Marketing Simulation

Marketing Simulation

1. MIS

   • Marlketing Information Systems
   • The Perceptual Map is a valuable tool for visualizing brand positioning. It shows the segment ideal point and the perceived position of brands
   • There are two key ways to re-position brands. R&D and Advertising
   • Market Orientation: orientation is the organisation culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and thus continuous, superior performance of the business.” (Narver and Slater)
     • Customer Orientation - Competitor Orientation - Inter Functional Co-ordination
       • Long term, Profit focus
       • Competitor Orientation: A seller understands the short term strengths and weaknesses and long term capabilities and strategies of both the key current AND key potential competition.
       • Inter-functional Co-ordination: Your team Co-ordinated use of the organisation's resources in creating superior value for target customers.
   • 1. Intelligence Dissemination: A lot of informal "hall talk" in this business unit concerns our competitors' tactics or strategies. When something important happens to a major customer or market, the whole business unit knows about it within a short period. (Kohli 1993)
     • 2: Intelligence Generation: We are slow to detect changes in our customers' product preferences. We periodically review the likely effect of changes in our business environment (e.g., regulation) on customers. (Kohli 1993)
       • 3. Responsiveness: We are quick to respond to significant changes in our competitors' pricing structures. The activities of the different departments in this business unit are well co-ordinated. (Kohli 1993)
   • Planning horizon and information characteristics.
     • Mainly External > Interior
   • Micro-environment: Company, Competitors & potential Competitors (Kotler)
   • Strategy-Scanning Alignment: Competitive Strategy - Focus of Scanning - Organisational Performance Kumar, Subramanian & Strandholm (2001) + Jennings and Lumpkin (1992)
   • Strategic sense:“Firms scan the environment to collect information or data about actual or potential changes in the market; then they collectively interpret or make sense of that collected information. After the interpretations and sharing, they take strategic actions in order to adapt to the changing environment and achieve superior performance. (Wei & Wang 2011)
     • Market Driving (Innovation strategy)
     • Market driven (Organisational responsiveness)
       • Competitive marketing advantage > Financial Performance
   • Competitive success: “One way organisations compete is by acquiring superior strategic information via decision-makers effective scanning of the internal and external organisational environments and interpreting that information into a form they can use to implement appropriate actions that will lead to effective performance" (Thomas 1993)
   • A marketing information system (MIS) consists of people, equipment and procedures to gather, sort, analyse, evaluate and distribute needed, timely and accurate information to marketing decision makers
   • The marketing Information System (Lecture 1 - Slide 19)
   • Internal departments, for example: Finance, Production, Marketing, Stockholding etc
   • A MDSS (Marketing decision support system) is defined as (a coordinated collection of data, models, analytical tools and computing power by which an organisation gathers information from the environment and turns it into a basis for action
     • CRM “Managerial efforts to manage business interactions with customers by combining business processes and technologies that seek to understand the company's customers“
     • Example Structure or MDSS. User interface = Inputs/Databases. Processing Engine. Outputs/Reports
   • Internal Records: Manual Company Report, Financial Summary, Production summary, Industry Sales Report, Product Features and Prices Report, Marketing Activity Report The information from the financial summary and the production summary are ‘Internal Records’
   • Information Analysis: Sales force allocation Online query + feasibility studies for an R&D project Marketing planning report
   • A completed R&D project is necessary to launch a new brand or to upgrade an existing one. POMOVE is called the base R&D project. When it is launched or upgraded, a brand has the physical characteristics specified in its base project (Steps on lecture 1 slide 38)

