Business Policy & StrategyChapter Seven Marketing Murdick, Moor, Babson & Tomlinson, Sixth Edition, 2000
Marketing Concept • Concernof every area of the business • Foundation for overall strategy and policies of the business • Customer-oriented business approach • Tells what business(es) to start, products/service to introduce or discontinue and basic culture of the organization
Marketing Concept Begins With Potential Customers’ Needs-Four P’s • Product • Price • Place • Promotion An organization’s existence depends on satisfying the customer.
S.W.O.T. Analysis • SWOT: strengths, weaknesses, (INTERNAL) • Opportunities, Threats (EXTERNAL) • Analysis used to develop corporate strategy
ForecastingShort Term VS. Long Term • Short term (now-next year) provides info on: • # Of units that should be produced • # Of employees needed • What revenue and expenses to expect • Long term provides info on: • Need for productive capacity • Industry prospects and resource allocation
Forecasting Techniques • Quantitative techniques • Past trends • Surveys • Qualitative techniques • Interviews • Focus Groups • Delphi Technique
Impact of Benefits • Consumer spending not necessarily correlated with price of products • Company cannot rely on word of mouth to promote products benefits in short run, so • Promotional techniques • Advertising • Personal selling • Key to successful promotion involves stressing benefits.
Product • Product can be considered a service • Product brand and packaging affects the sale • Products can include convenience, impulse, shopping and specialty goods • Product life cycle
The Role of Price • A lower price(penetration price) may generate more volume and profit or lower volume and profit • Analysis of customer to find best price • how much they buy • what value do they perceive • losing customers to a competitor
The Role of Price • Pricing Techniques • cost-oriented pricing (contractors) • demand-oriented pricing (athletic events) • competition-oriented pricing (gas) • Price varies due to • seasonal changes • inventory adjustment • Trends • age of product
Shaft examples: Ex. 1 $20 x 2 $40 - 20 @$10each $20 •Complementary product Ex. 2 $15 x 6 $90 - 60 @$10each $30 Lowering prices may increase or decrease profits
Basic Elements of Promotional Mix • Advertising • Personal selling • All others publicity contests public relations authors signing books trade fairs coupons exhibits displays entertainers
Techniques to use: 1) Concentration of consumers 2) Extent of demonstration required 3) Customizing to consumers’ needs 4) Degree of benefits offered 5) Complexity of technique 6) Funds available
Product State how product satisfies needs State how products satisfies needs better than competition Price Assist customers in seeing the benefits are more important than price Place State added benefits/value of superior distribution Relationship to elements in Marketing Mix
Place • Intermediaries • Additional benefits • Target market • Design channel • Relationship to Marketing Mix
Intermediaries • Wholesalers • Merchants • Buy from producer • Sell to retailers or industrial buyers • Agent/Brokers • Assist in moving goods from producer to consumer or industrial markets
Intermediaries • Retailers • Convenience • Quality • Store excitement • Price • Breadth/Depth • Service
Target Market • Industrial • Consumer
Design Channel • Coverage • Requirements • Profitable
Product Select appropriate distribution channel May need to use different channels Price Should be consistent with distribution channel Promotion Superior distribution in comparison to competition Provide how distribution provides additional benefits Relationship to other elements in Marketing Mix
Product Policy Analysis • Designed to indicate the direction the firm will grow in the future. • Designed to keep the company from running off in all directions.
Marketing Policy Analysis • Designed to clarify the geographic, customer, and other characteristics of the market as appropriate for the firm.
Profit Policy Analysis • Sales volume to provide a sizable dollar amount. • Minimum profit as a percentage of sales.
Personal-Selling Policy Analysis • Guiding the structure of the sales organization. • Behavior of sales representatives on the job.
Customer Relations Policy Analysis • Relations with customers, often unwritten
Advertising Policy Analysis • Broad company wide promotion policies are not usually written. • Reveal underlying philosophy of management.
Product Policy Market Category Policy Profit Policy Personal-Selling Policy Customer Relations Policy Advertising Policy The policies must be examined relative to strategic marketing plans of the company.
Three Policy Choices • Expand sales into new categories of customers • Increase penetration into existing market segments • Hold present market share by concentrating on product design and manufacturing innovations; no marketing innovations
Expand Sales to New Categories • May be a good approach depending on the situation • Research and cost/benefit analysis will determine if this is a good choice • “what to do” and “how to do” plans must be developed
A firm may: • Expand geographically • Develop additional related products or models within product line to enter new market area • Develop new products unrelated to its present line • Develop customized products
Increased penetration • Most difficult marketing task • Product/Brand differences are small or non-existent • Major way to sell more products/services is to take customers away from existing competitors
Increased penetration accomplished by: • Superior marketing efforts • Promotional techniques to drown out competitors’ advertising • Total market can be expanded • Pricing/Service mix to give a competitive advantage
Non-Marketing Innovations • Adopt current marketing practices • Works well with small firms where their core competency is in another area. • Rather than wasting money developing new marketing strategies, the firm will concentrate on quality and service
What To Consider When Determining A Marketing Mix • Do all activities share the same goals and objectives? • Can additional costs in individual divisions be justified? • Budgets and schedules should be formally prepared on a regular basis
Marketing Pitfalls • Sales grow at a rate where manufacturing can not keep up • Focus too much on large customers • may fall into the trap of maintaining a large number of unprofitable small customers • 80/20 Rule • Not enough research
Demand • Elastic is when the customers are price sensitive. Increased prices may lower sales and therefore, lower total revenue. • With inelastic demand, customers will generally purchase the product regardless of the price (food, gas, etc)