4.2 Marketing Planning Chapter 25 Part 1

Marketing Planning A formal document which outlines the details of how a business plans to achieve its marketing objectives as derived from its corporate objectives.

Marketing Mix Effectively combining key decisions in the areas of product, price, promotion, and place to successfully market a product.

The 4 P’s of Marketing Product Price Promotion Place

Product The right product could include: An existing product An updated existing product A new product

Price The right price must be set for the product Too low – the product quality may be perceived as low quality Too high – the customer may not be able to afford the product Can you identify a product that fits into a too LOW price and a too HIGH price category?

Promotion Telling your customer about your product and convincing them to buy. Packaging is considered part of promotion and can reinforce image or create a product preference. Can you think of any promotion activities that encouraged you to make a purchase? Can you think of any creative packaging that would make you purchase one product over another?

Place Distributing the product to the proper PLACE so customers can make a purchase. If your product is not available at the right time and place, customers cannot buy it. Where might you make purchases? How is “PLACE” changing?

The 3 other P’s There are 3 more P’s – related to Service People: Selling services require people to create a positive experience for the customer (restaurants, hair salons) Process: Satisfying customer needs as part of marketing services (automatically renewing a membership) Physical Evidence: Customers can see for themselves the quality of the product (a clean lobby at a hotel, table clothes used a nice restaurant)

Successful Marketing Mix The marketing mix must be consistent in order to be successful in sending a clear message to customers. Example: McDonald’s Product: Fast Food Price: Inexpensive to moderate Promotion: Billboards, road signs, TV commercials Place: Convenient, busy streets People: FAST service, Order takers Physical Evidence: Clean

What is wrong with this picture? An expensive well-known brand of perfume for sale by a street-vendor. Saks Fifth Avenue wrapped your fine china purchase in newspaper. Lamborghini sports cars are advertised in Seventeen magazine.

Marketing Ethics Ethical marketing issues are increasing with the globalization of the world’s markets. What do you think of these situations? Sell a printer cheaply or give it away to sell expensive ink cartridges. Advertise low airfare then add taxes and surcharges after the purchase has been made.

What do you think? Advertise toys to children and not clearly distinguish between and advertisement and children’s programming. Close retail stores and only sell on the Internet when your customer base historically does not use computers. Buy cheap raw materials to decrease a products price.

Marketing Audit A regular review of the cost and effectiveness of a marketing plan including the analysis of external and internal influences.

Marketing Audit A marketing audit answers the question: What is our current situation? 3 Factors: Examine INTERNAL strengths and weaknesses Examine EXTERNAL opportunities and threats Review progress of the plan: Market share – how does it compare with the objective Actual sales performance – is it meeting original sales goals Is the company meeting its SMART objectives

Porter’s Five Forces A framework that helps industries analyze competition in the market place and understand the elements involved. 1. Threat of entry 2. The power of buyers 3. The power of suppliers 4. The threat of substitutes 5. Competitive rivalry HL

Porter’s 5 Forces Supplier Power Buyer Power Threat of EntryThreat of SubstitutesCompetitive Rivalry HL

1. Threat of Entry The ease that other businesses can join the industry. Threat is highest when: Economies of scale are low in the industry Technology needed to enter the business is relatively cheap Distribution channels are easy to access There are no legal or patent restrictions The importance of product differentiation is low so extensive advertising is not required. Name a business that fits this description. HL

2. The power of buyers The power that customers have on the industry. Customer buyer power is greatest when: There are many small undifferentiated firms to buy from. The cost of switching suppliers is low. Buyers can easily buy from other businesses. Name a business that fits this description. HL

3. The power of suppliers The power of suppliers to businesses is great. Supplier power is greatest when: The cost of switching suppliers is high. The brand being sold is well-known (or powerful) like Nike shoes Suppliers could realistically open their own forward-integration operations (coffee suppliers open their own cafes) Name a business that fits this description. HL

4. The threat of substitutes The existence of substitutes (replacing metal with plastic….NOT substituting brands – Honda cars with Ford cars) Substitute threats exist when: New technology makes other options available Satellite TV replaces antenna reception Price competition forces customers to consider alternatives Train fare is cheaper than airfare New products lead to consumers spending on different products leaving less to be spent on your product. Paying for Internet service reduces the amount spent on clothing. Name a business that fits this description. HL

5. Competitive Rivalry - CENTER Competition from your competitors. Competition is greatest when threats exist from the four elements of Porter’s 5 Forces. 1. Threat of entry – easy to enter the market 2. Threat of substitute products – alternatives 3. Suppliers have power 4. Customers have power HL

5. Competitive Rivalry - CENTER Competition from your competitors. Rivalry from existing firms is greatest when: There are many firms with a similar market share – Think Coke vs Pepsi High fixed costs force firms to try to obtain economies of scale – Think Toyota vs Honda There is slow market growth that forces firms to take market share from their rivals to increase sales – Think Bank of America vs Wells Fargo Can you think of other examples? HL

Porter’s 5 Forces How does this impact business decision making? By analyzing new markets potential. By analyzing existing markets. Develop strategies to improve a businesses current market position and gain a competitive advantage. Product differentiation Patents and copyrights Focus on less competitive market segments Merging with suppliers or customers Signing exclusive agreements with suppliers and commit customers to long-term contracts. HL