Fluent Essays

Consumer and Organizational Buying Behavior Start Recording This a great cartoon of the evolution of what Erich Fromm (social philosopher) tongue-in-cheek called Homo Consumens 1 Chapter 7: Analyzing Business Markets Chapter 6: Analyzing Consumer Markets Marketing Planning Process Analyze the Marketing Environment Analyze Company Strengths & Weaknesses Analyze the Competitive Environment Analyze Customers (Behavior) Segment customers. Target segments with unmet needs or weak competitors. Differentiate and Position your brand Design an integrated Marketing Mix (4P strategies). How will it change over the PLC Implementation Plan, Roll-out Control Performance Metrics and Measurement Plan Evaluation Corrective Action So where are we in our master framework of the Marketing Planning process ? 3 Factors Affecting Consumer Behavior Culture Sub- culture Social class Reference groups, social networks Family Roles & status Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept Motivation Perception Learning Beliefs and attitudes Decision process Situation factors PERSONAL CULTURAL SOCIAL PSYCHO- LOGICAL BUYING 4 US moving from a melting pot society to a salad bowl society with many subcultures SUBCULTURES Hispanic Americans 59 mil $1.7 tril African Americans 47 mil $1.5 tril Asian Americans 20 mil $1 tril Cross cultural marketing Book discusses ethnic sub cultures. Numerous companies from Autos, personal care, fast food, retail etc. have ethnically targeted campaigns Hispanics will grow to 29 % of pop in 2060. There are strong country of original loyalties. Surprising behaviors—35% of Twitter users are Hispanic vs 18% of the rest. African Americans growing in affluence and sophistication. Heavy users of digital and social media. Asia Americans are a very diverse group from many countries. Most affluent and most educated. In very recent years big growth in Cross cultural marketing (text calls “total marketing strategy”) featuring interracial and blended couples and families. 5 SOCIAL CLASS Upper Uppers 0.3% Lower Uppers 1.2% Upper Middle 12.5% Inherited wealth. Cultural products. Reference group for LU. Earned wealth. Conspicuous consumption. Career professionals. Deal in ideas. Functional quality market. Middle Class 32% Working Class 38% Upper Lowers 9% Lower Lowers 7% White, gray, “aristocratic” blue collars. Middle class morality. Neat & Pretty homes. Buy “popular” brands. Blue collar. Traditional sex-roles & stereotypes. Heavy peer influence in brand choice. Unskilled labor, low education, just above poverty. Buy impulsively, unwisely. Visibly poor, on welfare. Resigned, reject middle-class values. 6 Text doesn’t cover social class in any detail. But for your quick reference this is the way social class has been described for many many years. The percentages are merely figurative in this day and age. There is considerable movement across classes in beliefs and behaviors. I have grouped then in three broad groups which are more useful today US middle class shrank from 61% in 1971 to 51% in 2011 and has been stable the past 10 years. But middle markets have taken a beating. PEW Research Center data Population: Share of US adults living in middle-income households decreased from 61% in 1971 to 51% in 2019.  PEW Research Center data Projections Strategic Q1: What is the Impact of a Smaller US Middle Class on the Market? Smaller middle class = Declining middle brands: Lower End Middle Brand Premium Hyundai Chevrolet Lexus Wal-Mart Sears Nordstrom’s Days Inn Holiday Inn Four Seasons We talked about this. The values of the middle market are also getting pulled toward successful brands in the polar markets. This is exacerbated by high quality Value brands and downward stretch of luxury brands. Middle brands increasingly look like being stuck in Porter’s “middle”. 9 Middle market is shrinking but still substantial. Yet it is increasingly difficult to come up with a viable middle-market positioning strategy. WHY? Quality Value-brands Downward stretch of Luxury-brands Middle brands The values of the middle market are also getting pulled toward successful brands in the polar markets. This is exacerbated by high quality Value brands and downward stretch of luxury brands. Middle brands increasingly look like being stuck in Porter’s “middle”. 10 Q2: What is the Impact of a Growing Global Upper Middle Class? Transformation of the Luxury Niche into a $157 bil Global Mass Market dominated by Louis Vuitton, Gucci, Prada, Giorgio Armani, Hermes and Chanel Predicted to be 44% by 2020 We also talked about this. Partly due to global Gen Y, and partly leap frogging traditional mid class values. China 33% of world luxury market in 2018, predicted 44% by 2020 (US was 22% in 2017 down 1% from 2016). 