Marketing Planning MBA- Notes
Dr Amit Rangnekar www.dramitrangnekar.com
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Marketing Planning Ses Topic sion
Case Study
1
Flex / 3
EnvironmentSituation Analysis, environment, industry & competition
Recommended reading- Notes, Kotler /Keller /Koshy/Jha 13e (KKKJ), Research Journal Article (RJA)/book from EBSCO/ library
Faze Notes: Ch1 Analysing Marketing Opportunities KKKJ: Ch 3 (Environment) pp 61-85, Ch 9 (Competition) pp 225-247 RJA: Porter M, The 5 competitive Forces that shape strategy, Harvard Business Review, Jan 2008
2
Marketing Strategy (STPD) McDonalds & Branding India entry strategy
Notes: Ch 2 Marketing Strategy KKKJ: Ch 8 Segmentation & Targeting pp 198-223, Ch 11 Positioning, Kotler 13e Ch11 Differentiation pp 280-305, Ch 9 Own Notes pg 15-18 Product Lifecycle & Marketing Strategies Own Notes pg 19-22 RJA: Marketing Strategy how it fits with business strategy, Marketers Toolkit, Harvard Business School Press, 2006
3
New Product Development Tata Nano NPD
Notes: Ch 3 Marketing Mix KKKJ: Ch 20 (New Market Offering) pp 549-581 RJA: Bonabeau, Roddick, Armstrong, A more rational approach to new product development, Harvard Business Review, Mar 2008
4
Marketing Tactics (Mix)
Moov
Notes: Ch 3Marketing Mix KKKJ: Ch 12 (Product) pp 307-335, Ch 9 (Branding) pp 225247, Ch 10 () pp 248-279 RJA: Levitt T, Marketing Myopia, Harvard Business Review, Jul 2004
5
Strategic Portfolio Analysis Taj Hotels & Lifecycle Management
Notes: Ch 3 Marketing Strategy KKKJ: Ch 2 (Developing Marketing Strategies and Plans) pp 3259 RJA: Aaker, Joakimsthaler, Brand Leadership, Free Press, 2001
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
About the Author Dr Amit Rangnekar, MBA (Marketing) and PhD (Business Strategy) from NMIMS, Mumbai, has over 2 decades of progressively responsible pharma industry experience with Centaur Pharmaceuticals. In 2006 Dr Rangnekar was awarded a 10 nation scholarship to Europe by the Government of Denmark to complete his doctoral research. His co-authored book "Cases in Indian Management" was launched in Mumbai, Dubai and London in 2008. Embarking onto teaching as a hobby in 2003, Dr Rangnekar is a visiting faculty at Mumbai's leading B-Schools. His repertoire of insightful notes and compelling case studies have added value to over 7,500 MBA students. He shares his thoughts and knowledge with a global audience through his immensely popular website and blog, which have together clocked over 800,000 hits. Dr Rangnekar has presented on various business case studies on marketing, branding and business strategy, at B-schools and corporates across India and Europe. He has been a part of global leadership programmes of numerous Fortune 100 companies in Europe and Asia. He is an external guide for two PhD research scholars. Co-ordinates Email
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Concise class notes on marketing, branding and strategic management Researched Case studies in power point presentation (ppt) Tips on PhD, Pharma and deliverables Various publications of the author Insights into pharmaceutical industry
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Marketing Planning- MBA Notes- Dr Amit Rangnekar Marketing Plan- ―Plan your work, and work your plan‖- to achieve firm‘s market strategy Plans to build existing / launch new brands Timing of its sales and promotional activities, pricing intentions & distribution efforts How will the plan be controlled and the results measured.
