31 August 2023
16:22
Marketing strategy: STP approach
Consumer's analysis: buying decision
process (5 steps) + sub topics
Pricing: 4 factors in pricing decision;
different pricing strategies
Communication and adv: 6 steps
communication plan (6 Ms)
Brand: branding strategies, 3 brand
architectures
Experiments: 2 types subject
- Marketing research: secondary and primary
sources; qualitative vs quantitative.
- Distribution channels, different strategies
(omni, cross…)
Relationship marketing and CRM
Sales Promotions
-
MARKETING STRATEGY: STP APPROACH
Together with economic growth, mass market has lost importance and efficiency, and nowadays it is
important to know that customers have different needs and wants.
STP approach means the processes of segmentation, targeting and positioning.
- Segmentation: starts with the understanding that consumers differ from one another, and the willing of
fulfilling all their different needs. Segmentation is to divide the whole market in various different
segments, by grouping customers with similar needs and wants finding common dimensions, and then
differentiating the offer (size, flavour, colour of product) for each segment in order to sell to more items
to more people more often.
- Objective of segmentation: reduce risk and increase marketing efficiency (cost) and effectiveness
(customization, by directing efforts only towards the designated segments)
- Segmentation strategies:
1. Concentration: working only on one segment (one marketing mix). Advantage of capturing and fulfilling
only one segment's needs; disadv only one demand, if falls also company will.
2. Multisegment: focusing on 2+ segments. Advantage of capturing more customers thus more sales; disadv
because expensive.
- Advantages: capture unfullfilled needs (more customers); higher customers satisfaction; higher efficiency
in adv expense; higher competitiveness.
- Customer variables: used for implementing segmentation:
1. Geographic: geographic origin; country of residence
2. Demographic: age, gender, religion, etnicity, education (even though they are low cost and easily
implemented, could lead to inaccurate defining of product users profiles)
3. Psycographic: attitude, lifestyle (how people tend to spend money). VALS method is used to assess these
(values, attitudes and lifestyle)
4. Behavioral: usage rate, loyalty status, benefits, occasions.
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- Targeting: measuring the attractiveness of each segment and select the one(s) to focus on. Evaluation
and selection of one or more market segments to enter. Targeting makes the promotion, production and
distribution of products easier and more cost-effective.
▪ Attractiveness: getting infos about segment's profitability.
When developing target market we need to coinsider:
▪ Parsimony: unwillingness to spend money
▪ Purchasing behaviour
▪ Segment size
▪ Segment growth rate
▪ Segment environmental factors
▪ Potential competition
Anyway, if a segment is large and growing, doesn't necessarily mean that is optimal to target, because there
are also other factors like strong competition that could negatively affect profit. One of the models used to
measure profitability is Porter's 5 forces:
1. Industry competitors (threat of rivarly)
2. Threat of new entrants
3. Threat of Substitute products
4. Suppliers' relative power
5. Buyers' relative power.
Moreover, the firm can choose between 4 market coverage alternatives:
1. Indifferentiated marketing: mass marketing; same marketing mix for all.
2. Differentiated ==: one different marketing mix for each segment
3. Concentrated ==: one different marketing mix only for the selected segments
4. Custom ==: one marketing mix for each consumer
- Positioning: the distinctive position, with respect to competitors, that a company has in the mind of
customers. How a company wants customers to see its product.
CONSUMERS' ANALYSIS
- Decision making process (5 steps)
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1. Need recognition
The first stage occurs when a customer recognizes a need, this can happen both for internal and external
stimuli. An internal stimuli could be the dissatisfaction with the current used product or the will to go
from the current position to the desired one (social status maybe), or also when a consumer runs out of a
product. External ones could be a change in income and so the need for cheaper/more expensive
products, socio-cultural environment (family influence, comment of a friend…).
▪ Company's marketing also plays a key role in this stage because it can share informations and adv to
teach, inform and generate a need in the customer's mind.
