CIV 1299S
THE BUSINESS OF CONSTRUCTION
Tamer E. El-Diraby
University of Toronto
Marketing Program on One Page
• Target Market - group of customer to which
organization directs its marketing
• Uncontrollable Factors - factors outside the
control of our organization, i.e., competition,
economy, social trends
• Value Proposition - distinct combination of
benefits and price we offer to customers
• Communicate and Deliver Value - through the
marketing mix
– product
-- price
– promotion
-- place
1
Marketing Defined
Micro-marketing
The performance of
activities that seek to
accomplish an
organization’s objectives
by anticipating customer
needs and directing the
flow of need-satisfying
goods and services.
Macro-marketing
A social process that
directs an economy’s
flow of goods and
services to effectively
match supply and
demand and to meet
society’s objectives.
Marketing Overview
• Applies to profit and nonprofit organizations.
• NOT just persuading customers to buy.
• Begins with customer needs and focuses on
customer satisfaction.
• Marketing activities --but it is a philosophy that
guides the whole business.
• Seeks to builds a relationship with the customer.
2
Industrial Evolution
F
F
R&D
M
P
Q
F
Q
P
M
I
R&
D
Q
R&
D
P
The Competitive Edge
Quality
Product
Process
People
+
Info
Now-then
Us-them
Customer
+
Marketing
=
Profit
Who
Where
How
3
Important Note
• Marketing in Manufacturing Industry
• Marketing in Service Industry
• Marketing in Construction?
The 4-M Approach to Advertising
• Who is your Market?
• What Message do you want to convey to the
Market?
• What Media will you use to convey the Message
to the Market?
• How will you Measure the effects of the Message
delivered by the Media to the Market?
4
The Three C’s
• Customer
• Competitors
• Company
Customers
• Who buys and why? è wants vs. needs
• How many customers are there; will there
be?
• Are there relevant (segments)?
5
Competitor Analysis
• Who is the competition? How is this determined?
• Why analyze your competition’s strengths and
weaknesses?
– Because consumers have choices
• Once the competition has been identified, ask what
are their …
– Objectives?
– Strategies?
– Strengths and Weaknesses?
How do You Want to Compete?
• Market Leadership
– McDonalds, Microsoft, Nestle, Dell, Schwab, Sony
• Market Follower (including Fast Follower)
– Wendy’s, Gateway, Lite Beers
• Market Challenger
– Virgin Air, Panasonic, Sprint, Avis, Pepsi
• Market Nicher
– Logitech, Victoria’s Secret, The Body Shop, Palm Pilot
6
Company Analysis
• Why analyze your own strengths and weaknesses?
– To view the competition through the eyes of your customers
– To assess your relative ability to win over the customer
• Corporate and Business unit Objectives
• Strengths and Weaknesses
Strengths and Weaknesses Checklist
Performance
MAJOR
STRENGTH
Marketing
1. Company reputation
-------2. Market share
-------3. Customer satisfaction
-------4. Customer retention
-------5. Product quality
-------6. Service quality
-------7. Pricing effectiveness
-------8. Distribution effectiveness -------9. Promotion effectiveness
-------10. Sales force effectiveness -------11. Innovation effectiveness
-------12. Geographical coverage
-------Finance
13. Cost/availability of capital -------14. Cash flow
-------15. Financial stability
-------Manufacturing
16. Facilities
-------17. Economies of scale
-------18. Capacity
-------19. Able, dedicated workforce -------20. Ability to produce on time
-------21. Technical manufacturing
skill
-------Organization
22. Visionary,capable leadership-------23. Dedicated employees
-------24. Entrepreneurial orientation -------25. Flexible or responsive
--------
Importance
MINOR
STRENGTH
NEUTRAL
MINOR
WEAKNESS
MAJOR
WEAKNESS
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HI
MED
LOW
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7
Bringing the 3 C’s Together: Situation Analysis
• What customer needs and wants can we meet?
• Do we want to meet them?
– What is the payoff – size, growth, share, profit potential?
• Why us? Why not someone else?
