CHAPTER 2 How Consumer Analysis Affects Business Strategy Marketing Strategy Involves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive goods Value: the difference between what consumers give up (pay with resources) for a product and the benefits they receive in return 2 1
Foundations of Market-driven Strategies A thorough understanding of consumer trends, global markets, models to predict purchase and consumption patterns, and communication methods to reach target markets most effectively Consumer Behavior Consumer Insight 3 Creating Market-driven Strategies Shared vision (among partners) about the market and expected changes Selecting avenues for delivering superior value to customers Positioning the firm and brand based on distinctive competencies Recognizing value of collaborative relationships with channel members and other entities New organizational designs for implementing and managing strategies 4 2
Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs 5 Market Analysis The process of analyzing consumers and trends; current and potential competitors; company strengths and resources; and the technological, legal, and economic environments One goal is to minimize the number of failed products introduced to the market by better understanding the wants and needs of the market 6 3
Market Analysis: Consumer Insight and Product Development Consumer Insight: an understanding of consumers expressed and unspoken needs and realities that affect how they make life, brand, and product choices. Combines fact (from research) and intuition to yield an insight that can lead to a new product, existing product innovation, brand extension, or revised communication plan 7 V8, a brand of vegetable and fruit juices, introduced a new individual size juice box for consumers who want to drink on the go. 8 4
Market Analysis: Consumer Environment Includes demographic trends, personal and group influences, motivation, attitudes, knowledge, changing needs, consumption patterns, and consumer lifestyles Changes in the consumer environment can lead to changes in packaging, positioning, product design, and advertising methods -Mitsubishi -Healthy Choice 9 Changing Consumer Health Trends 10 5
Market Analysis: Corporate Strengths and Resources Resources: -Financial -Personnel / managerial -Production -Development and design -Research -Marketing / advertising Strengths: -3M known for leadership, quality, and innovation -Advertising highlights corporate strength 11 Market Analysis: Current and Potential Competitors -Who are current competitors and which firms are likely to become competitors? -What are advantages/disadvantages of competitors and competitive products? -How will competitors react to new products or innovations (Manco tape; see Duck Company Case) 12 6
Market Analysis: Market Environment State of Economy Government Stability and Regulations Market Environment Physical Conditions Technology 13 Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs 14 7
Market Segmentation Process of identifying a group of people similar in one or more ways, based on a variety of characteristics and behaviors Results in market segment: a group of consumers with similar needs and behaviors that differ from those of the entire mass market Goal: minimize variance within groups and maximize variance between groups Opposite of market aggregation 15 Market Segmentation Identifying Segments Consumer Characteristics ~Demographics ~Psychographics ~Purchase & Consumption Behavior Geographical Characteristics ~National boundaries ~State or regional boundaries Situational Characteristics ~Work versus Leisure usage ~Where used ~Personality ~Culture ~Values ~Urban/rural ~Zip code ~Time Using multiple variables to narrow target 16 8
Criteria for Choosing Segments Measurability: ability to obtain information about the size, nature and behavior of a market segment Accessibility: degree to which segments can be reached, either through various advertising or communication programs or methods of retailing Substantiality: size of the market--is it large enough to be profitable? Congruity: how similar segment members are in characteristics or behaviors 17 Market Segmentation Increasing diversity in consumer needs and wants leads to mass customization: customizing goods for individual customers in high volumes and at relatively low costs Key is understanding which customized features customers value the most Ability to reach segment of one Segmentation can increase profitability -decreases marketing expenses -increases value (and therefore price) to consumers 18 9
Segmentation at The Limited Different stores for different folks Each division evolved from servicing a new segment of consumer The Limited: Young to Boomer Career Women Structure: Young Men 19 Lane Bryant: Larger-sizes for Real Women Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs 20 10
Market Mix Strategies: Product Product: the total bundle of utilities (or benefits) obtained by consumers in the exchange process Internal considerations include: -What are the costs of developing, producing, distributing, and selling the product? -How much profits will the product generate? External considerations include: -Will new product satisfy consumer demand better than old product or competitive product? -What packaging will most likely attract consumers and fulfill storage needs best? 21 Market Mix Strategies: Price Price: the total bundle of costs given up by consumers in the exchange process Pricing considerations include: -What is the best pricing policy for the product or for the store? -How will consumers react to Everyday Low Prices or promotional prices? -Is it more important to have the lowest price or prices in the range consumers expect to pay? -What effect does price reduction or price ending have on perceived quality of product? -What does pricing policy need to be to maintain a healthy profit margin? 22 11
