Transcript Slide 1

Market Development, Information, and
Bargaining Power
• Reasons for market
development
• Strategy in market
development
• Tools and outcomes
• Participation in
commodities market
development
• Bargaining power and
market “stabilization”
• Market information
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MARKET DEVELOPMENT
Lars Perner, Instructor
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Promotion: Strategic and Tactical
Objectives
• Awareness
• Trial
• Attitude toward the
product
Emerging
Markets/
New Products
– Beliefs
– Preference
• Temporary sales
increases
Mature markets
/established
products
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Marketing Strategy
ASSESS AND RE-EVALUATE
MARKETING
OBJECTIVES
What we want to
accomplish
STRATEGY
How to best use
available resources
to accomplish objectives
under circumstances.
Make tough choices!
TOOLS
Use resources such
as distribution,
advertising, sales
promotion,
demonstrations
ASSESS
MKTG 442AND RE-EVALUATE
TACTICS
AND
ADAPTATION
Implementing strategy
as things change.
More tough choices!
OUTCOME
CONSUMER/
MARKET
RESPONSE
Consumers or
intermediaries
respond
MARKET DEVELOPMENT
Sales are influenced
(e.g., volume,
frequency, switching,
price sensitivity)
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Market Development Issues
DECREASE
CONSUMER
PRICE SENSITIVITY
GET MORE PEOPLE
TO BUY PRODUCT
TRIAL
AWARENESS
INCREASED
SALES OF
PRODUCT
BUYING
CONVENIENCE
GET PRODUCT
USED FOR
NEW PURPOSES
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JOINT
VENTURES/
COBRANDING
DEVELOP
PREFERENCE
RELATIVE TO OTHER
PRODUCTS OR BRANDS
MARKET DEVELOPMENT
“Big picture
.
only”—details
not important!
ADVERTISING
DISTRIBUTION
ENHANCEMENT
GET CURRENT
USERS TO USE
MORE
SALES
PROMOTION
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Market Development: The Objectives
GET CURRENT USERS TO USE MORE
“Snickers satisfies you!” ● “Ask for A-1 Steak Sauce” ● “A sandwich just isn’t a sandwich
without miracle whip” ● “Beef—it’s what’s for dinner” ● “The Incredible, Edible Egg” ●
Fast food restaurant advertising
GET MORE PEOPLE TO BUY PRODUCT
Hungry Man dinners ● Hot Pockets ads ● Variety seeking advertising ● Spam luncheon meets advertising
GET PRODUCT USED FOR NEW PURPOSES
“Orange juice—it isn’t just for dinner anymore” ● “Beef—it’s what’s for dinner”
● Spam luncheon meets advertising ● Baking soda ads
DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDS
Kraft cheese ads suggesting that Kraft has more calcium ● Total cereal ads suggesting vitamins
● “Coke is the real thing” ● “The Pepsi generation” ● “The night belongs to
Michelob” ● Florida orange juice “Maxwell—it’s good to the last drop”
● Progresso and Campbell’s soup ads
DECREASE CONSUMER PRICE SENSITIVITY
“Costs a little more, but it’s worth it” ● Zachy farms chicken ads
● Campbell’s soup ads
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MARKET DEVELOPMENT
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Strategy Issues
• Deciding on objectives
– Realism
– Suitability for
• Company strengths
• Competitor positions
• Market structure and change
• How much to spend on objectives
– Cost of advertising and/or other promotion relative to gains
– Most appropriate ways of achieving objectives based on
• Cost
• Effectiveness
• Synergy
• Consistency of objectives
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Some Tools
• Advertising
–
–
–
–
–
• Price/sales promotion
Awareness
Trial
Preference
Reminder
New uses
–
–
–
–
• Joint ventures/cobranding
• Demonstrations
• Product investment
• Distribution
– Availability in
retail stores
– Quality of
placement within
retail stores
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Coupons
Sales
Value
Premium
–
–
–
–
MARKET DEVELOPMENT
Quality
Differentiation
Packaging
Usability convenience
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Consumer Adoptions of New Foods or New Food
Uses
TRIAL
PROMOTION
ADOPTION BY
LIMITED GROUP
WORD OF MOUTH
TRIAL
INCREASING
ADOPTION/
ADAPTATION
OBSERVATION
MEDIA
COVERAGE
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Effects and Outcomes
AWARENESS
TRIAL
SALES
Volumes
Prices
REPEAT
PURCHASES
PREFERENCE
REDUCED
PRICE
SENSITIVITY
USE BY
MORE
PEOPLE
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USED IN
MORE
SITUATIONS
USED
MORE
FREQUENTLY
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Market Development
• Levels
– Commodity
• Differentiation from competing commodities
• Increase in demand for commodity
– Corporate product category (e.g., Coca Cola
drinks, including Dasani)
– Product category brand—e.g., Kraft American
cheese slices
– Brand (product line)—e.g., Kraft foods
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Commodities Market Development Programs
• Typically regional—e.g., Florida orange juice;
Idaho potatoes; Hawaiian sugar cane;
Washington Apples; Texas beef
• Intention is to differentiate
• Compulsory participation in advertising
programs
– Development is not worthwhile for the individual
farmer
– The individual farmer is assumed to benefit from
overall campaign
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Definitions
Innovation:
“An idea, practice, or
product perceived to be new by the
relevant individual or group.”
