Developing Marketing Strategies Ian Mejia 2009 Redfield College

Syllabus Points Covered developing marketing strategies market segmentation and product/service differentiationmarket segmentation and product/service differentiation product and serviceproduct and service –positioning –branding –packaging price including pricing methods — cost, market and competition-basedprice including pricing methods — cost, market and competition-based –pricing strategies/tactics — skimming, penetration, loss leaders, price points –price and quality interaction promotionpromotion –elements of the promotion mix — personal selling, advertising, below-the-line promotions, public relations –the communication process including opinion leaders and word of mouth place/distributionplace/distribution –distribution channels and reasons for intermediaries –channel choice including intensive, selective, exclusive –physical distribution issues including transport, warehousing, inventory environmental effects on distribution — technology, local governmentenvironmental effects on distribution — technology, local government

Market Segmentation Market segmentation is the process of identifying niche markets within a mass market. Market segmentation is the process of identifying niche markets within a mass market. Market segmentation is effective because it gathers people with similar characteristics and allows a business to be more specific with its strategies. Market segmentation is effective because it gathers people with similar characteristics and allows a business to be more specific with its strategies.

Markets can be identified through Demographic factors Demographic factors Geographical factors Geographical factors Psychographic factors Psychographic factors Behavioural factors Behavioural factors

Demographics Age Age Sex Sex Education Education Income Income Occupation Occupation Religion Religion

Geographical Factors Where do customers make purchase decisions? Where do customers make purchase decisions? Seasonal variations? Climate, conditions etc. Seasonal variations? Climate, conditions etc. Type of living conditions Type of living conditions City / Suburbs / Rural City / Suburbs / Rural

Psychographic Why does a customer buy a product or service? Why does a customer buy a product or service? Lifestyle characteristics Lifestyle characteristics Personality types Personality types Self perception Self perception Beliefs Beliefs Any personal influence on a buying decision. Any personal influence on a buying decision.

Behavioural Factors What is the purchase situation when making a purchase? What is the purchase situation when making a purchase? Customer loyalty Customer loyalty Usage rates (how often) Usage rates (how often) Purchase occasion (what is occurring during the purchase) Purchase occasion (what is occurring during the purchase)

Product Differentiation Product differentiation is a marketing strategy designed to reinforce the distinctions between products intended for a similar market segment. Product differentiation is a marketing strategy designed to reinforce the distinctions between products intended for a similar market segment. This occurs to: This occurs to: -tailor a base product. -differentiate from competition.

Tailoring a Base Product This allows businesses to penetrate a range of markets and allows customers to purchase a product more suited to them. This allows businesses to penetrate a range of markets and allows customers to purchase a product more suited to them. Extras on cars, i-pods, mobile phone accessories Extras on cars, i-pods, mobile phone accessories

Differing from Competition Make one product seem superior or better at meeting the needs of a customer. Make one product seem superior or better at meeting the needs of a customer. May increase the market share of a business May increase the market share of a business May allow a premium price to be charged for a good or service, justified by a superior product. May allow a premium price to be charged for a good or service, justified by a superior product.

The Four P’s. Product Product Price Price Promotion Promotion Place Place

1.0 Product Positioning Positioning -Positioning is a marketing term that describes how customers percieve a product in relation to a similar product in a market. -Products are positioned to tap in to target markets to create value in a consumers mind.

Perceptual Maps

Effective Positioning Determine 1. What do customers think of the product now? 2. What does the business want consumers to think about the product? 3. Which differentiation strategy will elevate the consumers’ current perceptions to the desired perception.

1.1 Positioning Strategies Product Users – emphasis on the type of user, someone they can relate to or emulate to. Product Users – emphasis on the type of user, someone they can relate to or emulate to. Product Usage – emphasis on the benefits of usage or how it can be used Product Usage – emphasis on the benefits of usage or how it can be used Competition – positioning in relation to competitors Competition – positioning in relation to competitors

1.2 Branding Branding is the use of names, terms, symbols, and designs used to identify a product. Branding is the use of names, terms, symbols, and designs used to identify a product.

Successful branding involves 1. Attracting attention 2. Being memorable 3. Communicates Position 4. Is Easily Recognisable / Distinguishable

1.3 Packaging Packaging plays an important role in establishing a product’s branding. Thus its function is both: Packaging plays an important role in establishing a product’s branding. Thus its function is both: Functional, and Branding in nature. Functional, and Branding in nature.

