Section 2 : Marketing Strategies

1. Section 2: Marketing Strategies

2. Market Share vs. Market Growth Rates • Market Share • The percentage of the total market (industry) revenue that your company has. Example: Heinz has 60% of the ketchup market, meaning that they earn 60% of all US ketchup sales. • Market Share Growth Percentage • The annual percentage growth in your market share versus the competition. Example: Heinz’s market share growth rate was 2 percentage points in 2017 (58% to 60%).

3. Product Life Cycle Stages Terminiology • The Boston Consulting Group Matrix (BCG Matrix)) StarQuestion Mark Cash CowDog Market Growth Rate Low High Relative Market Share High Low

4. The BCG Approach Of Analyzing Business Portfolios • Stars • High market share, high growth • Need heavy investment to finance growth • Next stop: “Cash Cows” • Cash Cows • High market share, low growth (mature phase) • Well-established and successful • Produce profits and cash to fund other products (Stars and Question Marks)

5. The BCG Approach Of Analyzing Business Portfolios • Question Marks • Low market share, but high growth • Require a lot of cash/investment to increase growth • Decision: build into “stars” or phase out? • Dogs • Low market share, low growth • Usually have negative cash flow or break even • Businesses will most likely discontinue

6. Marketing Quiz • According to the BCG matrix, a low-growth, low-market share product would be called a ______. • According to the BCG matrix, a low-growth, high-market share product would be called a ______. • According to the BCG matrix, a high-growth, low-market share product would be called a ______. • According to the BCG matrix, a high-growth, high-market share product would be called a ______.

7. The Goal of Any Business & The Marketing Concept: Profitable Growth! • Most Marketing Strategies are “Growth Strategies” (growth of market share through increasing revenue) • “Growth is Pure Oxygen”, says one CEO • Satisfies shareholders • Attracts top employee talent • Creates vibrant and exciting culture • But: Growth Must Be PROFITABLE GROWTH • Discuss Sirius-XM Radio, GM, Tesla • Marketing is the business function that has the primary responsibility for achieving profitable growth for the company!

8. Starbuck’s: Product-Market Growth Strategies Existing New Products Products Market Product Penetration Development Market Development Diversification Existing Markets New Markets

9. Starbuck’s: Product-Market Growth Strategies • Market Penetration (Higher Sales of Existing Products to Current Target Markets) • “A strategy for company growth by increasing sales of existing products to current market segments without changing the product” • Example 1: Doritos decides to increase TV advertising of its products to sell more. • Example 2: Sprint drops its price of it’s unlimited data plan to get new subscribers and sales.

10. Starbuck’s: Product-Market Growth Strategies • Market Development (Selling Existing Products to New Markets) • “A strategy for company growth by identifying and developing new market segments for existing customer products” • Example: Starbucks • Starbuck’s developing new target markets for senior consumers and ethnic groups using existing products. • Starbuck’s moving into mainland Europe to expand it’s reach by setting up new stores. • Example: McDonald’s • McDonald’s focusing more on African Americans as a key target market for their sales.

11. Starbuck’s: Product-Market Growth Strategies • Product Development • “A strategy for company growth by offering modified or new products to current markets” • Starbuck’s and Product Development • Starbuck’s developing new food offerings to bring customers in at lunch and dinner • Starbuck’s product development includes partnering with other companies to extend its brand to coffee ice cream (Breyer’s) and bottled Frappuccino drinks (Pepsi)

12. Starbuck’s: Product-Market Growth Strategies • Diversification • “A strategy for company growth by starting up or acquiring businesses outside the company’s existing products and markets” • Starbuck’s and Diversification • Starbuck’s developing the “Reserve Roastery” in NYC to upscale it’s brand as more than just a coffee shop. • Starbuck’s leveraging its brand name and developing a casual clothing line consistent with the “Starbuck’s experience”.

13. Advantages to Diversification • Leverages the current “brand name” to make more money • Discuss BMW and Google extending their brand name to new products and markets • Protects profitability of overall company in case the main product fails • Discuss Blockbuster’s failure to diversify • Discuss car company’s diversification into different types of autos including electric.

14. Marketing Quiz • Marketing for p_____ growth is a key objective for most companies. • What is market penetration? Give an example. • Product _______ is developing new products for existing markets. • What is “diversification”? Why would a company pursue that growth strategy? • What is “market development”? Give an example.

