Comercial management, Apuntes de Administración de Empresas

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Comercial

Management II

4rt Course 2013/

Joana Coll Gomila

Joana Coll Gomila Teacher: Antonio Ladron 01/01/

1.- Market segmentation and positioning strategies 2.- Managing the product over time 3.- Strategic Planning in Marketing 4.- Strategies for International Markets 5.- The Marketing Plan 6.- Product, product line, and brand Strategies 7.- Pricing Strategies 8.- Marketing Communications 9.- Distribution Strategies

Topic 1: Market segmentation and

positioning strategies

Markets are heterogeneous. Consumers differ in:

The benefits wanted: preferences. When we segment the market we have to know how consumers value attributes. The amount they are able or willing to pay: price sensitivity. The relative importance of the price is another dimension in which consumers differ. In marketing pricing is another important characteristic/ attribute. Price is not only related to the budget (poor, rich...). You can be price sensitive and be rich. It’s about how you differentiate because my perception is that all products are very similar and they you become more price sensitivity. Demographics: is a key for macro segmentations. Variables involved: age, gender, race, education and income. In some products the service and the product is consumed at the same time. So the family structure (fairly lifestyle) Psychographics: religion (beliefs, lyfstyles…) Behavioral (purchase and consumption): eg. Yogurt market, cookies, coffee, beer, etc: quantities, usage and consumer frequency, consumption and purchase habits, occasion… Behavior related to purchases and consumption. Consumer characteristics where buying or consuming products. If you live alone and you buy little things, little frequency. The behavioral process is different for a huge family. Ex. Consumption of cereals (frequent consumers, sporadically consumers  the process is different). Even the media they are exposed to…

Some concepts:

Segmentation : it’s a process in which a firm analyses the market and forms groups. The process of determining customer groups within the market that has special characteristics which are significant for the marketing strategy. Segmentation is synonym of groups of consumers with similar characteristics. This segmentation is relevant for the firm strategy. Related with the concept of a target market: when you segment the market you create a target segment.

Target market: when you segment the market in groups of consumers with similar characteristics then it comes an evaluation process. Those segments in which the firm is

“Microeconomic approach of Marketing”. Oranges and apples vs taste and nutritional facts

We could ask every consumer to evaluate a set of attributes in terms of:

 Its ideal level of attributes  Its importance

Eg of ideal levels of attributes. Let’s assume that the two basic attributes considered by consumers when buying plain yogurts are: sweetness, fat/creaminess. We could ask every consumer to rate the ideal level of sweetness and fat for a yogurt (1-7 semantic scale):

**1. Level of sweetness:

2. Level creaminess (fat)**

The information can be included in a “Perceptual Map”. The “ideal product” for each individual is plotted in a two- dimensional map:

Discrete variable - We could plot in a perceptual map : graphical representation of the market. Consumers are plotted. Get an idea of how consumers are distributed in terms of preferences. We can have homogeneous preferences (In theory). In practice preferences are heterogeneous.

The possible preference patterns are:

Unsweet. Very sweet 1 2 3 4 5 6 7

Not creamy Very creamy 1 2 3 4 5 6 7

Clustering method: allow us to group consumers in segments (eg. 3 groups) dividing the population. It is a statistics methodology that helps us to group similar consumers.

How do you think that the consumers across these three segments differ?

Basic statistical analysis

What variables characterize the segment? (statistical significance) Characterize segments in explanatory variables (which help us fully understand the segment).

1. Age: example, the age distribution of the group B is higher than C.
2. Gender: higher percentages of females over male in the group C for example.

KELLOGG’S: SPECIAL K

Do you think that the Light-product market is a feminine one? How dos Nestlé want to be positioned with this spot?

Target : female doing diet. The taste is good enough as a full fat product. 0% strongly associated with “bona figura”. Advertising campaigns of low-calories brands are focused on females. The more I target on the segment, the more effective will be the advertising.

Direct marketing action: any communication action in which the advertiser or manufacturer request for a measurable response. Ex. Advertising through the web page. Every time you open or sign in an advertiser page, this is a direct marketing action.

Do the consumer profiles vary for the different segments?

Banks: La Caixa. Banks started targeting young students, who weren’t a traditional target of banks because they aren’t profitable now. At some point, banks started to use young students as target. Why? CRM: consumer relationship management. It consists on the philosophy of treating his/her consumer in a long term relationship in order to promote preferences and loyalty. CLV : customer lifetime value. Banks value his/her consumer in a long term profitability; that’s my bank stats focusing in young people, not now, but getting profits in the long term.

Example of segmentation by family life cycle: Family children segment. It is for all family and children, for example Disneyland Paris. We have to understand family life cycle as a group of people. Portaventura is for teenagers and young people (group of friends) amusement parks.

Hotels are also an example of segmentation by family life cycle. The valuation is the gold key (based on several attitudes) and also the hotel can segment. Web pages offer the possibility to do a full evaluation of the hotels.