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
1 Environment Situational Analysis
SWOT Analysis- To assess the internal / external environment a firm operates in Strengths (Internal) Weaknesses (Internal) USP's, capabilities, competitive advantage, resources, experience, knowledge, data, financials, marketing, reach, communication, service, legacy innovation, location, geography, price, value, IT quality, accreditations, processes, systems, culture, values, behaviour, management, reputation,
Opportunities (External) Market / business / product development, industry potential and phase, competitor vulnerabilities, new markets, demographics or lifestyle trends, global influences, technology, innovation, niches, verticals / horizontals, geographies, surprise, new contracts, information and research, partnerships, distribution, volumes, production, economies, season, influences
Proposition, capabilities gaps, presence, strength, reputation, reach, financials, vulnerabilities, timescales, deadlines, pressures, supply chain, morale, attrition, commitment, leadership, processes & systems, management,
Threats (External) PEST, competitive intentions, market demand, contracts and partners, sustaining capacities, finances & capabilities, obstacles, insurmountable weaknesses, industry cycles, seasonality
The environment
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
PESTLE analysis Political -Environmental, legislative, regulatory, policy, stability, initiative, lobbies, war and conflict, pressure groups Economic- Economy, global trends, taxes, levies, FDI, interest,Stocks, forex, climate, market, trade cycles, industry specific factors Sociocultural- Demographics & psychographics, Attitudes, opinions, beliefs, buyer behaviour, ethnic & religious factors Technological- Competing & emerging technologies, R&D, costs and capacities, solutions, innovation, information, communication, IPR, licensing, disruption Industry Environment / Attractiveness Analysis (Porter’s 5 Forces of competition) Analyses forces driving industry competition, intensity of competition- Indian Hotels not Tatas Collective strength determines profit potential, identifies areas where company can defend 5 Key areas- threat of entry & substitutes, power of buyers & suppliers, competitive rivalry. How to analyse Industry - (Michael Porter, HBR-Jan, 2008) Analyse average profitability over a period 3-5 year period can distinguish temporary/ cyclical changes from structural changes Industry analysis helps understand underpinnings of competition/ root causes of profitability Analyse industry structure quantitatively, than qualitatively with lists of factors Quantify 5 forces: buyer's switching cost (inducement an entrant/rival must offer customers). Define relevant industry: Products, exclusive/ indirect industry, scope, competition Identify & segment participants- buyers, suppliers, competitors, substitutes & new entrants Assess drivers of each competitive force- determine which are strong & weak- Why Determine overall industry structure & consistency- profitability levels & reasons, controlling factors; are more profitable players better positioned wrt the 5 forces Analyse future changes (+/-) in each force Aspects of industry structure, influenced by company, competitors or new entrants
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Marketing Planning- MBA Notes- Dr Amit Rangnekar Common Pitfalls Define industry- too broadly or too narrowly Do not focus on most important forces, pay equal attention to all forces Confusing effect (price sensitivity) with cause (buyer economics) Confusing cyclical or transient changes with true structural changes and industry trends Use framework for strategic choices than declare industry - attractive/ unattractive Analysing Competition: Industry structure- Consolidated (Steel, Auto, Telecom) / fragmented (Restaurants, Laundry, unorganised retail) Monopoly (Railways, Gillette, Amul) / duopoly (Pepsi-Coke, BoeingAirbus)/ oligopoly (Pharma, Steel, Auto, Telecom) Market structure- Leader, challenger, followers, nicher Lines- Broad (Electronics, Auto)/ narrow (Steel, Telecom, Hotels) Competition- satisfy same / similar needs- Direct / indirect - Eg Coke- direct Pepsi, indirect Bottled water, juice, beer Key variables in analyzing competition: What segments do they serve? What products do they offer? Brands, categories dependence? What channels do they use? What pricing strategies have they pursued? What management resources do they have? What financial resources do they have? What are their objectives? What are their core competencies? What alliances are they pursuing, and for what purpose? How successful are they in the marketplace? Share of market /voice /mind /heart? Competition
Category
Beverages
Need fulfilled
Brand Competitors
Product Competitors
Generic Competitors
Basic requirement Market products similar Compete in same class, Market different customer features, but differ in features, products to solve same benefits & price benefits & price problem, satisfy same basic need Refreshment Coke, Pepsi Tea, Nimbu Pani Regular water Thums Up Mineral water
Chocolates Dessert/ snack
Dairy Milk, 5Star Celebrations
Mithai, Namkeens Ice creams, Fruits
Aniseed/Saunf Candy, Sugar
Films
Entertainment
PVR Fame Adlabs
Single screen Drama theatre
TV, Shopping Reading, Internet
Cars
Transportation
Maruti, Hyundai Tata
Small cars, Big cars, SUVs
Taxi, Auto, BEST, Local train, Walk
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
