Further Thoughts About Differentiated Products AG BM 102

"Many a small thing has been made large by the right kind of advertising." Mark Twain

Introduction Payoff is clear Doing it right is harder Need clear vision of where you are going

What are your Goals? Sales volume? Market share? Market rank?

Source: Advertising Age Total Market: 10 bil. cases

Who is your customer? One night on evening news – three soup ads in 3 minutes Who eats canned soup? Some clues – who watches network news? Who is pictured in ads? Middle aged women – one meets another at airport

Chiquita Bananas What is the message? Who is the customer?

Marketing Mix The 4 Ps: –Product –Price –Place –Promotion

Two Types of Promotions Pull Promotions –Consumer-Directed Mass media advertising Coupons Packaging Push Promotions –Trade-Oriented Give favorable pricing and merchandising attention to a brand or product.

Food Processors and Retailers in Advertising Food Processors Account for one-half of the total food industry advertising expenditures. Food processors account for 25 % of the total advertising outlays by all processors. Food Retailers Account for 30% of the total food industry advertising expenditures. Food retailers spend more on advertising than any other group of retailers.

Marketing Strategy A planned course of action for securing the desired response from a carefully defined market.

Marketing strategy includes 1. Carefully selected customers 2. Clearly defined objectives 3. A uniquely differentiated product 4. Distribution, pricing, and promotional policies consistent with the above.

Marketing strategy focuses on Markets to be served Products to be offered

Marketing Plan Outline 3. Company Analysis: An assessment of the organization’s strengths, weaknesses, constraints, and ultimately responsive strategies, either exploiting strengths or correcting or compensating for weaknesses. 1. Industry Attractiveness Analysis: An assessment of the industry and environmental factors affecting the product/service. 2. Competitor Analysis: An assessment of the competitors activities and predictions future competitor product strategies. 4. Customer Analysis: An examination of the basic aspects of consumer behavior in terms of who they are and why and how they buy. 5. Market Potential, Forecasting, and Budget: A forward-looking activity that helps the entrepreneur determine appropriate strategic objectives. 6. Marketing Strategy: The plan for achieving the organization’s objectives by developing a sustainable competitive advantage through the markets entered and the programs used to serve them. Situation Analyses Strategy

Who is your competition? What product are you worried about? – Progresso Soup showed Campbell’s Chicken and Stars and then their soup with more ingredients How will you distinguish your product? How will they respond?

Five Forces Determining Industry Structural Attractiveness Potential Entrants (Threat of Mobility) Potential Entrants (Threat of Mobility) Buyers (Buyer power) Substitutes (Threats of substitutes) Suppliers (Supplier power) Suppliers (Supplier power) Industry Competitors (Segment rivalry) Porter (1980)

Bases for Industry Analysis Market Factors Competitive Factors Environmental Factors Size Growth Stage in life cycle Cyclicity Seasonality Marketing mix Profits Financial ratios Power of buyers Power of suppliers Rivalry Threat of substitutes Concentration Capacity utilization Entries and exits Technology Economic Social Political Regulatory

Examples of Competition Levels Diet-Rite cola Diet Pepsi Diet Coke Regular colas Fruit Flavored colas Diet lemon limes Lemon limes TeaBeer Coffee Bottled water Wine Juices Baseball cards Ice cream Video rentals Fast food Product Form Product Category Generic Competition Budget Competition

Otto’s Pub & Brewery Brew Pub on North Atherton Variety of unique beers Fancy sandwiches Draw a circle of competition

Customer Profile 1. Who they are: –purchaser –user 2. What they buy: –amount –brand, features –usage situation

Customer Profile 3.Where they buy. 4.When they buy. 5.How they choose: 1.consumer behavior 6. Why they select a product (customer value): –functional –service –image

Customer Profile 7. Will they buy it (again)? –satisfaction –intention 8. Sensitivity to marketing mix: –product, price, place, promotion

Otto’s Who is customer? What will they buy? When will they buy? How do they choose? Will they buy it again? How do you reach them?

There is only one boss--the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else. --Sam Walton People are not all the same--Person Variability People make choices depending on the situation--Situational variability Listen to the whispers and you won’t have to hear the screams. --Cherokee saying Customer Analysis

Concluding Comments Differentiating a product is difficult Maintaining the differentiation is also difficult Do it right and payoff is there