CONSUMER
COMPANY
COMPETITION
CONDITION
MARKET SEGMENTATION-THE
2ND STEP
THE THREE MAJOR SEGMENTS COULD BE
COMPETITION:
-Michael Porter’s Five Forces Analysis
-Value Chain Analysis
-SWOT Analysis
Michael Porter’s Five Forces Model
THREAT OF NEW ENTRANT DEPENDS UPON:
-economies of scale
-Capital /investment requirement
-Customer switching costs
-Access to distribution channel
-Access to technology
-Brand loyalty
-Degree of retaliation from existing players
-Government policies
THREAT OF SUBSTITUTES DEPENDS
UPON:
-quality of the substitute
-Buyer’s willingness to substitute
-Relative price and performance of
substitutes
-Switching costs to substitutes
BARGAINING POWERS OF SUPPLIERS
DEPENDS UPON:
-concentration of suppliers Vs the buyers
-branding of the supplier
-suppliers threat to integrate forward
-quality n service
-switching cost of the suppliers
BARGAINING POWER OF BUYERS DEPENDS
UPON:
-concentration of buyers VS the suppliers
-products represents a significant amount of
buyer’s costs or purchases
-differentiated/undifferentiated product
-switching costs to the buyers
-buyers threat of backward integration
-information update of the buyers
INTENSITY OF RIVALRY DEPENDS
UPON:
-structure of competition;numerous
competitors vs clear cut market leader
-degree of product differentiation
-structure of industry costs;high fixed costs
leading to price cutting
-exit barriers; high leads to intense rivalry
VALUE CHAIN –MICHAEL
PORTER
IDENTIFIES 9 WAYS TO CREATE MORE
CUSTOMER VALUES THROUGH PRIMARY
AND SECONDARY ACTIVITIES
PRIMARY ACTIVITIES:
1. INBOUND LOGISTICS
2. OPERATIONS
3. OUTBOUND LOGISTICS
4. MARKETING AND SALES
5. SERVICE
Cont….
SECONDARY ACTIVITIES:
6.FIRM INFRASTRUCTURE
7.HUMAN RESOURCE MANAGEMENT
8.TECHNOLOGICAL DEVELOPMENT
9.PROCUREMENT
Framework for competitor analysis
Future goals current strategy
Assumptions capabilities
FUTURE GOALS:
Business Unit Goals
-financial goals
-values and beliefs
-organisational structure
-control and incentive system
Parent Company
-current sales of the parent company
-overall goals
-strategic relevance of the business unit to the
parent company
-diversification plans
PORTFOLIO ANALYSIS
-BCG
-GE
ASSUMPTIONS
• Competitor’s assumptions about itself
• Competitor’s assumptions about the
industry
CURRENT STRATEGY-competitor’s key
operating policies in each functional area
of the business
CAPABILITIES
-assessment of competitor’s strengths and
weakness in varied areas
-core capabilities of the competitor’s in each
of the functional areas
-Ability to grow
-quick response capability
-Staying power
COMPETITOR’S RESPONSE PROFILE
-is the competitor satisfied with its current
position?
-what likely moves or strategy shifts will the
competitor make?
-where is the competitor vulnerable?
-what will provoke the greatest and most
effective retaliation by the competitor?
CONDITION
MACRO ENVIRONMENT
DEMOGRAPHIC ENVIRONMENT
SOCIO-CULTURAL ENVIRONMENT
ECONOMIC ENVIRONMENT
POLITICAL ENVIRONMENT
NATURAL ENVIRONMENT
TECHNOLOGICAL ENVIRONMENT
LEGAL ENVIRONMENT
COMPANY
Internal Appraisal
-BCG
-GE McKinsey
-SWOT
Strategies in terms of 4 Ps:
-Product
-Price
-Place
-Promotion
PRODUCT
AN OFFERING THAT SATISFIES THE
NEEDS OF THE CUSTOMER
Major tasks in Product
Management
I. MANAGING THE PLC :--
STAGES:-
INTRODUCTION
GROWTH
MATURITY
DECLINE
NEW PRODUCT DECISIONS
• IDEA GENERATION
• IDEA SCREENING
• CONCEPT TESTING
• MARKETING STRATEGY
• BUSINESS/MARKET ANALYSIS
• PRODUCT DEVELOPMENT
• MARKET TESTING
• COMMERCIALISATION
STRATEGIES AT VARIOUS
STAGES
INTRODUCTION:-strategies to be aimed at
• Attracting customers by raising awareness of,
and interest in the product through advertising,
public relations and publicity efforts that stress
key product features and benefits.