2 Marketing Strategy Marketing- entire business from the customer’s point of view- Drucker Strategy- directing action towards achieving desirable marketing outcomes Marketing strategy- directing action towards achieving desirable marketing outcomes Marketing strategy answers 2 key questions Why should customers buy our product Which customer needs do our products fulfill more effectively than competitors Nokia not the 1st mover but No.1 by giving customers what they desired Apple & Intel do not rely on MR, create new categories through innovation Google search effective due to a simple, uncluttered & efficient approach Hybrid/electric cars differentiate on pollution free driving- valuable to customers Marketing strategy looks to Identify different needs & groups in the market (segmentation) Target groups/markets it can satisfy in a superior way (targeting) Locate brand in the minds of consumers (positioning) Communicate (promotion) to the target market a value proposition that is distinctive, valuable & meaningful (differentiation) Who are our customers Who buys and uses our product How do they use it Where do they buy When do they buy How often do they buy Buying roles and needs/ benefits sought Product/ Benefits Buying Roles Sought Initiator/s Influencer/s LED TV Wife Friend Viewing Pleasure Value
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How much do they buy How do they choose Why do they prefer How do they respond to our communication
Decider/s
Purchaser/s Husband
User/s Kids
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
STPD- (Segmentation, Targeting, Positioning, Differentiation) Segmentation- Where to compete Identify buyer subsets with similar needs demonstrating similar buyer behavior Segment- viable, profitable, access, measurable, potential, competitive intensity, values fit Tourists- by state/country, age, interests- adventure, history, sports, nature, cuisine Segmentation methods Segmentation
Variables
Illustrations
Demographic
Age Education Geography Income Sex Occupation
Kids, youth, elderly Literates, illiterates Rural, urban, regional Rich, middle, poor Male, female, boys, girls Business, service
Psychographic
Values, attitudes, lifestyle (VALS) Activities, interests, opinions (AIO) Cultural, social, psychological
Preferences, choices Work-hobbies, Fashion-food, Self, influences
Behavioural
Usage User Occasions to use Benefits sought Loyalty
Heavy, light Regulars, non regulars, new Special, annual, seasonal Quality, service, economy None, strong, split, switchers
Exercise- Consider a company in fmcg / consumer durables / services and identify its demographic, behavioural and psychographic segmentation strategies Targeting- Which product, which market Select segment/s to target, target resource allocation at this segment
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Targeting strategies Mass marketing- Target company‘s marketing mix towards entire market, not specific to any segment eg Amul butter, Parle G, Coke, Pepsi Differentiated marketing- Target different marketing mixes to different segments eg UB group markets multiple whisky brands in premium segment (Teacher‘s, Antiquity, Single Malt, Black Dog) Market concentration- Concentrate mix on 1 market segment eg HP- PC, Laptop, Printers; Nirma- economy detergents Niche Marketing- Target small market segment with specific, specialized marketing mix. Niche profitable to operate for nicher but not attractive for major players to enter. Eg FerrariLuxury- sports car segment, Mont Blanc- Luxury Pens segment
Exercise- For a well known company in fmcg / consumer durables / services and identify how which of its leading brands are targeted to which segments Positioning – Locating the brand in the mind of the customer The act of designing the firm‘s market offering so that it occupies a distinct and valued place in the minds of its target customers Positioning by Attribute BenefitUseUser-
Illustration Raymond Since 1925 Sea view, service, speed ICICI- Fast A/c opening Louis Philipe-Upper crust
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Positioning by CategoryQualityValue-
Illustration Big small car-Indica Benz-Future of the automobile Budget Hotels, Residential flats
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Positioning strategies Single Camry-Touch Perfection Double Tavera-Comfortable family car Triple Liquidity, safety, returns-MFs Multiple positioning strategy- presented differently to various target audiences A chocolate-based health drink will have central positioning- nutrition, but will appeal to various segments with intact central positioning. It will mean Energy drink for active people, Dietary food supplement for elderly & pregnant ladies, Essential growth supplement for youngsters, Nutritional revitalize for busy executives. Perceptual mapping Brands 'mapped' on common parameters (matrix) to understand positions owned by brands in the customers mind. Helps identify weak/strong/ absent competitive positions. Gaps regarded as opportunities for launch/ positioning/ repositioning. Eg Perceptual map of watches Exercise: Map perceptions of Price v range for organized retail players ( malls, super markets, hyper markets, department stores in India. What should be the positioning strategy for Walmart’s India entry strategy based on the perceptual map. Positions that firms successfully own in India consumer’s minds Beauty- Lux Generic-Cadbury/Xerox/Amul/ BandAid Premium-Bose, Benz Range- Vijay Sales, Alfa, Nokia Thanda- Coke Macho- Enfield Bullet World scale- Reliance Performance- Nokia, Bata, Titan Reach-HLL, Glaxo, Colgate, ITC Innovation- Sony, Apple Friendly salesmen-Eureka Forbes Youth- Pepsi, Swatch Fast food- Udipi, Vada Pav, Sev Puri Kids-McDonalds, Esselworld, J&J Economy- Big Bazaar Tourism-Goa, Kerala, Rajasthan
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Fever- Crocin Service- Private Banks, Maruti, LIC Delivery-Domino‘s/ Blue Dart/ Dabbawallas Indian MNC-Ranbaxy, Infosys, Wipro Value-Dollar Shops, Factory outlets Headache-Saridon/Anacin
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Differentiation- How to compete Add a set of valuable, meaningful and compelling differences to distinguish your offering from that of the competition. PQRSTUV- performance, quality, rate, service, technology, utility, value and people. design, durability, reliability, repairability, ordering ease, delivery installation, customer training, customer consulting, maintenance and repair.
