Transcript Document

A Brief History of
Marketing Strategy
James E. Coleman
CPA, CFP®, PhD
What this course is about:

Address 3 common expectations of
employers of recent MBA’s





Ability to work/manage teams
Ability to evaluate and solve problems
Ability to communicate solutions persuasively
Learn basic tools and techniques for
analyzing markets & industries
Understand how to apply the marketing
strategy development process across various
settings
Marketing Strategy Development Process:
The Search for Opportunities
FOUR P’s
F
O
U
R
C
‘s
(Context)
External Market Environment
3rd edition
Provides Marketing Strategy
Development Practice
Overview
 You take over marketing management responsibilities
for your firm.
 Must satisfy customers to sell product and earn profits
 Focus is on marketing strategy planning.
 Requires integration of all strategy decisions.
 Requires attention to competitive environment.
 Considers short term and long term perspectives.
 Features ongoing, rapid feedback.
The Process
Analysis of market situation/opportunities
Planning and budgeting
Make marketing plan DECISIONS!!!
Next
Decision
period
Submit plan decisions
The marketing game! simulation
Company reports returned to firms
Industry Environment
 Market growth
 Traditional PLC applies, but subsidiary to strategy
 Technological environment
 No major innovations expected
 Yearly revision cycle
 Competitive environment
 Type of competition depends on firms’ decisions
Six Key Product-Market Segments
Concerned
Parents
High-tech Modern
Managers Students Professional
Creators
Harried
Assistants
Segments have different needs, preferences,
situations, sizes, growth rates.
Home
Users
Past Sales By Market Segment
For Voice Recognition Device
25000
Assistants
20000
Managers
Students
15000
Home
10000
Creators
Parents
5000
0
0
1
2
Year
3
Distribution Channels
Firm 1
Firm 2
Firm 3
Channel 1
Traditional
Dealers
Firm 4
Channel 2
Discount
Dealers
Firms reach customers
through full-service
dealers and
Internet/mail-order
discount dealers.
Concerned
Parents
High-tech
Managers
Modern
Students
Harried
Assistants
Professional
Creators
Home
Users
Different segments
have different shopping
preferences.
Product 1: Voice Recognition Device (VRD)
Number of Special Commands (5-20)
Key
Product
Features
Error Protection (1-10)
Ability to Customize (1-10)
R&D for Product Modifications:
Computing Costs
Feature (Product 1)
Cost to Decrease
Cost to Increase
Special Commands (5-20)
$0
$8,000*(change)2
Error Protection (1-10)
$0
$5,000*(change)2
Ease of Learning (1-10)
$3,000*change
$3,000*(change)2
Product 2 R&D costs follow the same pattern as Product 1 (shown above)
Example
Last
period’s
product
This
period’s
product
Change
Cost to Change
Special Commands
6
8
+2
$8,000*2*2=$32,000
Error Protection
4
3
-1
$0
Ease of Learning
3
5
+2
$3,000*2*2=$12,000
Feature
Total modification costs:
Note: R&D for product changes is more expensive
if you have to make big changes in a short period of time…
$44,000
Level 3
Product 2: Digital Vocal Communicator (DVC)
Number of Tasks (1-10)
Key
Product
Features
Similarity of Commands (1-10)
Ease of Learning (1-10)
Not necessarily cannibalistic of Product 1,
but additional sales support is needed.
Types of Advertising
Pioneering
 Best for expanding market demand early in PLC
Direct competitive
 Best for stimulating current sales (reduced carryover)
Indirect competitive
 Best for building brand awareness & improves carryover
Reminder
 Improves ad effectiveness if brand awareness is high
Corporate (Institutional)
 Creates ‘halo’ effect for the other product (not useful for
single product situations)
Marketing Responsibilities (Level 3)
2 PRODUCTs
Features (and R&D for product modifications)
PRICE
Wholesale price may differ in each channel
and for each product
PLACE
Distribution intensity by channel, product
PROMOTION
-Advertising
$ Spending for each product
Type for each product
-Personal selling
Number of sales reps in each channel
Percent non-selling time in each channel
Commission rate
-Sales promotion
$ Spending per channel, product
CUSTOMER SERVICE $ Spending
MARKET RESEARCH 7 reports may be purchased
Demand forecast/
production order
Number of units for each product
Production Economies of Scale
Percent of Base Unit Cost
102
99
96
93
90
87
84
81
78
75
72
0
100,000
200,000
300,000
400,000
500,000
Cumulative Units Produced
Unit production costs will decline as cumulative production
increases, but this is not reflected in the pro forma estimates
Response Functions and Marketing Spending
Sales
Saturation
Level
Threshold
Level
Marketing Spending
Spending too little may have little effect, but
spending too much just increases costs
and reduces profit.
Marketing Budget Items (Level 2 and 3)
 R&D product modification costs
 Sales force salaries and severance pay
 NOT commissions (which come out of profits)
 Advertising expense
 Customer service expense
 Sales Promotion Expense
 Market research reports expense
BUDGET FOR FIRST PERIOD: $984k
Use it or lose it!
Discretionary Budget
$1,500,000
If you overspend your regular budget it is
automatically deducted from this amount.
“When it’s gone, it’s gone.”
If you overspend after it’s gone, it comes out
of your advertising budget.
