Nations four strategies are depicted In the matrix below. 1 . Market Penetration: This involves increasing sales of an existing product and penetrating the market further by promoting the product heavily or reducing prices to increase sales. This strategy has the lowest risk strategy as the firm knows the product and the market. Market penetration is often used by supermarkets and large retail chains. 2. Product Development: The business develops/introduces new products into existing markets with the aim of selling the new product to existing customer groups. For example Microsoft with their
Oxbow game console Introduced the Kinetic, an add on that allows customers to play without the use of a controller, much like the Nintendo WI. This is an example of a new product which simply needs to be added onto the existing model aimed at the existing market. Product Development Is a medium risk strategy as the business Is familiar with the market but not the new product. 3. Market Development: under a market development strategy a firm sells existing products to new markets. For example a sandwich shop which is doing well in one area, expands and opens another sandwich shop in a different region.
Through market development our sandwich shop has the potential to become a national chain. There are different ways to define new markets including different locations for sales to aiming products at different customer groups (age, background, interests, income). 4. Diversification: Diversification involves selling new products to new markets. For example if a business which usually sells food to families, decides It would like to sell cars to single men It would be diversifying. Diversification Is a high risk strategy as the business Is unfamiliar with the product and the target market.
However as It also has he potential to produce the highest rewards many businesses are prepared to take the risk.. Conclusion the markets that the products are aimed at. Under the matrix they have the option to stick with the markets and products they know (market penetration) or change one thing the market (market extension) or the product (product development). For those prepared to take accept big failure risks for potentially larger rewards there is diversification into new products and markets. MARKETING CONCEPTS Introduction The concept of marketing has evolved over time.
Whilst in today's business world "the customer is king". In the past this was not the case, some businesses put factors other than the customer first. This article examines factors that businesses may orientate their marketing around, so that you can recognize when your marketing strategy is orientated around something other than the customer. Production Orientation The focus for the business is to reduce costs through mass production. A business orientated around production believes that the "economies of scale" generated by mass production will reduce costs and maximize profits.
A production orientated business needs to avoid production efficiency processes which affect product design ND quality. Compromising product design and quality for the sake of production is likely to reduce the product's appeal to customers. Product Orientation A product orientated company believes that its product's high quality and functional features make it a superior product. Such a company believes that if they have a superior product customers will automatically like it as well.
The problem with this approach is that superiority alone does not sell products; superior products will not sell unless they satisfy consumer wants and needs. Sales Orientation A sales orientated company's focus is simple; make the product, and then sell it to he target market. This type of orientation involves the organization making what they think the customer needs or likes without relevant research. However as we know sales usually aren't this simple. An effective marketing strategy requires market and marketing research, prior to product development and finally an effective promotion strategy.
Market Orientation A market orientated company puts the customer at the "heart" of the business; all activities in the organization are based around the customer. The customer is truly king!. A market orientated organization endeavourers to understand customer needs ND wants, then implements marketing strategy based on their market research; from product development through to product sales. Once sales have begun further research will be conducted to find out what consumers think about the product and whether product improvements are required.
As markets continuously change, market research and product development is an ongoing process for a market orientation company. Conclusion In today's competitive world, it is more important than ever to implement a market available on the market fairly quickly. If an organization does not offer customers hat they are looking for (product and customer service) they will buy from a competitor that does. BCC GROWTH MATRIX The Boston Consultancy Group (BCC) matrix classifies product lines into four categories based on market share and market share growth rates.
The BCC growth matrix helps firms to decide how much money to invest in a product line, based on whether a product has a good market share and whether the market share is increasing, decreasing or remaining constant. Star (High Relative Market Share, High Growth) A product classified as a star has a high market shares in a market that is growing. A tar is at the growth stage of the product life cycle so it will need investment (money) to maintain its growth rate and market leading position. It is also generating money for the company so it is worth the investment. The challenge for the business is to turn it into a cash cow.
Question Mark/Problem Child These are products with a low market share but operate in high market growth rates. The challenge for the business is to discover what is causing the low market share and hindering growth. The danger is that the business invests a lot of money in the product without an impact on growth rates. However if the business can solve the robber a question mark product can generate good returns. Cash Cow (High Relative Market Share, Low Growth) Cash Cows are products at the mature stage of the lifestyle, they generate high amounts of cash for the company, but their growth rate is slowing.
