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PART 3.  Developing Market Strategies

[11] Positioning and differentiating the market offering through the product life cycle

1. Many marketers advocate promoting only one product benefit, thus creating a unique selling proposition as they position their product. People tend to remember "number one." Double-benefit position and triple-benefit positioning can also be successful, but must be used carefully.

2. The key to competitive advantage is product differentiation. A market offering can be differentiated along five dimensions: product (form, features, performance quality, conformance quality, durability, reliability, repairability, style, design); services (order ease, delivery, installation, customer training, customer consulting, maintenance and repair, miscellaneous services); personnel, channel, or image (symbols, media, atmosphere, and events). A difference is worth establishing to the extent that it is important, distinctive, superior, preemptive, affordable, and profitable.

3. Because economic conditions change and competitive activity varies, companies normally find it necessary to reformulate their marketing strategy several times during a product's life cycle. Technologies, product forms, and brands also exhibit life cycles with distinct stages. The general sequence of stages in any life cycle is introduction, growth, maturity, and decline. The majority of products today are in the maturity stage.

4. Although many products exhibit a bell-shaped product life cycle (PLC), there are many other patterns, including the growth-slump-maturity pattern, the cycle-recycle pattern, and the scalloped pattern. The PLCs of styles, fashions, and fad can be erratic; the key to success in these areas lies in creating products with staying power.

5. Each stage of the PLC calls for different marketing strategies. The introduction stage is marked by slow growth and minimal profits. If successful, the product enters a growth stage marked by rapid sales growth and increasing profits. There follows a maturity stage in which sales growth slows and profits stabilize. Finally, the product enters a decline stage. The company's task is to identify the truly weak products; develop a strategy for each one; and finally, phase out weak products in a way that minimizes the hardship to company profits, employees, and customers.

6. Like products, markets evolve through four stages: emergence, growth, maturity, and decline.     

[12] Developing new market offerings

1. Once a company has segmented the market, chosen its target customer groups and identified their needs, and determined its desired market positioning, it is ready to develop and launch appropriate new products. Marketing should participate with other departments in every stage of new product development.

2. Successful new-product development requires the company to establish an effective organization for managing the development process. Companies can choose to use product managers, new-product managers, new-product committees, new-product departments, or new-product venture teams.

3. Eight stages are involved in the new-product development process: idea generation, screening, concept development and testing, marketing-strategy development, business analysis, product development, market testing, and commercialization. The purpose of each stage is to determine whether the idea should be dropped or moved to the next stage.

4. The consumer-adoption process is the process by which customers learn about new products, try them, and adopt or reject them. Today many marketers are targeting heavy users and early adopters of new products, because both groups can be reached by specific media and tend to be opinion leaders. The consumer-adoption process is influenced by many factors beyond the marketer's control, including consumers' and organizations'  willingness to try new products, personal influences, and the characteristics of the new product or innovation.

[13] Designing global market offerings

1. Companies cannot simply stay domestic and expect to maintain their markets. Despite the many challenges in the international arena (shifting borders, unstable governments, foreign-exchange problems, corruption, and technological pirating), companies selling in global industries need to internationalize their operations.

2. In deciding to go abroad, a company needs to define its international marketing objectives and policies. The company must determine whether to market in a few countries or many countries. It must decide which countries to consider. In general, the candidate countries should be rated on three criteria: market attractiveness, risk, and competitive advantage.

3. Once a company decides on a particular country, it must determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment, Each succeeding strategy involves more commitment, risk, control, and profit potential.

4. In deciding on the marketing program, a company must decide how much to adapt its marketing mix (product, promotion, price, and place) to local conditions. At the two ends of the spectrum are standardized and adapted marketing mixes, with many steps in between. At the product level, firms can pursue a strategy of straight extension, product adaptation, or product invention. At the promotion level, firms may choose communication adaptation or dual adaptation. At the price lecel, firms may encounter price escalation and gray markets. At the distribution level, firms need to take a whole-channel view of the challenge of distributing products to the final users. In creating all elements of the marketing mix, firms must be aware of the cultural, social, political, technological, environmental, and legal limitations they face in other countries.