11 REFERENCE GROUP INFLUENCE SEEK TO BELONG TO MEMBERSHIP REFERENCE GROUP ASPIRATIONAL REFERENCE GROUP DISSOCIATIVE REFERENCE GROUP Conformity AVOID EMULATE 12 1. The typical influence of membership groups is “conformity.” But in some groups, such as Family, there is also pressure to be independent/individual in some ways. 3. E.G.: In a more “youthful” culture, a lot of medical ads still tend to use older spokespersons? AGE is a dissociative factor in many health care situations. As it is, denial is a common barrier in seeking HS. Many “younger” consumers are inclined to feel “I am too young to worry about that kind of a problem.” GROUP DYNAMICS Cliques Closeness Conformity Opinion Leaders Mavens Bridges Connectors Salesmen Bees Strength of Weak Ties—Mark Granovetter 13 1. The typical influence of membership groups is “conformity.” But in some groups, such as Family, there is also pressure to be independent/individual in some ways. 3. E.G.: In a more “youthful” culture, a lot of medical ads still tend to use older spokespersons? AGE is a dissociative factor in many health care situations. As it is, denial is a common barrier in seeking HS. Many “younger” consumers are inclined to feel “I am too young to worry about that kind of a problem.” CELEBRITY ENDORSEMENTS ASPIRATIONAL REFERENCE GROUP INFLUENCE Most Expensive Celebrity Ad Campaigns George Clooney for Nespresso. $40-60 mil Beyonce Knowles for Pepsi. $50 mil Michael Jordan also $60 mil for Nike. George Clooney, reportedly 60 million for Nespresso For single ads between 500k and 2 mil 14 INFLUENCER MARKETING Word of Mouth on Social Media Companies spending $100 bil per year on influencer marketing Reportedly businesses make an average of $6.50 for every 1$ they spend on influencer marketing Kylie Jenner, $1 mil per post Disney’s Social Media Mom’s Celebration in Orlando Caveat: 90% of WOM is still offline (75 face to face, 15 on phone) The social media include Instagram, Facebook, Twitter, Pinterest and Youtube Kylie Jenner has 250 mil followers on social media Disney invites 150-200 moms of their carefully selected 1300 bloggers, and their families to Orlando each year We have a Guest Speaker Amanda Mizrahi on April 8 who is an expert on Influencer Marketing 15 Psychological Factors Affecting Consumer Behavior Culture Sub- culture Social class Reference groups Family Roles & status Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept Motivation Perception Learning Beliefs and attitudes Decision process Situation factors PERSONAL CULTURAL SOCIAL PSYCHO- LOGICAL BUYING 16 Motivational Research Rational vs. Subconscious 90% of behavior is driven by subconscious forces Old marketing saying: sell the sizzle, not the steak Source Zaltzman, Harvard Neuroscience research shows that people whose brains are damaged in the area that generates emotions are incapable of making decisions 17 Freudian Psychoanalysis “Freud on Madison Avenue” published in 2010 looks back into the development and evolution of motivational research since the 1950s. 18 Ernest Dichter’s research: Consumers resist prunes because prunes are wrinkled looking and remind people of old age. Men smoke cigars as an adult version of thumb sucking. Women associate baking with giving “birth.” In 1957 subliminal ads (James Vicary): "Eat Popcorn” “Drink Coca-Cola” increased popcorn sales 57.8%, Coke 18.1% Subliminal Processing? In 1957 James Vicary inserted a frame "Eat Popcorn" and "Drink Coca-Cola" into a movie for a split second. The subliminal ads supposedly created an 18.1% increase in Coke sales, popcorn increased 57.8%. This was later discredited (some said it was a hoax). 20 Learning Theory: Classical Conditioning, Stimulus-Response Pavlovian Learning Model Stimulus—Gratification—Conditioning—Learned Response Does stimulus-response work? Are we like animals? Well if you see who often advertisiers use "frequency" campaigns with much concentrated repetition, it must work ! But the alternate model is the attitude-behavior, or reasoned action model. Early meta analysis study showed correlation of attitude behavior to be 0.38 but statistically very significant. 21 Theory of Reasoned Action Beliefs, Attitude, Behavioral Intentions Subjective Norms Attitude Behavioral Intentions ˜ Behavior Developed Fishbein and Ajzen iin 1975 as a theory of moral behavior. Subjective norms are about the social norms of behavior we believe are expected from us by family, friends, reference groups, and society in general. Early (Wicker 1969) study showed average correlation to be only 0.15 (max 0.30). After refinement ad elaboration of model, meta analysis study (Kraus 1995) showed correlation of attitude behavior to be 0.38, statistically very significant but r-square still only comes to 0.14 i.e., explains only 14 % of behaviors. 