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Chapter 11

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Queen's University
COMM 103
Gregory Libitz

Chapter 11: Understanding the Marketing Effort Four Pillars of the Marketing Effort  Ch. 10 focused on concepts, models, and tools relating to the need identification and solution positioning, including a preliminary discussion on value prop dvlpmt  This chapter directs attention towards the remaining four R’s, and the marketing effort focus needed to ensure the org’s success in an increasingly competitive environment o Known as “marketing mix” - comprises strategic and tactical decisions relating to p/s offerings, pricing, distribution, and communication efforts and approaches  Effort is on developing, demonstrating, & communicating why p/s is the best solution, then ensuring it’s easily assessable at a price that best represents price/quality trade-off o An effective marketing mix should result in achieving a definitive “fit” between a p/s offering and the needs of consumers Product Strategy – Value Proposition Attributes versus Product Attributes  When thinking of product strategy, one has the tendency to focus on tangible attributes o Although this is valid, this tunnelled vision may result in marketers failing to develop and leverage other essential and core-differentiating attributes  Viewing product strategy as that of value proposition attributes, brings into play a considerably broader range of attributes which can be used to fully align the org o Broadens focus to include items like branding, emotional bonding, peer acceptance, and post-purchase service support  the overall experience  When thinking about product positioning and product strategy, the key is to think about how the p/s offers the customer the best solution compared to competitors  Viewing product strategies as the development of value prop attributes shifts the marketing team’s focus from simply “building a better mouse trap” to creating positive performance gaps between the company and its competitors The Power of Brands  A brand name which communicates and epitomizes positive performance attributes which are judged to be superior to competitor goods is huge in today’s markets  A brand which carries emotional ties and strong intrinsic values to the value prop greatly improve the chance of success  Strong brand names communicate quality, reliability, product consistency, and peer acceptance in many market sectors  A brand’s ability to move its customer market beyond simply awareness of the brand itself to that of a level of commitment is what makes branding so powerful o Truly successful brands are those that have evolved to the top of the brand ladder  Brands which reach the “Brand Commitment” level have an active and loyal customer base which continually place the brand at the top of their pre-determined purchase list o Need to successfully connect with customers on three levels: product features, benefits, and emotional ties Brand Success  Brand awareness is gained as org’s communicate that the brand offers distinctive features o The movement up the brand ladder towards brand preference and brand loyalty results in customers using this brand and choosing to repurchase it o Brand commitment evolves as ongoing use of the brand results in it becoming an automatic response when the need for the product presents itself  The ability to transition a brand from awareness to commitment is all about delivering the value prop in a way which demonstrates distinctiveness and creates emotional and psychological ownership with the customers as the proven solution to solving their needs Pricing Strategy – Return on Sales Maximization  Questions which challenge marketers and managers pricing products and/or services o Is business all about obtaining the biggest market share? o Should the pricing strategy be solely based on undercutting competitors? o Does our pricing strategy truly reflect the value of our offered product/service? o Does the strategy support our brand and the positioning behind our value prop?  In the face of a growing global marketplace, increased competition and innovation is causing a downward pressure on the price of goods in many sectors o Also higher capital costs, HR costs, R&D requirements – cause lower margins Responding to Price Pressures  Protect our Price point Respond to Price Reduction Requirements o Communicate Product importance Process Innovation o Develop Brand Distinction Develop Greater Economies of Scale o Develop Quality Differentials Reduce Quality o Develop Unique Needs Solution FeatureReduce Marketing Effort  The ability to effectively differentiate a firm will enable that firm to minimize price as a major point of comparison, thereby reducing its influence in the decision-making process Managing the Pricing Process  Determining what price to charge is critical to the execution of the marketing strategy and overall success of marketing effort - Consider many factors & internal/external influences  Internally, managers and marketers must fully understand the cost base of the org and the margins which are needed to ensure costs are being sufficiently covered  Externally managers and marketers need to assess the competitiveness of their price against alternate products, and against consumers’ willingness to pay Key Fundamentals to Setting Price 1. Fully identify the cost structure of the product/service being offered 2. Research the cost structures of major competitors – & extent of price comparison 3. Analyse the price elasticity of the target market – change in demand at various prices a. Understanding consumers’ acceptable price range – consumer price threshold 4. Determine the degree of value prop strength which the p/s commands in the marketplace a. Can identify premiums which can be allocated to the base pricing model Remembering Maximizing Return on Sales  Need to ensure that the required margins are incorporated into the pricing structure to ensure that additional organizational obligations are factored into the pricing formula  Profit expectations, including acceptable ROI made in the product within a defined payback period, also need to be taken into consideration  Successful pricing strategies seek to maximize the return on sales on the