5. Depending on the level of international involvement, companies manage their international marketing activity in three ways: through export departments, international divisions, or a global organization.   

PART 4.  Shaping the Market Offering

[14] Setting the product and branding strategy

1. Product is the first and most important element of the marketing mix. Product strategy calls for making coordinated decisions on product mixes, product lines, brands, and packaging and labeling.

2. In planning its market offering, the marketer needs to think through the five levels of the product. The core benefit is the fundamental benefit or service the customer is really buying. At the second level, the marketer has to turn the core benefit into a basic product. At the third level, the marketer prepares an expected product, a set of attributes that buyers normally expect and agree to when they buy the product. At the fourth level, the marketer prepares an augmented product, one that includes additional services and benefits that distinguish the company's offer from that of competitors. At the fifth and final level, the marketer prepares a potential product, which encompasses all the augmentations and transformations the product might ultimately undergo.

3. Products can be classified in several ways. In terms of durability and reliability, products can be nondurable goods, durable goods, or services. In the consumer-goods category, products are convenience goods (staples, impulse goods, emergency goods), shopping goods (homogeneous or heterogeneous), specialty goods, or unsought goods. In the industrial-goods category, products fall into one of three categories: materials and parts (raw materials and manufactured materials and parts), capital items (installation and equipment), or supplies and business services (operating supplies, maintenance and repair items, maintenance and repair services, and business advisory services).

4. Most companies sell more than one product. A product mix can be classified according to width, length, depth, and consistency. These four dimensions are the tools for developing the company's marketing strategy and deciding which product lines to grow, maintain, harvest, and divest. To analyze a product line and decide how many resources should be invested in that line, product-line managers need to look at sales and profits and market profile.

5. A company can change the product component of its marketing mix by lengthening its product via line stretching (downmarket, upmarket, or both) or line filling, by modernizing its products, by featuring certain products, and by pruning its products to eliminate the least profitable.

6. Branding is a major issue in product strategy. A brand is a complex symbol that can convey many levels of meaning. Branding is expensive and time-consuming, and it can make or break a product. The most valuable brands have a brand equity that is considered an important company asset and that must be carefully managed. In thinking about branding strategy, companies must decide whether or not to brand; whether to produce manufacturer brands, or distributor or private brands; which brand name to use; and whether to use line extensions, brand extensions, multibrands, new brands, or co-brands. The best brand names suggest something about the product's benefits; suggest product qualities; are easy to pronounce, recognize, and remember; are distinctive; and do not carry negative meanings or connotations in other countries or languages.

7. Many physical products have to be packaged and labeled. Well designed packages can create convenience value for customers and promotional value for producers. In effect, they can act as "five second commercials" for the product. Marketers develop a packaging concept and test it functionally and psychologically to make sure it achieves its desired objectives and is compatible with the public policy and environmental concerns. Physical products also require labeling for identification and possible grading, description, and product promotion. Sellers may be required by law to present certain information on the label to protect and inform customers.   

[15] Designing and managing services

1. A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. It may or may not be tied to a physical product.

2. Services are intangible, inseparable, variable, and perishable. Each characteristic poses challenges and requires certain strategies. Marketers must find ways to give tangibility to intangibles; to increase the productivity of service providers; to increase and standardize the quality of the service provided; and to match the supply of services during peak and nonpeak periods with market demand.

3. Service industries lagged behind manufacturing firms in adopting and using marketing concepts and tools, but this situation has now changed. Service marketing strategy calls not only for external marketing but also for internal marketing to motivate employees and interactive marketing to emphasize the importance of both "high-tech" and "high-touch"

4. The service organization faces three tasks in marketing: (1) It must differentiate its offer, delivery, or image; (2) it must manage service quality in order to meet or exceed customers' expectations; (3) it must manage worker productivity by getting its employees to work more skillfully, increasing the quantity of service by surrendering some quality, industrializing the service, inventing new product solutions, designing more effective services, presenting customers with incentives to substitute their own labor for company labor, or using technology to save time and money.

