. ©South-Western Publishing

SWOT Analysis Strengths and Weaknesses INTERNAL      

Production Costs Marketing Skills Employee Capabilities Financial Resources Available Technology Company/Brand Image

SWOT Analysis Opportunities and Threats EXTERNAL Social

Technological

Demographic

Political/Legal

Economic

Competitive

Environmental Scanning Collection and interpretation of information about forces, events and relationships in the external environment that may affect the future of the organization or the marketing plan implementation.

Strategic Windows Market Penetration

Increase market share among existing customers

Market Development

Attract new customers to existing products

Product Development

Create new products for present markets

Diversification

Introduce new products into new markets

Strategic Alternatives Market Penetration

Increase market share among existing customers.

Market Development

Attract new customers to existing products

Product Development

Create new products for present markets

Diversification

Introduce new products into new markets.

Strategic Opportunity Matrix Present Product

New Product

Present Market

Market Penetration

Product Development

New Market

Market Development

Diversification

Selecting a Strategic Alternative Common Tools

Philosophy

Profitability Portfolio Matrix

$ Market Share

BCG Portfolio Matrix

HIGH

HIGH

LOW

MARKET GROWTH RATE

MARKET SHARE DOMINANCE

High growth Market leaders Require cash

LOW High growth Low market share Need cash Poor profit margins

$ Low growth High market share High cash flow

Low growth Low market share Minimal cash flow

6

Portfolio Matrix Eg MARKET SHARE DOMINANCE

HIGH LOW

MARKET GROWTH RATE

HIGH Laptop Computer (STAR)

LOW Palmtop (PROBLEM CHILD) Now bundled with mobiles

Personal Computer (CASH COW)

Mainframe Computer (DOG)

Strategies for Resource Allocation Build

Provide financial resources if SBU (Problem Child) has potential to be a Star.

Hold

Preserve market share if SBU is a successful Cash Cow. Use cash flow for other SBUs.

Harvest Divest

Increase short-term cash return. Appropriate for all SBUs except Stars.

Get rid of SBUs with low shares in low-growth markets.

Target Market Strategy 

Segment the market based on groups with similar characteristics



Analyze the market based on attractiveness of market segments



Select one or more target markets

Marketing Mix: The “Four Ps” Price Promotion

Place Product

Product Strategies The starting point of the “4 Ps”

Product Includes physical unit, package, warranty, service, brand, image, and value

Distribution (Place) Strategies

Place

Product availability where and when customers want them.

Involves all activities from raw materials to finished products

Promotion Strategies

Promotion

Role is to bring about exchanges with target markets

Includes integration of personal selling, advertising, sales promotion, and public relations

Pricing Strategies The most flexible of the “4 Ps”

Price Price X Units Sold = Total Revenue

Learning Objective

Explain why implementation, evaluation, and control of the marketing plan are necessary.

Following Up the Marketing Plan 

Implementation



Evaluation



Control  Marketing Audit Comprehensive Systematic Independent Periodic

Marketing mix – Product Product is the “heart” of Marketing Mix Price

Promotion

Place (Distribution)

Types of products PRODUCTS

Consumer Products

Convenience Products

Shopping Products

Business Products

Specialty Products

Unsought Products

Types of consumer products Convenience Product

A relatively inexpensive item that merits little shopping effort.

Shopping Product

A product that requires comparison shopping, because it is usually more expensive and found in fewer stores.

Specialty Product

A particular item that consumers search extensively for and are reluctant to accept substitutes.

Unsought Product

A product unknown to the potential buyer or a known product that the buyer does not actively seek.

Types of consumer products Convenience Products

Shopping Products

Specialty Products

Unsought Products

Product items ,lines and mix Product Item

A specific version of a product that can be designated as a distinct offering among an organization’s products.

Product Line

A group of closely-related product items.

Product Mix

All products that an organization sells.

Depth of the product lines

Product items ,lines and mix eg Gillette Width of the product mix Blades and razors

Toiletries

Mach 3 Sensor Trac II Atra Swivel Double-Edge Lady Gillette Super Speed Twin Injector Techmatic

Series Adorn Toni Right Guard Silkience Soft and Dri Foamy Dry Look Dry Idea Brush Plus

Writing instruments

Lighters

Paper Mate Flair

Cricket S.T. Dupont

Advantages of product lines Advertising Economies

Package Uniformity

Why Form Product Lines?

Standardized Components Efficient Sales and Distribution Equivalent Quality

Product mix width The number of product lines an organization offers.