22 Information Processing Theory Info processing theory is a rational model but is based on underlying mechanisms of subconscious and conscious processing, not just manifest phenomena. Note again the importance of “frequency” rehearsal/repetiton 23 Newest Phenom: Neuromarketing New Technologies: fMRI (Functional Magnetic Resonance Imaging) SST (Steady State Topography) EEG (Electroencephalography) Eye Tracking Galvanic Skin Response VIDEO Picture left bottom is hyperlinked 24 Neuromarketing Fundamentals Subliminal Processing is Back? “Priming” Freudian motivation is back? Amygdala Rational ? Emotional ? The amygdala is the “primitive” brain responsible for emotions, survival instincts, and plays a role in sexual activity and libido, or sex drive. 26 Highly successful Axe ads In your face sexual What about subliminal ads? Magazine ads featuring sex are on the rise. business.com Jun 25, 2021 Thanks to social media, which reduces inhibitions Article is reporting on a study from Georgia Univ. 27 But what about subliminal ads? Sex Symbol? Appeals to our reptilian brain? Appeals to our reptilian brain? 29 “sex” plosion 30 http://www.youtube.com/watch?v=erp-MQc1ubQ Swensen’s Icecream Photo is hyperlinked to http://www.youtube.com/watch?v=erp-MQc1ubQ 31 “Priming” Group 1 (left): https://forms.gle/hh3FPS1XscsLmx1R9 Group 2 (right): https://forms.gle/BD6rrCtgpS2A53BS8 Freudian motivation is back? Quick read on priming on the Internet: https://alldgt.com/priming-in-marketing/ Subliminal Processing is Back? Priming are hidden or subtle cues embedded in words or pictures to trigger subconscious connections in the brain. Most Ads try to do this by using conscious or visible cues. But priming is subconscious. It’s the old subliminal drink coke, eat popcorn thing again. Works even in conscious cues. Person 1 is considered in a positive likeable way. Person 2 perceived in a negative way. Psychologist Malcolm Gladwell entire book on priming. 32 Psychological Factors Affecting Consumer Behavior Culture Sub- culture Social class Reference groups Family Roles & status Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept Motivation Perception Learning Beliefs and attitudes Decision process Situation factors PERSONAL CULTURAL SOCIAL PSYCHO- LOGICAL BUYING 33 Consumer Decision Processes Five Stage Model of Consumer Decision Making Heuristics: Expectancy Value model, Conjunctive, Lexicographic, Elimination rules Conjunctive = minimum acceptable levels of attributes Lexicographic = most important attribute 34 Consumer Behavior on the Internet Omnichannel eWoM 38 UGC User Generated Content Customer Service End Note ? 40 Buyer Behavior in Business Markets 41 Buyer Behavior in Business Markets Market Structure And Demand Concentration: fewer, larger buyers Geographically concentrated Derived Demand Buyer and seller more dependent on each other Build close long-term customers relationships Characteristics of Business Markets 1. Market Structure and Demand 43 2. Nature of the Buying Unit Professional purchasing Complex buying influences Buying Center Who would you direct your marketing activities to in an organization? More Rational Less Emotional Inelestic dd System buying Service Buying Influences New Models of B2B Joint Innovation “Supplier Development” Relationships 46 Supplier Development Dept not Purchasing Dept. at Walmart Maersk and IBM: Use of the same social media sites used in B2C marketing New Models of B2B Relationships “Supplier Development” Joint innovation e-Procurement Trading platforms Social Media LinkedIn 590 million business professionals Its content nabs 9 bil views per week 47 Maersk and IBM illustrations. Use of the same social media sites used in B2C marketing 1. 
 Marketing Planning Process Analyze the Marketing Environment Analyze Company Strengths & Weaknesses Analyze the Competitive Environment Analyze Customers (Behavior) Segment customers. Target segments with unmet needs or weak competitors. Differentiate and Position your brand Design an integrated Marketing Mix: 4Ps. Product, Price, Promotion, Place. How will it change over the PLC Implementation Plan, Roll-out Control Performance Metrics and Measurement Plan Evaluation Corrective Action Start Recording So where are we in our master framework of the Marketing Planning process ? 1 SEGMENTATION, TARGETING, DIFFERENTIATION, POSITIONING Chapter 9: Identifying Market Segments and Targets Chapter 10: Crafting the Brand Positioning Divide the total market into homogenous preferences Select segments with unmet needs or weak competitors Distinguish your offerings from competitors Positioning Segmentation Targeting Create the brand image and position in consumers’ minds Differentiation Value Proposition E 3 How do you divided the market into homogenous preferences ? Segmentation 1. Effective Criteria 2. Variables (Bases) 4 Effective Segmentation Criteria Segment size, purchasing power, profiles, can be measured. Communication media, distribution. Segments are large or profitable enough to serve. Measurable Accessible Substantial Differentiable Actionable Effective programs can be designed to attract/serve the segments. Segments respond differently to different marketing mixes. 