Understanding of the market

Macroenvironment : demographic, economic, political, laws of a country – far away from

the company itself, cannot have a great impact on the short term. Company has to adjust to.
Cannot have much impact on.

Questions : how can they understand each part of the market. Diferent types of data –
primary data : collected to answer a particular question that the company will have and
secondary data : collected for something else that can be use to help us understand
something ex : internal corporate information, government agencies, trade and industry
associations, Marketing research time, commercial publications, news media.
 check the transparency

Pest analysis to study the macroenvironment :

- Political factors : level of stability, the political structure, what kind of global
organization
- Economic : GDP, growth, rich
- Social : cultures, issues of family, cooperative type or individualist, cultural DNA
- Technological factors : good infrastructure

PESTEL analysis :
- Environmental
- Legal

Framworks use to judge the macroenvironment : use when helping companies go in foreign
market.
- Useful and often simple heuristic
- Alloxs for a systematic approach
- More detailed as commitment increases

Microenvironments : company itself, suppliers, marketing intermediaries, customers,

competitors, publics (any group or organization that is impacted by what you do as a
company, pressure group, NGO etc).

How do firm understand each component : understanding the customers.

Porter 5 forces framework – understand the industry analyzing – look at competition,

buyers,
- bargaining power of suppliers,
- bargaining power of buyers,
- threat of new entrants,
- threat of substitute products

How to understand customers ?

- What is the information I need ?
- Can I get this information internally or externally?
 - Is it already available,
- If not how can I get it ?

Firm have a marketing system : what information do you require, find way to collect it and
distribute it.

Different research data and methods :

- Secondary -> accumulation
o Internal data available in the company
o External sources for the secondary data, government agencies, market
research companies, publications, newsletter.
- Primary -> process
o Experimental
 Laboratory
 Field experiment
o Non- experimental ?
 Qualitative
 Quantitative

Quakers
- Year 1 : telephone survey
- Year 3 : adjust data collection process
- Year 5

Happiness Survey :
1. We get a number at the end – but what does it actually mean in this country ? Not
hugely information
2. Could interview each one of us – but very long, take the rest of the trimester to
discuss happiness + how do I compare? Difficultl to quantify and compare this level
with others.

Observational research : Go to a retailer and follow customers around –

- Rich data
- Quite expensive
- Intrusive, ethical issues,
- Time consuming
- How aware people are of being watch – affect their behavior.

CONSUMER BEHAVIOR

Consumer buyer behavior : the buying behavior of final consumer – individuals and
households that buy goods and services for personal consumption

Impact :
- the environment : the firm impact by the product, the price, the place where it is
sold, promotion + microenvironeent have a impact
 - Buyer’s black box : hard to understand what is going on in the consumer mind,
buyer’s characteristics, buyer’s decision process
- Buyer responses : buying attitudes and preferences, where, when, how much do they
buy. Long term relationship with companies.

Consumer maket : All the individuals and households that buy and acquire goods and
services for peronal consumption

Factors influencing consumer behavior

- Cultural, subculture, social class – member of middle or upper class. French culture
involve a lot of eating out, sitting in café. Subculture : football, origin etc.
- Social : groups and social networks (church, mosque, sport, commuity), family, roles
and status (type of clothes, brand of cigare etc).
- Personal : Age life cycle stge, occupation, economic situation, lifestyle, personality
and self-concept.
- Psychological : motivation, perception, learning, beliefs and attitudes

Process : need recognition -> information search -> evaluation of alternative -> purchase
decision -> postpurchase behavior.

Adoption process : for new products

- Awareness : aware of new product
- Interest : seek information
- Evaluation : if it make sense
- Trial : estimate of its value
- Buy

Adopter Categories : depends when you buy the product : Innovators, early adopters, early
mainstream, late mainstream, lagging adopters.

Influence of Product characteristics on Rate of Adoption

- Relative advantage – better than what exists ?
- Compatibility : does it fit the values and experiences of target consumers
- Complexity – how easys/ difficult to understand
- Divisibility – can I try it on a limited basis
- Communicability – can one consumer easily describe to another.

BUSINESS BUYER BEHAVIOR

Business buyer behavior : organizations selling to one another, buy goods and services for
use in the production of other products and services that are sold rented or supplied to
others.