As market growth rate is slowing, investment should be reduced to maintain current market share. There is a chance product sales may start to decline, appropriate marketing mix strategies should be employed to try to prevent this from happening. The firm could also look at reducing costs through price leadership strategies. A cash cow is at the maturity stage of the product life cycle. Dogs These are products which have low market shares and low market growth rates. A dog will generate low profits or even a loss. Therefore dogs drain business money, time and resources.
If the dog is not providing the company with any benefit e. G. Gateway to other product sales it is probably best to phase it out. Some businesses may decide to re-invent the dog and injecting new life into the product. (see Heinz Case Study). A dog product is at the end of the product life cycle. Conclusion The BCC matrix is a good starting point when reviewing an existing product line to decide future strategy and budgets. The market share is compared (relative to) against the largest competitor in the industry. The BCC helps firms analyses future opportunities or problems with their product lines.
AID COMMUNICATION MODEL AID is a communication model used by firms to help them sell their products and Attention When a product is launched the first goal is to grab attention. Firms spend millions thinking about how to grab attention for their product. The method used to gain attention will depend on the product, options include sponsorship, hospitality events and large promotion campaigns. If the product is a gadget or technology a firm may iced to showcase it at a technology exhibition for example E the annual video game conference show which is visited by Journalists and technology industry professionals.
If the product is trendy and fashionable the firm may ask a celebrity who will appeal to the target market to endorse it. Interest Once you have secured people's attention, the next Job is to hold their interest. This is done by promoting product features and clearly stating the benefit the product has to offer. The aim at this stage is to provide the customer with information that will move them to the next stage of the process, desire. Desire The third stage is desire; at this point you want the information (interest) customers have about your product to create a desire to have your product.
A unique selling point will help customers desire it over competitor products. If your product is a trend setter, the latest "must have" product, buzz marketing will help create a strong desire. Action The final stage is the purchase action, if a company has been successful with its AID strategy then customers will purchase its products. The task at this stage is to help the purchase action by making it as simple as possible. For example by offering a angle of payment options and avenues e. G. Credit card, cheese, via high street shops and through the internet.
SOOT Analysts A SOOT analysis enables firms to identify factors which need to be taken into account when developing marketing and corporate strategy. SOOT is an acronym which stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are internal factors which are controllable by the organization. Opportunities ; threats are external factors which are uncontrollable by the organization. Strength Factors Strengths are internal factors that will help the organization be successful. They can include employees, procedures, business assets and products.
Examples of internal factors that are a strength are: * A strong brand name * Market share * Good reputation * Expertise and skill Weakness Factors and success. Just like strengths they can relate to employees, procedures, business assets and products. Examples of internal factors that are a weakness are: * Low or no market share * No brand loyalty * Lack of employee experience * Inefficient company processes and procedures Opportunity Factors Opportunities are factors outside the business which the firm may be able to use to help it grow the business. Examples of opportunities include * A growing market. Increased consumer spending. * Legal changes which make selling abroad (internationally) easier * Changes in society such as an increase in birth rates Threats Factors Threats are factors outside the business which could make trading conditions more challenging for the firm. Examples of threats include * Competitors * Government policy such as a ban on some of the activities carried out by the firm * Taxation rules which reduce the firm's or consumer income * A change in consumer habits which makes the firm's products less appealing to the target rarest.
Conclusion A SOOT analysis is a simple way to quickly assess the things that are "good" and "bad" for an organization on a particular date. After the SOOT analysis firms should work out how to they can build on their strengths and make the most of opportunities. They also need to assess the impact of weaknesses to decide whether they need to get rid of them or simply prevent them from growing. Threats are external factors so organizations can not control them or wipe them out, instead firms should plan how to minimize their impact on the business. SERVICE MARKETING MIX (Extended Marketing MIX)
In the previous article we discussed the characteristics of a service. In this article we look at how the marketing mix for marketing a service is different to the marketing mix for products. Just like the marketing mix of a product the service marketing mix comprises of Product, Price, Place and Promotion. How ever as a service is not tangible the marketing mix for a service has three additional elements: People, Process and Physical Evidence. People People are an essential ingredient in service provision; recruiting and training the right staff is required to create a competitive advantage.
Customers make Judgments about service provision and delivery based on the people representing your organization. This is because people are one of the few elements of the service that customers can see and interact with. The praise received by the volunteers (games makers) for the London 2012 Olympics and Paralytics demonstrates the powerful effect people can create during service delivery. Staff require appropriate service. In the I-J many organizations apply for the "Investors in People" Accreditation to demonstrate that they train their staff to prescribed standards and best practices.
Process This element of the marketing mix looks at the systems used to deliver the service. Imagine you walk into Burger King and order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company.