 Diversifies risk  Capitalizes on established reputations

Product mix depth The number of product items in a product line. Attracts buyers with different preferences Increases sales/profits by further market segmentation Capitalizes on economies of scale Evens out seasonal sales patterns

Consumer Marketing Channels

0-level channel Manufacturer

Consumer

1-level channel Manufacturer

Retailer



Consumer

Retailer



Consumer

Retailer



Consumer

2-level channel

Mfg

 Wholesaler

3-level channel Mfg

 Wholesaler

Stockist



Analysis Framework Company Analysis

Competitor Analysis

Competing Firms

Marketing Analysis Product Price Promotion Distribution

Product Market

Customer Analysis

Consumers

Setting the Promotional Mix Figure 14.4

14 - 40

Multichannel Distribution System Figure 12.4

12 - 41

The Relationship Between Analysis Planning Implementation and Control Figure 2.6

2 - 42

Sales Promotion Tactics Consumer-directed Samples Coupons Cash refund offers Price offs s Prizes Patronage rewards Free trials Tie-in promotions

Trade-directed Price offs Allowances Free goods Sales contests Trade shows Specialty advertising

Types of Industrial customers Commercial – Industrial Distributors – OEMs – s

Govt – Public sector ( BHEL. STU etc ) – Govt ( Army , Electrectricy boards etc )

Institutional/Co-operatives(eg CSD canteen) – Public institutions( Govt hospitals ) – Private ( Colleges etc )

General Pricing Approaches Break-Even Analysis and Target Profit Pricing

Revenues 1000 Thousands of Rs

Target Profit Rs??

800

Total Costs

Break-even point

600 400

Fixed Costs

200 0

10

20

30

40

Sales Volume in Thousands of Units

Quantity To Be Sold To Meet Target Profit

Industrial Product Marketing

Capital goods

Auto Componants

Material and parts/Industrial consubales

Supply and services

Installation/Heavy.

OEM

Raw material.( steel etc )

Packaging

Accessories.

After market

Accessories (acids, oils etc ).

Legal servises

Plant &building.

STU

Componants (semi finished parts ,TV tubes ) Sales tax services Stationary Semi finished goods .

Used in Production process

Enter the finished product

Goods and services to the operations

Market Dynamics ( spark plug) Company

Distribution Channel Push Strategy Retailer

Mechanics/

Influencers

Pull strategy Fleetowner

Car /2 wh owner

Individual truck owner

SWOT analysis of strengths, weaknesses, opportunities,and threats.

Porter’s model of five strategic forces affecting industry competition.

Typical Promotional schemes( Auto trade ) Mechanic schemes (cash coupon , point coupon ) Retailer schemes – Push strategy schemes ( gifts , 1 free in 12 , periodily complete target ) – Ghost buyer – POP display

Distributor schemes – Turn over disc – % increase over last yr – MSR

POP wall painting ment

Case study cont (Mico “soft belly”) Distributors/stockist only interested to push out product Distrubutors/stockist nil interest on product Retailer neutral in Mico / Comp A Mechanics have better Quality perception of Mico due to higher price and older name Nil promotional schemes for trade channel and mechanics No sales force visits

Facts A typical retailer sells 500 plugs pm A typical mechanic fits 10 plugs per day ( 6 cars service or 15 two wheeler ) Influencing factor – Mechanic has 50% say in choice of brand and rest on consumer – Retailer has 30% say – Customer has 20% say

Each sales person of distributor costs Rs 5k pm Each company A sales person costs Rs 20k pm

Auto Componants Vehicle type segmentation

CV/LCV

Tractor

Car/SUV 2/3 wheelers

Stationary engines

Auto Componants Market “usage” segmentation

OEM

Repl market

(20%) NIL contribution

(70%) 90% contribution

Export (10%) 10% contribution

4 wh

2 wh

Rep

OES

STU/Govt

Fleet owners

Nil

Nil

After Market ( Repl Market ) 4 P’s

Price ( OEM brand) Standard Economy

Product

Promotion

OEM status

Publicity

Non OEM

Advertising Schemes Special discounts

Place Regional Distributors State Distributors Town Stockist/Wholesalers Main Dealers Retailers Fleetowners OES

Fast moving Auto Componant( Filters ) Fast consumable Forecasting

Price ( OEM brand) Standard Economy

Product

Promotion

CV/LCV

Publicity

Car

Advertising

Tractor

Schemes Special discounts Coupons

Place Regional Distributors State Distributors Town Stockist/Wholesalers Main Dealers Retailers Fleetowners OES