Business buying process : the decision process by which business buyers determine which
products and services their organizations need to purchase and then find, evaluate, and
choose, among alternative suppliers and brands.
The business market is huge, bigger than the consumer market. Different than consumer
mrket:
- Market structure and demand : Normal companies have less and larger buyers.
Loosing consumer counts ≠ consumer market. Goodyer sells to a few car
manufacturing customers. Demand is derived – tyre demand comes from car
demand. Inelastic demand, doesn’t fluctuate in the short run.
- Nature of the buying unit : more people and more professional ≠ family. Trained
purchasing agents who spend life working on buying better. Complex purchases may
have buying committees including technical experts. Lots of people involved.
- Type of decisions made and process : Decisions are more complex, expensive,
technically tricky. Longer and more formalized process (detailed products specs,
written purchase orders, proper supplier search etc). Often parties more dependent
on one another.

Model of buying behavior :

- The envionemnt : product, price, place, promotion and component of the
macroenvironement (PESTEL) competition
- The buying organization : buying center, lots of pople involved, purchasing people
and engineers. Different type of people buying.
- Buyer responses : product or service choice, supplier choice, order quantities,
delivery terms and times, service terms, payment.

Buying situations – 3 types

1. Straight rebuy : routine no change
2. Modified rebuy : some spec, price, terms modifications. Opportunity for new
suppliers, old suppliers get nervous.
3. New task : buying product or service for the first time. Huge opportunity for
suppliers.

Factors that influence business buying behavior

- Environmental factor : economy, supply conditions, technology
- Organizational : objectives, strategies, strctures, systems, procedures.
- Interpesonal : influence, expertise, authority, dynamics
- Individual : age, education, personality preferences

The process : Problem recognition -> general need description -> product specification ->
supplier search -> Persona solicitation -> suppler selection -> Order routine specification ->
Performance review.

WEEK 6

New products matter lifeblood of company – have to develop new products. But knew
products are risky.

How to get new products

- acquire companies that produice them : mix ray of success. Acquisition unsuccessful
- develop new products but risky : many fail (50-60%) : Market size overestimate, poor
design, bad timing, bad position, wrong price, executives push poor products

Traditional New product Development

Idea generation -> idea screening- concept dvp testing, marketing strategy development
(segmentation, targeting, positioning), business analysis (business cases, what if scenarios),
Product development, test marketing – commercialization.

Managing New Product Development

 Customer-centered NPD : try to understand the problem of the customers.
 Team-based NPD : try to get people from different organization to work together,
create better product, finance peple, marketing people.
 Systematic NPD : regularly

NPD in a Recession : ingeneers are more available for a lesser price, should continue –
Launch during a recession more likely to be successful.

For startups : business model canvas as a way of developing new products, understand what
their business model are for the market.

Product Life Cycle

Product life cycle : aggregate of all the different products outhere.

5 diferents stages
- Product dvp
- Introduction
- Growth
- Maturity
- Decline

Product can stay in the maturity for a long time -> Cornflakes.
Some other go straight to decline.

Question : what they do with different products.

Marketing objectives change through the different stages :

 Create product awareness during introduction
 Growht : maximize market share
 Maturity : Maximize profit while defending market share
 Decline : Reduce expenditure and milk the brand

Strategies
Pricing :

What is a price ?

“price is the sum of all the values that customers gie up to gain the benefits of having or
using a product or service”.

What do firlms consider to set a price ?

- Price floor : no profits below this price

- Competition and other external factors : competitots strategies, marketing strategy
objectives and mix,nature of the market and deman.
- Price ceiling : no demand above this price

Other internal and External Considerations Affectif price decisions :

- Internal factors : marketing strategy, objective, marketing mix
- External factors : elasticity, environmental factors (taxes on cigarettes)

What is the differences beteen cost-based pricing, value-based pricing, competition based
pricing ?

Cost based princing : not a customer driven -> set a price regarding the cost, sell the product
at that price. -> production driven pricing

Value-based pricing : assess customer needs and value perception, understand how much
the customer is willing to pay. Set a taget price to match customer perceived value,
determine costs that can be incurred. -> marketing driven pricing.

Good-value pricing : the right combination of quality good service at a fair priec.
- Everyday low pricing : Wlmart, Aldi – retailers providing good product at low pricing.
Rare to see promotion and discount
- High low pricing : involves charging higher prices on an everyday basis but running
frequent promotions to lower price temporarily on selected items.

