Transcript analysing the business environment

MARKETING AND SALES
MANAGEMENT
James S. Boles, Ph.D.
Georgia State University
Atlanta, GA
ANALYSING THE BUSINESS
ENVIRONMENT
Failing to plan is planning to fail!
The only constant in the modern
world is change!
The Macro Business Environment
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Demographic Environment
Economic Environment
Natural Environment
Technological Environment
Political-Legal Environment
Social-Cultural Environment
The Demographic Environment
• Trends in the demographic environment:
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The Economic Environment
• My firm’s economic environment:
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The Natural Environment
• My firm’s natural environment:
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The Technological Environment
• My firm’s technological environment:
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The Political-Legal Environment
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The Social-Cultural Environment
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Analysing Current Business
• Boston Consulting Group Matrix:
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Stars
Cash cows
Dogs
Question marks
MARKETING STRATEGY TOOLS
SWOT Analysis
Five Forces Analysis
SWOT Analysis
• Strengths
• Weaknesses
• Opportunities
• Threats
Strengths & Weaknesses
of a SWOT Analysis
• Firm decides what its strengths are in relation to
other firms/competitors
• Useful to develop information needed to allow
better competitive decisions
• SWOT encourages good thinking about strengths,
weaknesses, opportunities and threats. However,
it lacks prescriptive power.
• Thus, the need for Five Forces Analysis
Five Forces Analysis
• The Five Forces Model includes:
– Barriers to entry
– Power of suppliers
– Power of buyers
– Rivalry among competitors
– Availability of substitutes
Industry Analysis with the
Five Forces Model
New Entrants
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What are the barriers to entry?
Can we raise them? Can they by lowered?
Characteristics of Potential new entrants
Likely competitive strategies of these entrants
When will they enter our market
Suppliers
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How Large and concentrated are they?
Can firms switch suppliers easily?
How important is their product to us?
How much cost does their product represent?
What is their relative bargaining power over us?
Buyers
• How concentrated are our customers?
• Potential for creating a new market or growing
this one?
• How high are switching costs?
• How price sensitive is each customer segment
• Customer’s relative bargaining power?
Substitutes
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What are the substitutes for our product?
How viable are they as replacements?
How quickly will they penetrate our market?
Which players in the industry will see substitutes
as a chance for diversification?
Competitors
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Who are our major competitors today?
What are their relative industry positions?
What is the competitive advantage of each?
How is product differentiation achieved?
Delivering Value and Building
Customer Satisfaction Through
Quality
Quality is the totality of
product/service characteristics that
bear on its ability to satisfy stated or
implied needs.
Satisfaction
• Satisfaction: A person’s feelings of pleasure or
disappointment resulting from comparing a
product’s perceived performance (or outcome) in
relation to his or her expectations.
– Setting expectations is key to insure buyer satisfaction
– Know your capabilities to set expectations accurately
– In some cases, exceeding expectations results in
“delighted” customers -- but not in every case
– Sometimes satisfied customers defect (leave)
Benefits of Market Orientation
• Higher customer satisfaction
– In general, satisfied customers are more loyal & buy
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Spread favorable word-of-mouth
Are more brand loyal (less price sensitive)
Give feedback
Reduce costs
• Higher profits (short-term and long-term)
• Greater value for customers
– You know them and their needs
Management Characteristics of a Market
Oriented Firm
• Customer focus
– Obsessed with understanding needs and delivering
satisfaction
• Competitor orientation
– Continuous recognition of competitors’ sources of
advantages, competitive position and strategies
• Team approach
– Cross-functional teams dedicated to developing and
delivering customer solutions -- high morale &
commitment to excellence
Customer Satisfaction
• Customer satisfaction can lead to retention
• Customer retention leads to increased profitability
– Much cheaper to keep customers than to find new ones
– Cheaper to serve customers that you know
– Current customers know what to expect -- more likely
to be satisfied
• Typically only “delighted” customers are safe
from defection!
• Satisfaction metrics are often interpreted
incorrectly!!
The Meaning of Customer Satisfaction
• Typically a skewed distribution of satisfaction
• Most dissatisfied customers do not complain -they just LEAVE!
– Encourage complaints
– Have clear policies on dealing with complaints
• Provide quick remedies when possible
– Complaint recovery is a source of customer satisfaction
– Can actually be an opportunity
Life-Time Value of the Customer
• Total Customer Value is based on:
– Image Value; Personnel, service and product value
• Total Customer Cost is based on:
– Monetary cost; Time cost; Energy and psychic cost
• A key metric is determining the value of satisfied
customers
– Cadillac customer = $350,000 over the lifetime of the customer!!
– Avoid customers with a record or profile of a “switcher”
– Avoid hard to serve customers when possible
Buyer Behaviour
Consumer and Organisational Buying
Behaviour
Steps in the Consumer Buying Process
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Need recognition
Alternative search
Alternative evaluation
Purchase decision
Post-purchase evaluation
Alternative Search
• 5 sources for information about alternatives
– Internal -- own stored information
– Group -- family, friends, neighbors
– Marketing -- ads, salespeople, dealers,
packaging, displays, promotions
– Public -- publicity, consumer reports, reviews
– Experiential -- trying or viewing the product
while shopping
Alternative Evaluation
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Customer is trying to satisfy a need
Customer is seeking benefits
Each product is a bundle of attributes
Desired attributes vary by purchase
situation
• Consumers develop a belief about each
brand (brand image) that mentally positions
the product
Purchase Decision
• Purchase decision involves several issues
– vendor, quantity, timing, payment method
• Situation events can influence purchase
– stock-out, long lines, store hours, others
opinions
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Post-Purchase Evaluation
• Perhaps the most important step for longterm business development
• Often overlooked by retailers/service
providers
• Poor evaluations lead to:
– bad word-of-mouth; complaints; returns; etc.