• Inducing customers to try and buy the product
through the use of various sales tools and
pricing activities.
• Strengthening and expanding channel and
supply chain relationships to gain sufficient
product distribution to make the accessible to
target market.
• Setting pricing objectives that will balance the
firm’s need to recoup the investment with the
competitive realities of the marketplace
OCCASIONS OF PRICING:-
1. SETTING A PRICE OF A NEW PRODUCT
2. INTRODUCTION OF EXISTING PRODUCT IN
A NEW MARKET
3. RESETTING /ADJUSTING THE CURRENT
PRICE
THE PROCESS…..
• SELECTING THE PRICING OBJECTIVES
• DETERMINING THE DEMAND
• ESTIMATING COST
• ANALYSING COMPETITOR’S
COSTS,PRICES AND OFFERS
• SELECT A PRICING METHOD
• SELECTING THE FINAL PRICE
SELECTING THE PRICING
OBJECTIVES
THE COMPANY FIRST DECIDES WHERE IT
WANTS TO POSITION ITS MARKET
OFFERING. THE CLEARER A FIRM’S
OBJECTIVES, THE EASIER IT IS TO SET
PRICE.
• Survival.
• Maximum current profit.
• Maximum market share.
• Maximum market skimming.
• Product-quality leadership
Demand estimation
Factors contributing to Price sensitivity:
• Unique Value effect
• Substitute Awareness effect
• Difficult Comparison effect
• Total expenditure effect
• End-Benefit effect
• Shared Cost effect
• Sunk Investment Effect
• Price Quality effect
• Inventory effect
Measuring demand curves:
-controlled experimentation
-Direct probing
-Statistical analysis of past data
Demand is likely to be less elastic under the
following conditions:
• There are few or no substitutes or competitors.
• Buyers do not readily notice a higher price.
• Buyers are slow to change their buying habits.
• Buyers think the higher prices are justified.
• Costs set the floor to the price.
• Competitors’ prices and the price of substitutes
provide an orienting point.
• Customers’ assessment of unique features
establish the price ceiling.
2) MARKETING CHANNELS
PHYSICAL DISTRIBUTION
1.TRANSPORTATION
-MODE:air,rail,road,water,pipeline
-ROUTING
-COST
….cont.
2. WAREHOUSING
a. Critical storage points
nos. Location
b. Inventory control-costs
SET OF INDEPENDENT
ORGANISATIONS INVOLVED IN THE
PROCESS OF MAKING A PRODUCT
OR SERVICE AVAILABLE FOR
USE/CONSUMPTION.
INTERMEDIARIES:
TYPES OF MARKETING
INTERMEDIARIES
• CFAs
• Distributor/wholesaler
• Retailer
exclusive:owned or franchise
shop in shop
• commission agents
FUNCTIONS
a)Information-Potential & current customers
-Competitors
-Forces in the mktg. environment
b)Promotion
c)Negotiation
d)Risk taking(financial,credit
terms,storage,pilferage)
e)Transactional efficiency
financing to the manufacturer
service provider
presale
post sale
LEVELS OF CHANNEL
• ZERO LEVEL
manufactureconsumer
eg: EUREKA forbes
• ONE LEVEL
Presence of one intermediary
Manufactures----retailer agents distributor ---consumer
Eg. Automobiles
• TWO LEVELS
Manufacturewholesaler-retailer-consumer
Eg. FMCG products
• THREE LEVELS
Manufactureagentswholesaler-retailer-consumer
Eg. agricultural products
CHANNEL DESIGN
DECISIONS
1. ESTABLISH CHANNEL OBJECTIVE
-market coverage
-control objectives
-ensuring minimum effort exerted by the
consumer in procuring the product
-quality objective
…cont.
3. IDENTIFY CHANNEL
ALTERNATIVES
i)Intensity of distribution
• Exclusive( one area, one shop )
• Selective ( products available in few shops)
• Intensive ( every retail shop has the product )
ii) Proximity to end users.
iii) Existing distribution practices (by competitive
analysis).
PRODUCT-
FEATURES,SIZE,SHAPE,FINISH,PACKAGING,L
ABE-LLING,BRAND NAME,COMPANY NAME.