Value-Added Pricing : cutting prices to match competitos – add value to what you are giving
to the consumer. To differentiate their offer andthus support their hgher price.

Competition-Based pricing : following what the competition is doing, not what a leader of a
market is doing but other competitors.

New product pricing strategy

What are two main pricing strategies for new product ?

 - Market-skimming : taking of the top layer of the market : high initial price to take top
of market then drop price to cover other segments : Iphone / PS3
- Market penetration : try to get as many customers as you can – low prices to get
volume.
Ikea changed their strategy in China starting with market-skimming and then going to
market penetration.

Product mix pricing :

- Product line pricing,
- Optional product pricing
- Captive product pricing : products that must be used with the main product – ink
with printer is really expansive
- By-product pricing : Pricing low value by-products to get rid of or make money on
them
- Product bundle pricing : product sold together as one product.

Changing prices

How to adjust pricing :

- Discount and allowance pricing : reducing to reward customer responses, promotion.
- Segmented pricing : adjusting to segment of the market, loctions /products.
- Psychological pricing : adjusting prices for psychological effect.
- Promotional pricing : short-run sales
- Geographical pricing : depends for the geographic location of customers
- Dynamic pricing : adjusting prices continually to meet the characteristics and needs
of individual customers ans situations
- International pricing : adjusting prices across international market.

Respond to price change or not ?

Perspective on pricing
- The most important decision in evaluating a business is pricing power.If you need a
prayer session before raising price, then you’ve got a problem.
- Ogilvy : People assume that marketers use scientific methods to determine their
pdouct’s price. But in almost everycase I’ve seen in my career the process is
guesswork”.

Distributions channels/place

- What is a marketing channel

Different wys for food manufacturer to reach the customer : how does a product goes from
the manufactury to the consumer.

- What do the actors do ?

 o Physical distribution
o Take ownership and take risk
o Take possession of products but different ownership- retailers don’t
necessary own the product. If they sell the product, pay the manufacturors
for the product.
o Promote the product
o Match products to customers
o Buy a lot, sell a little
o Financing

- What sort of conflict Exists and why ?

o Different interests and often have incentives that clash. the manufactors can
earn more money if the retailers make less.
o Each task costs money and nobody wants to pay. Carrefour becoming more
and more powerful but forcing others to pay for things.
o As the power of the retailers grew they began to demand other actors carry
the risk in the channel while most of rewarf goest to retailer.

- What do customers want/needs : service outputs

o Bulk-breaking – broken down into smaller units
o Spatial conveninence ) how close to home

- Shodl companies satisfy the wants of the consumer ?

o Competition : better than the competition
o Availability of resources
o Ability to Compensate
o Legality

Top retailers in the world form 2016

- Wal Mart
- Costco
- Kroger
- Schwar
- Amazon
- Carrefour

Retailing is still somewhat national. Wal mart does not translate very well to European
context.

3 strategic issues in retailing

- Managing multi-channel : strengths an weaknesses.
- Strong power position of major retailers : slotting fees, failure fees – forcing
manufacturors to pay if the product doesn’t sell, privte brand
 - Globalization of retailing : real estate/logistics/supplier
relationships/regulations/cultural sensibity

Gray market :
- What is the gray market : a market where a firm’s products are sold through
unauthorized dealers.
- How ig : 20-50% of all sales of product. 20 billion dollars in the IT sector
- How does it happen ?
o Everybody in the distribution channel is involved. Manufacturors have excess
product – sell it to unathtorize dealer. Migh force their authorize dealers to
take excess product then sell to unauthorized dealers.
o Distributor needs cash : sell to another distributer who is unauthorize.
o Distributor keeps local rather than taking it abroad.
o Internet allows sales to be made easier.
o Arbitrage between Canada and the USA for automobiles.
- Problems :
o Dilution of exclusivity
o Free-riding : authorized dealers skip service.
o Trust goes between channel partners
o Pricing segmentation is hurt –
o Reputation and legal liability : who is responsible – perused product but the
customer doesn’t necessary nknow this.
- Benefits of Gray market
o New markets, allows to test a product without having to go through the
whole channel
o Supply constraints
o Helps sgmentation rather than only going through authorized dealers;
o Marketing intelligence : IBM wanted to test the market in China, marketing
research
o Quick market entry
- How to Manage It : 3SS
o Sensing
o Speed : how quickly can we react to the violations
o Severity : can you take strong enough level of punishment.