2. Information search
The second stage is information search. After recognizing the need, the customer search for information
about what could fulfill this need. Information can be collected via any source, which are grouped into 4
categories:
▪ Personal sources: family, friends
▪ Commercial sources: adv, sales people, dealers
▪ Public sources: mass media
▪ Experimental sources: direct experience with the product
Again, company's role is using marketing to make sure customers reach enough information about their
product, but not overloading with too much information.
3. Evaluation of alternatives
The third stage starts when information is acquired. In this stage customer groups various brands in
different sets:
▪ Consideration/evocative set: in this set customer puts known brands which are considered for eventual
purchase.
▪ Inert set: composed of brands that are indifferent to the consumer
▪ Purchase set: brands that are actually purchased
A company has to make sure to reach a spot in the consideration set, and subsequently into the purchase
set, in this case primary research in stage 2 is very relevant. (focus must be on positioning too).
When in the consideration set, customer uses 3 different models to evaluate each brand, multi-attribute
models:
▪ Conjunctive heuristic: the customer select a minimum cut off level of each attribute that must be met
by the brand; the choice will be of any brand that first reaches that minimum cut off level for all
attributes.
▪ Lexicographic heuristic: customer ranks the attributes based on perceived importance, then compares
the brand and selects the one that scores the maximum on the first ranked attribute. If two brands
have the same score, then the focus is on the second best, and so on.
▪ Elimination-by-aspect heuristic: Comparing brands on a selected important attribute, and eliminating
the ones that do not meet the minimun accetable cutoff levels.
Other factors affecting evaluating process are:
▪ Experience
▪ Experimentation
▪ Research and analysis
4. Purchase
In the fourth stage the purchase is made. When purchasing two factors influence the customer:
▪ Purchase intention: expected income, price and product benefits
▪ Situational factors: physical surroundings (location, sounds, weather…); social surroundings (presence
of people that influence customer decision); task definition (motives/objective of the purchase);
temporal factors (timing); antecedent state (moods, physical state). These situational factors aren't
avoidable but can be regulated.
External influences are important to purchase decision:
▪ Group influence: family and friends
▪ Product class influence: social class
Situational influence: culture (main elements are language, religion, values and attitude…,really
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▪ Situational influence: culture (main elements are language, religion, values and attitude…,really
important in global marketing)
5. Post-purchase evalutation
The last stage regards the evaluation of product's performance based on previous expectations.
Customers evaluate the product both during and after using it. This stage is important because future
potential purchases are dependent on it. If actual performance matches customer's expectations he/she
will be neutral. If actual performance is better the result will be satisfaction, if worse customer will be
dissatisfated.
- Where do consumers buy?
Understanding the process to move products to reach the final consumer. (i.e. online or offline?)
- When do consumers buy?
Understanding the timing of purchase (i.e. seasonal factors like greeting cards during celebrations
period).
PRICING
- Price means profit for the firm and value to gain some benefits for consumers. For this reason it
must match both levels needs/wants. In setting price a company has to consider various factors
such as costs of production, distribution, promotion and profitability objectives (internal factors),
demand, competition, suppliers and buyers power and customers perceived value (external
factors).
Customer perceived value: the value customers are expecting from a product thanks to its
attributes, including price. It is a core concept when deciding on price. It's the result of the sum of
the value attached to each attribute level by a customer.
Product---> bundle of attributes
Attributes---> have different levels
Attribute levels---> fulfill different consumers needs.
Perceived value is important because it defines customers' reservation price (the maximum they're
willing to pay for something). Company can influence perceived value thus reservation price
through non-pricing activities such as advertising and promotion to increase perceived value, or
putting the actual price near the promotion price, showing customers the actual value compared to
what they're paying.
- Factors affecting pricing decision:
1. Stage of Product life-cycle
▪ Early stage: high prices because of high marginal cost; no or few competitors.