5. Even product-based companies must provide postpurchase service. To provide the best support, a manufacturer must identify the services that consumers value most and their relative importance. The service mix includes both presale services (facilitating and value-augmenting services) and postsale services (customer service departments, repair and maintenance services).

[16] Developing price strategy and programs

1. Despite the increased role of nonprice factors in modern marketing, price remains a critical element of the marketing mix. Price is the only one of the four Ps that produces revenue; the others produce costs.

2. In setting pricing policy, a company follows a six-step procedure. First, it selects its pricing objectives. Second, it estimates the demand curve, the probable quantities that it will sell at each possible price. Third, it estimates how its costs vary at different levels of output, at different levels of accumulated production experience, and for differentiated marketing offers. Fourth, it examines competitors' costs, prices, and offers. Fifth, it selects a pricing method. Finally, it selects the final price.

3. Companies do not usually set a single price, but rather a pricing structure that reflects variations in geographical demand and costs, market-segment requirements, purchase timing, order levels, and other factors. Several price adaptation strategies are available: (1) geographical pricing; (2) price discounts and allowances; (3) promotional pricing; (4) discriminatory pricing; and (5) product-mix pricing, which includes setting prices for product lines, optional features, captive products, two-part items, by-products, and product bundles.

4. After developing pricing strategies, firms often face situations in which they need to change prices. A price decrease might be brought about by excess plant capacity, declining market share, a desire to dominate the market through lower costs, or economic recession. A price increase might brought about by cost inflation or overdemand.

5. There are several alternatives to increasing price, including shrinking the amount of product instead of raising the price, substituting less expensive materials or ingredients, and reducing or removing product features.

6. The firm facing a competitor's price change must try to understand the competitor's intent and the likely duration of the change. The firm's strategy often depends on whether it is producing homogeneous or nonhomogeneous products. Market leaders attacked by lower-priced competitors can choose to maintain price, raise the perceived quality of their product, reduce price, increase price and improve quality, or launch a low-priced fighter line.  

[17] Designing and managing value networks and marketing channels

1. Most producers do not sell their goods directly to final users. Between producers and final users stands one or more marketing channels, a host of marketing intermediaries performing a variety of functions. Marketing-channel decisions are among the most critical decisions facing management. The company's chosen channel(s) profoundly affect all other marketing decisions.

2. Companies use intermediaries when they lack the financial resources to carry out direct marketing, when direct marketing is not feasible, and when they can earn more by doing so. The use of intermediaries largely boils down to their superior efficiency in making goods widely available and accessible to target markets. The most important functions performed by intermediaries are information, promotion, negotiation, ordering, financing, risk taking, pysical possession, payment, and title.

3. Manufacturers have many alternatives for reaching a market. They can sell direct or use one-, two-, or three-level channels. Deciding which type(s) of channel to use calls for analyzing customer needs, establishing channel objectives, and identifying and evaluating the major alternatives, including the types and numbers of intermediaries involved in the channel. The company must determine whether to distribute its product exclusively, selectively, or intensively, and it must clearly spell out the terms and responsibilities of each channel member.

4. Effective channel management calls for selecting intermediaries and training and motivating them. The goal is to build a long-term partnership that will be profitable for all channel members. Individual members must be periodically evaluated. Channel arrangements may need to be modified when market conditions change.

5. Marketing channels are characterized by continuous and sometimes dramatic change. Three of the most important trends are the growth of vertical marketing systems, horizontal marketing systems, and multichannel marketing systems.

6. All marketing channels have the potential for conflict and competition resulting from such sources as goal incompatibility, poorly defined roles and rights, perceptual differences, and interdependent relationships. Companies can manage conflict by striving for superordinate goals, exchanging people among two or more channel levels, co-opting the support  of leaders in different parts of the channel, and encouraging joint membership in and between trade associations.

