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IP Program SUSTAIN ACTIVE_ Dr. Yvonne Brodrechtova

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2 IP Program SUSTAIN ACTIVE_16.05.2014 Dr. Yvonne Brodrechtova
Marketing Tools IP Program SUSTAIN ACTIVE_ Dr. Yvonne Brodrechtova

3 Source: Kotler 2003; American Marketing Association, 2014
Definition of marketing Marketing … is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit.  … is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. Many people believe that marketing is just about advertising or sales. However, marketing is everything a company does to acquire customers and maintain a relationship with them. Even the small tasks like writing thank-you letters, playing golf with a prospective client, returning calls promptly and meeting with a past client for coffee can be thought of as marketing. The ultimate goal of marketing is to match a company's products and services to the people who need and want them, thereby ensure profitability. Marketing comes in a wide variety of flavors based on audience, media platform and business in today’s evolving and dynamic marketplace. Therefore, it’s no surprise that marketers define what they do differently: KOTLER: is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit.  Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.” AMS: is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. Source: Kotler 2003; American Marketing Association, 2014

4 Source: Polonsky, 1994; American Marketing Association, 2008
Definition of green marketing Green marketing ? … consists of all activities designed to generate and facilitate any exchanges intended to satisfy human needs or wants, such that the satisfaction of these needs and wants occurs, with minimal detrimental impact on the natural environment.  … is the marketing of products that are presumed to be environmentally safe.   Unfortunately, a majority of people believe that green marketing refers solely to the promotion or advertising of products with environmental characteristics. Terms like Phosphate Free, Recyclable, Refillable, Ozone Friendly, and Environmentally Friendly are some of the things consumers most often associate with green marketing. While these terms are green marketing claims, in general green marketing is a much broader concept, one that can be applied to consumer goods, industrial goods and even services. For example, around the world there are resorts that are beginning to promote themselves as "ecotourist" facilities, i.e., facilities that "specialize" in experiencing nature or operating in a fashion that minimizes their environmental impact. Thus green marketing incorporates a broad range of activities, including product modification, changes to the production process, packaging changes, as well as modifying advertising. Yet defining green marketing is not a simple task. Indeed the terminology used in this area has varied, it includes: Green Marketing, Environmental Marketing and Ecological Marketing. The question of why green marketing has increased in importance is quite simple and relies on the basic definition of Economics: "Economics is the study of how people use their limited resources to try to satisfy unlimited wants." [McTaggart, Findlay and Parkin 1992, 24]. Thus mankind has limited resources on the earth, with which she/he must attempt to provide for the worlds' unlimited wants. Ultimately green marketing looks at how marketing activities utilize these limited resources, while satisfying consumers wants, both of individuals and industry, as well as achieving the selling organization's objectives Source: Polonsky, 1994; American Marketing Association, 2008

5 Five reasons for increased use of green marketing
Organizations perceive environmental marketing to be an opportunity that can be used to achieve its objectives Organizations believe they have a moral obligation to be more socially responsible Governmental bodies are forcing firms to become more responsible Competitors' environmental activities pressure firms to change their environmental marketing activities Cost factors associated with waste disposal, or reductions in material usage forces firms to modify their behavior

6 Example: Forest products industries
Example: Forest products industries (Green) marketing can help to ensure new opportunities for the forestry sector Customer-oriented industry (adaptation is necessary for survival) Production-oriented industry (very traditional, slow to respond) Now we will follow example of forest products sector, why, because forest sector plays the key role in the transition towards a greener and more sustainable economy. The forest sector contributes already largely to the Green Economy, but could play an even more significant role if governments and others seize the opportunity to use wood based products for green construction and furniture wherever possible and take measures to support the wider adoption of modern wood energy. However, the forest industry has traditionally been production-oriented rather than customer-oriented causing production of large volumes of commodities at low cost and rely on sales to move the product away from the production facility. In other words, forest products industry mostly focused at their products and production with little and slow adjustment to its environment. This has been changing. Rhetoric in company annual reports indicates that companies are striving to become more customer-oriented rather than production-oriented. Other indicators of a move toward a customer focus include the following: a concentration on customers relationship and relationship marketing increase use of branding (FSC, PEFC certification) embracing new tools of management and marketing (supply chain management, e-business) organizational changes in production and marketing This places the industry in a new situation where adaptation is necessary for survival. The role of marketing is to adjust the company to its environment, particularly market. (Green) marketing can help to ensure new opportunities for the forestry sector