– What advantages/disadvantages do we have/face?
– What competitive responses will our strategies provoke?
• What steps do we need to take to achieve our goals?
• How sustainable is our business/marketing model?
The Four P’s
Product
Place
C
Price
Promotion
8
Product
“Customers don’t buy 1/4” drills, they buy 1/4”
holes.”
A product is a set of benefits from which
customers derive value
A product is not a set of…
-features (tangible things)
-performances (things that it does)
What about services?
Construction Products
9
Price
• The issues
– What is the value to customers of the benefits the product
provides?
– How much does it cost to deliver these benefits?
– How much do or will customers have to pay to get these
same or substitute benefits elsewhere (i.e., from
competitors)?
• The objective
– Choose price to maximize long-run profit
Promotion (decisions)
v
What is the objective?
v
Awareness
v
Persuasion
v
Reminder
u
What is the appropriate message?
v
What is the appropriate vehicle(s)?
10
Place (distribution)
Managing the Marketing Process
Consumer
Segmentation
Product
Price
Competition
Company
Target
Position
Promotion
Place
11
The Marketing Mix: The Four P’s
Product
Place
Promotion
Price
Physical Goods
Service
Features
Quality Level
Accessories
Installation
Instructions
Warranty
Product Lines
Packaging
Branding
Objectives
Channel Type
Market Exposure
Kinds of
Middleman
Kinds and
Locations of
Stores
How to Handle
Transporting
and Storing
Service Levels
Recruiting
Middlemen
Managing
Channels
Objectives
Blend
Salespeople
Kind
Number
Selection
Training
Motivation
Advertising
Targets
Kinds of Ads
Media Type
Copy Thrust
Who Prepares?
Sales Promotion
Publicity
Objectives
Flexibility
Level over PLC
Geographic
Terms
Discounts
Allowances
Hierarchy of Objectives
Company
Objectives
Production
Objectives
Finance
Objectives
Product
Objectives
Marketing
Objectives
Place
Objectives
Personal
Selling
Objectives
HR
Objectives
Promotion
Objectives
Mass Selling
Objectives
R&D
Objectives
Price
Objectives
Sales
Promotion
Objectives
12
Marketing Overview
Market Analysis
Marketing Strategy
Marketing Tactics
Customer
Competition
Company
Probing
Partitioning
Prioritizing
Positioning
Product
Place (distribution)
Price
Promotion
Mark*Strat: Analyze 3Cs - Determine Strategy - Execute Tactics
Marketing Planning
Narrowing down to focused strategy with screening criteria
Customers
Company
S.
W.
O.
T.
Segmentation
& Targeting
Product
Place
Target
Market
Differentiation
& Positioning
Price
Promo
Competitors
External Market Environment
13
Defining The Market
Selecting
target
marketing
approach
Segmenting
into possible
target markets
Narrowing down to
specific product-market
All
customer
needs
One
broad
product
market
Some
generic
needs
Homogeneous
(narrow)
product
markets
Single
target
market
approach
Multiple
target
market
approach
Combined
target
market
approach
Matching Products to Markets
Generic
Market
Definitions
Customer
(user) needs
+
Customer
types
+
Geographic
area
+
Product type
(good and/or service)
ProductMarket
Definitions
14
Marketing Management
Market
Research
Studies
Questions
and Answers
New Information
Information
Sources
Internal
Data
Sources
Marketing
Models
Decision
Maker
Results
Answers
?
Inputs
Decision
Support
System
(DSS)
Databases
External
Data
Sources
Marketing
Manager
Decisions
Outcomes
Information
Technology
Specialists
Feedback
Elements of Marketing Program
Target
Market
+
Marketing
Mix
=
Marketing
Strategy
+
Time-Related
Details
=
Marketing
Plan
+
Other
Marketing
Plans
=
A Firm’s
Marketing
Program
15
Steps in Segmentation
Market Segmentation
Product/Service
Positioning
Market Targeting
1. Identify
Segmentation
Variables and
Segment the Market
3. Evaluate the
Attractiveness of
each Segment
5. Identify Possible
Positioning
Concepts for each
Target Segment
4. Select the Target
Segment(s).
