Macroenvironment Factors - CDSTEP

Week 1: Macroenvironment factors: CDSTEP - Social and Cultural Trends: o Culture o Greener Consumers o Privacy Concerns o The time poor society o Regional subcultures o Ethnicity o Country culture - Demographic: o Age and population are the most important factors - Technology: impacts every aspect of mkt o New products o New forms of communication o New retail channels o New payment mechanisms - Economic: consumers and businesses are affected by o Recession (business cycle) o Changes in interest rates o Inflation o Unemployment - Political/ Legal - Factors affecting supplier power: # suppliers vs buyers Importance of the buyer Switching costs Threat of forward integration Importance of the supplier’s product Substitute for the supplier’s product Factors affecting threat of entry: Economies of scale Capital requirements Incumbent ads independent of size Access to distribution channels Govt policy Factors affecting rivalry: # competitors brand loyalty Industry growth industry concentration Exit barriers quality differences - Factors affecting buyer power: Volume of purchase The product is standard or undifferentiated Switching costs Threat of backward integration Factors affecting threat of substitute products: - Price-performance trade-off Switching costs: sensitive to the price, lower switch Technology Implications for strategy: - Positioning the company - Exploiting industry change - Shaping industry structure: eg offering new product - Defining the industry: who are customers, supplier MKT strategy: Generic approaches - Porter’s 3 generic strategies: o Cost leadership:  Having the lowest per-unit (i.e. average) cost in the industry – lowest cost relative to rivals  Defends against buyers, suppliers and provides entry barriers o Differentiation:  Creating a product offering that is considered, industry wide, as unique  Defends against competitive rivalry, buyers, reduces substitutes, higher margins help with suppliers o Focus/ Niche:  Strategy built on serving the needs of a particular target market  Requires one or both of the previous 2 strategies for that particular niche. Red Ocean: Many competitors - Compete in existing market space - Beat the competition - Exploit existing demand - Make the value-cost trade off - Align the whole system of a firm’s activities with it strategic choice of differentiation or low cost Blue Ocean: 1st one to create market, new feature/ product - Create uncontested market space - Make the competition irrelevant - Create and capture new demand - Break the value-cost trade off - Align the whole system of a firm’s activities in pursuit of differentiation and low cost 7 Ps of service mkt - The traditional mkt mix consists of: o Product: what creates the value of the customer o Price: how much do you charge for that value o Place: how you deliver that value o Promotion: how you communicate the value to the consumer - 7 Ps of service mkt add: o People: human actors who influence the service experience and perceptions o Process: all of the steps involved in delivering the actual service (value) to the customer o Physical Evidence: any tangible components related to the delivery of the service; gives insight to customers about the service. Week 2: STP Segmentation: - Dividing market into distinct needs, characteristics, or behaviors, who might require separate product or mkt mixes Targeting: - Choosing which group to appeal to Positioning: - Creating a clear, distinctive and desirable position in the target consumer’s mind, relative to competition Segmentation Strategy or Objectives Segmentation Bases Targeting Positioning Evaluate select target market identify and segment develop positioning attractiveness Step 2: Segmentation Bases: Geographic Demographic Psychographic Behavior country, province, city, urban, rural, climate age, gender, income, education, occupation, ethnic background, religion, family life cycle, etc. - Lifestyles: how we live to achieve our goals - Self-values: how one sees oneself - Self-concept: goals for life benefits derived, usage rates, user status, loyalty, occasion. Step 3: Evaluate segment attractiveness - Identifiable - Reachable - Responsive - Substantial and Profitable: Segment Profitability = segment size x segment adoption % x purchase behavior x profit margin% - FC Step 4: Select target market 4 targeting strategies to choose from based on attractiveness of the opportunity and firm’s core competencies: - Undifferentiated - Differentiated - Concentrated - Micromarketing Step 5: Identify and develop positioning strategy  Product attributes  Benefits & symbolism  Market leadership Repositioning: - New design - New endorsers - New image - New uses - Ect… as long as it meets changing needs - Value - Competition - New message - New audience - New packaging Week 3: Return on Invested Capital (ROIC): tells us how much value the company creates – how efficiently it allocates its available capital ROMI (Return on Mkt Investment): a metric used to measure the overall effectiveness of a mkt campaign by considering the incremental contribution over the cost of the campaign What is a good ROMI?  Ultimately, it depends  Can be useful to compare and evaluate 2 projects o Eg: should we invest in a social media campaign with lower costs, that will yield 100 mew sales or a radio campaign with higher costs that will yield 500 new sales?  Based on estimates (can never know actual results ahead of time) o Can be useful to run 3 cases: expected, best, worst Week 4: - What makes a brand?  