Market Mix Strategies: Promotion and Place Promotion: activities involved in selling a product, including advertising, personal sales, publicity, and public relations -What message should be sent to consumers? -Which elements will best reach segments? -How will attributes be communicated best? Place: physical distribution and location of sale (retail outlet) -Where do consumers want or expect to buy this product? -What is the most efficient distribution channel and method to get product to place of sale? 23 Market Mix Strategies: Brand Brand: a trademark or distinctive name identifying a product or manufacturer A promise to consumers that attributes they desire most will be obtained when they buy the preferred brand Often create an emotional attachment 24 12
Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs 25 Strategy Implementation Even the best strategies are worthless if not implemented well in the marketplace 7Rs for formulation and implementation 26 13
Strategy Implementation Research Rate Resources Retailing Reliability Reward Organization Design, conduct, analyze Speed to market Company resources Methods, type, location Upon channel members Design and run programs Consumer Give information Speed of shopping Forms of payment Where shop & buy Of brand & retailer From programs Relationship With partners & customers To store and brand Customer Satisfaction 27 Customer Loyalty and Retention Strategies 28 14
Customer Loyalty Programs (1 of 2) It is less costly and easier to keep a customer than it is to create a new one With increased choices, consumers are becoming more fickle and less loyal Loyalty programs are designed to reward consumers for repeat patronage rather than reward cherry-pickers These programs can increase loyalty to a brand, service, retailer, or organization Common programs include purchase (store/brand), stay (hotel), or flyer (airline) 29 Customer Loyalty Programs (2 of 2) Help identify customer segments that can be targeted with special offers or perks that are of more value to customers Ultimate goal is to strengthen the relationship with the customer 30 15
Strengthening Relationships with Loyalty Programs Make individualized marketing a reality Institute a total quality control policy Introduce an early warning system Build realistic expectations Provide guarantees Provide information on product use Solicit customer feedback Acknowledge, address & rectify complaints Reinforce customer loyalty 31 Global Marketing Strategy Thinking Globally: involves ability to understand markets beyond one s own country of origin with respect to: Sources of demand Sources of supply Management & marketing methods 32 16
Global Marketing Strategy Organizations must understand consumers on a global basis Globalization provides opportunities for growth for large and small firms The Internet provides a way to reach global markets inexpensively 33 Global Marketing Strategy Can marketing be standardized? -Can a firm use the same marketing program in all target countries, or must it create a different program for each? -Which are greater-- the similarities among or differences between consumers in different countries? -How do advantages of economies of scale and unified brand image compare to advantages of culture-specific messages? 34 17
Global Marketing Strategy Cultural analysis: the comparison of similarities and differences in behavioral and physical aspects of cultures Cultural empathy: the ability to understand the inner logic and coherence of other ways of life and refrain from judging other value systems Intermarket segmentation: the identification of groups of customers who transcend traditional market or geographic boundaries (similar segments around the world) 35 Intermarket Segmentation Building marketing strategy on peoples universals rather than differences. Escada customers are similar in affluence, taste, and style, regardless of where they live. 36 18
Global Advertising Effectiveness Global advertising sends the same message to consumers around the world Localized campaigns adapt messages to the norms of the different cultures When is global advertising most effective? -Message is based on similar lifestyle -Ad appeals to basic human needs and emotions -Product satisfies universal needs and desires Language problems may occur, but back- translation, visual language, and local experts (advice) helps overcome them 37 Global Advertising Effectiveness Before choosing a brand name, marketers should consider the following: -Does the name of the product have another meaning in other countries in which it might be marketed? -Can the name be pronounced everywhere? -Is the name close to that of a foreign brand, or does it duplicate another product sold in other markets? -If the product is distinctly American, will national pride and prejudice work against the acceptance of the product in foreign markets? Review Question What are the characteristics of customer loyalty programs? 38 19