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
3 New Product Development New Product Development (NPD) Market Penetration (Least risk) – go rural, price penetration Market Development (Low risk) - new audience, new region, exports Diversification (Highest risk)- related - Amul into foods, unrelated- Amul into Garments NPD (High risk) - existing customers, develop, innovate, new- Automobiles If NPD based on sound segmentation and understanding of target customers - risk reduces If NPD is first and then you figure out how to market, it usually leads to disaster Exception- Alexander Bell invented the Telephone, but it was an innovation. Today- NPD competes with similar products /effective substitutes- customers spoilt for choice Stages in NPD Idea generation- Employees, sales force, trade, competitors, customers Idea screening- Feasible, workable, practical Concept development & testing- Feedback from target audience Marketing strategy- Mix (4Ps), STPD, Targets, Projections, Geographies Product development- Final touches & Mfrg Test Marketing- Geography or Segment Commercialisation- National/Global launch Why new product development (NPD) Changing customer needs – Diet Coke, Saffola New Segment Entry- Maruti SX4 New Capabilities- UB Group New Concepts- Suzuki Swift, Tata Ace / 1L Car New technology- I-Pod, I-Phone, TV Changing market needs- Scooters to Bikes Own successes- Brand / line extensions- Maggi Competitive Successes- Krackjack- 50:50, Marie Product lifecycle- MS Office, Play Station 1,2,3 Portfolio / Business realignment- Reliance Mobile Environmental changes- Music downloads
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Marketers- primary link between company, customers & competitors- strategically placed to identify latent /unmet needs and communicate to the company. Play role in pricing, place, promotion and launch plans. New Products Types -Incrementally altered or improved products Breakthrough Incremental New to the world performance features Improvement in existing product Huge advances in performance Derivative of existing platform Dramatic cost reduction Exploits existing forms / technology Higher risk Lower risk Infrequent Costlier Targets new /existing markets Marketer’s responsibility Envision market, Create demand Educate market Change the basis of industry competition: • Electric lighting, antibiotics, microwave, credit card, transistor, heart pacemaker, hip and knee replacements, GPS
More frequent Less costly Targets existing/ adjacent markets Listen to existing market Accommodate current demand Intel‘s Pentium IV computer chip- incremental improvement over Pentium III as they share same fundamental technology Incorporated design improvements that enhanced chip performance Windows, MS Office, Play station
Exercise: Course of NPD in your industry over L10Y- what changed the basis of competition, what were the real breakthroughs, which were only incremental? What are the new technologies / products lined up, how will they affect your company and competitors when launched, in terms of sales and profitability?
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
4 Marketing Tactics Marketing Mix (Neil H. Borden, '4Ps'- McCarthy) Marketing tactics/tools/mix elements leading to different strategies and value propositions Car- Mix of Engine, Mileage, Looks, Price, Features, Quality, EMI options Product Brand, features, design, quality, range Warranty, AMC, service, size, packing, performance
Price Strategies, Credit, Costs
Promotion \Sales Promotion, Personal Selling, Advertising, Sponsorship, Multi-level Marketing, Direct Marketing, Trade fair & Expositions
Place Channels, location, coverage, transportation, inventory, width, spread, reach, shippers
Product- What satisfies a need OR company’s offer to customers ―We lead the public with new products than ask them what products they want. The public does not know what‘s possible, but we do, so instead of doing much market research, we create a market for a product by educating them‖ (Akio Morita, Sony) ‗Product/service design guided by a deep understanding of what customers need, want, and are willing to pay for, as determined by market understanding and research.‘ HBS
Differentiate by physical aspects & less tangible elements ( warranty, ASS, service) Product-Tangible eg Books ; Services-Intangible eg Banking, Finance, Hospitality Products also deliver services eg car-product & transportation-service, Mobile Products sans service risky eg TV, Fridge, AC without back-up Service Team -Risky Value (valere-latin- worth)- Consumer‘s estimate of the utility/capacity of a product/brand to satisfy their needs. Price is what you pay, value is what you get- Warren Buffet Value proposition- Bundle of benefits a product offers to fulfill customer needs & wants Brand- An identifying symbol/words/mark distinguishing a product/company from its competitors. Branding is an essential part of marketing. Brand = (Functional + Economic+ Emotional) Value Propositions. Nokia- Functional, Amul- Economic, Saffola- Emotional Customer- One who buys goods or services, may or may not consume- Mother Consumer- One who consumes, but may or may not have purchased- Kid Client- A regular customer or one who avails professional services- legal, hospitality Prosumer: Active loyal consumers, who influencing other consumers and initiate feedback Customer satisfaction: Core- Quality, service, value; Desire (Within an arms length of desire- coke), customer delight (Maruti service), delivery (blue dart), service (Taj)
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Product decisions Design: As the USP- ipod, iphone, LG Chocolate. Quality: Consistent with other elements of the marketing mix. Bose speakers Pricing: A premium pricing strategy should reflect quality or value. Benz Features: Additional features to enhance benefit offered to target market? Nokia Branding: Power of instant sales, trust, quality, reliability, loyalty base, differentiation Brand value of Microsoft > GDP of Pakistan. Does your perception change for Nike sneakers with/ without the swoosh or nike logo? Cannibalisation- Breakthrough and incremental innovations may cannibalize some part of the existing business. Eg Honda Civic hybrid-power vehicle, attracted eco-friendly or fuel economy (or both) buyers, who may have otherwise purchased Honda Civic, Accord or City. Moov sachets may tap the traveler segment and entice trial but may cannibalise Moov economy pack Wisest to move forward with new-product ideas & accept cannibalisation, else competitors will. Product Mix - HUL Portfolio- Consumer Product-Mix Width Product line- group of brands closely related by function & benefits- Dell PC, Nokia Product mix- total set of brands marketed by a firm, may contain product lines Width- product lines in the mix- HP PCs, Laptops, Printers in home & business segments HUL 11 lines (Personal wash, laundry, skin care…….) Length- total number of items in the mix- 25, average length is 25/11 = 2 Depth- Variants of each product in the line- Lux has 4 fragrances and 2 sizes, so 8 Deciding which product lines to grow, maintain, harvest, and divest? Home & Personal care