5 Most Imp.: Differential. Segments must have different preference structures, different shopping and media habits, and respond differently to different communications and promotional mixes. 2. Sometimes a degree of market separation may be necessary to implement targeted strategies. Bases for Segmenting Consumer Markets Geographic Demographic Age, gender, ethnicity Income, education, occupation Family size/ life cycle, Social class Psychographic Lifestyles Motives Personality Behavioral Benefits sought, Occasions. User status, usage rate. Loyalty, price sensitivity. Nations, states, regions Cities, suburbs, rural Climate, terrain 6 A large part of Database marketing today is based on a new twist to the old emphasis on Usage Rate—the RFM model=Recency, Frequency, Monetary Value. What is a Lifestyle? Activities: Clubs, community, entertainment, hobbies, shopping, sports, vacation, work. Interests: Degree of involvement in community, family, fashion, food, home, recreation. Opinions: Beliefs about, society, culture, business, economy, technology, self and social issues. AIO, VALS, PRIZM, PERSONIX 7 Clustering 8% 11% 13% 12% 13% 14% 13% 16% Lifestyles VALS- 2 Values & Personality SRI International Stanford Research Institute (SRI) International 9 VALS Multiple Segmentation Bases Acxiom’s Personix Lifestage System PRIZM: Geodemographics PRIZM cluster analyzes 35,600 ZIP areas into 66 homogenous segments based on 39 variables: - Demographics from Census of P&H - Lifestyle data from regional surveys - Media data from Mediamark Research Profiles brand preferences for 1000 products, e.g. autos, health insurance, detergents. * PRIZM was developed by Claritas Corp. Now owned by market research giant Nielsen. 11 PRIZM was developed by Claritas Corp. Now owned by market research giant Nielsen. Elite Suburbs: Exurban Blues: Blue Blood Estates Middle America Pools & Patios Military Quarters Kids & Cul-de-Sacs Country Families: Urban Uptown: Shotgun & Pickups Money & Brains Urban Cores: Young Literati Hispanic Mix Second City Society: Heartlanders: Gray Power Grain Belt Second City Centers: Rustic Living: Towns & Gowns Back Country Folks Sunset City Blues Hard Scrabble Blue Blood Estates Shotguns & Pickups 12 All 66 PRIZM segments are grouped into 14 broader Social Groups 0.8% of US hh Primary age: 35-54 Hh income: $113K Home value: $452K Predominant white & Asian Mod Republicans Sample ZIPs: Potomac MD Saddle River NJ Old Westbury NY Rolling Hills CA PRIZM: Blue Blood Estates 13 Blue Blood Estates: Consumer Profile Lifestyle Products What’s Hot: Country Clubs 471 1st Class travel 323 Tennis 317 Investments>50K 316 Price Club 280 Housekeepers 244 What’s Not: Burger King 80 Power Tools 71 Kmart 58 Chiropractors 56 Food/Drink Pita bread 261 Imported wine 260 CF Diet Coke 154 Dominos’ Pizza Soy sauce 131 Mags/Newspapers Wall St. Jl. 607 Longevity 481 Architectural Digest 425 Fortune 424 TV/Radio Classical radio 509 Masterpiece Theatre 258 Wall Street Week 240 Pay-per-view Concerts 225 Cars/Trucks Ferrari 2146 Land Rover 1816 Jaguar 1582 Infiniti 1455 Mercedes 1359 Lexus 1124 Saab 1124 Dodge Viper 1025 14 1.7% of US hh Primary age: 35-54 Hh income: $33.3K Home value: $58.4K Predominant white Blue collar Ed: High School Cons. Republicans Sample ZIPs: Lynchburg TN Iron City NC Dallas, GA Hager City, WI PRIZM: Shotguns & Pickups 15 Shotguns & Pickups: Consumer Profile Lifestyle Products What’s Hot: Chewing tobacco 265 Tractor pulls 240 Auto races 197 Hunting 172 Fishing 163 What’s Not: Bowling 45 Foreign Videos 42 Costco 15 Online services 0 Food/Drink Spam 163 Diet Rite cola 154 Grits 153 Pasta 140 Mags/Newspapers Woman’s World 231 Bassmaster 216 Modern Bride 197 Guns & Ammo 183 Country Living 182 TV/Radio Bold & the Beautiful 267 Young & the Restless 212 CBS this Morning 191 Rush Limbaugh 182 Cars/Trucks Dodge 3500 pickup 251 Chevy 4x4 pickup 246 Dodge 4x4 pickup 232 Ford 4x4 pickup 224 Pontiac Sunbird 177 Chevy Berettas 176 16 Targeting 17 TARGET MARKET STRATEGIES Undifferentiated Marketing Multiple Segment Marketing Concentrated Segment Marketing Micromarketing (Individuals) Diffused Preferences Appeal to what is common in prefs (price) Clustered Preferences Distinct Mktg Mix Unique large segment, or underserved preference, (high-end or ignored) Personal mktg, customized Super premium, INTERNET Marketing Expense Low High When Suitable? 