Professional Documents
Culture Documents
2010 Marketing For IBA 1
2010 Marketing For IBA 1
Marketing
INDEX1.
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Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
p. 2
p. 4
p. 7
p. 11
p. 15
p. 17
p. 19
p. 21
p. 23
p. 25
p. 27
p. 29
p. 31
p. 32
p. 33
p. 34
p. 35
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p. 37
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p. 41
p. 43
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Production orientation: the belief that corporate success comes from efficient production, profit by
selling large volumes
Product orientation: the belief that corporate success comes from having the best product, asking a
higher price for more differentiated goods.
Sales orientation: the belief that corporate success comes from having proactive salespeople.
Marketing orientation: Corporate success comes from understanding the relationships in the
market. Consists of:
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Customer orientation: Corporate success through understanding and satisfying customer needs
Competitor orientation: Degree to which the company understands what the competitors are
offering the customers. Does that product have the same (or better) value?
Inter-functional coordination: Degree to which the internal structure of the organisation and the
attitudes of its members combine to deliver marketing orientation.
4 Ps:
7 Ps
Elasticity of demand: Wedding rings are price inelastic, chicken meat is price elastic.
Competition: Monopolistic competition Monopoly Oligopoly Perfect competition
Social sciences
Sociology
People in groups
Psychology
People as individuals
Anthropology
Study of cultures
Business Disciplines
Economics
Study of wealth creation
Marketing
Corporate Strategy
Study of competitive advantage
Scope of Marketing:
Consumer marketing; Industrial marketing; Service marketing; Not-for-profit marketing; Small
business marketing; International marketing
There is only one boss the customer. And he can fire everybody in the company from the chairman on
down, simply by spending his money somewhere else. (Sam Walton, founder of Wal-Mart)
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Cultural environment;
Language Religion Shared beliefs Customs History Gender roles
Political and legal environment:
1. Patent legislation
2. Taxation
3. Safety regulations
4. Contract law
5. Consumer protection legislation
6. Control of opening hours
European Union:
1. Technical standards
2. Frontier controls
3. Safety standards
4. Currency fluctuations
5. Advertising
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The competition:
Levels of competition:
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Technological environment:
A new product will sooner or later be replaced by another product (from any company), which is
technically more advanced. The threat of new products from other companies wiping out existing
products on the market is very real. Another issue is that the new rivalling products may come from
an entirely different industry (Mailing industry
Computer & E-mail industry)
Industry issues:
Intensity of competitive response or retaliation will depend on the following factors:
1. The degree of concentration in the industry; how many competitors? (Few competitors =
heavy retaliation and the other way round)
2. The rate of growth in the industry; rapidly growing industries are less stable, so more fall-out
of companies which are not profitable.
3. The degree of differentiation; if products are essentially the same, heavy retaliation will
follow upon strategic actions
4. Cost structures; if there are high fixed costs, a high level of sales is required.
5. Investment structures; If the industry has small average investments, then a newcomer will
have a substantial impact on the rest of the industry
6. Competitive information; How well-informed are firms about their competitors? This will
define a big part of the competitions behaviour
7. Strategic objectives of competitors; If strategic objectives of 2 companies do not conflict,
they are not really competing (e.g. Ford & Rolls Royce)
8. Cost of leaving the industry; Some capital will have almost no second-hand value, so if you go
out of the market, you will go bankrupt. Mining and steel industries are examples.
Internal Environment:
Staff Relationships:
Formal structure: The official relationships between members of an organisation
Where people are positioned in the organisations hierarchy
Informal structure: The unofficial relationships between members of an organisation
Friendships & Alliances between co-workers
Corporate culture:
The shared rules and beliefs within the company. The way we do things around here.
Resource constraints:
The way an organisation uses its resources and plays it to its strengths.
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It is important that employees are satisfied: Word-of-mouth from employees is much more powerful
than official communications from the firm itself.
Public Relations: The practice of creating goodwill towards the organisation.