Unspent money carries to future periods and
earns interest.
Computing Prices
Computing Retail Prices from Wholesale Prices:
Expected Retail Price = Wholesale price/(1-% Markup)
Example:
Wholesale price = $105
Channel 1 Retail Price = ($105/(1-.50)) = $210
Channel 2 Retail Price = ($105)/(1-.35) = $161.54
Computing Wholesale Prices from Desired Retail Prices:
Wholesale Price = Retail Price * (1 - % Markup)
Example:
Desired Retail Price = $190
Channel 1 Wholesale Price = $190*(1-.50) = $95.00
Channel 2 Wholesale Price = $190*(1-.35) = $123.50
Retail Prices Charged Final Consumers
The retail price set by a dealer depends on:
 The wholesale price in the dealer’s channel.
 The customary markup used in the channel.
 The portion of any sales promotion “deals” that the
dealer passes along to consumers as a price
reduction.
A “Good” Wholesale Price
Should cover the unit cost of the product
(given its features).
Should result in a retail price that will appeal
to target consumers.
Should result in a profit margin that will
contribute to other expenses and profit.
Competitor Analysis
Review posted reports of industry results.
Analyze past strategies & likely changes.
Evaluate positioning and target segments.
Firms
Segments
1
1
X
2
?
3
4
5
6
2
3
4
X
X
?
X
?
Industry Sales Report (Free)
Brand
Firm 1
Unit Sales Share (units) $ Sales (retail)
25,151
.250
$4,292,964
Firm 2
25,151
.250
$4,292,964
Firm 3
25,151
.250
$4,292,964
Firm 4
25,151
.250
$4,292,964
Total
100,604
Channel
1
2
Unit Sales Dollars Sales
56,296 $10,696.240
44,308
$6,475,614
$17,171,854
Product Features and Prices Report (Free)
Brand
of
VRD
Firm 1
Firm 2
Firm 3
Firm 4
Retail
Retail
Error Ease
price
price
of
channel channel
Special protect1
2
commands ion learning
8
8
8
8
3
3
3
3
3
3
3
3
$190.00
$190.00
$190.00
$190.00
$146.15
$146.15
$146.15
$146.15
Market Activity Report (Free)
Firm 1
Firm 2
Firm 3
Firm 4
$250,000
$250,000
$250,000
$250,000
Sales Promotion
Channel 1
Channel 2
$0
$0
$0
$0
$0
$0
$0
$0
No. Sales Reps
Channel 1
Channel 2
Commission
Customer Service
10
10
5%
$92,500
10
10
5%
$92,500
10
10
5%
$92,500
10
10
5%
$92,500
Adv. Dollars
Adv. Type
Additional Market Research Reports
(NOT Free)
1. Market share by segment (all brands)
2. Market share by channel (all brands)
3. Consumer preference study
4. Marketing effectiveness report
5. Sales by segment by channel (own brand)
6. Consumer shopping habits study
7. Product positioning report
Note: separate reports are available for each product,
Except for the consumer shopping habits study
Market Share by Segment Report ($15,000)
Segment
Brand
1
2
3
4
5
6
Firm 1
Firm 2
Firm 3
Firm 4
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
Total
Sales
(units)
20,028
15,084
25,104
10,240
22,056
8,092
Who’s selling to whom?
Who’s buying what?
What is each firm achieving?
Which segments are buying?
Market Share by Channel Report ($12,000)
Brand
Channel 1 Channel 2
Firm 1
Firm 2
Firm 3
Firm 4
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
Total Sales
(units)
56,296
44,308
What’s selling where?
Who’s buying what?
Consumer Preference Study ($30,000)
Segment
Students
Home
Assistants
Creators
Managers
Parents
Special
Error
Ease of
Commands Protection Learning
10-13
7-10
10-13
12-15
13-16
5-8
2-4
2-4
6-8
2-4
6-8
2-4
1-3
6-8
6-8
4-6
2-4
7-9
What kind of product would a segment prefer?
What reference price seems typical for the segment?
How are segments similar and different?
Price
Range
low
low
high
high
high
low
Marketing Effectiveness Report
($25,000 or $30,000 for both prod.)Competitors Competitors
with lower
with equal or
Index
Index
higher Index
Brand Awareness
Customer Service
Consumer Group Rating
Industry Average Rating
0.550
0
3
100%
100%
Channel 1:
Sales Rep Workload
Dealer Satisfaction
Channel Strength
(“Push”)
100%
1.00
.500
0
0
3
3
Channel 2:
Sales Rep Workload
Dealer Satisfaction
Channel Strength
(“Push”)
100%
1.00
.500
0
0
3
3
Detailed Sales Analysis ($15,000)
Segment
1
2
3
4
5
6
Channel 1
896
1,109
5,602
1,808
4,363
1,086
Channel 2
5,269
3,337
1,396
1,196
1,865
1,074
Firm
Unit sales by segment and channel
Are you reaching your target?
Customer Shopping Habits ($7,000)
Segment
Students
Home
Assistants
Creators
Managers
Parents
Percent of Shopping
Percent of Shopping
in Channel 1
in Channel 2
?
?
?
?
?
?
?
?
?
?
?
?
Who shops where?
How do shopping patterns match distribution focus?
Product Positioning Report ($30,000)
Segment
Brand
1
2
3
4
5
6
Firm 1
Firm 2
Firm 3
Firm 4
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
?
Which brands are closest to which segments?
Which segments have no close brands?
Submitting Marketing Plans
 Submitting marketing plans decisions
 Submit your decision plan files via email
no later than the due date and time per class calendar.
 Each firm has a distinct industry and firm
identification (e.g., A1, B3, etc.)
 Need to keep it straight!
 Passwords and the TMGPlan software
 Remember password used to create Plan
 It is case sensitive (upper and lower case make a difference)
 Best to stick to one password!
Recommendations
Analyze the reports as you would analyze a
case.
Make intentional changes.
Find a balance in marketing research
spending.
Be integrative--think carefully about how each
decision impacts each of the others.
Have some fun!