18 You book treats targeting in this manner. Undifferentiated or Mass marketing: Diffused/fickle preferences—Appeal to what is common among preferences (usually price). Or: Variety strategy (Seiko). C Differentiated or Segment: Clustered Preferences Concentrated or Niche: Small/underserved segments. Usually very high end (RR/ Ferrari); very unique/individualistic (Apple); ignored (Auto insurance, finance). Micromarketing: Regional assortments/promos; Dell; National Bicycle/Levy’s. Extent feasible due to new electronic channels. Targeting Criteria Segment(s) with unmet or poorly served needs Segments with high levels of customer dissatisfaction Market evolution: changes in consumer tastes/values, or in market structure (distribution channels) Weak competitors - with older technologies, - poor marketing programs, - not engaged in the new media New technology or business model that disrupt the market Differentiation & Positioning (Chapter 10) 20 But Differentiation is not that simple. Where does one start? NEXT SLIDE Product Differentiation Form Features Quality Performance Quality Precision Quality Durability Reliability Reparability Design: The Integrating Force Differentiation Variables Product Services Personnel Distribution Channel Image Consumer’s model of Quality As your book lays out for you there are many variables you can differentiate with. Let us take the most natural one—PRODUCT differentiation. CLICK. But here too there are many dimensions, CLICK and then dimensions within dimensions CLICK. So what is your answer ??? Exactly, as marketers our answer always is “how the customer sees it” 21 Quality Segments Positioning 22 POINTS OF PARITY Differentiation & Positioning POINTS OF DIFFERENCE Key is a Unique Selling Proposition (USP), or a few, that are: important to consumers, distinctive vis-à-vis competitors’ positioning, highlights an attribute of the firm on which it has superior capabilities, and The United Airlines slogan, which debuted in 1965. United Airlines The United Airlines slogan, which debuted in 1965. United Airlines (4) communicates in powerful ways (“Brand Mantras”). Communicates in powerful ways—Just do it, Think Different Text also mentions Preemptive, Affordable and Profitable, but these are not the driving concepts 23 Price Positioning - High - Medium - Low Q: Benefit/Attribute positioning--Price Would you appeal to price advantage? No—affordable quality or value Would you position on quality? ? No—use social status or ego Benefit and attribute positioning are hard to maintain in a dynamic market (e.g. tech products. 24 Q: So How do you market to the middle ? Most “popular” brand Brand symbols, mascots Points of parity with premium brands Positioning by associations: lifestyle, peer effects, reference group effects Tony the Tiger, Kellogg cereals 25 Brand Mascots The misery of Sears and Kmart   Sears could not find a way to market to the middles class. But it never tried to develop a unique Brand identity. Like may be developing a powerful, likeable Mascot. Even Target has been able to differentiate itself in the Discount retailing market with a mascot. Compare McDonald’s likeable Ronald McDonald with Burger Kings creepy King ? Bk retired the King in 2011 but I think they have brought him back ! Do you think he resonates with Gens X Y or Z? P.S. Walmart is slowly killing its POD—friendly service. If Amazon gobbles up the bulk of its market, then the only viable physical discount retailing chain may well become Target. 26 Brand Associations: Disney--Magic Kingdom Budweiser--Just Regular Guys POSITIONING PITFALLS Under positioning Over positioning Confused positioning Doubtful positioning 28 USP: Perception of expertise that comes from specialization. KFC Double: Appeals to dual segments. LR Discovery Triple: Aquafresh Under: Poor or vague positioning. But necessary for mass market appeal. Over: Too powerful & narrow an image. Sears. Cadillac. Brand becomes synonymous with a product. Kleenex, Xerox, Roller Blades. Confused: Too many images, too frequent changes, too many overlapping product lines. Doubtful. To tall a claim. Smallest/most powerful; fastest/most gas efficient. Pepsi clear, clear gasoline. Q: Rate these Brand positions Under positioning Over positioning Confused positioning Doubtful positioning Doubtful Over Confused Under Used to be well positioned Pepsi-doubtful Burger King-confused. Too many advertising themes/mascot is weird and outdated Sears—0verposition in middle class image Chevy—under positioning 29 Video: Repositioning your Competitor Embedded video Jack Trout on Repositioning the Competition. Trout is well known authority on positioning for 4 decades. In 1972 he and Al Ries wrote the book on Positioning. 