Ice cream
Foods
Coffee Tea
Colour cosmetics Deodorants
Oral care
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Hair care
Surf Excel Rin Wheel
Skin care
Laundry
Personal wash Product Lux line Lifebuoy Length Liril Hamam Breeze Dove Pears Rexona
Foods
Fair & Sunsilk Pepso- Axe Lakm BB Br Kissan Kwality lovely Natural dent Rexon e Lipton u Knorr Walls Ponds Clinic Close a AnnaUp purna
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Product line strategy Upgrade customers - Maruti 800, Alto, Zen , Wagon R Cross-sell- HP printers, PC & Laptops, Godrej- Washing machine, TV, fridge, micro, AC Line-stretch- popular(Titan), mass(Sonata), premium(Xylys), youth (Fastrack), ethnic (Raga) Line fill- Maruti variants AX, LX, VX; I-Pod- nano, shuffle, classic, 80/40/20/8/4gb Line prune- Reduce unwanted / unprofitable- Maruti Gypsy Extending Product Lines into New Segments- once successful, companies extend their product lines to create derivative (incremental) products that address adjacent markets. Power of the brand name reduces the risk of these product-line extensions (but may devalue the brand). Horizontal product-line extensions seek to appeal to different customer tastes (Coke, Diet Coke, Vanilla Coke) while Vertical lines aim to offer a product for every pocket or for different levels of need (Ms Office Home/Professional Edition). In most cases horizontal and vertical extensions are based on incremental development. Eg Vertical- GM product-line concept pioneer- Aimed to satisfy buyers in every economic stage of life, with Chevrolet brand for the first-time buyer of modest means- and moving progressively upscale with Pontiac, Buick, Oldsmobile, and Cadillac. Buyers would trade up to fancier and more expensive GM brands with growing affluence. Horizontal- Each GM division extended horizontally with Chevrolet-trucks, vans, SUVs. Product platform- Key to success (HBS) Product platform (Meyer & Lehnerd) is ―a set of subsystems & interfaces that form a common structure from which a stream of derivative products can be efficiently developed and produced.‖ Robust platforms help in incremental or derivative products for specific market segments at reasonable cost. Swatch- successful product family based on a common platform- simple, inexpensive to manufacture, and capable of supporting endless external variations. Product platforms based on design elegance and manufacturability give companies low-cost opportunities to customize products for different market segments. The platform of common elements can merged with unique elements to create a product for a particular market segment.
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Apple iPod- vertical & horizontal product-line extensions to control meaningful segments with unique products before rivals can gain traction. Black & Decker in the early 1970s, created a platform of electric motor and controls on which it based dozens of consumer power tools: electric drills, sanders, saws, grinders etc. This gave B&D cost leadership, reduced complexity in operations, cut inventories, helped them take on cheaper variants and gained leadership. Technology lifecycleNew products are launched at short intervals to tide over technological obsolescence eg Nokia mobiles have short lifecycles so multiple models are launches in similar segments in short timer frames
Source: Harvard Business Review
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Place (Distribution/ channel/ intermediary)- Set of institutions performing activities to move product from production to consumption-Bucklin
Retail store, distributor network, e-commerce web site or a direct mail catalogue Functions- Order Processing, Warehousing, Inventory, Transportation, Collections Ensures- Availability, visibility (Dikhta hai voh bikta hai), movement, feedback Width- Trade coverage, Reach- Customer coverage, Depth- Brand coverage Growing impact of convergence- internet, mobile, retail revolution Critical- offer product where and when customers want economical, death of distance, geographically disperse market, niche products reach wider audience, low entry barriers, display variety & functionality, interactive, Payments risky, gaining popularity, delivery costly- Books, CDs, medicines, travel, tourism 3rd Party Logistics ( AirFreight, GATI)- Tremendous scope Channel Intermediaries and decisions How to effectively reach target customers Direct or indirect channels / Single or multiple channels Length of channel- types of intermediaries / Number of intermediaries at each level Which intermediaries? Avoid intrachannel conflict- Nike 1-Level Manufacturer 1 2 3 4
2-Level Manufacturer
3-Level Manufacturer
Stockist Consumer Industrial, IT
Consumer IT Hardware
Retailer Consumer Retail /Malls
4-Level 5-Level Manufacturer Manufacturer C&F C&F Stockist Retailer Retailer Consumer Consumer Garments Pharma /FMCG
Distributors (C&F)- Bulk to smaller packs, handle major area, supply to stockists Wholesalers (Stockists)- Resell to retailers, storage, coverage essential Others- Commission agents, co-operatives, indentors (imports), agents (magazines) Retailers- Strong customer influence, consumption / purchase pattern insights, service Speciality (Sports), supermarket (Big Bazaar), convenience (Kirana), factory outlets, warehouses, direct sellers (Encyclopaedia), vending machine (Tea), co-operatives (Apna Bazar, Grahak Peths, Societies), chain stores (Monginis) Internet (Services)- Channel margins and inventory costs major savings- passed on, hence Companies use many channels to connect/ transact business with customers. Eg Books use many paths to reach customers without causing conflicts between channels.