15. Product Positioning: A Key Marketing Strategy! • Product Positioning • “Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target customers” • Positioning is based on making the consumer believe something special about the product • Mercedes: “engineered like no other car in the world” • Jaguar: “a blending of art and machine” • Bentley: “18 handcrafted feet of shameless luxury” • Positioning requires understanding of competitors

16. More Examples of Product Positioning • Discuss the following companies • Subway: Fresh and Healthy • BMW: Quality and preciseness • Crest: best at fighting cavities • Volvo: safety • Charmin: the softest • GEICO: the least expensive • Cadillac: Life Success and Luxury

17. Marketing Mix: Further Detail on The 4 Ps • Product • Quality • Design & Materials • Color • Features • Brand Name • Packaging • Supporting Services (warranty, repair process)

18. Marketing Mix: A Review of The 4 Ps • Place (Distribution) • Coverage (where is product available) • Channels (layer of “intermediaries”) • Manufacturer (makes product) • Wholesaler (sells to another wholesaler or retailer) • Retailer (sells to “end customer”) • Transportation (air, ship, train, truck, etc.) • Logistics (organizing the distribution)

19. Marketing Mix: A Review of The 4 Ps • Price Strategies • List price: Highest price (MFSRP) • Sales Price: Discount from MFSRP) • Rebates: An additional discount later if you return a form (selling price is net of rebate) • Trade-ins on selling price (cars and phones) • Pricing is usually “competitively priced” or priced with an eye towards the competition. • May be priced above or below cost • Pricing may also be “cost-plus pricing” or pricing that starts with the products cost as the basis (construction)

20. Marketing & Consumer Buying Behavior

21. Consumer Markets & Consumer Buying Behavior • Terms Defined • Consumer Market • All the individuals and households who buy goods and services for personal use • Consists of approx. 6 Billion people • Consumer Buying Behavior • The buying behavior of final consumers or individuals and households who buy goods and services for personal use

22. A Simple Model Of Consumer Behavior • Key marketing question: How will consumers respond to various marketing mixes? • Stimulus-Response Model Of Buying Behavior Marketing “Black Box” Buyer’s Stimulus Response

23. What Influences The “Black Box” Decisions • Characteristics Affecting Consumer Purchases • Cultural • Social • Psychological

24. Characteristics Affecting Consumer Purchases Cultural Factors • Defined: The set of basic values, behaviors, and wants learned from family and other key institutions (school, church, etc.) • Human wants are often learned from their culture • U.S. culture teaches • Achievement and success • Efficiency and practicality • Individualism and freedom • Material comfort • Youthfulness and fitness • Humanitarianism

25. Characteristics Affecting Consumer Purchases Cultural Factors (continued) • Marketers must be “in tune” with the culture and with cultural differences • Example: The culture of cell phones. How are marketers changing their promotional practices? • Example: US culture towards health. How are restaurant offerings evolving? • Marketer’s look for “cultural shifts” • Fitness • Ways to Be Educated and Trained • Relationships

26. Characteristics Affecting Consumer Purchases • Subcultures ( A culture within a broader culture) • Defined: Group of people with shared value systems based on common life experiences • Specific subcultures • Hispanic Consumers • Cuban, Mexican, Central American, South American, and Puerto Rico • Spanish speaking, fastest growing • Viewed as highly “brand loyal” (key market) • Largest and fastest growing minority

27. Characteristics Affecting Consumer Purchases • Subcultures (continued) • African American Consumers • If U.S. population of AA consumers were a nation it would rank 12th in world buying power! • Many companies target African Americans specifically • BET network, McDonalds, Nike, etc.

28. Characteristics Affecting Consumer Purchases • Subcultures (continued) • Targeting Asian American Consumers • Chinese, Filipinos, Japanese, Koreans • Most affluent subculture • Income exceeds U.S. average by 20%! • Targeting The 50-Plus Market • Fast growing (Baby Boomers, WOOFS, DEWKs, and DINKs). Discuss these achronyms. • Targeting Different Social Classes • A subculture based on various factors : income, education, wealth, occupation

29. Characteristics Affecting Consumer Purchases • Social Class: Major U.S. Social Classes • “Upper Class” (3%) • High Income and family wealth • Net worth usually minimum of $1M • Middle Class (44%) • Mostly focused on “career” • Average pay “white & blue” collar that live “on the good side of town” • Working Class (38%) • Usually “blue collar”, no college education • Lower Class (15%) • Living standard just above poverty • Unskilled work, rely on public aid or charity