30 Positioning or Perceptual Maps - Segmenting - Targeting - Differentiating - Positioning Positioning maps can do it all for you—segmenting, differentiating and positioning in a very visual way. 31 Blue Collar Full Bodied Popular with Men Special Occasions Dinning Out Popular with Women Less Filling Pale Color Low in Alcohol On a Budget Old Milwaukee Light Meister Brau Old Milwaukee Miller Lite Coors Light Michelob Budweiser Beck’s Heineken Miller Coors Regional Beer Market Rate each brand on the above features Rate your preferences for each feature Chicago market, 1993 data 32 Blue Collar Full Bodied Heavy Popular with Men Special Occasions Dinning Out Premium Popular with Women Less Filling Light Pale Color Low in Alcohol On a Budget Correlation Space Local Brewery Length of vector = importance of variable in forming the dimensional linear combination. Angle between vectors = correlation between variables Note length and angle are in multidimensional space 33 Blue Collar Full Bodied Heavy Popular with Men Special Occasions Dinning Out Premium Popular with Women Less Filling Light Pale Color Low in Alcohol On a Budget Dimenisional Space HEAVY LIGHT PREMIUM BUDGET Local Brewery Blue Collar Full Bodied Heavy HEAVY LIGHT PREMIUM BUDGET Popular with Men Special Occasions Dinning Out Premium Popular with Women Less Filling Light Pale Color Low in Alcohol On a Budget Old Milwaukee Light Meister Brau Old Milwaukee Miller Lite Coors Light Michelob Budweiser Beck’s Heineken Miller Coors Brand Positions Local Brewery Blue Collar Full Bodied Heavy Popular with Men Special Occasions Dinning Out Premium Popular with Women Less Filling Light Pale Color Low in Alcohol On a Budget Preference Space 1 4 2 3 5 HEAVY LIGHT PREMIUM BUDGET Local Brewery 36 1 4 2 3 5 Blue Collar Full Bodied Heavy HEAVY LIGHT PREMIUM BUDGET Popular with Men Special Occasions Dinning Out Premium Popular with Women Less Filling Light Pale Color Low in Alcohol On a Budget Old Milwaukee Light Meister Brau Old Milwaukee Miller Lite Coors Light Michelob Budweiser Beck’s Heineken Miller Coors Perceptual Map Local Brewery More recent Perceptual Map of the Beer Market shows: Perceptual Map have been applied to many markets: Perceptual mapping sensitive to variables used. Requires careful selection of measurement variables … and it is not very useful if we don’t’ map preference segments … and Company Brands show little separation on variables used (individual brands may show better discrimination) … in this study only luxury brands showed meaningful “corporate” brand identities In this study only BMW and Volvo were found to have meaningful corporate brand identities (like Apple has). 42 Divide the total market into homogenous preferences Select segments with unmet needs or weak competitors Distinguish your offerings from competitors Positioning Segmentation Targeting Create the brand image and position in consumers’ minds Differentiation Value Proposition 43 Experience Barista Starbuck’s has connections to Moby Dick and Nordic fables. The founders wanted a logo which evoked Seattle's maritime history. They found a 15 th century old sketch of a two-tailed mermaid in an old nautical book. The two tails (on either side) are not emphasized now. 44 Note on POSITIONING MAPS The next slide pictures a map of a regional beer market. Two major dimensions (red) define this space– Heavy-Light, Budget-Premium [he variables underlying these dimensions are the white arrows, known as vectors. They are positioned in the map by their correlations in the data]. The consumer preference segments in this space are shown as red circles reflecting the size of the segment. The position of the major brands are shown as black squares. The map shows which segments each brand is primarily serving (the closest circle) and which attributes it is most associated with (nearby vectors) . An especially valuable research technique for analyzing the segment structure of markets and positioning brands, is “Perceptual Maps”. They use advanced statistical methods to identify (1) the important dimensions describing the perceptual space in which consumers see brands, (2) where competing brands are seen as positioned in this space, and (3) where customers preferences (segments) are clustered in this space. 45 STRATEGIC MARKETING PLANNING Chapt. 2: Developing Marketing Strategies and Plans Chapt. 12: Addressing Competition and Driving Growth            Image size: 987 × 506 Find other sizes of this image: All sizes - Medium Copyright © 2003 Prentice-Hall, Inc. 1 4-2 Figure 2.1, p. 38 SBU Marketing Marketing Copyright © 2003 Prentice-Hall, Inc. 4-3 SBU The Marketing Plan Growth/Exit Strategies Competitive Strategies Chapter 18 Define the firm’s territories: Technologies & products Core competencies Vertical network Geographical scope (Market Segments) Implementation & Control Copyright © 2003 Prentice-Hall, Inc. 4-4 A year later: Despite Fox News and parts of social media predicting the Swoosh’s downfall, the company claimed $163 million in earned media, a $6 billion brand value increase, and a 31% boost in sales. Nike ad featuring Kapernick A Nike story Copyright © 2003 Prentice-Hall, Inc. The story highlights how Nike has created huge engagement with its customers through its media omnipresence, but ALSO that a brand has to be more than a product. As one ad agency executive put it “brands have to have a purpose and soul” Colin Kaepernick and Eric Reid of the San Francisco 49ers kneel in protest during the national anthem prior to playing the LA Rams at Levi's Stadium, Sept. 12, 2016 4 4-5 But what does the Nike story have to do with Strategic