2. Develop Profiles of
Resulting Segments
6. Select, Develop
and Signal the
Chosen Positioning
Concept
Portfolio Analysis: The BCG Matrix
STARS
Invest
???
Problem
Child
Reinvest
Ca
sh
Flo
w
Growth &
Cash Required
High
> 10%
No
Invest
Low
<10%
Divest
CASH COW
Cash Flow
DOG
10
1
0
Relative Market Share
wrt Biggest Competitor
logarithmic scale
16
The BCG Growth-Share Matrix
HIGH
LOW
STARS
* Market Leaders
* Fast Growing
* Require Investment to Grow
STRATEGY
* Protect Share
* Reinvest earnings through price cuts,
Product Improvement, More Efficiency
* Obtain Large Share of New Users
HIGH
Market
Growth
CASH COWS
* Profitable Products
* Generate More Cash Than Needed
For Share Maintenance
* Slow Sales Growth
STRATEGY
* Maintain Market Dominance
* Invest in Process Technology Improvement and
Price Leadership, R&D in Other Product Markets
LOW
PROBLEM CHILDREN
* Rapid Growth
* Poor Profit Margins
* Enormous Demand for Cash
STRATEGY
* Invest to Aggressively build share
* Buy existing shares by acquiring
DOGS
* Majority of Products fall in this category
* Cost disadvantage - few growth opportunities
at Reasonable Cost
* Markets not Growing
STRATEGY
* Focus on a specialized, defendable segment
* Harvest: Cut back all support to maintenance
* Divest (sell); Abandon (Delete from line)
Market Attractiveness
The G.E. Multifactor Portfolio Model
High
Business Position
GROW
BUILD
Medium
REINFORCE SUPPORT
Low
Market
Attractiveness
S
MAINTAIN HARVEST
High
Medium
DIVEST
Low
Market Attractiveness
* Market Size
* Growth Rate
* Cyclicality, Seasonality
* Competitive Intensity
* Rate of Technological Change
* Barriers to Entry
* Economies of Scale
* Regulatory Environment
Business Position
* Market Share
* Product Quality
* Price Competitiveness
* Brand Image
* Production Strength
* Financial Resources
* Technological Skills
* Sales Effectiveness
* Distribution Capability
17
Methodology
Select market segments
Select pool of experts
Develop evaluation criteria
Develop matrix
Analysis & conclusions
Case Study: Egypt
• Egyptian economy: 2nd largest in ME
• GDP = $94 billion
• GDP growth rate: from 1.9 to 5%
• Inflation: from 21 to 7%
• Privatization / BOT
• Changes to business laws
18
Market Segments
• Electric power (E)
• Sanitary works (S)
• Water supply (W)
• Civil works (C)
• Residential buildings (R)
• Non-residential buildings (N)
Companies
• Five major companies (A, B, C, D, & E)
• More than 75% of the market
• Control almost every large project
• Largest employers in the filed
19
Market Attractiveness
CRITERIA
WEIGHT
Overall market size
Annual market growth rate
20%
Historical profit margins
5%
Barriers to entry & exit
Competitive intensity
Resource & energy require.
10%
15%
Environmental impact
10%
20%
20%
Company Competitiveness
CRITERIA
WEIGHT
Market share
Market share growth rate
10%
Product quality
15%
Productive capacity
Unit cost
Material suppliers
20%
15%
Managerial efficiency
15%
15%
10%
20
Company A
5
High
S
3.67
Medium
E
C
N
W
R
2.33
Low
1
5
3.67
Strong
1
2.33
Medium
Weak
Company B
5
High
S
3.67
Medium
N
E
C
W
R
2.33
Low
1
5
3.67
Strong
2.33
Medium
1
Weak
21
Company C
5
High
S
3.67
E
C
Medium
W
N
R
2.33
Low
1
5
3.67
Strong
1
2.33
Medium
Weak
Company D
5
High
S
E
3.67
C
Medium
N
R
W
2.33
Low
1
5
3.67
Strong
2.33
Medium
1
Weak
22
Company E
5
High
S
E
3.67
C
Medium
N
W
R
2.33
Low
1
5
3.67
Strong
2.33
Medium
1
Weak
Analysis
• More research is required in the area.