Way to differentiate products  Can represent firm or entire product assortment (GM), product line (Chevrolet), or single product (Corvette)  Brand elements include names, logos, symbols, characters, slogans, jingles, distinctive, packaging - Value of Branding:  Brands establish loyalty  Brands protect from competition  Brands reduce mkt costs  Brands are assets  Brands impact market value  Brands facilitate purchasing - Brand overview: 1. Brand Equity: the value a brand adds to a product  Brand awareness - Perceived value  Brand associations - Brand loyalty 2. Brand ownership strategies:  Manufacturer or national brand  Store or private label  generic 3. Brand name strategies:  Corporate or Family Brand  Corporate and Product Lind Brand  Individual - Brand Dilution: extend yourself  Diluting your brand  Changing the perception of the brand - Brand ownership: shifted the image no name to PC  Lower quality premium brand to compete with the higher brands  Sell directly to consumers  Product sold at your store - 10 ways to create brand beyond tangible benefits:  Creating a conceived linkage to a tangible benefit: Pantene mends damaged hair  Forming a mental context: W-hotel – Premium service, unique  Directing an Experience: Red Bull a wave of energy beyond the physical drink  Creating a means of self-presentation  Creating a means to deliver a message: Debeers: Diamond are 4ever – Commitment to the relationship.  Building a Social Cultural Authority: Apple a device for creativity and expression  Creating a Long Hand: Body shop protecting the environment  Creating an Alto Ego: Provocative sexual being Diesel  Building an Emotional Gym: allow consumers to experience emotional possibilities  Facilitating Fantasies: timberland allow consumers to fantasize about being courageous adventures. - Market Share $ Branding Metrics  Market share gives an overall idea about the composition of industry Revenue Market Share Unit Market Share Relative Market Share Assesses comparative market strength Brand Development Index Regional or segment differences in brand purchases and consumption. Category Development Index Regional or segment differences in category purchases and consumption Category Penetration Measures category acceptance by a defined population. Useful in tracking acceptance of new product categories - Key Trends 2018  Brands encounter new challenges  AI moves from idea to everyday reality  Sharing personal data sparks more concern  Brand experience builds difference Week 5: - What is a new product?  Radically new (e.g. the 1st telephone, TV, dishwasher)  Incremental (e.g. continuously updating car models) - New products result from: The process of innovation - Newness is subjective:  How marketers position it  How the market perceives it Reflects the prices at which goods are sold. The units sold by a particular company as % of total market share, measured in the same units. Indexes a firm’s or a brand’s market share against that of its leading competitor. Index of how well a brand performs within a given market group, relative to its performance in the market as a whole Index used to show how well a category perform in a given market segment, relative to its performance in the market as a whole - Why create new products:  New products add value to the firm  Satisfy the changing needs of consumers  Diversify firm’s risk - Diffusion of Innovation:  Innovators (2.5%): who want to be 1st to have the new product  Early adopters (13.5%): generally don’t like to take as much risk as innovators  Early majority (34%): tend to wait until bugs are worked out  Late majority (34%): the last group of buyers to enter a new product market  Laggards (16%): who like to avoid change and rely on traditional products until they are no longer available. Product Life cycle:  Introduction: innovators start buying the products  Growth: the product gains acceptance, demand and sale increase, and competitors emerge in the product category  Maturing: industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them  Decline: sales decline and the product eventually exit the market - Strategies for extending the PLC:  Develop new uses - Modify product  Increase frequency of use - Increase # users  Find new users - Reposition product  Change mkt strategy Product Lines vs Brand Portfolios: - Brand extension: taking the brand into a previously unrelated territory or market - Line Extension: adding variation to an existing product  E.g. adding more scent for shampoo: shampoo cucumber, etc - Brand Portfolios: developing a brand portfolio strategy  Pros:  Ability to adjust mkt mix to reflect the consumer’s perceptive  Can be used to defend against competitive pressure  Cons:  Potential confusion of brand meanings  Brand proliferation – increased costs with inventory, logistics, etc.  Potential to dilute mkt efforts, limiting the growth of the key brand. Product Line Analysis: used to determine if you should launch a new product in the marketplace  Step 1: Estimate impact on total sales in the market and cannibalization of existing products  Step 2: Estimate Price and Costs to find Contribution  Step 3: Calculate ROI for scenarios  Step 4: Make decision - Customer Retention: of the people who try out brand, how many will continue to purchase our brand. - Repeat Volume = [Trial Population x Repeat Rate] x Volume of Purchased x Frequency of Purchase Sales Projections:  Penetration: how many customers we are retaining + new customers  Average Frequency of Purchase: how often people buy our particular product  Average Volume of Purchase: when they buy, how much they buy