30. Characteristics Affecting Consumer Purchases Social Institutions & Factors • Family • One of the most important buying groups • Roles of husbands, wives, and children key • Involvement in decision making key • Wife primary purchasing agent for food, clothing, household products (60% and falling) • Women account for 50% of all hardware store purchases (Home Depot aware, targets women’s magazines) • Husband prime agent on car purchases (55% and falling)

31. Characteristics Affecting Consumer Purchases Psychological factors • Maslow’s Theory Of Motivation: Self-Actualiz Esteem Needs Social Needs Safety Needs Physical Needs (food, clothing, shelter)

32. Characteristics Affecting Consumer Purchases • Freud’s Theory Of Motivation • Suggests a person does not truly understand their motivations or needs • Deeper meanings may be denied or not understood • Example: If person wants to buy a Harley • wanting an economical way for short trips? • wanting a pastime to enjoy the outdoors? • Trying to feel young and independent again? • Marketers try to figure out what is in the “black box” (consumer’s mind) in order to sell them product’s

33. Selling: The 7 Steps of the Selling Process

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35. Step 1: Prospecting Customers • Prospecting is the first step in the sales process, which consists of identifying potential customers, aka prospects. • The goal of prospecting is to develop a database of likely customers and then systematically communicate with them in the hopes of converting them from potential customer to current customer.

36. Step 1(Cont.): Ways to Prospect Customers • E-Prospecting on the Internet (individuals & businesses) • Direct Mail (email or US mail) • “Cold Calling” (calling directly, knocking on doors, visiting a business that is not expecting you (soliciting)) • Networking (talking and getting the word out with others) • Getting Published • Public Exhibitions • Orphaned Customers (Customers that did not complete previous sale for whatever reason) • Observation

37. Step 2: The Preapproach • The preapproach is the “doing your homework” part of the process. A good salesperson researches his prospect, familiarizing himself with the customer’s needs and learning all the relevant background info he can about the individual or business. • Includes Learning About the Company (or Individual) • The Industry the Potential Customer is In & Nature of Business • Types of Customers the Business has • Competitor or Current Provider • Locations • Decision Makers • Financial Performance (available for corporations; 10K & 10Q)

38. Step 3: Approach the Customer • First impressions (e.g., the first few minutes of a sales call) are crucial to building the client’s trust. • Similarly, as a professional salesperson, you would almost never make a pitch right away; instead, you’d work to establish a rapport with the customer first. This usually involves introductions, making some small talk, asking a few warm-up questions, and generally explaining who you are and who you represent.

39. Step 4: The Presentation • There’s a good deal of preparation involved before a salesperson ever makes her pitch or presentation, but the presentation is where the research pays off and her idea for the prospect comes alive. • By the time she presents her product, she will understand her customer’s needs well enough to be sure she’s offering a solution the customer could use. • The presentation should be tailored to the customer, explaining how the product meets that person or company’s needs.

40. Step 5: Handling Objections • After you’ve made your sales presentation, it’s natural for your customer to have some hesitations or concerns called objections. • Good salespeople look at objections as opportunities to further understand and respond to customers’ needs. • For instance, maybe you’re trying to convince a friend to come camping with you. “I’d like to go” your friend says, “but I’ve got a big project I need to finish at work, and I was planning to spend some time at the office this weekend.” “That’s no problem,” you tell him. “I’m free next weekend, too. Why don’t we plan to go then, once your project’s out of the way?”

41. Step 6: Closing the Sale • Eventually, if your customer is convinced your product will meet her needs, you close the sale by agreeing on the terms of the sale and finishing up the transaction.   • This is the point where the potential gym member signs her membership agreement, the restaurant owner decides to purchase the ovens. • Sometimes a salesperson has to make several trial closes during a sales call, addressing further objections before the customer is ready to buy.

42. Step 7: Follow-Up • While it might seem like you’ve accomplished your goal, the customer relationship has only begun. • The follow-up is an important part of assuring customer satisfaction, retaining customers, and prospecting for new customers. This might mean sending a thank-you note, calling the customer to make sure a product was received in satisfactory condition, or checking in to make sure a service is meeting the customer’s expectations. • Follow-up also includes logistical details like signing contracts, setting up delivery or installation dates, and drawing up a timeline. From the buyer’s perspective, the follow-up is the implementation step in the buying process. Good follow-up helps ensure additional sales, and customer referrals.