7 (Green) marketing mix The core of marketing is
The core of marketing is (Green) marketing mix The marketer‘s task is to build a marketing plan to achieve company‘s desired objectives. The marketing plan consists of numerous decisions on the mix of marketing tools to use. The marketing mix is the set of (green) marketing tools the firm uses to pursue its marketing objectives in the target market. At the core of (green) marketing is marketing mix (Kotler 1984). The marketer‘s task is to build a marketing program or plan to achieve the company‘s desired objectives. The marketing program/plan consists of numerous decisions on the mix of marketing tools to use. The marketing mix is the set of marketing tools the firm uses to pursue its marketing objectives in the target market. The marketers task is to build a marketing program or plan to achieve the company’s desired objectives. The marketing program consists of numerous decisions on the mix of marketing tools to use. The marketing mix is set of marketing tools the firm uses to pursue its marketing objectives in the target market. McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place and promotion. Four P represents the seller view of the marketing tools available for influencing buyers.  From the buyers point of view, each marketing tool is designed to deliver a customer benefit. Robert Lauterborn suggested that the sellers four Ps correspond to the customers four Cs.

The marketing mix (a set of marketing tools) quality, brand name, design packaging product variety and features services, warranties, returns ADDITIONAL MARKETING TOOLS BASIC MARKETING TOOLS PLACE PROMOTION PRICE PRODUCT PHYSICAL EVIDENCE PROCESS PEOPLE list price discounts, allowances payment period credit terms advertising, sales promotion public relations sales force direct marketing channels coverage assortments locations inventory transport Source: Kotler 2003

9 Source: Juslin and Hansen, 2011
„The best way to get and keep customers is to constantly figure out how to give them more for less.“ PRODUCT CONCEPT I.: The product continuum Total product Web-based ordering Special packaging Proprietary grading Core product One of the basic decisions facing a company is what product to produce and which service to offer. Taken together, through additions of either physical improvements or services and information, the product can move from core product toward being a total product. An example from forest products industry, the core product could be hardwood lumber. Additions could be physical improvements such as proprietary grading or services as special packaging or web-based ordering. Together they would form total product. Thus, the product could be defined as a bundle of benefits satisfying customer needs. Source: Juslin and Hansen, 2011

10 Source: Juslin and Hansen, 2003
„Watch the product life cycle, but more importantly, watch the market life cycle.“ PRODUCT CONCEPT II.: Product life-cycle OSB Softwood lumber Plywood SALES Wooden I-joists The product life cycle is important from both a market attractiveness perspective and from a company-strengths perspective. All products go through a life cycle similar to biological organisms. A typical product life cycle would follow patter as illustrated on the figure. At introduction, the profitability of a product is negative due to investment to bring the product to market. As growth in demand increases, early investments are covered and the product becomes profitable. During maturity, the product should be profitable enough to contribute to the development of new products. A company should have a balanced group of products with respect to their relative stages in the life cycle. An example from forest products industry in North America illustrates various products along the product lifecycle. Wooden plastic composites were introduced couple years ago. Since then, new capacity has been added but the product can be defined as being in the introduction stage. Most engineered products are in the growth stage. Since the introduction of OSB, structural plywood has moved into the decline portion of its lifecycle. OSB has moved through the introduction stage and may be nearing maturity stage, though production is still increasing. WPC PROFITS Introduction Growth Maturity Decline Source: Juslin and Hansen, 2003