7. Channel arrangements are up to the company, but there are certain legal and ethical issues to be considered with regard to practices such as exclusive dealing or territories, tying agreements, and dealers' rights.

[18] Managing retailing, wholesaling, and market logistics

1. Retailing includes all the activities involved in selling goods or services directly to final consumers for personal, non-business use. Retailers can be understood in terms of store retailing, nonstore retailing, and retail organizations.

2. Like products, retail-store types pass through stages of growth and decline. As existing stores offer more services to remain competitive, their costs and prices go up, which opens the door to new retail forms that offer a mix of merchandise and services at lower prices. The major types of retail stores are specialty stores; department stores; supermarkets; convenience stores; discount stores; off-price retailers (factory outlets, independent off-price retailers, and warehouse clubs); superstores (combination stores and supermarkets); and catalog showrooms.

3. Although most goods and services are sold through stores, nonstore retailing has been growing much faster than store retailing. The major types of nonstore retailing are direct selling (one-to-one selling, one-to-many-party-selling, and multilevel network marketing); direct marketing (which includes e-commerce and internet retailing); automatic vending; and buying services.

4. Although many retail stores are independentlu owned, an increasing number are falling under some of corporate retailing. Retail organizations achieve many economies of scale, such as greater purchasing power, wider brand recognition, and better-trained employees. The major types of corporate retailing are corporate chain stores, voluntary chains, retailer cooperatives, consumer cooperatives, franchise organizations, and merchandising conglomerates.

5. Like all marketers, retailers must prepare marketing plans that include decisions on target markets, product assortment and procurement, services and store atmosphere, price, promotion, and place. These decisions must take into account the major trends in retailing.

6. Wholesaling includes all the activities involved in selling goods or services to those who buy for resale or business use. Manufacturers use wholesalers because wholesalers can perform functions better and more cost-effectively than the manufacturer can. These functions include, but are not limited to, selling and promoting, buying and assortment building, bulk breaking, warehousing, transportation, financing, risk bearing, dissemination of market information, and procision of management services and consulting.

7. There are four types of wholesalers; merchant wholesalers (full-service wholesalers like wholesale merchants and industrial distributors, and limited-service wholesalers like cash-and-carry wholesalers, truck wholesalers, drop shippers, rack jobbers, producers' cooperatives, and mail-order wholesalers); brokers and agents (including manufacturers' agents, selling agents, purchasing agents, and commission merchants); manufacturers' and retailers' sales branches, sales offices and purchasing offices; and miscellaneous wholesalers such as agricultural assemblers and auction companies.

8. Like retailers, wholesalers must decide on target markets, product assortment and services, price, promotion, and place. The most successful wholesalers are those who adapt their services to meet their suppliers' and target customers' needs.

9. Producers ofphysical products and services must decide on market logistics-----The best way to store and move their goods and services to market destinations. The logistical task is to coordinate the activities of suppliers, purchasing agents, manufacturers, marketers, channel members, and customers. Major gains in logistical efficiency have come from advances in information technology. Although the cost of market logistics can be high, a well-planned market-logistics program can be potent tool in competitive marketing. The ultimate goal of market logistics is to meet customers' requirements in an efficient and profitable way.       