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Eg Amazon.com made books & other items conveniently available to customers on the net 24/7, book-buyers could browse hundreds of books without visiting bookstores. Amazon offered convenience, faster alternative, full range and reviews (Source- Dolan, HBS, 2000) Eg Dell’s strategic decision to sell PCs directly to customers by skipping trade channels allowed Dell to capture customer information missed in other distribution forms, make customers configure own PC, reduce costs by made-to-order manufacturing, make product available 24/7key differentiating factors in a product class with similar competing products. Exercise: X firm uses which aspects of ‘place’ in its marketing plans? Do they effectively in satisfying customers and generating sales and profits, or could new channels be added? Price- Fit between crucial financial component- cost & marketing component -value
Price is what a buyer must give up in exchange for a product or service Price decisions- price point, list price, discounts, payment period, etc Commodities differentiated by price Price is high when product is perceived as new, unique, and without strong substitutes Pricing flexibility is a function of product uniqueness with implications for the PLC Objectives: sales, profits, market share, ROI, competitive position, demand, costs, survival etc Center-stage in marketing wars, Inter-firm rivalry-Mobile Industry Product differentiation blunted- Surf / Ariel, Mature products / Markets- TVs Economic Value Proposition- Titan- High priced despite local & Grey market competition
Pricing Methods By Cost - Cost Plus and Break Even By Competition - Going Rate, competitive, cartelling- Tyre industry, sealed bids (tenders) Customer Oriented- Perceived Value (Lifestyles), Auctions (EBay), Value-Buffett, McDonalds
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Pricing Strategies Pricing Strategy Matrix Price High Quality High 1-Premium (Quality is Medium 4-Over-charging indicative) Low 7-RipOff / Skimming
Medium 2-HighValue 5-Medium Value 8 False Economy
Low 3-Penetration 6-Good Value 9-Economy
Penetration- HQLP- NPL, Entry, Attract, Ensure trial- Amul Premium- HQHP-Sustainable advantage- Bose Speakers, Benz Economy- Functionality & Value-, Nirma, Supermarkets-own brand Skimming- LQHP-Significant advantage, unsustainable-Reliance Mobile Rip-Off- Medium quality, very high price - Pricey Hotels/ Restaurants 1,5,9-coexist in same market till buyers insist on quality, price, value 2,3,6- ways to attack 1,5,9 as 2 = HQMP, 3=HQLP,6=MQLP 4,7,8 overpricing wrt quality-customers feel ‗taken‘, bad oral publicity, avoid
Exercise- Using the Pricing Strategy Matrix Identify pricing strategies of a firm with a large brand portfolio Pricing strategy of competitors within a product category / industry Prestige pricing- Create perception of quality /exclusivity in consumers minds by setting high price. Many consumers judge quality by price, reasonable price connotes acceptable quality, exorbitant price adds an aura of excellence & exclusivity. Packaging & advertising reinforce this perception. Cosmetics, Clubs, High end mobiles. Bait & Hook pricing- Initial low price but high price for replacement or peripherals- Gillette & Print cartridges. Generic replacement possible so (unique or incompatible) disruptive innovation can win, or warn customers of void warranties if replacement used. Discriminatory- Same brand/service, 2 prices o Customer segment- Student discounts o Product form- Ketchup-100gm-20, 250gm-45, 500gm-75 o Image- Taj- Palace (Premium), Resorts (Lifestyle), Hotels (Business), Indione (Budget) o Location-Theatres-Stall-50, Balcony-75, Dress Circle-100, Stadium-Pavilion, stands o Time- Seasonal-Cheaper/costlier during season, happy hours, bakeries-25% off after 8 Other Pricing Strategies o Psychological- Bata, Mobile Airtime Tariffs o Geographical- Medicines / Electronics across countries or Urban/Rural-Electronics o Promotional –Extensive usage, if successful-copied, if unsuccessful-financial drain o Loss Leader- Factory outlets
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
o o o o o o
Special Discounts / Rebates - BOGOF, % Off, Sale Financing- EMIs, Low interest rates Warranties/ AMCs- Extended warranties, TVs-Onida 4 year warranty, Free AMC Psychological Discounting- Prices slashed 399 to 199, Baazee Old for New- New for Old at discounts- Exchange offers-Van Heusen, TVs Value –Superstores-Big Bazaar
Price point sensitivity- cover all price points in a product category- Cadburys- chocolates from Re1-Éclair to Rs 500 Celebrations pack. Also Nokia phones. Maruti pricing strategy Customer‘s budget is Rs 4 lakhs, so he may look at look at cars priced between Rs 3-5 lakhs. Maruti has 6 models/17 variants in this range, at sensitive price points. Customer ends up buying lower version of a higher model than planned. (Hypothetical prices for illustration).