11 Product differentiation Product branding
„Who should ultimately design the product? The customer, of course.“ GREEN PRODUCT CONCEPT Product Product life cycle Product quality Product differentiation Product branding Product: Taking in consideration: A producer should offer ecological products which not only must not contaminate the environment but should protect it and even liquidate existing environmental damages. Product life cycle: Marketers could use new instrument such as life-cycle assessment that allows ecological considerations to be introduced into marketing decisions. The life cycle assessment model seeks to identify the main types of environmental impact throughout the life cycle of a product. The reason behind is the need to have a precise process accounting and to highlight potential improvements that could be used in order to increase the environmental, energy and economic efficiency and overall effectiveness of the processes. Quality: the customer is a key to defining the quality, since a product can only be high quality if customer feels it is so. There is not a united definition of quality in forest products industries, however, dimensions of quality could be: supplier/salesperson characteristics, supplier services, supplier facilities, lumber performance, lumber characteristics. Thus, in the forest products industries is mostly technically oriented. A label is considered part of the technical information attached to the product. There exist numerous voluntary and mandatory labels. Among voluntary labels typical for forest products industries are WWF, FAIRTRADE, FSC. Among mandatory labels are danger symbols, declaration of content, conformity with standards, etc. Product differentiation: Through quality can firm differentiate and increase their performance. Any product can be placed along the spectrum, depending on the extend to which it is differentiated from other products. One end of the spectrum is occupied by true commodity products. True commodity products do not differ among manufacturers. They are standardized, so if you buy 10 from one company and 10 from another, they will all be essentially the same. Thus competition for commodity products is based solely on price. The other extreme is specialty product that cater to a specific market segment. As the product matures, or more competitors enter the market the product can eventually become a commodity. An example from the Finish plywood industry illustrates this process well. When plywood with a polyethylene film was first introduced, it was used as concrete forms and was considered a specialty product. As competitors entered the market, the product eventually moved down the continuum towards being a commodity. At this point, companies began to look for the next specialty applications in the ship building industry. Entering new market, they moved back to a specialty. Product branding: A current trend in the forest industry is differentiation through the creation of product brands. The goal is not to be like all the others, but to gain competitive advantage through differentiation. However, differentiation through the physical product alone is becoming increasingly difficult. For example, in the paper and pulp industry large companies are often using the same paper machines and paper technologies. Because they are producing from a common base and strive high quality levels, it is very difficult to differentiate in this area. Therefore, the differentiation can be placed on the supply chain, delivery performance, environmental issues, or ethical credibility. All the features of the product must be combined under one coherent identity with an associate and identifiable name – a brand. Forest industry brands are IKEA.

12 DISCUSSION WHAT DECISION CONCERNING YOUR (GREEN) PRODUCT IS MOST IMPORTANT IN YOUR MARKETING (BUSINESS) PLAN? concept of product , quality, brand name, design, packaging, product variety and features, services, warranties, returns.

13 PRICE I. Missed opportunities High Price paid Medium Price= Value Low
PRICE I. „Sell value, not price.“ Missed opportunities High Price is the one element of the marketing mix that produces revenue, the other elements produce costs. Prices are the easiest marketing-mix element to adjust, the product features, channels, and even promotion take more time. Price also communicates to the market the company’s intended value positioning of its product or brand. So therefore we have to differentiate between price and value: prices is the amount of money that supplier asks for a product or service and the amount which the customer provides. On the other hand, value is the amount of money the customer would potentially pay for that product or service. A price can be set without any consideration of the customer, but the value is defined by the customer. Now looking at the picture: If the price is higher than the value received, the company will fail to harvest potential profits. We talk about unharvested value. So price should align with value. Green price: Usually, prices for green products may be a little higher than conventional alternatives as the target groups are willing to pay extra for green products. Price paid Medium Price= Value Low Unharvested value Low Medium High Value received Source: Kotler, 2003