2. STP: SEGMENTATION, TARGETING AND POSITIONING

   • Market segmentation 1. Identify bases for segmenting the market 2. Develop profiles of resulting segments
   • Market targeting 3. Develop measures of segment attractiveness 4. Select the target segment(s)
     • Market positioning 5. Develop positioning for each segment 6. Develop marketing mix for each target segment
   • Market segmentation consists of viewing a heterogeneous market (one characterized by divergent demand) as a number of smaller homogeneous markets in response to differing product preferences among important market segments (Smith)
     • “A market segment consists of a group of customers who share a similar set of needs and wants. Rather than creating the segments, the marketer’s task is to identify them and decide which ones to target”.
   • Doyle: Better matching of customer needs: 1. Enhanced profits. 2. Enhanced opportunities for growth. 3. Retention of customers. 4.Target communications. 5. Market segment share
   • Basic Customer Characteristics: Demographic, Geographic, Psychographic, Geodemographic (Acorn)
   • Factors Influencing Feasibility of Segmentation: 1. Measurable 2. Accessible 3. Substantial 4. Unique Appropriate Stable
     • 7. + “Predictability” which enables marketing plans to be established and enacted (cited in Tonks, 2009:345)
       • Fuchs & Diamantopoulos. Aspects of positioning. Intended Positioning. Actual Positioning. Perceived Positioning. Slide 33
   • Marketing Factors: 1.Size of segment 2.Segment growth rate 3.Stage of industry evolution 4.Predictability 5.Price elasticity and sensitivity 6.Bargaining power of customers 7.Seasonality and cyclicality of demand
   • Economic and technological factors : 1.Barriers to entry Markstrat- possibly in terms of investment eg low base cost – price competition – budget brand 2.Barriers to exit Markstrat- possibly in terms of investment 3.Bargaining power of suppliers 4.Level of technology utilisation 5.Investment required 6.Markstrat Margins available Markstrat
   • Competitive factors: 1.Competitive intensity Markstrat- certainly when more brands are launched. 2.Quality of competition current competitors weak/ strong? 3.Threat of substitution Degree of differentiation
   • Environmental factors: 1.Exposure to economic fluctuations 2.Exposure to political and legal factors 3.Degree of regulation 4.Social acceptability and physical environment impact
   • TARGET MARKET SELECTION Source: Hooley et al 1998 p312. Lecture 2. slide 12
   • Channel 4: UK tribes
   • “the development of identity is more socially constructed than biologically determined”
   • Numerical: Data accuracy Fallacy of averages – on some attributes far from the average Post codes Segment stability [Hoek, 1996] – relative size, membership a dynamic process Mathematical techniques creating segments – interpretative/ subjective ? Eg cluster analysis
   • is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market. The end result of positioning is the successful creation of a customer-focused value proposition, a cogent reason why the target market should buy the product

3. Brand Portfolio

   • Hierarchy of Planning Decision.1.Auditining. 2.Objectives. 3.Developing Strategy. 4.Developing Strategy. Deciding Tactics. %. Implementation and Control
   • Market Share: Economies of Scale. Bargaining Power. Options for competition. Measure of managerial performance. Security + Status
     • Criticisms of PIMS: Porter (1980):- “There is no single relationship between profitability and market share, unless one conveniently defines the market....”
       • Market share (controllable) Market growth rate (uncontrollable)
   • TOOLS: Boston Consulting Group (Brand map) Growth Share Matrix GE Multi factor portfolio
     • 2.Stars, 3.Cash Cows, 1.Question Marks, 4.Dogs
     • GE Multifactor Portfolio: White – Develop Shaded – Continue Hatched – Divest/Harvest
   • Relative share = Marketing share % divided by second highest share. Always start with your own. Market leader or not
   • Positioning Factors = Features
   • Economic Factors = Base Cost
   • Accuracy = Feasibility. Speed = Online Query
   • Emerging brand hierarchy
   • Brand portfolio planning looks across the entire brand set with an eye for reallocating resources READING
     • “Brand portfolios often bloat, fragmenting marketing resources and destroying economies of scale.
     • Brands sometimes get lost in large portfolios
   • READING. Framework. 1. Understand. 2. Assess brand contribution. 3. Assess market position: traction; momentum 4. Address problem/ opportunity brands. 5. Develop brand portfolio renewal plan . Slide 54/55

4. PRICE

   • Penetration v Skimming Strategy.
     • Skimming = High Price/Low Volume
       • New product pricing situation Price skimming; penetration pricing 25%; experience curve pricing No pricing strategy : 60% slide 36
         • Distibution Coverage = Tracks product sale in different channels
     • Penetration = Low Price/High Volume
   • "While pricing strategies are observable in the market, pricing practices are hidden behind the boundaries of an organisation"
     • ASDA's price comparison
     • Human capital: “an effective pricing process requires well-trained people who understand the company in all its complexities – it strategy, range of products or services, customers, suppliers and competitors.”
     • Systems capital: people can only be effective if the organisation invests in systems to support pricing
   • Social capital: "the internal glue that coordinates and holds together the many participants in the pricing process“…”Extends to customers. Involves an ability to sell ideas and reasons behind price changes, rather than simply provide technical descriptions.”
   • New product pricing situation Price skimming; penetration pricing; experience curve pricing Competitive pricing situation Leader pricing*; parity pricing; low priced supplier; premium pricing No Competitive pricing strategy:
   • Innitially, the transfer cost equal to the base cost
     • it decreases when we up the units 15% each time
   • Segement pricing - Conjoint Ananlysis
   • Pure bundling The products or services are offered only as a bundle. Eg Package holiday
     • Mixed leader bundling aims to use price reductions for A [higher volume service + lower margin] to increase its sales volume, which pulls increased demand for lower volume, higher margin B. EG: [A]mobile phone + [B] call plan
     • For mixed joint bundling, the contribution margins/sales of the products in the bundle should be about equal, demand should be price elastic (Sky Sports + Sky Movies)
   • Search attributes. Experience attributes. Credence attributes
   • Elasticity slide24
   • Strategies: EDLP (Every Day Low Prices). Promotional [Hi-Lo] pricing. EDLP + Hi-Lo
   • CLV = [Monthly profit X customer life time in months] MINUS Acquisition costs See slide 53
   • Life Cycle = See slide 57