Packaging Strategies Product Identification Product Identification Product differentiation Product differentiation Cost efficient Cost efficient Socially responsible Socially responsible Market requirements Market requirements Government requirements Government requirements Brand Identity Brand Identity

2.0 Price Opportunity cost vs Profit Opportunity cost vs Profit Do we compete on price? Or lower the significance of price through product differentiation. Do we compete on price? Or lower the significance of price through product differentiation.

2.1 Pricing Methods Cost Based Method Cost Based Method Market Based Method Market Based Method Competition Based Method Competition Based Method

Cost-based Method This method involves pricing products where the final price is the cost of a product, plus a profit margin on each product. This method involves pricing products where the final price is the cost of a product, plus a profit margin on each product. From the break even point, a business then adds how much margin they want to receive per unit sold. As a percentage per unit, or as a fixed amount. From the break even point, a business then adds how much margin they want to receive per unit sold. As a percentage per unit, or as a fixed amount. What are the possible problems associated with this type of pricing method? What are the possible problems associated with this type of pricing method?

Market-based Method A pricing method where the price is determined by the demand equalling supply. A pricing method where the price is determined by the demand equalling supply.

Competition-based Method This method involves setting a price relative to that of a competitors. This method involves setting a price relative to that of a competitors. Competition based pricing is often coupled with strong product differentiation, with the emphasis on increasing market share. Competition based pricing is often coupled with strong product differentiation, with the emphasis on increasing market share.

2.2 Pricing Strategies Price Skimming Price Skimming Penetration Pricing Penetration Pricing Loss Leader Pricing Loss Leader Pricing Price Points Price Points Percieved Quality Pricing Percieved Quality Pricing

Price Skimming A business sets an initial high price and then reduces it over time. A business sets an initial high price and then reduces it over time. The idea is to ‘skim’ the top of the market, this technique is generally reserved for new products with little or no competition at the time of release. The idea is to ‘skim’ the top of the market, this technique is generally reserved for new products with little or no competition at the time of release.

Penetration Pricing A strategy used to gain large amounts of market share through a very low initial price. A strategy used to gain large amounts of market share through a very low initial price. The idea is to induce a repeat purchase a rapidly gain market share The idea is to induce a repeat purchase a rapidly gain market share

Loss Leader Pricing Selling a product at a loss to attract customers to buy other products or eliminate ay competition by pricing them out of the market. Selling a product at a loss to attract customers to buy other products or eliminate ay competition by pricing them out of the market. The idea is that competitors will be forced to follow suit or lose their market share. It is a test of who has deeper pockets? The idea is that competitors will be forced to follow suit or lose their market share. It is a test of who has deeper pockets?

Price Points A pricing method using one base product with a number of add-on features that will increase the price A pricing method using one base product with a number of add-on features that will increase the price

Percieved Quality Pricing Using price to position a product as being higher quality because of the perception of high price meaning higher quality. Using price to position a product as being higher quality because of the perception of high price meaning higher quality.

Pricing Strategies What are the possible opportunities and threats for: What are the possible opportunities and threats for: Price skimming? Price skimming? Penetration pricing? Penetration pricing? Loss Leader pricing? Loss Leader pricing?

3.0 Promotion Personal Selling Personal Selling Advertising Advertising Below-the-line Below-the-line Public Relations Public Relations

Personal Selling Direct spoken communication either in person or over the phone. Direct spoken communication either in person or over the phone. Positives and negatives?? Positives and negatives?? Rajneel is India’s elite telemarketer. He has sold over 10,000 mobile phones, and over 600 laptops. He has been rewarded with a new headset… and he’s proud.

Advertising Communication with the attempt to influence a consumer’s perceptions of a brand and position. Communication with the attempt to influence a consumer’s perceptions of a brand and position. New and innovative forms of advertising are being introduced New and innovative forms of advertising are being introduced

Public Relations Focused on the relationship between a business and its markets. Public relations aims to market through improving a business’ image. Focused on the relationship between a business and its markets. Public relations aims to market through improving a business’ image.

Word of Mouth Becoming more and more popular as a marketing tool. Becoming more and more popular as a marketing tool. Opinions of friends or family is held in a higher regard Opinions of friends or family is held in a higher regard How can you utilise this? How can you utilise this?

4.0 Place Distribution Distribution How will your product be distributed? How will your product be distributed? How will it reach your market? How will it reach your market?

Physical Distribution Issues Transport Transport Warehousing Warehousing Inventory Inventory Environment Environment