14 The firm has to consider many factors in setting its pricing policy:
„The best respond varies with the situation.“ PRICE II. The firm has to consider many factors in setting its pricing policy: Selecting the pricing objective Determining demand Estimating costs Analyzing competitors’ costs, prices, and offers Selecting a pricing method Selecting the final price Adapting the price Initiating and responding to price changes There are a number of objectives that a company may strive to achieve through its pricing decisions. A company may price to obtain short or long term profits, to increase market share, or simply to meet the price of the competition. The firm has to consider many factors in setting its pricing policy: Selecting the pricing objective (in finish industry for instance the pricing objective for saw mills is a steady flow of sales, for paper mills to maintain market share, etc.) Determining demand (price and demand are usually inversely related) Estimating costs (fixed, variable costs which equal total costs) Analyzing competitors’ costs, prices, and offers Selecting a pricing method (for instance: market-based pricing such as pricing newsletters in the US, cost-based or value based) Selecting the final price (pricing methods narrow the range which the company must select its final price. In selecting that price the company must consider additional factors, including psychological pricing, gain-and-risk-sharing pricing, the influence of other marketing mix elements on price, company pricing policies, and the impact of price on other parties. Adapting the price (geographical pricing, price discounts and allowances, promotional pricing, discriminatory pricing, product-mix pricing) Initiating and responding to price changes (companies face situation where they may need to cut or raise prices: initiating price cuts, initiating price increases, responding to competitor’s price changes, reaction to price changes.

15 DISCUSSION WHAT (GREEN) PRICE ADAPTATIONS SHOUD YOU INCLUDE IN YOUR MARKETING /BUSINESS PLAN? geographical pricing, price discounts, price allowances, discriminatory pricing, promotional pricing.

16 The marketing communication mix consists of:
„Integrated marketing communications is a way of looking at the whole marketing process from the viewpoint of the customer.“ PROMOTION I. The marketing communication mix consists of: Advertising Sales promotion Public relations and publicity Personal selling Direct and interactive marketing Modern marketing calls for more than developing a good product, pricing it attractively, and making it accessible. Companies must also communicate with present and potential stakeholders, and the general public. Every company is inevitably put into the role of communicator and promoter. For most companies, the question is not whether to communicate but rather what to say to whom, and how often. Marketing communication mix consists of: Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor: For instance, advertising includes traditional advertising such as radio, television, and print as product brochures, catalogs, postcards. However, the television is not the main means of advertising for most of the forest industry companies, some large companies use rather image building campaigns. Radio is used even less in forest industry and if used then on the local markets. On the other hand, exception are forest products companies which produce consumer products, use television extensively: it is always brand based for instance Kleenex brand comes from Kimberly Clark. Print advertising is very common even the smallest forest industry companies, because placing ads in trade journals targets specific industry sectors and is therefore both efficient and economical. This is especially true for furniture companies. Product brochure is extensively used in forest industry to communicate technical information to end-users, at trade shows, etc. Sales promotion is a variety of short-term incentives to encourage trail or purchase of a product or service. In consumer markets, typical sales promotion tools include coupons, rebates and contests. Since most forest industry companies operate in a business-to business environment, these tools are relatively uncommon. The most common promotion tool seen in the industry is the trade show: for instance Interzum in Koeln, Paper summit in north America, Furniture and living in Nitra, Slovakia, etc. Public relations and publicity are a variety of programs designed to promote or protect a company’s image or its individual products. Marketing communication is done by individual companies via design of furniture, sustainable forestry, increased use of wood, or via enhancing the image of wood as environmentally friendly material…  Then there is forest sector communication: countries and national organizations often communicate with a wide range of stakeholders regarding the importance and environmental performance in the field of forestry. Here we speak of very broad efforts to promote the entire forest sector. Forest certification provides the most current example of communications activity on a forest level. Personal selling is face to face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders. Example: personal selling is the most popular type of marketing communication in the forest industry. For instance personal selling represents more than a half of overall efforts toward marketing communication in the Finish forest industry. It is used most in the pulp and sawmill sectors where it makes up about two thirds of the total communication effort. Taken together: The forest industry relies heavily on personal contacts with the customer, but tends to work closely with industrial customers rather than end-users. This means that their customers are typically large volume buyers and that they do not have large numbers of customers. Despite the personal selling, use of mail, , cold calls, trade shows, and etc. are typical of direct and interactive marketing. The goal is to increase revenue, attract new customers, retaining current customers, analyzing the competition, market analysis, coordinating sales activities…    Many forms of communication can be sent directly to the customer or potential customer via mail, fax or . The product brochures discusses above are a common example. Other potential direct items include catalogs, price lists, product samples, postcards, newsletters, etc.