[19] Managing integrated marketing communications

1. Modern marketing calls for more than developing a good product, pricing it attractively, and making it accessible to target customers. Companies must also communicate with present and potential stakeholders, and with the general public. The marketing communications mix consists of five major modes of communication: advertising, sales promotion, public relations and publicity, personal selling, and direct marketing.
2. The communication process consists of nine elements: sender, receiver, message, media, encoding, decoding, response, feedback, and noise. To get their messages through, marketers must encode their messages in a way that takes into account how the target audience usually decodes messages. They must also transmit the message through efficient media that reach the target audience and develop feedback channels to monitor response to the message.
3. Developing effective communications involves eight steps: (1) Identify the target audience, (2) determine the communications objectives, (3) design the message, (4) select the communication channels, (5) establish the total communications budget, (6)  decide on the communications mix, (7) measure the communications' results, and (8) manage the integrated marketing communications process.
4. In identifying the target audience, the marketer needs to close any gap that exists between current public perception and the image sought. Communications objectives may be cognitive, affective, or behavioral-that is, the company might want to put something into the consumer's mind, change the consumer's attitude, or get the consumer to act. In designing the message, marketers must carefully consider content, structure, format, and source. Communication channels may be personal (advocate, expert, and social channels) or nonpersonal (media, atmospheres, and events). The objective and task method of setting the promotion budget, which calls upon marketers to develop their budgets by defining specific objectives, is the most desirable.
5. In deciding on the marketing communications mix, marketers must examine the distinct advantages and costs of each promotional tool and the company's market rank. They must also consider the type of product market in which they are selling, how ready consumers are to make a purchase, and the product's stage in the product life cycle. Measuring the marketing communications mix's effectiveness involves asking members of the target audience whether they recognize or recall the message, how many times they saw it, what points they recall, how they felt about the message, and their previous and current attitudes toward the product and the company.
6. Managing and coordinating the entire communications process calls for integrated marketing communications (IMC): marketing communications planning which recognize the added value of a comprehensive plan that evaluates the strategic roles of a variety of communications disciplines and combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of discrete messages. 

[20] Managing advertising, sales promotion, public relations, and direct marketing

1. Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. Advertisers include not only business firms but also charitable, nonprofit, and government agencies that advertise to various publics.
2. Developing an advertising program is a five step process:(1) Set advertising objectives; (2) establish a budget that takes into account stage in product life cycle, market share and consumer base, competition and clutter, advertising frequency, and product substitutability; (3) choose the advertising message, determine how the message will be generated, evaluate alternative messages for desirability, exclusiveness, and believability; and execute the message with the most appropriate style, tone, words, and format and in a socially responsible manner; (4) decide on the media by establishing the ad's desired reach, frequency, and impact and then choosing the media that will deliver the desired results in terms of circulation, audience, effective audience and effective ad exposed audience; and (5) evaluate the communication and sales effects of advertising.
3. Sales promotion consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade. Sales promotion includes tools for consumer promotion (samples, coupons, cash refund offers, prices off, premiums, prizes, patronage rewards, free trials, warranties, tie in promotions, cross promotions, point of purchase displays, and demonstrations); trade promotion (prices off, advertising and display allowances, and free goods); and business and sales force promotion (trade shows and conventions, contests for sales reps, and specialty advertising).
4. In using sales promotion, a company must establish its objectives, select the tools, develop the program, pretest the program, implement and control it, and evaluate the results.
5. Public relations (PR) involves a variety of programs designed to promote or protect a company's image or its individual products. Many companies today use marketing public relations (MPR) to support the marketing departments in corporate or product promotion and image making. MPR can affect public awareness at the fraction of the cost of advertising, and is often much more credible. The main tools of PR are publications, events, news, speeches, public-service activities, and identity media. In considering when and how to use MPR, management must establish the marketing objectives, choose the PR messages and vehicles, implement the plan carefully, and evaluate the results.
6. Direct marketing is an interactive marketing system that uses one or more media to effect  a measurable response or transaction at any location. Direct marketing, especially electronic marketing, is showing explosive growth.
7. Companies are recognizing the importance of integrating their marketing communications in systems called integrated marketing communications, integrating direct marketing, and maximarketing. The aim is to establish the right overall communications budget and the right allocation of funds to each communication tool.
8. Direct marketers must plan campaigns by deciding on objectives, target markets and prospects, offers and prices, followed by testing the campaign and establishing measure to determine the campaign's success.
9. Major channels for direct marketing include face-to-face selling, direct mail, catalog marketing, telemarketing and M-commerce, direct response marketing, kiosk marketing, and e-marketing.