 Physiographic (lifestyle, personality, Social class…) e.g. cars, 4x4, fast food, alcoholic drinks. Land rover experience lifestyle. Kellogg’s: they talk about doing exercise, concern about having a healthy life and weight.

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Also an example of physiographic segmentation is alcoholic drinks such as Martini. Slogan: no martini no party. It is a very good example. Martini repositioned his product using a strategy that modifies the perception of the brand in consumer’s mind. The truth is that Martini is a cocktail, but it was used as vermouth and traditionally the use was very limited. Because of the flavor is vermouth. They wanted to reposition in order to promote consumption in every moment of the day. And as a consequence, of course the demand grew up. Chico Martini is in the advertising campaign and he appears in many situations drinking Martini.

Income is a demographic variable but exclusivity (high class  social class) is a psychographic one. The first spot was related to this. The second one they wanted to link with the Mediterranean way of life, people enjoying the life. “viva la vita”. Lifestyle physiographic variable, whereas the third one his slogan was No martini, no party.

 Behavioral (usage and consumption of the category, consumption frequency, consumption habits, purchasing habits, consumption occasion).

Eg of consumer occasion. Even the same consumer in different occasions can evaluate a product very different, for example chocolate. 3 different occasions: 1 for cooking, 2 as gift, 3 for snack (for me). The same with the wine, chocolate, travels, hotels…

Eg of behavioral depending on usage. Holidays vs business. The truth is that these two segments are very different. Easyjet is focused on holiday segment. They were growing planning holidays packets. Complementary activities for holiday people; whereas an opposite example is nH hotels (1st^ European chain for business segments) Focusing on business. Easy access to the airport and Juan Carlos I business fair grounds.

Segmentation based on the user category:

Example: mobile-phone; is the mobile-phone market a mature one in developed countries? In developed countries the mobile-phone market has also a potential number of users: old people. It is also known as lack segment (segment tardio)

Valuation of frequency: products like detergent, deodorant, toothpaste… the consumption frequency depends on the members of family and it is not significant, in other words,

Category

Non users

Non potential potential

Users

Ex. users

New users

Regular

Frecuency

Loyalty

DAB= distance among consumers. A,B = consumers X1=attribute 1 X2=attribute 2. It can be more attributes.

Consumers are compared by the distance. This is the clustering methodology. In this example, we have 8 attributes. Using distances  we obtain average of the three segments based on preference response. Average response representation.

Segment 1: 53% of importance is in price and then the package design.

Segment 2: 5% the price is not important. The high level of alcohol is very important, probably is a masculine segment. They are very concern about the country where brewed. It can exist correlation among strong beers and importation.

Segment 3: It is a not sensitive price. The consumers really concern about the sense and taste characteristics.

2. Segment profiles: graphical techniques to interpret the information.

Perceptual maps with more than 2 attributes. The idea is make a picture that allows us to preserve the most important information in it. Two methodologies: principal component analysis and factorial analysis.

Some examples of perceptual maps: The amusement parks

4 attributes: price, fantasy, fun rides, educational activities – animals

The outcome is plot in two dimensions: 1,2,3 segments. The arrows from the center.

Interpretation?

Perpendicular of the arrow. Segment 3: people value educational and animals. Segment 1 and 2 don’t value the education.

Economical or high price, both segments 2 and 3 are sensitive where as segment 1 no.

For a perceptual map to be a good procedure we have to complement it with evaluation brand.  existing “product position”.

b. Existing “product Positioning”: consumers evaluate the perceived levels of attributes for the established brands. Each product is positioned in the map, according to the average perceived levels.

Consumers evaluate the perceived levels of attributes with the brand. We can determine market opportunities.

Hamm can go to segment 2. We should target for segment 2. Based on the fact that there’s no brand it could be useful reposition =reformulation his/her product. Make it milder and relaunch the brand. We need to recommunicate. This is the usefulness of perceptual maps.

Three main levels can be distinguished:

 Demand life cycle (basic need)- for example communication (competing technologies)  Technology life cycle – Eg. Mobile phones  Product life cycle – Eg. Iphone 4S

Basic underlying needs:

TRANSPORTATION, COMMUNICATION, FOOD, CALCULATION  TECHNOLOGY LIFE CYCLES??

Example of US music recording media. The demand for records, CDs, cassettes, broadly speaking the aggregate demand for music leisure is constantly growing.

Some theories say that some basic need demand is declining. Health care

Some other examples

The huge food market: FOOD

Technology life cycle (growing, preservation, storage and transportation) New technologies allow to extending the distribution to many different places.

 Fresh : growing vegetables, farming…  Salted- dried , dried fish, meat, vegetables (extend the distribution)

 Canned food ( extensivenes s= geographic concept and intensiveness = number of points of sales distribution channels)  Frozen food (requires more sophisticated packaging technology and distribution channels)  Refrigerated: from the consumer point of view why they prefer refrigerated products? Much better in quality but, it has a very short expiry date. Eg. Pastas gallo The demand of refrigerated food is growing. The consumption of canned food at some point started to decrease. Every consumer is 3-4 times a day demanding  Organic food: it is about growing and better taste. The demand of organic food is a growing technology.