Contact with customers:
Front line staff (frequent, daily contact with customers), Second-line staff (occasional contact with
customers), Backstage staff (virtually no contact with customers)
Nowadays, employees do not just obey commands:
Kanter and Piercy identified 10 forms of resistance:
1. Criticism of the details of the plan
2. Slow action in implementing the plan
3. Slow response to requests
4. Becoming unavailable
5. Suggestions that resources would be better directed elsewhere
6. Suggestions that proposals are too ambitious
7. Setting up petty obstructions and annoyances to wear the proposer down
8. Attempts to delay the decision, hoping the proposer will lose interest
9. Attacks on the credibility of the proposer with rumour and innuendo
10. Deflation of any excitement surrounding the plan by pointing out the risks
Internal Marketing: The practice of creating goodwill among the employees
The marketing mix still applies with internal marketing.
Product = marketing plan and actions necessary to make the plan work
Price = what employees have to give up for the plan
Promotion (=communication) = ensuring understanding of the plan
Place = where the exchange of the plan takes place (a meeting in an office, or during an away-day)
Persuasion: About changing attitudes:
1. Articulate a shared vision: explain the wider vision, the purpose of the plan
2. Communicate and train: clearly communicate the plans to the employees
3. Eliminate misunderstandings about the what the plan is
4. Sell the benefits of the plan
5. Gain acceptance by association: link the plan to a widely-accepted company strategy (such as
customer service or quality management)
6. Leave room for local control over details: let the people who have to implement the plan
have at least some say in what is being done
7. Support words with action: be an example for your employees
8. Establish two-way communication: Top-down communication doesnt work anymore in the
21st century. People lower down the hierarchy are closer the customers and to the problem.
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Services Marketing
Services (without any product characteristics) have the following characteristics:
1. Intangibility
2. Inseparability of production and consumption
3. Variability, not one service is the same
4. Perishability, services cannot be stored for later use
Branding
Consumers output from brands:
Self-Image
Quality
Cost
Expected performance
Differentiation from competing brands
Strong brands create a barrier to entry for competing new brands.
Also, strong brands function as:
A sign of ownership to let customers know what they buy
A differentiating device used to differentiate from similar products
A functional device functionality
A symbolic device a brand that conveys the appropriate message
A risk reducer you know what you can expect; companies must NOT damage this trust!!
A shorthand service you tag information about the product & brand in the consumers memories
A legal device A brand protects the firms intellectual property
A strategic device identifying and using the added value the assets constituting the brand represent
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When?
proximity
to
purchase
time of day
Where?
different
locations
different
social
situations
How?
envisaged
usage
nonenvisaged
usage
How much?
Heavy user
Moderate
user
Light user
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Post-purchase evaluation:
Voice responses (direct communication)
Private responses (word-of-mouth)
Third-party responses (lawyer, consumer champion)
Voice responses should be encouraged, because they are a lot easier to deal with than private and
third-party responses. A well-treated complaint often makes the customer trust higher than when
they have no complaints in the first place
Extreme dissatisfaction can result in a boycott.
Disposal forms:
Dumping
Recycling
Selling second hand
Re-using in a novel way
Drive: The force generated in an individual as a result of a felt need
A gap between actual and desired state can be enjoyable, the extent to which this is enjoyable, is
called the optimum stimulation level (OSL).
Needs: UTILITARIAN: the practical benefits of the product
HEDONIC: the pleasurable or aesthetic aspects of the product
Involvement: the degree to which the individual feels attracted to a specific brand.
Involvement has cognitive (rational) and affective (emotional) aspects.
Involvement is influenced by both personal sources and situational sources (embarrassment factor)
Involvement is a FUNCTION OF loyalty (the tendency to repeat purchase of the brand)
Learning = behavioural changes that take place relative to an external stimulus condition
1. Must be a change in behaviour
2. This must result from external stimulus
No learning in the following cases:
1. Species response tendencies (reflexes, instincts)
2. Maturation (development of humans)
3. Temporary states (drunkenness, during period)
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1.
2.
3.
4.
5.
The difficulty and goal of marketers lies in knowing what the general perception of the members of
the target group will be, as not one perception of the world is the same through 2 different
individuals.
