Transcript MG 298 Entrepreneurship - Indian Institute of Science

MG 298
Entrepreneurship
Module #4
Marketing Management: Market
Opportunities and Marketing
Aug – Dec 2007
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Marketing Philosophy
• The marketing concept provides an orientation
for conducting a business, a way of thinking, and
a basic approach to business problems.
• Marketing is .. The whole business seen from
the point of view of its final result, that is, from
the customer’s point of view.
• The principal task of the marketing function… is
not to be skillful in making the customer do what
suits the interests of the business as to be skillful
in conceiving and then making the business do
what suits the interests of the customer
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Indicators of Customer and
Marketing Orientation
• What information do you collect about the exact
needs of your customers?
• Could you consider custom designing your
products or services for smaller groups of
customers? How?
• Are your employees specifically trained to
represent your company to customers? How?
• How do you convert unsatisfied customers to
satisfied customers? Do you have any strategy?
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Five steps for assessing market
opportunities
• 1. Identify business environmental forces (economic,
legal, regulatory, technological)
• 2. Describe the industry and its outlook (type, size,
market segments, marketing practices)
• 3. Analyze key competitors (products, market
positioning, market practices (channels, pricing,
promotion, services), estimated market share
• 4. Create a target market profile (levels, generic needs,
product types, end-user focus, targeted customer
profiles, implications for opportunity
• 5. Set sales projections (formal/ intuitive approaches,
comparison of results)
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Sources of information for Market
Opportunity Analysis (MOA)
• 1. Published sources: Periodicals,
newspapers, trade association reports,
information service reports, government
documents, company reports
• 2. Interviews with experts: Managers of
suppliers, trade companies, associations,
consultants, sales persons
• 3. Personal observation: Of customers,
competitors, environmental influences
• 4. Primary marketing research: focus groups,
concept tests, cross-sectional surveys,
longitudinal panels, experiments
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Marketing implications of new
product/ venture characteristics
• Characteristic
Marketing action
• 1. Relative advantage
Clear communication
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Obtain third party endorsement
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Price the product favorably
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Construct product to deliver benefits quickly
• 2. Compatibility
Understand customer life style, to
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minimize required adaptation
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Make product fit with related products
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Make product/ brand fit social situation
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Marketing implications of new
product/ venture characteristics
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3. Complexity Make the product readily understandable
Strive to make product user friendly
Make product at complexity not exceeding substitutes
4. Testability Offer money-back guarantee
Reduce the costs and risks of trials
Make small quantities free or at low price
Provide incentives to encourage trials
Offer special incentives for durable items
5. Observability Encourage visible use by customers
Make it easy form others to perceive brand
Create incentives for customers to encourage friends
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Marketing Mix Variables
• 1. Product: Features, Quality, Packaging,
Branding, Services, Guarantees, Assortment
• 2. Distribution: Types of channels/ middlemen,
Store/ distributor location, Storage,
Transportation and Logistics, Service Levels
• 3. Price: List price, Credit terms, Discounts,
Selection and allowances, Flexibility
• 4. Promotion: Promotion blend: Advertising,
Media, Copy, Timing; Personal selling: Training,
Motivation, Allocation; Sales promotion, Publicity
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Four Steps for Pricing Products
• 1. Establish Specific Objectives for Pricing
Programs: For example,
• Increase sales or profit growth
• Maximize short-run/ long-run profits
• Discourage entrants
• Speed exit of marginal competitors
• Discourage price cutting
• Stabilize market prices
• Rapidly establish market position
• Rapidly recover new product development costs
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Four Steps for Pricing Products
• 2. Determine the extent of price flexibility:
Determined by costs, demand, competition, and
legal and ethical considerations
• Demand and competition set the ceiling for
prices; determine “what the market will bear”.
• Range between cost floor and demand and
competition ceiling defines the flexibility in
pricing
• Critical demand consideration is price
elasticity= % change sales/ % change in
price
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Four Steps for Pricing Products
• 3. Develop price strategies: guidelines
and policies to effectively guide pricing
decisions to match target markets:
• Whether prices should vary day to day;
• Overall price levels;
• Price stability;
• Pricing relative to the stages of the
product/ service life cycle; and
• Use of psychological pricing
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Four Steps for Pricing Products
• 4. Establish prices: How are prices for specific
products actually set?
• Sound approach to pricing must incorporate
cost, competition, and demand factors
• Costs establish the floor for a possible price
range
• Cost plus pricing involves adding a % of the cost
to set the price.
• There could be many other strategies.
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Alternative Pricing Strategies
• Markup Pricing: Different from cost plus;
markups are calculated as % of selling price
(rather than cost)
• Successful new ventures are founded on
innovative, low-margin pricing (hoping that high
volumes will provide good returns)
• Break-even Pricing: Determine the level of
sales needed to cover all relevant fixed and
variable costs (e.g. FC= Rs . 1,00,000; Unit
VC=Rs.2; and Price= Rs.4, Break even= 50,000)
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Alternative Pricing Strategies
• Target Return Pricing: Set the price as a
desired % return over and above the break-even
point (weakness is that it ignores market
demand; yet ensures that prices exceed all
costs, contribute to profit)
• Going-rate Pricing: Set prices equal to or a
certain % above or below competitor’s prices.
Depends on pricing objectives, structure of
industry, relative production selling, and
administrative costs
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Promotion Decisions
• Promotion is considerably more than just
advertising. Can use four major tools:
• 1. Sales Promotion: Communicating with
audience through variety non-personal
and non-media vehicles, e.g. free
samples, gifts, coupons, etc.
• 2. Advertising: Communicating with
audience through non-personal paid
media
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Promotion Decisions
• 3. Publicity: Communicating with audience by
personal or non-personal media, that are not
explicitly paid for delivering the messages; the
audience is more likely to perceive the media
rather than the business as the source of
messages.
• 4. Personal selling: Communicating directly
with an audience through paid sales personnel
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Criteria to Determine Roles of
Promotion Tools
• Cost of reaching an audience
• Ability to reach target audiences with little
leakage to persons not included in them
• Ability to deliver a complicated message
• Ability to engage in interchanges with
target audiences
• Credibility
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Sales Promotion
• Can be aimed at target markets, but also at
distributors and sales personnel (e.g. offering a
free vacation to person with highest sales
volume)
• Real estate developer may use the following
sales promotions: special events to draw
customers’ attention; price promotions on slow
moving property; attractive signs at development
site; prizes and other incentives for high-selling
real estate brokers
18 September 2007
(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Sales Promotion
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An entrepreneur may want customers to:
Try the product (or service);
Switch brands;
Stock up on the product;
Visit a dealer’s showroom;
Make an inquiry about the company’s
product
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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Sales Promotions
• 1. In-store promotions: aimed at
communicating with customers, while they are
shopping in a store;
• 2. Audience-direct sales promotions: aimed at
reaching audiences directly, either through the
mail, or through advertisements, or delivery by
sales personnel; include samples, gifts,
contests, or discount coupons
• 3. Trade shows: events where a number of
companies display their wares in exhibits at a
central location, invite dealers or customers
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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(c) 2007 Parameshwar P. Iyer
Indian Institute of Science
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