Social Influences on Consumer Buying
• Social influences
– cultural and subcultural
• affects everyday behaviour, a basic influence
• transmitted by family, church and schools
– Social class
• affects attitudes and values
– Reference groups and family
• family, close friends, professional associations
• most people have multiple reference groups
Marketing Influences Consumer Buying
– Product
• appearance, packaging, performance
– Price
• quality, value, prestige, very important!
– Promotion
• advertising, sales promo, salespeople, publicity
• must be consistent and have repeated exposure
– Distribution (place)
• must be located where the buyer wants it
• stock-outs are killers
Situation Influences Consumer Buying
• Physical surroundings
– geographic and institutional location, décor, sounds,
aromas, lighting, weather and merchandising
• Social
– who is present? Others roles in consumption?
• Temporal
– time of day or season, holiday, time since last purchase,
time constraints on consumer
Situation Influences Consumer Buying
• Task definition
– shopping intent, selection, obtain information,
and/or buyer role versus user role
• Antecedent states
– moods, momentary conditions, variety seeking,
habitual behaviors. These are immediately
antecedent to the purchase decision
Organisational Buying
• Steps in the Process:
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Problem recognition (need recognition)
Determination of characteristics and quantity
Search for qualified potential sources
Acquisition and analysis of proposals
Evaluation of proposals and supplier selection
Selection of an order routine
Feedback and post-purchase evaluation
Major Influences in
Organisational Buying
• People
– Users, influencers, deciders, approvers,
gatekeepers, buyers
• Environmental
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Purchasing department evolution
Cross-functional roles, Centralized purchasing
Internet purchasing, Long-term contracts
Lean production (JIT)
Key Requirements in
Organisational Buying
• Value
– lowest total cost of ownership
• Understanding customer requirements
– transaction
– relationship
– partnership
Key Influences on
Organisational Buying
• Company reputation
– quality, price, delivery, previous experience
• Salesperson
– understands buyer requirements
– investigates needs thoroughly
• Technological interface
• Capability
MARKET SEGMENTATION
The process by which a market is divided
into distinct customer subsets of people
with similar needs and characteristics
leading them to respond in similar ways to
a product/service offering
Growing Importance of Segmentation
– As markets mature, competition becomes more intense
– Customers have more varied needs and desires
– Technology -- micro-segmentation and relationship
marketing
– Identifies opportunities for new product development
– Helps design of effective marketing programs
– Improves strategic allocation of marketing resources
SEGMENTATION PROCESS
• 4 Major segmentation descriptors for consumer
and business markets: physical, behavioral,
product-related and benefits sought
• Objective is to divide the market into relatively
homogeneous groups
– Selection of Meaningful Descriptors
– Determine if there are differences in the dependent
variables
– Evaluation of the results
Segmenting the Market: Physical Descriptors
• Physical Descriptors
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Age
Sex
Life Cycle
Income
Geography
Education
General Behavioral Descriptors
• Life cycle
• Social class
• Interests (psychographics)
• Firm purchasing structure
• Buying situation
Product-Related Behavior Descriptors
• Product usage (place and frequency/scope)
• Loyalty
• Purchase predisposition
• Purchase influence
• Innovativeness
Customer Needs
• Benefits sought
– Different emphasis on various benefits of the product or
service
– What is the “bundle of benefits”
• Choice criteria
– Evaluated on the existence of desired characteristics
and the value of each characteristic
Service Segmentation
• Customers must be compatible with the service
since they are part of the service process
• Services lend themselves to customization far
better than products
• Some services may be able to use technology to
reduce variability and costs
Selected Macro-level Bases of Business
Segmentation
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Size
Geographic Location
Usage Rate
Structure of Procurement
Product/Service Application
SIC code
Characteristics of Purchase Situation
Value in Use
Selected Micro-level Bases of Segmentation
• Key criteria
– Quality, Delivery, Supplier Reputation
• Decision-specific conflict
– High or Low
• Purchasing strategy
– Optimizer, Satisficer, etc.
• Structure of decision-making unit
– Who are the major participants in the decision?
Selected Micro-level Bases of Segmentation
• Importance of purchase
– High……….Low
• Attitude toward vendors
– Favorable…………Unfavorable
• Organisational innovativeness
– Innovator…………..Follower
• Personal characteristics
– Demographics, Risk Averse?, Confidence, Job
Responsibility; Decision Style; etc.
Effective Segmentation Requires
• To be effective, identified segments must
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Measurable
Substantial
Accessible
Differentiable
Actionable
Marketing Research
Gathering information and measuring
market demand
Steps in the Research Process
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Define the problem & research objectives
Develop the research plan
Collect information
Analyse the information
Use findings to make a decision
Defining the Problem and Setting
Research Objectives
• Types of research
– Descriptive, exploratory, causal
• What do we want to know?
– Clearly specify needed results
– Are we examining a symptom or the problem?
– Can we study this issue or problem?
Developing the Research Plan
• Data sources
• Research approaches
• Research instruments
– survey, interview, computer scored, etc.
• Sampling plan
• Contact methods
Decision Making with the Results
• First, don’t shoot the messenger!
• What do the results tell us?
– Are these issues actionable
– Was this the correct research approach (helps
guide future research)
– Can we trust these results
– Is there some form of unacceptable bias in the
study design (post-hoc analysis)
Methods of Conducting Marketing
Research Inexpensively (cheaply)
• Talk to your customers
– Conduct research by walking around
• Use customer comment cards
– Act on any consistent findings
• Do focus groups of customers
– Talk about how they want to do business
• Conduct business reviews with major
customers