[21] Managing the sales force

1. Sales personnel serve as a company's link to its customers. The sales rep is the company to many of its customers, and it is the rep who brings back to the company much-needed information about the customer.
2. Designing the sales force requires decisions regarding objectives, strategy, structure, size, and compensation. Objectives may include prospecting, targeting, communicating, selling, servicing, information gathering, and allocating. Determining strategy requires choosing the mix of selling approaches that is most effective. Choosing the sales-force structure entails dividing territories by geography, product, or market (or some combination of these). Estimating how large the sales force needs to be involves estimating the total workload and how many sales hours (and hence salespeople) will be needed. Compensating the sales force entails determining what types of salaries, commissions, bonuses, expense accounts, and benefits to give, and how much weight customer satisfaction should have in determining total compensation.
3. There are five steps involved in managing the sales force: (1) recruiting and selecting sales representatives;(2) training the representatives in sales techniques and in the company's products, policies, and customer-satisfaction orientation;(3) supervising the sales force and helping reps to use their time efficiently;(4) motivating the sales force, and balancing quotas, monetary rewards, and supplementary motivators;(5) evaluating individual and group sales performance.
4. Effective salespeople are trained in the methods of analysis and customer management, as well as the art of sales professionalism. No approach work best in all circumstances, but most trainers agree that selling is a seven-step process: prospecting and qualifying customers, preapproach, approach, presentation and demonstration, overcoming objections, closing, and follow-up and maintenance.
5. Another aspect of selling is negotiation, the art of arriving at transaction terms that satisfy both parties. A third aspect is relationship marketing, which focuses on developing long term, mutually beneficial relationships between two parties. 

[22] Managing the total marketing effort

1. The modern marketing department evolved through six stages, and today companies can be found in each stage. In the first stage, companies simply start out with a sales department. In the second stage, they add ancillary marketing functions, such as advertising and marketing research. In the third stage, a separate marketing department is created to handle the increased number of ancillary marketing functions. In the fourth stage, both sales and marketing report to a sales and marketing vice president. In the fifth stage, all of a company's employees are market and customer centered. In the sixth stage, marketing personnel work mainly on cross-disciplinary teams.
2. Modern marketing departments can be organized in a number of ways. Some companies are organized by functional specialization, while others focus on geography and regionalization. Still others emphasize product and brand management or market-segment management. Some companies establish a matrix organization consisting of both product and market managers. Finally, some companies have strong corporate marketing, others have limited corporate marketing, and still others place marketing only in the divisions.
3. Effective modern marketing organizations are marked by a strong cooperation and customer focus among the company's departments: marketing, R&D, engineering, purchasing, manufacturing, operations, finance, accounting, and credit.
4. A brilliant strategic marketing plan counts for little if it is not implemented properly. Implementing marketing plans calls for skills in recognizing and diagnosing a problem, assessing the company level where the problem exists, implementation skills, and skills in evaluating the results.
5. The marketing department has to monitor and control marketing activities continuously. The purpose of annual-plan control is to ensure that the company achieves the sales, profits, and other goals established in its annual plan. The main tools of annual-plan control are sales analysis, market-share analysis, marketing expense-to-sales analysis, financial analysis, and market-based scorecard analysis.
6. Profitability control seeks to measure and control the profitability of various products, territories, customer groups, trade channels, and other sizes. An important part of controlling for profitability is assigning costs and generating profit-and-loss statements.
7. Efficiency control focuses on finding ways to increase the efficiency of the sales force, advertising, sales promotion, and distribution.
8. Strategic control entails a periodic reassessment of the company and its strategic approach to the marketplace, using the tools of the marketing effectiveness review and the marketing audit. Companies should also undertake marketing excellence reviews and ethical/social responsibility reviews.

Please see also the following:

CRM        October 2006  

CRM        September 2006

CRM        August 2006   

CRM        July 2006   

CRM        June 2006 

CRM        May 2006   

CRM        April 2006   

CRM        March 2006   

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