Chapter 1: Marketing Outline

Seven Steps of Marketing Strategy Development

• Marketing is a circular function to create a plan with parts that are internally consistent and mutually supportive.
1. Consumer Analysis
• Identify segments so marketing can be targeted to them
• Who is buying and who is using the product?
• What is he buying process?
• Understanding the buying process leads to possible routes to reach buyers; the buying process includes:
• Awareness (interest/problem recognition)
• How do consumers become aware of my product?
• Where are my targets exposed to my message?
• Information Search
• Target market should get maximum favorable information about the product when and where the buyers make their buying decision
• Evaluation of Alternatives
• Both products within a category and substitutes
• Place positive information where your buyers are likely to look
• Identify and reach influencers
• Review convenience of product distribution 
• Purchase Decision
• Understand and mitigate risk for the consumer using tools such as:
• Trial
• Information about performance expectations and comparison data through:
• Advertising
• Knowledgeable salespeople
• Warranties
• Printed materials
• Evaluation (Post-purchase behavior)
• Buyer may experience post-purchase dissonance or buyer's remorse: "Did I make a mistake?" Evaluated through:
• Physical level (Testing)
• Psychological level (Peer Approval)
• Research can help to understand the buying process and can be translated into marketing action.
• Be specific about what question(s) you need answered.
• Know how the information will be used when the research is complete.
• Is it a high or low involvement product?
• High involvement = high risk to the consumer. These are driven by:
• High price
• Need for the product's benefit
• Need for the product's psychological reward
• Low involvement is much simpler because a low minimum level of acceptable performance is required.
• Transformation of a product from low to high involvement is marketing magic and can be accomplished in four ways:
• Link the product to a high-involvement issue
• Use involving advertising with a value expressive message
• Change the importance of the product benefits
• Introduce important characteristics to a product 
• Tinker with the product itself to distinguish it
• If the cost of trial is low, involvement is difficult to stimulate.
• Level of purchase planning is related to involvement
• High involvement products are usually planned and the buyer is likely to seek information.
• Otherwise, the proximity of the product to the need is important.
• How can the market most effectively segmented?
• If the market is not segmented then a mass market strategy is appropriate.
• Segments are homogenous groups of similar consumers with similar needs and desires. Segmentation serves the following purposes:
• Identifies segments that are large enough to serve profitably
• Identifies segments that can be efficiently reached by marketing efforts
• Helps to develop marketing programs
• By having a segment in mind one can effectivley aim and execute marketing activities to yield the most sales and profit per dollar spent. Four variables in segmenting markets:
• Georgraphic
• Federal census defines 310 Standard Metropolitan Statistical Area in the US
• Arbitron identifies 201 major TV markets in the US called Areas of Dominant Influence (ADIs)
• A. C. Nielsen uses "Designated Market Areas" (DMAs)
• Demographic
• Age
• Sex
• Income
• Marital Status
• Family Life Cycle
• Education/Occupation
• Ethnicity, Religion and Race
• Psychometric
• Lifestyle
• Personality
• Behavioral (observable purchase behaviors)
• Usage
• Purchase occasion
• Brand loyalty
• Responsiveness to price and promotion
• Use the following criteria to evaluate possible marketing segments:
• Measurability - can it be identified and quantified?
• Accessibility - can the segment be reached effectively?
• Substantiality - is the segment large enough to bother with?
• Profitability - is it financially worth while to pursue this segment?
• Compatibility with competition - are competitors interested in this segment?
• Effectiveness - able to service this segment?
• Defendability - against competitor attack
2. Market Analysis
• Takes a broader view of potential consumers to include market sizes and trends, and includes a review of competitive and regulatory environment. Is the segment worthy of a targeted marketing effort?
• What is the relevant market?
• This does not equal total sales in the product category.
• Growth and decline of consumer segments within a market should also be noted:
• When the market is growing, future sales growth can come from new users or existing customers.
• When the market shrinks, sales growth has to come from market shared gained from competitors and will be accompanied by a fight.
• Where is the product in its life cycle?
• PLC describes how a product's sales grow as new segments become aware and  begin buying it.
• Four stages of PLC:
• Introduction
• Awareness and education are needed, trial is important, high advertising cost may be required to get the word out.
• First buyers are innovators, then early adopters.