All services need to be underpinned by clearly defined and efficient processes. This will avoid confusion and promote a consistent service. In other words processes mean that everybody knows what to do and how to do it. Physical Evidence (Physical Environment) Physical evidence is about where the service is being delivered from. It is particularly relevant to retailers operating out of shops. This element of the marketing mix will distinguish a company from its competitors. Physical evidence can be used to charge a premium price for a service and establish a positive experience.
For example all hotels provide a bed to sleep on but one of the things affecting the price charged, is he condition of the room (physical evidence) holding the bed. Customers will make judgments about the organization based on the physical evidence. For example if you walk into a restaurant you expect a clean and friendly environment, if the restaurant is smelly or dirty, customers are likely to walk out. This is before they have even received the service. Summary The Service Marketing Mix involves Product, Price, Place, Promotion, People, Process and Physical Evidence. Firms marketing a service need to get each of these elements correct.
The marketing mix for a service has additional elements because the heartsickness of a service are different to the characteristics of a product. The Characteristics of a service are: (1) Lack of ownership (2) Intangibility (3) Inseparability (4) Permissibility (5) Heterogeneity. To certain extent managing services are more complicated then managing products, products can be standardized, to standardize a service is more difficult as there it can be affected by factors outside the service providers control. PORTER'S FIVE FORCES MODEL (Industry analysis model) Porter's fives forces model is an excellent model to analyses a particular industry.
It kooks at the five main factors that affect a particular industry: 1) Competitive rivalry 2) Power of suppliers 4) Threats of substitutes 5) Threat of new entrants. As the above factors influence industry performance, it is useful to find out about these factors before you enter an industry or if you are wondering why your business industry is not doing well. Competitive Rivalry Competitive rivalry is a good starting point to when analyzing a particular industry. If entry to an industry is easy then competitive rivalry is likely to be high.
If it is easy for customers to move to substitute products for example from coke to water then again viably will be high. Generally competitive rivalry will be high if: ; There is little differentiation between the products sold by competitors. ; Competitors are approximately the same size of each other. ; If competitors have similar strategies. ; It is costly to leave the industry (exit barriers) Power of Suppliers Suppliers are also essential for the success of an organization as they provide businesses with the resources they need to produce their products and services.
Supplier power can come from: ; If there is one or Just a few suppliers that can provide the resources a business needs. If it is expensive to move from one supplier to another (known also as switching cost) ; If there is no other substitute for the product provided by the supplier. Power of Buyers Buyers or customers can exert influence and control over an industry in certain circumstances. This happens when: ; There is little differentiation over the product and substitutes can be found easily by customers/buyers. Buyers/customers are sensitive to price fluctuations. ; Switching to another product is not costly for customers/buyers. Threat of Substitutes Are there alternative products that customers can purchase instead of yours? Alternative products that offer the same benefit as your products? The threat from substitute (competitor) products is high when: ; The price of the substitute (competitor) product falls. ; It is easy for consumers to switch from one substitute product to another. ; Buyers are willing to substitute products from different competitors.
Threat of New Entrant The threat of new organizations entering the industry is high when it is easy for an organization to enter the industry I. E. Entry barriers are low. When a new business is deciding whether to enter an industry it will look at: * How loyal customers are to existing products, * How quickly it can achieve economy of scales * Would it have access to suppliers and * Would government legislation prevent them or encourage them to enter the industry. Summary Porter's five forces model is an essential analysis tool if you want to understand an industry.
All five of Porter's forces affect the strength of an industry and the prices that an industry can charge. VIRAL MARKETING infectious excitement about your product so that people pass on information about it through emails, social networking sites, blobs and any other form of online network'. BUZZ MARKETING Buzz marketing is a form of viral advertising where carefully selected consumers are encouraged to talk about the product to friends and family in the hope that 'chatter' will create a buzz about their product. Firms will target people that are known as "trend setters"; people who are usually aware of the next big thing.
AMBUSH MARKETING Ambush marketing involves creating the impression that your business is linked with something when it is not. As the name suggests ambush marketing involves launching a surprise marketing campaign precisely at the right moment for maximum effect. The aim of ambush marketing is either to promote your product for as little cost as possible and/or to disrupt a competitor's marketing campaign. GENERIC (COMPETITIVE) STRATEGIES (MICHAEL PORTER) Michael Porter suggested that businesses can secure a sustainable competitive advantage by adopting one of three generic strategies.