Alto AStar Estilo Wagon R Ritz Swift
Prices in lakhs 2.5 3 3.5 LX LXI VX LX LXI LX
Desire
4 AX VX LXI LX
4.5
5
5.5
6
AX VX AX LXI VX AX LX LXI VX AX LX LXI VX LX
6.5
7
7.5
8
8.5
AX
LXI VX
AX
Product Mix-Profitable brands take care of others in the portfolio Product line- All segments full range- Maruti- Rs 2-8 Lacs at every 25000 interval Optional feature pricing-Ford Ikon-Insurance+ Deck+ Central Lock + Auto Cop free Captive product- Cameras / Razors cheaper but consumables –Film / Blades costly 2-Part- Esselworld- admission + rides, Airtime + SMS/VMS/STD By-product- Lubricants with petrol Product bundling- Season tickets, Time share Internet- Cheapest-No layers, minimum transaction cost, auctions, bargains, visibility
Other ways to ‗increase‘ prices without increasing price Revise discount structure Premium for urgent orders Change minimum order size or shipper Interest on overdue outstandings / penalty clause Charge for delivery/ services/ installation Produce less of low margin models
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Promotion- Marketing communication Objective- communication activities to ensure customers know your offerings, have favorable impression of them, and buy- sale, trial, awareness, remind, reassure Retention Levels -Reading10%, Listening20%, Audio-Visual70%; Sight, Sound, Motion effective. Integrate individual promotion mix components for effective communication Promo Tools / Mix (SPPASM DT) Sales Personal PR Advtg Sponsor MLM Promotion Selling ship Contests Presentation Inserts Advts Events Network, Coupons Samples Press kit Hoardings Period Residual Low Demo Seminars Banners Theme Income finance Commission
Direct Database Mailers, CRM Catalogue
Trade Fair/Expo Demos Brochures Tech-Info
Personal Selling- Effective but expensive way to manage personal customer relationships through a sales force as product complexity needs to be explained (Medical Rep, insurance, Eureka Forbes) Sales Promotion –(Akai / Aiwa/ Sansui)- Incentive to buy, ensures trial, D2C through trade BOGOF, Coupons, Discounts, Contests, Trial Public Relations (PR)- (Political parties / Top Companies/ IPO)- Subtle inserts used in image building, firefighting - impact if managed well, long term economy Direct (Credit card / insurance company mailers)- Targeted communication- database update, response, multiple use-2% response. Contest mailers, EMI, transfer of credit, catalogues, CRM Trade Fairs and Exhibitions (Print / Auto / Pharma / IT Expo)-Trade, product display / demonstration / awareness / trial, recent decline due to Internet Advertising- ‗Paid for‘ communication, Difficult to measure ad impact (Amul bylines excellent, sales impact?), Helps develop attitudes /create awareness/ communicate message, elicit response o Type of Ads- FRESHEN-Fear, Rational, Emotional, Social, Humour, Ethical, Negative o Media-Print- Newspapers/ magazines/ journals (local, national, trade, speciality) / pamplets o Electronic- TV/ radio Virtual- Internet, mobiles Outdoor–Hoardings/ Banners/ Kiosks/ Transport (Bus, Train, Taxi, Vans) Captive – Theatres, Train compartments, Cable TV Sponsorship- Organisation pays to associate with an event/cause-Sahara- Indian Cricket /Hockey/ Olympics. Event attributes associate with sponsor-Pepsi:Youth, Sahara:Patriotism Multi-Level Marketing (HerbalLife, Amway)- Network, Residual Income, Flexi-timings, Initiators earn maximum, financial schemes -suspect Exercise- Identify the Promotion Mix Strategy for any company of your choice
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Marketing Planning- MBA Notes- Dr Amit Rangnekar Promotional Spend Methods- (Half my ad-spend‘s wasted, which half? Wanamaker) Affordable –Amount decided on supposed affordability, ignores promo needs % of Sales- Anticipated sales, not by opportunities, promo-spend varies, % basis arbitrary Competitive parity- Share of voice, Assumes competitive spend-collective industry wisdomdebatable, Own opportunities/strengths/reputation not considered- IIPM highest print spender Objectives & Task Method- Define objectives/tasks, allocate spend, difficult to implement Pull v/s Push: Push (Sales force + Trade promotion), Pull (Advertising +Consumer promotion) traditionally HLL-Push and P&G-Pull strategy worldwide Integrated Marketing Communication (IMC) Strategic process to produce a consistent brand message at each customer touch point. Use multiple communication modes to foster awareness of product / services by informing people about features and benefits, and moving them to make a purchase.