• Product features are in flux
• Growth
• Education still important, competition is intensified.
• Early majority becomes interested in the product and examine which to buy rather than whether to buy.
• Selective distribution makes the product more accessible; it is important to boost sales volume ahead of the competition to reduce costs through production and advertising efficiencies.
• Maturity
• Late majority of the mass market buys, brand loyalty plays a dominant role.
• Price competition becomes heated in stable markets
• Product features have become standardized
• Advertising used to differentiate products, market are segmented as much as possible to meet specific unmet consumer needs.
• All possible channels of distribution are considered
• Decline
• Competitors offer similar products.
• Laggards are now buying too.
• Many companies focus on reducing price if competition remains or increasing price if the competitive field thins. 
• Trade relations are key to staying on the retail shelf (relationship marketing)
• Products can be reinvigorated after maturity and reenter a growth phase.
• End game strategy can allow remaining producers to extract large profits as only source of replacement parts.
• What are the key competitive factors in the industry?
• Five key competitive factors form the battleground:
• Quality
• Price
• Advertising
• Research and Development
• Service
3. Review of Competition and Self
• Use SWOT analysis to bring internal (strengths and weaknesses) and external (opportunities and threats) situation into focus. Ask:
• What are we good at? What is the competition good at?
• Who are we in the marketplace?
• What are our resources versus those of our competitors?
• Determine if there are barriers to entry
• Use a piggyback strategy to enter in this case
• Form a marketing strategy that competitors cannot easily copy
• Try to achieve market share leverage to produce more cheaply per unit
• How does my product perceptually map against the competition?
• How is my product positioned against the competition?
• Ten rules for positioning:
• Own a word in the consumer's mind
• Positioning begins with the product's name
• If you have a unique new product, use a new name
• Easiest way to own a word is to be first
• Don't stray from message
• Best way to respond to a competitor is to introduce a new brand
• First option for a follower is to introduce a new category
• Second option for a follower is to find an open position in the consumer's mind
• Third option for a follower is to reposition the competitor to undercut the leader's concept, product or spokesperson
• Stay consistent with the positioning you choose
4. Review of Distribution Channels
• Choice of channel influences the price you can charge and consequently the profit margin. Three questions should be asked:
• How can my product reach the customer?
• Direct 
• Through channel intermediaries
• Wholesalers
• Distributors
• Sales Representatives
• Sales Forces
• Retailers
• How much do the players in each distribution channel profit?
• Take the time to draw them out on paper
• Channel sketch can also provide insight into the retail price required to make a profit
• At each level in the distribution channel, the participant performs its function, it takes margin, and sells to the next participant closer to the consumer.
• Who holds the power in each distribution channel available?
• The relative power of the channel participants can dictate pricing based on the economics of the channel chosen
• Each channel has its own channel margin mathematics
• Understanding the math you are better able to make a choice of channel.
• Unique products usually give power to the manufacturer
• Non-unique product terms can be dictated by the channel intermediaries
• Planograms help stores plan shelf space for which they expect to receive slotting fees for each stock keeping unit (SKU)
• Slotting fees are a hot topic.
• What is the internet's role as a channel of distribution?
• Great way to sell a product, the internet has four functions as a channel of customer communication:
• Commerce (allows for sales and provides a 24/7 store front
• Content (an extension of the product)
• Customer Care (allows customers to access their accounts, check on deliveries, and get answers to FAQs)
• Convert Leads (turn awareness into sales)
5. Development of a Preliminary Marketing Mix
• Marketing mix consists of the four Ps:
• Product
• How does my product fit with my other products?
• Tries to identify areas of synergy among your products
• How will I differentiate my product?
• Distinguish it from the field through:
• Features
• Fit
• Styling
• Reliability
• Packaging
• Sizes
• Service
• Brand naming
• Brand equity can be transferred to new products using a brand line extension
• Product can be differentiated from the competition by creative advertising and promotion (even when physically identical)
• Perceptual maps can help to differentiate the product
1. This tool can help find a niche that makes the product unique
• How does the product life cycle affect my plans?
• Different aspects become more important in the competitive battles
• Branding is more important in the maturity phase
• Place
• What distribution strategy should I use?