▪ Growth and maturity: lower costs thanks to economies of scale, focus on increasing market share
through lowering prices.
▪ Decline stage: focus on cost of mantaining the product; possibility of competitors leaving.
2. Objectives
▪ Penetration pricing: set the lowest price, giving most value to consumers, in order to acquire
market share.
▪ Skimming pricing: set high price retaining most marginal value; generally used to create a position
of prestige and uniqueness and focusing on price insensitive customers.
▪ Competitive pricing: set price at the average of the market; generally used in industries with low
difference between products (tooth paste, shampoo…)
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3. Industry conditions
▪ Treath of new entrants: if low barriers it's important to keep low prices to avoid new entrants. If
high barriers new entrants possibility is reduced and company can keep high prices.
▪ Power of buyers and suppliers
▪ Substitues: the more technology innovations and substitute products, the higher the focus on
price competition.
▪ Unused capacity
▪ Rivarly: between competitors (depending on number and concentration)
4. Physcology of price
▪ Reference price: comparison made by consumers when purchasing; regards both individual
reference price and market standard.
▪ Price/quality relation: price used as signal of quality. If high quality products are priced low,
consumers may experience inconsistent perceptions and questioning the actual quality.
▪ Psychological price points: separating products by price levels (0.99 or 799)
- Pricing startegies
1. Product-line pricing
▪ Price bundling: selling a bundle of products at a lower price than if bought separately. More
effective than discounts on single items.
▪ Line pricing: same product line for different brands with different price (toyota and lexus),
covering more segments without brand dilution.
▪ Complementary prices: lock-in customers with a fixed principal product that then leads to other
complementary products (must be often substituted) to be purchased. Low margin on the
principal product. (i.e. game console)
2. Value pricing
Related to consumers perceived value, most value goes to consumers. Offering more value than
expected for the price paid, concerns also activities like communication and packaging. Different
from price-to-value (setting price on consumers perceived value level).
Key concept to understand: price isn't decide to cover costs, but to match consumers' value
perceptions.
3. Differential pricing:
▪ Price discrimination: charge different prices to each different type of customer.
- Dynamic price based on the timing of purchase (Ryanair);
- Customized price based on individual price elasticity, informations about customers' preferences
can be collected thanks to new technologies.
▪ Second-market discounting: develop second market in which to sell primary market's products at
discounted prices. (outlet??)
▪ Every-day low price: keeping always lowest prices possible and offering very few promotions.
▪ Periodic discounting: keeping high prices but offering frequent promotions.
▪ Flat vs Variable rate (pay per use)
- Consumer perceived value
Can be calculated:
▪ Value-in-use: economic value of the benefits obtained
▪ Field experiments: set different price levels for homogeneous markets with similar target
customers and analyze.
▪ Market share: analyzing Perceived value/price function
Conjoint analysis: decomposing total value into marginal value of each attribute level of the
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▪ Conjoint analysis: decomposing total value into marginal value of each attribute level of the
product.
COMMUNICATION AND ADV
- Marketing communication is particularly important because it gives answers and
information to customers, it facilitates their decision process and increases the possibility
that the decision falls on a specific brand (who advertises). But nowadays marketing
communication goes both ways, indeed customer's feedback, desires and wants must be
searched and understood by marketers. The core element of marketing communication is
the persuasion of customers to pursue engagement behaviors (buying, word of mouth…).
- The 6-Steps communication plan
1. Market: first of all a company has to select the right target market and audience, this is at
the basis to know how to develop a proper communication strategy. The difference
between the two is that target market usually refers to the individuals who are or are
gonna become buyers, while target audience is usually bigger and concerns people who
will use marketing communication to make decisions, or could influence the target market.
To select the target audience company could focus on aspects like age, gender, interests
and income…).