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Buyers techniques:
small risk
Straight rebuy same product over and over again, large quantities
Modified rebuy repeat purchase where some changes have been made
medium risk
New task A purchase which has no precedent
large risk
Key-account manager = someone charged with the task of managing the relationship with a
strategically important customer
Business networks;
Stable perhaps still growing, predictable course
Established fixed and relatively unchanging
Emerging growing and changing
Value analysis = evaluating components, raw materials and manufacturing processes to determine
ways of cutting costs or improving finished products (e.g. comparing long-life light bulbs with
regular bulbs)
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Potential customers:
- First-time prospects (never done business with before, potential customer)
- Novices (first-time users)
- Sophisticates (buy regularly from your company)
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>
Noise (surrounding distraction) & Interference (deliberate distraction) are disturbing the
communication process.
Redundancy = In communications, sending a message by more than one route to ensure correct
delivery (TV, radio, papers)
Denotative meaning of words; has a unique meaning for an individual
Connotative meaning of words; has the same meaning for everybody
Ethnocentrism = the belief that ones own culture is superior to others
Miscommunication
Implication: assuming things, having prejudices, recipient adding information
Distortion: interference or noise from outside can change the message (could also be bias)
Disruption: caused by outside interruptions or internal misgivings of the recipient
Confusion: contradictory facts
Agreement/disagreement: recipient understands but does not accept the message.
Understanding/misunderstanding: this is often not noticed
Personal transformation: people are not motivated to seek understanding
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Culture
Religion - Language -
Social structure
- Non-verbal language
High-context culture; highly homogenous with rigid rules, everybody knows their place
Low-context culture; highly heterogeneous and with tolerant rules (US & Western Europe)
Market Entry Tactics
Export agents person or company that takes responsibility for organising the export of goods
without taking title to the goods
Export houses An organisation which buys goods for sale abroad
Import houses An organisation which buys goods in from abroad
Confirming houses An organisation which handles the mechanics of exporting and importing on
behalf of manufacturers or buyers
Joint ventures teaming up with foreign firms to market each others products
Licensing agreements an agreement to use a firms intellectual property in exchange for a royalty
Franchising An agreement to use a firms business methods and intellectual property in exchange
for a fee and a royalty. Franchising is used in services industries.
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Competitive positions
1. Overall cost leadership minimise costs, reduced prices
2. Differentiation makes significantly differentiated products, premium prices
3. Focus specific markets, luxury items
Basic market positions
1. Market leader: DEFENCE STRATEGIES
2. Market follower (follows the lead of the main company in the market)
Cloners (almost exact copies)/ Imitators (some differentiation)/ Adapters (Improved products)
3. Market nicher; SPECIALIZE!
4. Market challenger
FRONTAL ATTACK/ FLANKING ATTACK / ENCIRCLEMENT ATTACK/BYPASS ATTACK/ GUERILLA
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Growth strategies:
Market penetration more sales in existing markets
Product development introducing new products in existing markets
Market development introducing existing products into new markets (exporting!)
Diversification New products, new markets (high risk, high profit)
Value-based marketing:
Increasing share-holder value, not necessarily linked to profitability
Approaches to strategy
Classical; environmental analysis as the basis for decision-making and long-term planning
Evolutionary; adapt to environment, survival of the fittest
Processualist; strategy through the bottom-up process
Systemic; companies follow policies predicted by their local social constraints
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Value network = the group of organisations which collectively add value to raw materials
Relationship marketing = the practice of concentrating on the lifetime value of customers rather
than their value in the single transaction. Aimed at retaining customers.
Cross-selling: Selling new products to existing customers. Much cheaper than selling to new
customers.