Diffusion process:
“The manner in
which innovations spread through
the market.”
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To Adopt or Not to Adopt: How Will Consumers Answer the
Question?
• Some causes of
resistance to adoption
– Perceived risk--financial
and social
– Self image
– Effort to implement
and/or learn to use the
product
– Incompatibility
– Inertia/overwhelming
existing choices
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Types of Innovations
• Fashions—tastes go
back and forth over
time—e.g., food fat
content
• Fads—product is “in”
for a short time and
then fades (e.g., ostrich
meat)
• Trends—consumption
of a food product either
increases or decreases
consistently over time
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N u m b e r o f n e w a d o p to r s
Innovators and Imitators:
The Lifecycle of A Product
Adoption of Innovations Over Time
40
30
20
10
0
Innovators
-2.50
2.5%
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Early
-1.50
adoptors
(13.5%)
Early
-0.50
m aj
ority
34%
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Late
m aj ority
0.50
34%
Laggards
1.50
2.50
(13.5%)
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P e r c e n t d iffu s io n
One Diffusion Pattern--Nicely Balanced...
The S-Shaped Diffusion Curve
1
0.8
100% adoption
or saturation
point
0.6
0.4
0.2
0
0
5
10
15
20
25
Tim e
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Implications for Foods
•
•
•
•
Many substitutes and individual tastes
Trying new foods for variety is common
Social opportunities for trial
Food tastes tend to be “learned” early in life
– Best opportunities for spread are with younger
consumers
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Influences on the Speed of Diffusion
• Risk to expected benefit ratio (relative
advantage)—usually not an issue for
foods
• Observability—is the product
consumed in public
• Product pricing—scarce foods are
“rationed” through cost
• Trialability—usually easy for foods
• Switching difficulties and learning
requirements/ ease of use—not a
problem for foods eaten out but may
be for foods to be produced at home
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Pioneering Advantage
• Consumer expectations are usually shaped
by the first encountered brand
• Satisficing and awareness by consumers
• Order of entry vs. pioneering advantage
• Positioning of existing pioneer vs. strategy
of first entry
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Bargaining Power
• Impact
• Sources
– Price
– Conditions
• Returns
• Time of payment
• Interest or finance
charges
• Quality or other
adjustments
• Transportation or other
services
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– Size, number, and
concentration of firms
– Supply control
– Unequal information
– Diversification (?)
– Product differentiation
– Control of resources
– Financial resources
– Ratio of fixed to variable
costs
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Marketing Orders and Agreements
• Mandates intended to “stabilize” markets
• Types of issues
–
–
–
–
–
–
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Grades, size
Packaging
Market allocation (quotas)
Minimum prices
Contributions to research
Advertising (market development)
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Market Information
• Some issues
• Problems
– Crop forecasts
– Demand forecasts—quantity
and prices
• Government information
programs
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– Price specification
(comparability of location,
time, and other factors)
– Net vs. gross prices
(allowances and discounts)
– Cost vs. accuracy of
information
– Changing market orientation
and scope of market
(proportion of buyers and
sellers involved in open
markets)
– Voluntary cooperation
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