Business, mission, goals a. What kind of business are we in? B. Compliments the definition. Written statement hat underscored this scope of an orgy’s operations in its definition and reflects managements vision of what the org seeks to do I. Crystallizes managements vision of the org long term direction and character it. Provides guidance in identifying, pursing, and evaluation market and product pops iii. Inspire and challenge employees to do things that are valued by the org c. Goals convert the org mission into tangible actions and results to be achieved thin a certain time frame 2. Organizational growth opportunities a.
What might we do- environment pop. Unmet or changing consumer needs, unsatisfied buyer groups, and new means of tech for delivering value to prospective buyers b. What we do best- org capability and competency. Distinctive competency is what they UNIQUELY do best c. What must we do- success requirements in certain industries to be able to even slightly compete 3. Product-market strategies, including both growth strategies and marketing tactics 4. Budgets a. Formal statement of plan in financial terms I. Operating- pro formal income statement because it is made up of future revenues and expenses I’.
Financial- how to operating income statement will affect the company’s cash position 5. Reformulation/recovery strategies a. Marketing audit- examination of company’s marketing environ, objectives, and starts to determine problem areas and pops and recommend a plan of action to improve the company’s marketing performance b. Are we doing things right, are we doing the right things? And the what ifs SOOT analysis formal framework for identifying and framing organizational growth opportunities S strength W = weakness O = opportunity T = threat What strengths are distinctive competencies?
Strategic Marketing Problems: Study Guide By alright Product-market grid and strategies (market penetration, market development, product development, diversification) product-market strategies consist of plans for matching an org existing or potential offerings with the needs of mess, informing mess that offerings exist, having offerings available at the right time and place to facilitate exchange, and assigning prices to offerings product market grid Market-penetration Strategy dictates that an org seeks to gain greater dominance in a make in which it already has n offering involves attempts to increase present buyers’ usage or consumption rates of the offering, to attract buyers of competition offerings, or to stimulate product trial among potential customers marketing managers should consider a number of factors before adopting a penetration strategy: must examine market growth must consider competitive reaction must consider the capacity of the market to increase usage or consumption rates and the availability of new buyers Marketing Development Strategy dictates that an org introduces its existing offerings to markets other than those it is errantly serving examples include introducing existing products to different geographical areas or different buying publics mix of make activities used must often be varied to reach different markets with differing buying patterns and requirements marketing development involves a careful consideration of competitor strengths and weaknesses and competitive retaliation potential make development in the international arena has grown in importance and usually takes 1/4 forms: exporting licensing joint venture direct investment Product-Development Strategy dictates that the org creates new offerings for existing markets approach taken may e to develop totally new offerings to enhance the value to customers of existing offerings or to broaden the existing line of offerings by adding different sizes, forms, counterclaiming new offerings lead their industries in sales growth and profitability companies likelihood of success is increased if its product-development effort results in offerings that satisfy a clearly understood buyer need toy industry qualities: lasting play value ability to be shared with other children ability to stimulate a child’s imagination successful centralization occurs when the offering can be communicated and levered to a well-defined buyer group at a price it is willing and able to pay cannibalism occurs when sales of a new product or service come at the expense of sales of existing products or services already marketed by the firm Diversification involves the development or acquisition of offerings new to the organization and the introduction of those offerings to publics not previously served by the organization diversification is often a high-risk strategy because both the offerings and the public or market served are new to the org Ethics and social responsibility should permeate every aspect stated above just do the right thing even if it may end up hurting your position in the org failure to recognize issues and to take action is the least ethical thing you can do?don’t ignore Answerer-Bush- Drink responsibly Chapter 2: Financial Aspects of Marketing Management Fixed vs.. Variable costs Variable costs- expenses that are uniform per unit of output within a relevant time period. Total variable costs will fluctuate with level of output Example cost of goods sold- material, labor, factory overhead, cost of merchandise Fixed Costs- expenses that do not fluctuate with output volume within a relevant time period, but come smaller per unit of output as volume increases (efficiency) two types programmed costs- result from attempts to generate sales volume (advertising, sales, sales promotion, sales salary) committed cost- required to maintain the org (rent and administrative salaries) Relevant vs.. Nun costs Relevant costs- expenditures that are expected to occur in the future as the result of some marketing action and differ among marketing alternatives being considered unique to the decision alternatives under consideration (opportunity costs are one of these) Sunk costs- direct opposite of relevant. Past expenditures for a given activity and are irrelevant in whole or in part to future decisions last years advertising costs, Margins (gross/gross profit, trade, net profit) Margin- the difference between the selling price and the cost to make the product expressed on a total volume basis, or by individual, on a percentage or total dollar term gross margin- difference between total sales rev and COGS implicitly included unit selling prices of products or services, unit costs, and unit volume.