product/service which is offered in a way which ensures competitiveness, lies within the customers’ acceptable price range, results in a recognized value advantage between our p/s and those of competitors, and contributes to the long-term wealth of the org Distribution Strategy – Connecting with Customers  The development of a distribution strategy is all about connecting with consumers o Channels of distribution and the development of channel intermediary relationships fundamentally revolve around ensuring that customers have convenient/accessible ways of purchasing the p/s  It is important for marketers and managers to think in terms of how and where customers will purchase the p/s, and then to create the linkage which allows them to do so  Key decision areas in determining where and how firms believe customers will have the best access to the product coupled with the optimal level of sales support as follows… Direct, Indirect, or Mixed Systems  Direct, indirect, or mixed systems refers to the amount of involvement and control which and org desires to maintain over the final sale of its products and/or services  Direct Distribution implies that the org intends to directly connect with its customers and handle the final sale of its prod/delivery of its serv without a channel intermediary o Tend to use this as a result of a belief that their prod is better supported by dedicated, company-employed, workforce and gain better customer loyalty o Or if a firm believes they can more effectively control transport/distribution costs o Firm/prod is new, may be necessary to educate customers about product’s benefits  Indirect Distribution implies the use of a channel intermediary, such as a broker, wholesaler, or retailer, to facilitate the sales of an org’s p/s to the customer o Tend to use this if they believe that significantly greater market reach and support can be provided by leveraging expertise, locations, facilities, and experience o Also used when an org feels that customer familiarity with the use of the product is sufficient enough that a company-employed selling approach is not necessary o Or if it costs too much to sell to reach customers without this aid  Mixed Distribution Systems are those which incorporate both direct and indirect distribution options within their distribution strategy o Ongoing dvlpt of web-based models has resulted in more orgs viewing this model as the preferred one – although mixed systems aren’t limited to the # of web sites Product and/or Service Delivery Options  Think in terms of accessibility/convenience in addition to cost & distribution efficiencies o Adopt the approach that maximizes options customers can look when purchasing  Increase in web development = variety of purchasing options necessary to maintain customer loyalty – & build customer convenience & flexibility into distribution strategy  Org’s which incorporate a number of different channel connections through which customers can purchase a p/s are undertaking a multi-channel distribution strategy The Importance of Sales Support within the Channel  Choose type of channel they believe will best support the customer during buying process  A key decision associated with determining the type of channel system lies in determining the level of sales support which is needed for the p/s o Although customers care about quality and price, a positive buying experience is what really drives value – supported by channel intermediaries in buying process  Dist. Ch.’s value lies in the stages of alternative selection & supporting purchase decision  Determining how extensive of a distribution channel to develop is directly related to the sales support required to educate customers on why to purchase one orgs p/s over another o Complex product = greater lack of familiarity with product category by customer, & the greater price = more important sales support becomes at time of purchase  When assessing the types of channel relationships to pursue, managers tend to assess the best fit around the following relationships categories – Intensive, Selective, & Exclusive Intensive Distribution  Distribute p/s through numerous channels/locations - maximize product availability  The idea is to have customers see the p/s wherever they go o A good example is convenience goods – goods used every day – where the decision to buy them is based on convenience and availability  The advg of this approach is it maximizes market penetration and offers potential for achieving significant scale  Ability & willingness of distributor to focus selling efforts on your prod are limited & no focused commitment to your prod – since carry other prod you directly compete with  The risk for the org is that it requires a significant financial commitment in inventory Selective Distribution  Narrow the breadth of access that p/s have in the marketplace  Decision to limit reach may be based on need for higher sales support at time of purchase  Could also be based on a desire to reinforce a brand name or particular image for a p/s  May also be based on geographic clusters, differentiation initiatives, joint ventures  Use approach if they feel that p/s will be better supported at point of sale by channel intermediaries – have higher degree of control over how prod is priced, marketed & sold  Since they offer these intermediaries authorized dealer status, the firm can minimize direct competition at the point of purchase Exclusive Distribution  Further focusing on distributing products through a single authorized intermediary  For manufacturers of prod, means offering prod through only one market representative  Often use this arrangement when the selling process associated with the products requires the highest levels of support, or when the org is trying to break into a new market  Also a key to franchise-based operations where the franchiser agrees to provide to the franchisee a full business operating model governed the exclusivity contract o The hope is that the intermediary will have a higher level of commitment  Exclusive distribution arrangements should also give the org max say in how p/s will be marketed and sold and prohibit the channel intermediary from carrying competitive lines  The risk for the org is that,
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