• Sanitary& power projects are the most
attractive segments.
• Building projects are the least attractive.
• One major company leads the market in
almost every segment.
23
Positioning
• Now that we have segmented the market and picked out
the segments we want to target with our offering, the next
question is, how can we convince consumers in the target
segment to choose our offering?
• To do this, we have to convince this segment that our
product / service / firm:
• Meets (or exceeds) their needs
• Does it better than competitive offerings
• This is the role of Positioning in a firm’s marketing strategy
Needs
•
Value = Performance Quality ÷ Price
•
Performance Quality = f (Product Attributes / Features)
•
That is, consumers are more focused on the Benefits from the product,
or Perceived Quality
Perceived Price could be different from the actual price of the product
(e.g., costs associated with delayed production)
•
•
Value = Perceived Quality ÷ Perceived Price
= Benefits ÷ Perceived Price
24
Suspension
Turning Radius
Example
Sportiness
Engine Capacity
Wheelbase
Roominess
Quality
Headroom
Miles / Gallon
Economy
Maintenance
Attributes
Benefits
Perceptions
ABCs of Positioning
• Attributes. Understand the attributes of the product
or service that drive the consumers’ perceived
product or service …..
• Benefits. The next step is to differentiate your
product or service offering from those of your
competitors’ via your ….
• Communication of Value. You can change your
advertising message, your channels of distribution,
your brand name, etc...
25
Finding the Attributes
•
•
•
•
•
•
•
•
•
•
•
•
•
How does consumer become aware if need for your product / service?
How does consumer find your offering?
How does consumer make final selection?
How does consumer order and purchase your product or service?
How is your product / service delivered?
How is your product installed?
How is your product service paid for?
How is your product stored?
What is the customer really using the product for?
What does customer need help with while using the product?
What about returns and exchanges?
How is product repaired or serviced?
What happens when product is disposed of and no longer in use?
Positioning Analysis
1. The key to positioning is determining the needs of consumers
along (several ?) important benefit dimensions
2. Consumers perceptions of the existing services / products / firms
in the market (including yours ?) along each of these dimensions
3. Inferring opportunities / threats from the way in which consumers
perceive the set of products (in 2.) relative to their needs (in 1.)
•
•
•
A perceptual map typically focuses on the two most important
attributes or benefits that consumers seek.
The perceptual map contains consumers’ Ideal Points (i.e., their
needs from 1. above) along each of the dimensions
It also contains Brand Locations, i.e., consumers’ perceptions of the
brands in the market along the two dimensions of interest
26
A Perceptual Map
Sportiness
Porsche
BMW
Acura
NSX
1
Jaguar
4
Supra
VW
Golf
Economy
Miata
Prelude
Celica
2
6
5
3
Corolla
Civic
Volvo
V70
Twingo
Punto
1~6: Clusters of Ideal Points
Radius proportional to # of consumers
Questions to ask when Positioning
• What position do we own?
• Find the answer in the marketplace
• What position do we want?
• Select one that does not become obsolete
• Who must we out-gun?
• Do we have enough money?
• Spend enough to accomplish objective
• Can we stick it out?
• Expect internal pressures for change
• Do ads match our position?
• Don’t let creativity get in the way
27
Summary
• Segmentation is the concept that recognizes
diversity in the marketplace. The process of
segmenting the market produces clusters of
people who are similar
• Targeting a segment involves the identification of
segments to which marketing effort will be
directed. Marketers must select targets for which
their product will meet a need.
• Positioning requires designing a company and
product image and developing a marketing mix to
promote the image to the target segment(s)
Long-Term Strategies
Product A
Product B
Sales
Sales
Dollars
Total cost
0
Total cost
1
2
3
Years
4
5
0
1
2
3
4
5
Years
28