A decrease is a concern because it has an impact on profit net sales- COGS ($100-$40=$60 OR 60%) read margin- the difference between unit sales price and unit cost at each level of marketing channel (the markup between each from the manufacturer to the wholesaler to the retailer) expressed as % if retailer buys an item for $10 and sells it for $20 it has a 50% margin percentage 10/20X100 if they have a goal, say a 30% margin calculate with purchase price ($2) At that point, $2 would be 70% of the selling price bought for $21. 70 (70% of selling price)= $2,86 retailer knows it wants to sell an item for $6 and that manufacturer margin is 40%, at what price does the manufacture sell to retailer? X/$6=40% et profit margin- expressed as $ or %.
It is the remainder after COGS, other variable costs, and fixed costs have been subtracted from sales rev influences the working capital position of the org, so the dollar amount affects their ability to pay COGS and selling expenses Contribution, breakable, and sensitivity analysis CONTRIBUTION ANALYSIS- the difference between total sales rev and total variable costs break-even-analysis- the unit or dollar sales volume at which an org neither makes a profit or loss total reef total variable + total fixed require three pieces unit variable costs total fixed costs selling price nit break even = dollar fixed costs / unit selling price – unit variable costs the denominator in this is called the contribution per unit this formula can also be used to calculate how to make a certain profit- Just add profit goal to numerator sales mix- the relative combo of products and services sold by a company contribution analysis and market size: if you find that you need to sell 50,000 units to break even, but the market potential is only 100,000, you have to decide if capturing 50% of the market is reasonable. Reference measurement: cannot only focus on net profit when choosing which products to keep in the mix cause even though a product may make the most profit, it may also carry the most fixed cost and overhead and then the company will eventually end up with a loss Cannibalizing away from another one of their products, therefore, making it fail Liquidity, working capital, current assets and liabilities liquidity- an orgy’s ability to meet short term financial obligations . A key measure of this is their working capital working capital- the dollar value of an roofs current assets minus their current liabilities companies should focus on controlling their marketing expenditures because often, this is what reduces working capital
Operating leverage operating leverage- the extent to which fixed costs and variable costs are used in the production and marketing of products and services this metric is usually high when their is high total fixed costs relative to the variable costs the high the LO, the faster profits will increase once sales exceed break even Discounted cash flow time value of money future cash flows expressed in terms of their present value determine the present value of org net cash flow (cash flow minus cash outflow) Customer lifetime value present value of all future cash flows arising from a customer relationship $ M (1/ With margin growth- $ M (1/(1+I-r-g) With acquisition cost $ M (1 +I-r)- AC Balance sheets vs.. Income statements; pro formal Income statement and performance analysis elements, element relationships, formatting, and calculations Sales- forecasted unit sales COGS- cost incurred in buying or producing products and services (constant per unit but vary with varying volumes) ?Gross margin- gross profit, remainder after COGS Marketing expenses- programmed expenses budgeted to produce sales. Advertising expenses are fixed. Sales expenses can be fixed, such as a sales person’s salary, or arable, such as commissions. Freight or delivery are constant per unit and vary with total volume. General and administrative expo- committed fixed costs for the planning period, which cannot be avoided if they’re going to run.