Planning ? It highlights the importance of company “Mission” ! “brands have to have a purpose and soul” Copyright © 2003 Prentice-Hall, Inc. Company Purpose Product vs. Market Oriented Missions Company Product Definition Market Definition AMTRAK We run a railroad We are in the transportation business XEROX We make copying equipment We improve office productivity TEXACO We sell gasoline We are in the energy business Columbia Pictures We make movies We market entertainment Encyclopedia Britanica We sell encyclopedia books We are an Information business Marketing Myopia? Copyright © 2003 Prentice-Hall, Inc. The Impact of “Mission” “A computer in every home” “We help solve business problems” Copyright © 2003 Prentice-Hall, Inc. The Strategic Business Portfolio The text has cut back on coverage of Portfolio based planning. Should you know more? Copyright © 2003 Prentice-Hall, Inc. The BCG Model Strategic Business Units (SBUs) Copyright © 2003 Prentice-Hall, Inc. 4-10 RESOURCE ALLOCATION: BCG Stars Cash Cows Q Marks Dogs RESOURCES Grow/ Maintain Share Market development Segmentation Brand advertising Sales promotions Grow Product development Product advertising Distribution OR Harvest Prepare to Divest Maintain Share Defensive advertising Price promotions OR Harvest Prune product line Reduce marketing budgets Copyright © 2003 Prentice-Hall, Inc. What is the problem with portfolio models? Next generation theories shifted focus to Competitive Advantage Copyright © 2003 Prentice-Hall, Inc. Internal resource allocation leads to lack of long term commitment to SBUs. Alternative “external” resource allocation argument—Oliver Williamson, superior allocative efficiency due to impacted knowledge. Counterargument, corporate raiders and spinoffs. 11 4-12 SBU The Marketing Plan Strategic Business Unit Level SBU Strategy (Chapt. 12) - Competitive Strategy. Porter Leader, Challenger, Follower, Nicher MARKETING Strategy - PLC and the Marketing Mix (Chapt. 12) - Growth Strategies (Chapt. 2) Marketing Plan Copyright © 2003 Prentice-Hall, Inc. STRENGHTS WEAKNESSES OPPORTUNITIES THREATS SWOT Copyright © 2003 Prentice-Hall, Inc. Competitive Strategy Porter’s Model 1980 Bargaining power of suppliers Bargaining power of customers Threat of substitute products Threat of new entrants Intensity of competitive rivalry Copyright © 2003 Prentice-Hall, Inc. 4-15 Uniqueness Perceived by the Customer High Value Position Industry wide Particular Niche DIFFERENTIATION COST LEADERSHIP F O C U S Brand Image Technology Service Distribution People Porter’s Strategies Copyright © 2003 Prentice-Hall, Inc. Why are Cost Leadership and Differentiation Incompatible? Standardization Volume Invest in Production Tech Bureaucratic Organization Variety Segmentation Invest in Marketing & R&D Decentralized Creative Organization Copyright © 2003 Prentice-Hall, Inc. CORE COMPETENCE Prahalad & Hamel 1990 Copyright © 2003 Prentice-Hall, Inc. CK Prahalad and Gary Hammel 17 CORE COMPETENCIES Core Competence Production Technology Marketing Research & Development Personnel Knowledge Skills Relevance to Consumers & Competitive Advantage Difficulty of Imitation Breadth of Application Copyright © 2003 Prentice-Hall, Inc. 18 Relevance Today of Porter, Prahalad & Hamel concepts? Copyright © 2003 Prentice-Hall, Inc. 19 Partnering (outsourcing) CAD CAM Flexible Manufacturing ! Copyright © 2003 Prentice-Hall, Inc. This sued to be what a manufacturing plant looked like not too long ago. Today CLICK it looks like this. Computer aided design and manufacturing have change the face and economics of manufacturing. CLICK 20 PARTNERING Hon Hai Foxconn: Revenue $5.33 tril in 2019. Mfg plants mostly in China but many low cost countries. RESHORING Copyright © 2003 Prentice-Hall, Inc. 21 Outsourcing by 2005. Hon Hai FoxConn is the largest contract manufacturer. Family owned. Flextronics started in the contract manufacturing of consumer electronics has branched out into a number of industries (including the automobile industry) and critical services (e.g., design engineering, global procurement). It has manufacturing plants in all the major low cost producing countries of the world, such as Brazil, China, Hungary, India, Malaysia, Mexico, Poland, and the Ukraine. Jabil, is third, continues to be focused on the global electronics industry. Coalition for a Prosperous America (CPA) Reshoring Index shows a first time uptick in domestic manufacturing in 2019. Import penetration in manufactures fell from 31.2 percent in 2018 to 30.6 percent in 2019. That is a small % change but a large $ change (42.6 bil) considering that in 2019 the US consumed manufactured goods worth a total of $7.1 trillion. © 2007 Henry Chesbrough The Current Paradigm: Closed Innovation System Research Development New Products & Services Current Market Internal Science and Technology Resources Henry Chesbrough Copyright © 2003 Prentice-Hall, Inc. Licence, spin