Case study spark plug Costing inv land bldg plant /machine

inv in lakh 100 200 800

interest

deprecaition/ int 2.5% 10.0%

1100

5 80 85 99

9% Qty Present

qty in lakh

150

raw / outsourced material direct mfg cost indirect cost

18.5 8.00 2.00

deprecaition int selling/ mkt cost cost promotional scheme total cost sell price to distribeter profit

8 300

0.57 0.66 1.33 0.00 31.06 33.5 2.44

200

qty mild aggressive 200 2,775 1,200 300 85 99 200 4,659 5,025 366

which is pull and push

promotional scheme value lakh lakh missionary sales person 40x0.60 24 distributer gift scheme 2% 200 retailer gift scheme 50 ghost scheme 10 Point of purchase gift scheme 50

?? ?? ?? ?? ??

mechanic sceme sales person scheme missionary sales man commision

?? ?? ??

0.5

125 100 40 599

18 8.00 1.50 0.43 0.50 1.00 1.64 31.06 33.50 2.44 328

heavy aggressive startegy 250 3,600 1,600 300 85 99 200 328 6,212 6,700 488

17.5 8.00 1.20 0.34 0.40 0.80 2.82 31.06 33.5 2.44 705

4,375 2,000 300 85 99 200 705 7,764 8,375 611

Case study questions for class Company A wishes to have a more robust non risky business plan in view of – Total Mkt. dominated by B that anytime of their choosing they can kill competition by reducing price. If so why is it not doing ?? – Company A cannot increase sales force due to very precarious profits – “A “ looking for a strategy – “A “ getting beaten up by distributors who are demanding more credit or more margin . What is to be done ??

Any possibility to reduce cost of production ?? Any ment ?? Cant afford right now . How to do focussed adv which is cost effective Present 3 distributors in each state who has approx 200 retailers being serviced Should there be diff distributor for diff segments Mkt startegy should it be diff for Car or 2 wh segments??

Case Study ( Spark Plugs ) Market players ( Mico , A) Market Share Present promotion Mico /A Present distribution channel ( Place ) Present product features ( commodity) Sales force Credit policy Mico “Push” only strategy Pricing ( next slide ) Company “me too” push strategy Company precarious profit situation / sales vol Present Production cost higher due to lower sales vol . Will reduce by Rs 0.50 if sales grow No special product features diffrentiation

Start the solution with Kotler suggested startegy

Analysis Framework Company Analysis

Competitor Analysis

Competing Firms

Marketing Analysis Product Price Promotion Distribution

Product Market

Customer Analysis

Consumers

The Marketing Mix Figure 2.5

2 - 61

Ansoff’s Matrix (Product/Market Matrix) Existing Markets

New Products

Market Penetration

Product Development

New Markets

Market Development

Diversification

Ansoff’s Matrix (Product/Market Matrix)

New Products

Existing Markets

New Markets

E.g. Realignments of the marketing mix

E.g. Geographical expansion

Same outlets and sales strategy - new product

Diversification related or unrelated

Figure 14.6 Break-Even Chart

PLC and Boston matrix

Tools of the Mix Figure 14.1

14 - 66

Solutions and various actions A can take ( “Product” mix strategy ) Expand range by taking similar product ( same channel ) and trading under own brand name – This reduces dependance on one product – Distributes fixed mkt expense on higher turnover ( reduce fixed cost in product X )

Come up with USP ( tech which gives some percieved benefit ) on X to show differentiation

Solutions and various actions A can take ( “Price” mix strategy ) Rearrange pricing to force more profit to retailer

Solutions and various actions A can take ( “Promotion ” mix pull strategy )

Retailer

– Increase his profit ( mark down of printed price ) – Increase interest by gift schemes on completion of target – 3 month complete and take Titan watch ( Rs 500 ) on 40 boxes – After 3 months increase sales by 25% and take a super gift – Complete yearly target and go to 2 nights holiday trip for wife ( involve family so that once committed to wife stays )

Mechanic – Increase interest by gift schemes on every plug / – Transister free after 200 plugs –

Solutions and various actions A can take ( “Place ” mix push & pull strategy ) Retailer – Increase his profit ( mark down of printed price ) – Increase interest by gift schemes on completion of target – 3 month complete and take Titan watch ( Rs 500 ) on 40 boxes – After 3 months increase sales by 25% and take a super gift – Complete yearly target and go to 2 nights holiday trip for wife ( involve family so that once committed to wife stays )

Mechanic – Increase interest by gift schemes on every plug / – Transister free after 200 plugs –