OVERHEAD = Net income before Tax- the remainder after all the costs have been subtracted from sales Chapter 3: Marketing Decision Making and Case Analysis Define the Problem derived This framework includes: The objectives of the decision maker A recognition of constraints A clearly articulated success measure, or goal, for assessing progress toward solving he problem Enumerate the Decision Factors 1 . Alternative courses of action = controllable decision factors because the decision maker has complete command of them 2. Uncertainties = uncontrollable factors that the manager cannot influence Consider Relevant Information Relevant Information = information that relates to the alternatives identified by the manager as being likely to affect future events Two notes of caution: Not everything in a case is “fact”, and in many instances relevant information must be created (ex.
Calculating break-even) After these first 3 steps (Defining the problem, enumerating he decision factors, and considering the relevant information), a manager/case analyst has completed a situation analysis = answers the question “Where are we now? ” Identify the Best Alternative Evaluate identified alternatives and the uncertainties apparent in the problem setting Decision Analysis = matches each identified alternative with the uncertainties existing in the environment and assigns a quantitative value to the associated outcome Allows you to consider “what if” situations Forces you to quantify outcomes associated with specific actions Useful in a variety of settings (Ex.
Pillsbury used decision analysis to decide whether to use a bag or box for its product offerings) Determines the value of “perfect” information Create a decision tree = graph with the two alternatives, the competitive response, and the financial outcome for each Develop a payoff table = tool for displaying alternatives, uncertainties, and outcomes facing a firm Calculates the probability of the occurrence of the uncertainty Computes the expected monetary value (MOVE) MOVE = The totaling of (the outcome of each uncertainty * its probability of occurrence) Higher contribution is the better alternative Develop a Plan for Implementing the Chosen Alternative Planning for the execution stage is crucial because it forces the case analyst to consider resource allocation and timing questions Ex. A new product launch is occurring – marketers must consider how financial, managerial, and manufacturing resources will be allocated Evaluate the Decision and the Decision Process Was a decision made?
Was the decision appropriate, given the situation identified in the case setting? In many marketing cases some information is Just not available, so when information is incomplete assumptions must be made These assumptions should be logically plopped and articulated After completing a case, the case analyst should answer these questions to examine their performance critically: Did I define the problem adequately? Did I identify all pertinent alternatives and uncertainties? Were my assumption realistic? Did I consider all relevant info? Did I recommend the appropriate course of action? Did I overlook any important info? Did I consider how my recommendation would be implemented? Monetary value (MOVE) Chapter 4: Opportunity Analysis, Market Segmentation, Market Targeting Opportunity analysis concept, including related activities: opportunity identification, opportunity-organization matching, opportunity evaluation Pop analysis consists of 3 interrelated activities opportunity identification opportunity-organization matching – determines whether an identified market pop is consistent with the definition of the org business, mission statement, and distinctive competencies opportunity evaluation – two distinct phases (qualitative and quantitative) pop analysis focuses on finding markets that an organization can profitably serve attractiveness is dependent upon competitive activity buyer requirements market demand and supplier sources social, political, economic, and technological forces organizational capabilities each of the above factors must be tied to its impact on the types of buyers sought, the needs of the buyers, and the means for satisfying these needs Market, market segmentation, target marketing definitions a market may be considered to be the prospective buyers willing and able to purchase the existing or potential offering of an organization viewing a market as composed of minarets allows a marketer to better gauge opportunities helps to identify more effectively who is competing in the caffeinated versus the decaffeinated markets market share is defined as the sales (in dollars or units) of a company, reduce, service, or brand divided by the sales of the market market segmentation is the breaking down or building up of potential buyers into groups groups are called market segments each segment is thought of as possessing some sort of homogeneous characteristic relating to its purchasing or consumption behavior, which is ultimately reflected in its responsiveness to marketing programs mass customization is tailoring products and services to the tastes and preferences of individual buyers in high volumes and at relatively low cost-combines the efficiencies of mass production and the effectiveness f designing offerings to a single buyers unique wants Segmentation benefits Benefits of market segmentation