There are also technologies involved in outside consumers. We can distinguish two big segments:

 Eat at home  Eat-out segment

Be careful with the marketing myopia : if you don’t see the market as a moving technology, you have to manage to adapt to the changes. Theodore Levit. The marketing myopia don’t understand the changes in demand and technology. Common example: managers of the ray wails didn’t understand the changes in the consumer needs (transportation technologies). You need to monitor the market.

Technological market is a market in which through the developing and research new products can be launch in the market very fast (impacting technology) Ex. Computers, videogames.

Communications: mail, telegraph, telephone (fixed phone, mobile phone) any other competing communication technology?

Product life cycle

The introduction of a new product offering innovative attributes (e.g. new technologies) usually presents a life-cycle curve along the diffusion process, characterized by four stages:

 Design/development: second stage only costs.

From moment 0 they launch the product. Red line is operating costs, and the blue line is the accumulated flaw, we haven’t achieved the operating breakeven yet. In green/red is the operating breakeven (gross profits). The blue breakeven is the total breakeven point, which is the point that we need to achieve for the whole project to be profitable.

A research of 80’ shows that 1 of 7 of the projects are profitable. It is more likely not to breakeven than to breakeven.

 Launch (introduction)

Characterized by slow growth rate sales. No matter how big the potential of the product is. Because of:

 Supply side: o Technological problems o Delays in expansion of product capacity o Reluctance of distribution channels (delays in obtaining distribution)

Intensive distribution needs also for a long channel. Through long channels is more difficult to obtain distribution of the product. The firm has to invest a lot of money in advertising campaign until the distribution. Small retainers are really reluctant to sacrifice the space to start to distribute new products. Ex. Nestlé

 Demand side: o Consumer unawareness: it takes time for consumers to be awarded. o Consumer reluctance: it takes time for consumer to look for and changing habits. Especially for technological products. o Long replacement period (durable products). The demand for a durable product is limited by the replacement. Whirlpool and washing machines.

Because of all the effort the introductory stage is characterized by no profits. Because of the production level, the economies of scale appear, not only in terms of production but also in promotional cost and distribution cost. Because of production level is low it faces high unit cost.

Low productivity, new production technology, low experience.

Manufacturers

Supermarkets

Holdsales

Retailers

Retailers

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Experience curve: the process in which through the experience the firm becomes more efficient. With experience firms become more cost-efficient.

Price

High

Low

Price is a really key:

High skimming (not affordable for all the demand) whereas low penetration (launch a product in which most of the market is affordable)

Promotional effort is also a key: Promote=communicate including advertisement, sales promotion…

High promotional (is translated to a higher price Fast/quick/rapid) whereas low (is a slow communication).

Maximize price and minimize cost is not always the most appropriate strategy.

Skimming strategies Skimming strategy (the gap between the cost and the market value is very high). Consumers are organized by the willingness to pay. It is typical for durable products.

Promotional effort High Low

Most of the market can benefit of it. Price sensitive markets.

It is particularly useful when: elastic demand (related to the price sensitivity) higher revenues by decreasing price, increasing demand. In consumer behavior means that consumers are very price sensitive. Appropriate: maximize revenues by launching the product at a lower price.

 Big markets with high economies of scale. Markets with huge fixed costs equal to entry natural barriers). The concept is: you are more cost efficient increasing the production.

The breakeven so relevant that only for example 2 o3 firms can survive. It is a really entry barrier to achieve those production barriers. To preclude competitors to entry in the market, it is an appropriate strategy to entre in a market with huge quantities in order to generate entry barriers at an affordable price. Natural monopoly: no competitors, because you launch a product an affordable price.

 Experience curve effects (entry barriers 2)

Fast penetration strategies:

 High risk of competitors in the short run. Example: easyjet and other low-cost airlines. Entry barriers are low. Penetration when they first launch cheap price but there is no entry barriers because there isn’t specific technology for it.

Slow penetration strategies:

 First two cases: Whirlpool and a new style. They are penetration.

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 Growth

We cannot control communication among consumers: word of mouth (boca oreja). Characterized by rapid market awareness/acceptance , the higher the growth rate, the igher the number of competitors.

New competitors: Second competitor reaction: whitestrips- simply white minute. Minute maid- don simon.

Low costs. Why?

 Economies of scale Why? Lower unit manufacturing costs, lower unit promotional distribution cost. We start making profits.  Experience curve.

Market fragmentation (new segments). The best example is the mobile phone industry. As the market evolves some consumers started to look for some particularities.

The most important strategy (requirement) when the market starts to segment is DIFERENCIATION. Improvement of quality and new attributes.

Besides differentiation you start looking for launching new products. Launch a new version (line extensions). Example: Pastas Gallo, familiar sizes, local flavors, international flavors…

New alternative distribution channels Eg. Fitness cloth- (trainers, sportive shoes 20 years ago they were only used to do sport. Big growth trend but also in Corte Inglés more distribution channels. Also PC’s now you can buy one in many commerce, mobile phones (also