He also identified a fourth strategy "middle of the road" strategy, which although adopted by some businesses, is unlikely to create a competitive advantage. Each of the four strategies are discussed below. Cost Leadership Strategy This strategy involves the organization aiming to be the lowest cost producer and/or stricture within their industry. The organization aims to drive cost down for all production elements from the sourcing of materials, to labor costs. To achieve cost leadership a business will usually need large scale production so that they can benefit from "economies of scale".
Large scale production means that the business will need to appeal to a broad part of the market. For this reason a cost leadership strategy is a broad scope strategy. A cost leadership business can create a competitive advantage: - by reducing production costs and therefore increasing the mount of profit made on each sale as the business believes that its brand can command a premium price or - by reducing production costs and passing on the cost saving to customers in the hope that it will increase sales and market share Low cost producers include Easy Group, Ryan Air, and Walter.
Differentiation Strategy To be different, is what organizations strive for; companies and product ranges that appeal to customers and "stand out from the crowd" have a competitive advantage. Porter asserts that businesses can stand out from their competitors by developing a r service features which are different from competitors and appeal to customers including functionality, customer support and product quality.
For example Promotion folding bicycles when folded are more compact than other folding bikes. Folding bikes are usually purchased by people with limited storage space at home or on the move; a compact bike is therefore a valued product feature and differentiates Promotion bicycles from other folding bicycles. A differentiation strategy is known as a broad scope strategy because the business is hoping that their business differentiation strategy, will appeal to a broad section of the market.
New concepts which allow for differentiation can be protected through patents and other intellectual property rights, however patents have a certain life span and organization always face the danger that their idea which gives them a competitive advantage will be copied in one form or another. Focus (Niche) Strategy Under a focus strategy a business focuses its effort on one particular segment of the market and aims to become well known for providing products/services for that segment.
They form a competitive advantage by catering for the specific needs and wants of their niche market. Examples include Roll Royce, Bentley and Saga a UK many catering for the needs of people over the age of 50. Once a firm has decided which market segment they will aim their products at, Porter said they have the option to pursue a cost leadership strategy or a differentiation strategy to suit that segment. A focus strategy is known as a narrow scope strategy because the business is focusing on a narrow (specific) segment of the market.
Are You "Stuck In The Middle" Some businesses will attempt to adopt all three strategies; cost leadership, differentiation and niche (focus). A business adopting all three strategies is known as "stuck in the middle". They have no clear business strategy and are attempting to be everything to everyone. This is likely to increase running costs and cause confusion, as it is difficult to please all sectors of the market. Middle of the road businesses usually do the worst in their industry because they are not concentrating on one business strength.
Conclusion To create a competitive advantage businesses should review their strengths and pick the most appropriate strategy cost leadership, differentiation or focus. Although each of these strategies are known as generic strategies (because they can be applied to very industry) they will not suit every business. For example small businesses may find it difficult to generate the economies of scale needed for broad scope cost leadership but a smaller customer base may enable them to offer a personalized service through a narrow scope focus strategy.
Conversely a larger business may not be able to generate sufficient revenue through a focus strategy but be able to pursue aggressive broad scope cost leadership because of the size of the business. Whatever strategy a business decides to adopt they should make sure that it isn't middle of the road because one business can not do everything well. The product life cycle concept suggests that a product passes through four stages of stages are introduction, growth, maturity and decline.
As a product evolves and passes through these four stages profit levels change and different strategies have to be employed to ensure product success.. Introductory Stage The introductory stage is the first stage of the product life cycle and occurs as soon as the product is available for sale. During this stage profits are low or non-existent because the firm will need to spend money creating product awareness: marketing campaigns can be expensive. The firm will also need to pay money to publicist the product to distributors and retailers.
Growth Stage If the introductory stage is successful the product will move into the growth stage. At this point retailers are stocking the product and consumers have begun buying it. During the growth stage there is a big increase in sales so that the product will enjoy a period of rapid sales growth. At this point profit will also increase as the manufacturing and promotion costs per unit sold decreases. The challenge for the business is to make the growth stage last as long as possible. This may involve reduce enhancements or entering new markets.
Maturity Stage Rapid sales growth cannot last forever so the majority of products will move into the third stage: maturity. Sales slow down as the product sales reach a peak. At this stage the business will probably introduce strategy to increase sales such as price reductions and additional promotional campaigns. Such strategy is expensive and is likely to lead too drop in profits. Decline Stage Sales and profits start to decline, the organization may try to change their pricing strategy to stimulate growth, however the product will either have to be re-modified, or replaced within the market.