identifies opportunities for new product development hakes in the design of marketing programs that are most effective for reaching Segmentation bases for consumer (customer and behavioral characteristics) and industrial (customer and behavioral characteristics) markets bases for market segmentation two broad types of variables are commonly used for market segmentation characterizations of consumers, such as gender, age, occupation, income, family life yecch, education, and geographic location, make up one type the other type consists of behavioral variables, including benefits sought from products and services, usage behavior, lifestyle, and attitudes the appropriateness of any one or combination of variables in a specific situation will depend on whether or not a variable relates to purchasing, use, or consumption behavior and responsiveness to marketing programs the choice of variables to use to segment a market often depends on insights into the buyer behavior, provided by creative research Targeting strategy types (differentiated, concentrated)
Offering concept and product levels (core, actual, augmented) Offering- benefits provided to target market by org. The tangible product plus the services, brand name, warranties, and packaging and the like. Talking about a product this way forces marketers to think of the entire offer going along with getting a product, rather than Just the product itself Offering portfolio, lines, and items Offering portfolio- the entire offering mix that a company offers to customers (grocery stores usually have over 40,000 items in their mix). Usually categorized into groups of things that fall under same category and sometimes marketed together. Each service line is a mix of products that offers single items in the line. Product line width vs.. Epithet, bundling Width- the number of lines offered by a company Depth- the number of items in a particular line The offer decision here is whether or not to Just market one product in a line, or to try to sell as a bundle of products (could Just offer one product, but on the other extreme, could try to sell the entire line together) Consistency- the extent to which products satisfy similar needs, appeal to similar buyer groups, or utilize similar technologies. Bundling- marketing two or more products into a single package to irate a new offering (digital cameras cases and memory cards)- travel places, hotel, flight, food. Offering mix decisions: additions, modifying, elimination, harvesting How to determine if should do this? Is it consistent with existing offerings? Don’t want cannibalizing Do you have enough resources? New products need a lot of initial capital Is there a market for this new product? ?what are the distinct advantages and is there a relevant buyer group that will recognize this?
Modifying, harvesting, and eliminating offerings modifying offerings is a common practice-organizations are always on the lookout for ewe ways to improve the value their offerings provide customers in terms of quality, functions, features, and/or price trading up involves a conscious decision to improve an offering-by adding new features and higher-quality materials or augmenting the offering with attendant services-and raising the price. Trading down is the process of reducing the number of features or quality of an offering and lowering the price harvesting involves reducing the investment in a business entity in the hope of elimination means that the offering is dropped from the mix of organizational offerings either outright or through sale to another organization
Product life cycle life-cycle concepts a life cycle plots sales of an offering or a product class over a period of time life cycles are typically divided into four stages: introduction maturity-saturation decline the sales curve can be viewed as being the result of offering trial and repeat purchasing behavior New product development process: idea generation, idea screening, business analysis, development, market testing, centralization Idea generation- can come from many sources- employees, suppliers, buyers, competitors. Can be found formally (market research), or informally (talking to people). Idea screening- 1 . Does the offering have relative advantage over existing? 2. Is it compatible with buyer’s use or consumption behavior? 3. It is simple enough for buyers to understand? 4. Can it be tested by buyers on a limited basis bore purchase? 5. Are there immediate benefits to the buyer as soon s purchased?
Business analysis Assess the financial viability in terms of estimated sales, costs, and profits, Payback period- the number of years it takes for an org to recapture its initial offering investment?short the BP, shorter it takes to make a profit (fixed costs/ estimated incoming cash flow) Doesn’t distinguish among offerings according to their actual size ROI- average net earnings or return divided by the average annual investment, discounted to the present time Doesn’t distinguish between offerings by their rockiness Development The prototype?various testing procedures are implemented Market Testing Product concept or buyer preference tests in a lab setting or field marketing Test marketing- scaled down implementation of one or more alternative marketing strategies for intro to new product Benchmark for sales Two tests can be evaluated for impact under market conditions Conceptualization