17 The communication process
„The best advertizing is done by satisfied customers.“ PROMOTION II. Identify target audience Determine objectives Design message The communication process Select channels The products styling and price, the shape and color of the packaging, the sales person manner and dress, all communicate something. The starting point is identify target audience, determine objectives, design message, select channels, establish budget, decide on media mix, measure results, manage integrated marketing communications. A communication with the market should put stress on environmental aspects, for example that the company possesses a FSC certificate or is ISO certified. This may be publicized to improve a firm’s image. Furthermore, the fact that a company spends expenditures on environmental protection should be advertised. Third, sponsoring the natural environment is also very important. And last but not least, ecological products will probably require special sales promotions. Establish budget Decide on media mix Measure results Manage integrated marketing com. Source: Kotler, 2003

18 DISCUSSION WHICH (GREEN) MARKETING COMMUNICATION MIX ARE YOU CONSIDERING IN YOUR MARKETING (BUSINESS) PLAN? advertising, sales promotion, public relations, sales force, direct and interactive marketing.

19 „Establish channels for different target markets and aim for efficiency, control, and adaptability“ PLACE I. The marketing channel is a link between the producer and consumer to fulfill its functions (forest products industries): Delivering products Gathering and transferring information Developing and disseminating communications Placing orders with manufactures Prompting delivery Etc. The marketing channel can be viewed as a link between the producer and consumer. We define marketing channel (also called a trade channel or distribution channel) as all the organizations, functions and flows that are needed to get the product or service from producer to customer. Particularly, functions of marketing channel are delivering products, gathering and transferring information, developing and disseminating communications, placing orders with manufactures, prompting delivery. In the most cases a forest company does not sell its products directly to final users, between them stands a set of intermediaries performing a variety of functions. Some intermediaries – such as wholesalers and retailers – buy, take title to, and resell the merchandise, they are called merchants. Others – brokers, manufacturers representatives, sales agents – search for customers and may negotiate on the producers behalf but do not take title to the goods, they are called agents. Still others – transportation companies, independent warehouses, banks, advertising agencies – assist in the distribution process but neither take title to goods nor negotiate purchases or sales, they are called facilitators.

20 Adapted from: Juslin and Hansen, 2003
„Successful go-to-market strategies require integrating retailers, wholesalers, and logistical organizations.“ PLACE II.: marketing channel alternatives Producer Domestic agent Foreign agent Sales office Importer Sales company Retailer Ind. end-user Consumer Intermediaries in the marketing channel provide services that benefit both the producer and the customer. In essence, they shorten the distance between the producer and the consumer in terms of time, culture, etc. and they move information in both directions: Relationship maintenance with final customer Handling details of price and delivery with final customer Provide credit/collection Provide inventory/storage Because consumer preferences are so specific, few companies have the resources necessary to provide all the functions of a full marketing channel. Even if a company has the resources to have its own captive marketing channel, it may not be in its own best interest to do so. Instead it may be more productive for the company to concentrate on its core operations, such as sawing lumber. Taken together, marketing channels decisions are among the most critical decisions facing management. The channels intimately affect all the other marketing decisions. The company’s pricing, advertising decisions, etc. Adapted from: Juslin and Hansen, 2003


22 Thank you! Dr. Yvonne Brodrechtova Technical University in Zvolen
Thank you! Dr. Yvonne Brodrechtova Technical University in Zvolen College of Forestry T. G. Masaryka 24 SK Zvolen Tel.: Fax:

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