PRICE- QUALITY EQUATION
PRICE-STATUS EQUATION
PLACE- STORE IMAGE,STORE- LEVEL
MERCHANDISING
PROMOTION:-
• PERSONAL SELLING
• PUBILC RELATIONS
• ADVERTISING
• SALES PROMOTION
PERSONAL SELLING- PAID PERSONAL
COMMUNICATIONTHAT ATTEMPTS TO INFORM
CUSTOMERS ABOUT PRODUCTS AND
PERSUADE THEM TO PURCHASE THOSE
PRODUCTS.
FACE TO FACE TRANSACTION BETWEEN A
SALESMAN AND A PROSPECTIVE CUSTOMER
FACTORS SUPPORTING PROMOTION
• KNOWLEDGE& EXPERTISE
• BETTER OUTLOOK & PERSONALITY
• EFFECTIVE COMMUNICATION SKILLS
• A CONVINCING MESSAGE
PUBLIC RELATIONS- TRACKS PUBLIC ATTITUDES,
IDENTIFIES ISSUES THAT MAY ELICIT PUBLIC
CONCERN, AND DEVELOPS PROGRAMMES TO
CREATE AND MAINTAIN POSITIVE RELATIONSHIP
BETWEEN A FIRM AND ITS STAKEHOLDERS.
CAN WIN IN YOUR FAVOUR THROUGH
• SPONSORSHIP
• NEWS(PRESS RELEASE)
• FEATURE ARTICLE
• PRESS CONFERENCE
• EVENT MANAGEMENT
• SOCIAL CAUSE
ADVERTISING—TELLING &
SELLING
ANY PAID FORM OF NON-PEROSNAL
COMMUNICATION OR PROMOTION BY
AN IDENTIFIED SPONSOR.
5 Ms OF ADVERTISING
MISSION –ADVERTISING OBJECTIVES
DIFFERENT METHODS:
• COMPETITIVE PARITY METHOD
• AFFORDABILITY
• PERCENTAGE OF SALES/TURNOVER
• OBJECTIVE- TASK METHOD
• PAST SALES –ADVERTISING
EXPENDITURE
MESSAGE
SHOULD BE
• SIMPLE
• CREATE A BANDWAGON EFFECT
MEDIA
MASS MARKETING
The process in which the seller engages
in the mass production, mass
distribution, and mass promotion of
one product for all buyers.
SEGMENT MARKETING
Serving to a group of customers who
share a similar set of needs and wants.
Basis of identifying segments
1. Geographic Segmentation
2. Demographic Segmentation
3. Psychographic Segmentation
4. Behavioral Segmentation
GEOGRAPHIC SEGMENTATION
It calls for dividing the market into different
geographical units.
Geographic variables
• region of the world or country, East, West, South,
North, Central, coastal, hilly, etc.
• country size/country size : Metropolitan Cities, small
cities, towns.
• Urban, Semi-urban, Rural.
• climate Hot, Cold, Humid, Rainy.
DEMOGRAPHIC SEGMENTATION
Demographic variables
• age
• gender Male and Female
• family size
• family life cycle
• education Primary, High School, Secondary, College,
Universities.
• income
• occupation
• socioeconomic status
• religion
• nationality
• language
PSYCHOGRAPHIC SEGMENTATION
The buyers are divided into different
groups on the basis of lifestyle or
personality or values
Psychographic variables
• personality
• lifestyle
• value
• attitude
BEHAVIORAL SEGMENTATION
Behavioral variables
• benefit sought
• product usage rate
• User status
• brand loyalty
• readiness to buy stage
REQUIREMENTS OF A
SEGMENT
DAMAS
Differentiable
Actionable
Measurable
Accessible
Substantial
Effective Targeting Requires…
2. EXPANSION-THROUGH INTENSIFICATION,INTEGRATION
AND DIVERSIFICATION
Low-cost
leadership
Differentiation Focus
PORTER’S GENERIC STRATEGIES
Competitive
Advantage
Lower Cost Differentiation
leadership
• Process engineering skills
leadership
•
Risks associated with each of the
generic strategies
Cost leadership:
• Competitor’s imitation
• Technological changes
• Threat of differentiation
• Inability to see changes in the market due
to over attention paid to cost
• inflation
Cont…
Differentiation :
• Competitor’s imitations
• Change in customer’s needs
Focus:
• Competitors find submarket within the
target.
• The segment becomes unprofitable.