out, divest Our current market Our new market Other firm´s market Open Innovation Paradigm External technology insourcing Internal technology base External technology base Internal/external joint ventures Copyright © 2003 Prentice-Hall, Inc. 4-24 Competitive Strategies for Market Leaders Market Challengers Market Followers Market Nichers Copyright © 2003 Prentice-Hall, Inc. Market Leaders Develop deep pockets in core competency—Marketing, R&D, Production, Human capital Thwart access to resources via vertical integration Thwart access to distribution Defense of market share by aggressive counteroffensives Grow the total market Copyright © 2003 Prentice-Hall, Inc. Market Challengers * Technology innovator * Improve around leader technologies * Attack leader by growing through flank markets, niches and regional markets * Attack sluggish defender with product modifications supported by heavy promotional campaign Blue Ocean Strategy v. Red Copyright © 2003 Prentice-Hall, Inc. Red Bull grabbed 44% of the energy drink market with unconventional and aggressive advertising 26 Market Followers: * Avoid technology innovation, follow by copying & developing “value” alternatives * Target segments ignored by major competitors * Invest in “efficiency” technology * Target discount retail chains and reseller private label brands. Copyright © 2003 Prentice-Hall, Inc. 27 * Target sub-segments with very specialized or custom needs (often high end) * Build strong personalized relationships Market Nichers        DuckDuckGo Logo PNG Copyright © 2003 Prentice-Hall, Inc. DuckDuck’s 12 bil searches per year to Google’s 2 tril 28 4-29 Copyright © 2003 Prentice-Hall, Inc. STRATEGIC PLANNING CORPORATE STRATEGY - Company Wide Vision, Direction - Managing the Business Portfolio BUSINESS UNIT (SBU) STRATEGY - Competitive Strategy MARKETING STRATEGY - Marketing Strategy and the Marketing Mix Copyright © 2003 Prentice-Hall, Inc. Chapt 2 again reviews the basic ideas in marketing strategy—segmentation, differentiation, positioning and the marketing mix. But we will study these in detail in subsequent chapters so I am leaving it to you to read here. Instaed I am going to focus on two other key aspects of marketing strategy, the PLC and the Growth strategy. 30 Product Life Cycles Marketing Strategy Growth Strategy Copyright © 2003 Prentice-Hall, Inc. The Product Life Cycle Time Product Development Introduction Profits Sales Growth Maturity Decline Losses/ Investments ($) Sales and Profits ($) Segments Products Pricing Distribution Promotion Copyright © 2003 Prentice-Hall, Inc. PLCs: Growth Gap Analysis Year 1 2 3 4 5 6 Growth Gap Revenues A A A A A A B B B B B B Growth/Revenue Gap C C C C C Copyright © 2003 Prentice-Hall, Inc. 4-34 Figure 2.2 p. 42 Copyright © 2003 Prentice-Hall, Inc. Growth Strategy: Ansoff’s Growth Matrix 4. Diversification 2. Market development New markets 1. Market penetration Existing markets Existing products 3. Product development New products Price, Heavy Promos, Advertising, Distribution Develop Technology New Features Versioning Unrelated Diversification Acquisitions & Mergers Geographic New Uses New Channels Copyright © 2003 Prentice-Hall, Inc. 4-36 Market Development New Uses Copyright © 2003 Prentice-Hall, Inc. 2000 Uses ! * Remove crayon from walls, blue ink from jeans, tea stains from a kitchen counter * Remove adhesive price tags from cases, old duct tape, oil stain from driveway, stickers and stuck dead insects from car * Clean off chewing gum stuck to your shoes, hair, or carpet. * Remove glue from hands, stuck rings on fingers, (wash your hands afterwards. * Remove candle-wax or glue from carpet * Clean tooth paste stains and bathroom tiles of mascara, nail polish, paint. * Great slug, snail, wasp, spider, etc. repellent; * Spray on trees to prevent beavers from chewing on them Snake charmer (A bus driver in Asia used WD-40 to remove a python coiled around the undercarriage). Copyright © 2003 Prentice-Hall, Inc. The Marketing Planning Process Analyze the Marketing Environment Analyze Competitors and Company Strengths & Weaknesses Strategic Market Planning Analyze Customers and Segments Develop products that better meet Needs. Target Segments with unmet Needs or weak Competitors. Design integrated Marketing Mix, 4Ps. New Shoes simulation Implementation/Roll-out, Budget New Shoes Simulation Control Performance Metrics Marketing ROI Plan Evaluation Corrective Action Results in a Marketing Plan illustrated in Pegasus p. 61-65 Copyright © 2003 Prentice-Hall, Inc. 38 Performance Metrics Marketing ROI Standard Measures of Performance Brand awareness Sales growth Market share Social media responses Newer Measures Customer Value & Relationships (Figure 2.8) Satisfaction. Net Promoter Score (10-9) – (6-0) Engagement Loyalty, Retention Customer Lifetime Value Brand Equity Copyright © 2003 Prentice-Hall, Inc. 4-40 Copyright © 2003 Prentice-Hall, Inc.