• Exclusive
• Selective
• Mass or Intensive
• The place of sale affects the perception of your product
• Each distribution method places certain responsibilities upon the manufacturer and the retailer
• When manufacturers share the cost of advertising with retailers it is "cooperative advertising"
• Manufacturers' incentives obliges the retailer to pay special attention to the product by giving it:
• Preferential placement
• Special promotion
• Display
• Sales attention
• On what basis should I choose a channel of distribution?
• Three factors should serve as a guide:
• Product specifics
• Level of attention
• Level of complexity
• Need for control
• Captive sales forces
• Margins desired
• What profits are available
• Promotion
• Includes all the advertising and selling efforts of the marketing plan. 
• Goal setting is key: know what you want to accomplish -- what buyer behavior you desire must be defined
• Push strategies encourages distribution channels to stock and sell a product to consumers
• Pull strategies pull buyers to the outlets that carry your product
• Five general categories of promotion:
• Advertising
• Takes many forms: TV, radio, outdoor (billboard), magazines, keyword internet search, banner ads, pop-ups, email, newspaper
• Magazine and newspaper advertising is purchased  based on the size and segmentation of their circulation in cost-per-thousand (CPM)
• Measurement vocabulary
• Reach is the percentage of the target market who see and hear your promotion or advertisement
• Frequency is the number of total impressions made on that audience
• Gross rating points (GRP) is Reach times Frequency
• Total rating points (TRP) is the sum of GRPs
• High GRPs do not guarantee sales
• A competitive measure of media is "share of voice"
• Advertising creative consists of:
• Message (concept)
• Copy (wording)
• Layout
• Personal selling
• Make direct contact with the buyer and personalize the message to fit the buyers needs and situation, and address questions in an interactive process
• Problem solving and consultation process
• Sometimes the only way to reach consumers because target markets are inaccessible by other media
• Sales promotion
• Designed to compliment and reinforce other promotional efforts, especially advertising. Two types of promotions exist:
• Consumer sales promotions
• Coupons
• Refund offers
• Samples
• Premiums
• Contests
• Trade-directed sales promotions
• Sales contests
• Point-of-purchase displays
• Dealer incentives
• Trade shows
• In-store demonstrations
• Public relations and publicity
• The PR message can be intended to create goodwill, correct an impression or situation, or to explain the firm's actions.
• Sponsorship of prestigious or charitable events can create a halo effect
• The goals of PR are less defined than sales targets, opinion polls and legislative goals are good measures
• Viral marketing
• Reach opinion leaders to create buzz around a product. This can be done through:
• Internet chat rooms
• Usenet groups
• Organization newsletters
• On collage campuses
• Publicity is an unpaid form of mass media communication about a company or a product
• Less control over the message
• Can track effectiveness through press hits
• Publicity includes:
• Press conferences
• Press releases
• Use by celebrities
• Staged events
• Direct selling
• Includes:
• The internet
• Keyword advertising
• Banner ads
• Pop-ups
• Email solicitation
• Junk mail
• Catalogs
• Shopping networks
• Long-format infomercials
• Key to direct selling is segmentation and targeting contact lists.
• Direct mail lists are a hot topic due to privacy concerns.
• Results are tracked by rate-of-return (ROR) and dollar amount per order.
• Price
• Nine major pricing strategies
• Psychological pricing (meet psychological needs)
• Cost plus (not a good way to price)
• Perceived value to the customer
• Skimming
• Penetration
• The Price/Quality Relationship
• Meet competition
• Meet profit goals based on the size of the market
• Price based on the price elasticity of the buyer
6. Evaluation of the Economics
• What are the costs?
• Variable costs vary with the volume of products sold or manufactured
• Fixed costs do not vary with volume even if no sales are made (within a relevant range)
• Promotional expenses such as advertising are seen as a fixed cost of a marketing plan
• They are considered sunk costs
• What is the break even?
• The point at which the fixed costs are recovered from the sale of goods but no profit is made
• These calculations can also be used to identify a target sales volume to yield a desired profit
• Economic evaluation is always conducted from the point of view of the present, so sunk costs are never relevant to the decision of whether additional money should be spent to market the product.
• How long is the payback on my investment?
7. Revision and Extension of Steps 1-6 until a consistent plan emerges
• If the plan is not internally consistent or mutually supportive, it needs to be tweaked. Start by asking yourself:
• Should I target another segment?
• Is the mail order distribution channel an option?
• Should I not advertise and rely on a cheap price to move my product?