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
5 Strategic Portfolio Analysis & Lifecycle Management Product Life Cycle Helps interpret brand/market dynamics, useful in planning, control. Every product goes through a lifecycle but length, shape, duration, phases differ. Difficult to determine PLC stage
PLC - Applications Strategies Sales Costs Profits Customers Competitors Objectives
Introduction Low Highest Nil Innovators Nil/existing Awareness, Trial
Growth High High Start Adopters Many MS, Usage
Maturity Highest High High Majority Max/New tech Profits, Maintain MS
Decline Ebb Low Ebb Laggards Many Reduce costs
Products Price Distribution Advertising
Brand Cost + Selective, Availability Awareness for customers, trade Heavy to entice Trial/purchase Max Target customers, Trade Mix Max
Build, extend, service Penetrate, Skim Intensive Awareness & Interest In Trade/mass mkt Cater to demand
Sustain, Phase out Reduce, Survival Watchful Reduce to retain loyals Minimum
Selective Convince, convert
Diversify, revive Competitive Extensive, Visibility Differentiation Benefits Encourage brand switch / substitute Selective Defend
New customers, mix Significant
Loyals Specific
Selective Nil
Sales Promotion PR Personal Selling Direct Sponsorships
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Nil Minimum
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Analysing market opportunities Strategic gap analysis- Where are we, where do we want to be, how do we get there
Different market needs & groups(segments) • Target groups/markets it can satisfy in a superior way (targeting) • Locate brand in the minds of consumers (positioning) • Communicate offering (promotion) to the target market • Target market recognises firm‘s distinctive offering (differentiation) • How brand satisfies consumer needs in a unique way—customer-focused value proposition
New
Markets
Current
Integrative growth- Vertical-Backward (Reliance- Polyesters), forward (Videocon-Next), Horizontal- M&A (HLL-Lakme) Diversification growth- Reliance Retail Intensive Growth Strategies Ansoff’s Product-Market Matrix- Offer strategic choices to achieve growth objectives EgMaruti Suzuki Current Products Market Penetration Launch 800, grabbed market share on styling, fuel economy, affordability Market Development Launch in class II-IV towns, easy loans, higher payback periods
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New Products New Product Development- NPD New models Van, Zen, Esteem, Wagon R, Baleno, Swift, SX4 Diversification Training schools, Auto insurance, True Value cars,
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Marketing Planning- MBA Notes- Dr Amit Rangnekar
Market Penetration (least risk)– go rural, price penetration Market Development ( low risk)- new audience, new region, exports NPD (High risk)- existing customers, develop, innovate, new- Automobiles Diversification (Hiighest risk) - related - Amul milk to foods, unrelated- Amul into Garments
Portfolio Models Relative Market Share
25% BCG Matrix- Product Portfolio Matrix (Parle Biscuits) Question mark Star 4 For SBUs/brands portfolio planning than decision making 3 1 Order- Question Mark, Star, Cash Cow & Dog 5 2 Dogs-Low share of low growth market, no cash 10% generation, consume cash, rid, hive 6 8 Cash cows- High share of low growth market, cash 7 generators, low investment, ex-stars, economies, Dog Cash Cow 0% profits, fund other brands 10x 1x 0.1x Question Mark -Low share of high growth market, consume resources, generate little- retain/grow/hive Stars-High share of high growth market, high costs low profits, generate high income, build Portfolio balance critical, reduce dogs, milk cash cows build stars Use funds generated by cash cows to turn ? to Stars, may become cash cows. Some ? may become dogs, larger contribution from successful products to compensate failures Limitations- Profitability, trends, environment, SBU sensitivities not considered
Market Attrac tiveness
GE matrix or Growth Share Matrix Medium Weak Strong 4 Market Attractiveness v Business strengths High Optimal business portfolio to fit firm 3 strengths, exploit attractive industries/markets Medium Which SBU's to invest, build, nurture, 2 hive Low Circle in Matrix is SBU, Circle size= market 1 4 3 2 1 size, pie size = SBU market share Business Strength Arrows= future direction & movement of Harvest/Divest S elec tivity/Earnings Invest/Grow SBU's Forecast for N3-5Y, including strategy, PLC, competition, technology, policy, incorporate in length & direction of arrows
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Market Growth
?
Marketing Planning- MBA Notes- Dr Amit Rangnekar
Factor Ratings Market attractiveness-attractive4 to unattractive1, Business strength-4strong to 1 weak Top 3 corner- strong in attractiveness, invest/grow; Diagonal 3- medium in attractiveness, selectivity, manage earnings; Bottom 3 corner- low in attractiveness, harvest / divest Implementation of portfolio analysis Identify drivers important to overall strategy, assign relative importance weights Score SBU's each driver, Multiply weights times scores for each SBU, Interpret results Review factors affecting Market Attractiveness: Size, growth, profits, demand, pricing, risks, competition/rivalry, differentiation Factors affecting SBU Competitive Strength Assets, competence, relative brand strength, market share, growth, loyalty, relative margin, technology / innovation, distribution, capacity, financial resources, cost structure GE Matrix- later and more advanced version of the BCG Matrix in three aspects: Broader- Market /Industry attractiveness replaces growth as attractiveness dimension Competitive strength replaces RMS to assess each SBU competitive position GE Matrix 3*3 grid, allows more sophistication while the BCG Matrix has only 2*2 Limitations- Core competencies not represented, SBU Interactions not considered
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