KAM = key account management
KAM stages of development model (describes stages in dyadic relationships)
Pre-KAM; relationship has not yet started, each partner is looking for the other
Early-KAM; partners have made a start upon doing business together
Mid-KAM; partnership is established and working well
Partnership-KAM; partners working in a highly-integrated way, dividing the work and profits
Synergistic-KAM; at this point the companies are virtually indistinguishable
Uncoupling-KAM; this can occur after any stage, they go separate ways
Quality management
Benchmarking: Setting performance standards by comparing performance with that of the best of
the competing firms
Managing the relationship in consumer markets
Relationship management examples;
Customer loyalty cards in supermarkets
Frequent flyer programmes
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HIGH
Market
Growth
S
$$
LOW
HIGH
Market Share
LOW
The War Horse (Big share, negative growth in market) and the Dodo (Small share, negative growth in
market) can also be added.
General Electric Matrix:
MARKET
ATTRACTIVENESS
HIGH
MED.
LOW
WEAK
Medium
Weak
Weak
This matrix is more flexible than the Boston Consulting Group Matrix
Cost-Plus pricing: Calculating production costs, adding profit margin = price
Five categories of product, from service to tangible goods
1. Pure tangible goods
2. Tangible goods with accompanying service
3. Hybrid
4. Major service with supporting goods and services
5. Pure service
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Packaging:
Informs customers
Meets legal information requirements
Aids the use of the product (easier to open)
Protection from the environment (most important)
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Innovation strategies:
1. Offensive; to be the first in the new market
2. Defensive; they act in response to competitive challenges from market challengers
3. Imitative; copies of other firms products, with our without slight adaptations
4. Dependent; component supplier for a car manufacturer that produces new models
5. Traditional; not innovative at all, resurrects or keeps producing old-fashioned products
6. Opportunist; produces and markets inventions
Stages:
Innovators
>
Early adopters
>
Early majority
>
Late majority
>
Laggards
Trial
Adoption
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Non-selling
Flag waving
Observing competitors
Getting an edge on non-exhibitors
Visitors:
Tyre kickers; have no purchasing intent or power, but pretend that they do
Wheeler-dealers; have power and intention to buy, want the best deal
Technocrats; engineers or technicians mostly information seekers
Foxes; have their own agenda, spying on competitors or selling their own products
Day trippers; students, retired people etc. coming to enjoy
The KAM/PPF model can be applied here also.
Exhibitions have to be thoroughly planned and worked out in order for them to work.
Staff has to be motivated
There are also alternatives of exhibitions;
Private exhibitions and road shows.
Sales promotions
Can be used to encourage the customer to trade up (=buy the more expensive version), to expand
usage or to use a trial.
Mechanics can help in persuading the customer.
Mechanics are the activities the customer must undertake during the sales promotion.
Sales techniques
Free tastings
Money-off vouchers
Two-for-one
Piggy-backing or bundling (giving a free sample attached to a purchased product)
Instant lottery or scratch cards
Free gift with each purchase
Loyalty cards
The offers should NOT look like they are too good to be true; customers might suspect a catch.
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Adoption of technology
Environmental factors
Internet adoption has gone in waves:
Wave 1: North America & Scandinavia
Wave 2: Rest of Europe, Australasia
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Effective supply chain management is a powerful tool for creating competitive advantage for the
following reasons:
1. It reduces costs
2. It improves asset utilisation
3. It reduces order cycle time
Establishing and Maintaining Relationships
1.
2.
3.
4.
Inventory Management:
JIT Just-in-time purchasing; no stocks, the responsibility for maintaining inventories lies with
suppliers
JIT, in general, is not used anymore.
Estimates of future sales are key in controlling the logistics and inventory.
Transportation
Five main categories:
-By Road
-By rail
-By air
-By water
-By pipeline
Liner = a ship or aircraft which operates on a regular route at fixed times
Tramp ship = a ship which does not follow set routes, but which sails when it has a cargo for a
particular port
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Wholesalers: sell to
other intermediaries
Agents
Licencees and
franchisees
Retailers: sell to
consumers
Management contracts
Agents
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Atmospherics
Product
mix
Retail
success
Buying the
right goods in
the right
quantities
Appropriate
service level
Service levels:
Self-service
Store
image
>
Limited service
>
Suburban
>
Full service
>
Out of town
Store image
Sight
Scent
Sound
Other sensory experiences
Other shoppers
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