2. Mission: after selecting the target audience objectives must be assessed. A SMART goal is
important (Specific, measurable, attainable, relevant and time-bound). Also, for a
marketing communication to be effective it has two consider the AIDA model (Awereness,
interest, desire, action), passages through which the potential buyer has to go thanks to
the communication strategy. The goals of a company's communication plan also depend
on the product life cycle. For example, in early stages it will focus on increasing customers'
awereness of the productand its benefits; in the middle stages on differentiating from
competitors and assess consumers preferences; in the last stages on consolidating the
brand image and retaining customers (loyalty).
3. Third step is deciding how to implement and communicate the message. Three decisions
are taken into consideration:
▪ Content of the message: What to communicate? This strictly depends on the goals set
previously
▪ Structure and format of the message: could be informational appeal or trasformational
appeal. Informational focuses on the technical feature of the product that is promoted, so
on more practical and functional reason to buy it (quality, features, performance).
Transformational tries to affect consumers emotional state (positively or negatively) and
motivate customers to buy (fear, sex).
Two typical topics in using a trasformational appeal are sex and fear. Both don't actually show a strong
connection with buying behaviour. Sex adv usually catch more attention; fear can induce customers to do
something (or stop doing), but it has a limit (for example cigarettes effect are seen like long-term outcomes and
adv showing their danger aren't so effective).
▪ Message source: from who comes the message? Usually a source has to carry some
specific characteristics:
- Expertise: is the source qualified/informed to speak about it? (doctor, dentist…)
- Trustworthiness: is the source perceived to be honest and reliable? (typical consumer)
- Likability: is the source's appealing good? Is it attractive? (celebrity, influencer…)
4. Following the media to deliver the message has to be selected. It could be broadcast
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4. Following the media to deliver the message has to be selected. It could be broadcast
media (tv), print media (newspapers), nowadays digital advertising is growing at a fast
pace. This step comes with the creation of a media plan in order to select the proper
media for communication. The media plan comprehends the situation analysis, the
marketing strategy plan (objectives->strategy->media broad classes->specific media
withing classes) and finally the creative strategy planning.
5. The Money step is concerned with the establishment of a budget to perform all the
previous activities. It can depend on:
▪ Sales: a specific percentage on total sales is defined to be spent on adv.
▪ Task: budget based on adv task to be done.
▪ Residual: budgeting on what's left from the other activities.
▪ Competitors: depending on competitor's expenditures on adv.
6. Last step in the communication plan is measurement of the results of the work, for
example through ROI.
PRODUCT AND BRANDING
- Brand: a set of symbols that define a company's product or service, differentiating it from
competitor's one, giving it a unique position in the mind of customers.
- Branding main objectives/functions: positioning, loyalty, revenues, entry barrier,
communication, protection.
- Brand strategies:
1. No brand
When competition is mainly based on price there's no necessity for branding activities.
Usually used for commodities products and results in cost advantage because no expenses
on communication/promotion.
2. Brand architecture
A strategy through which various brands are organized/grouped together under a single
main brand, and it specifies the interrelationship among the brands.
▪ House of brands: one main brands and many sub-brands. Each sub-brand has its own
identity and there's no clear association with the master brand. Each product has its own
brand. (different payoff and positioning)
► Each distinctive sub-brand can target different segments.
► Great cost diversification, less risk
► Easy to acquire new brands
► Expensive
▪ Branded house(umbrella brand): master brand shares the same visual identity with subbrands (the master brand name appears into sub-brands' name/logo), but they have some
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brands (the master brand name appears into sub-brands' name/logo), but they have some
differences. Same brand for all the products. (common payoff and positioning)
► Simple to create and maintain
► Enforces customers' loyalty
► Exploit economies of scale
► If master brand fails, also sub-brands will
► Risk of brand dilution
► The broader the business, the less relevant the brand
▪ Endorsed brand: one master brand that supports different sub-brands having their unique
designs. (common payoff, different positioning).
► Credibility is enhanced
► Sub-brands crisis could affect master brand
► Sub-brands must be coordinated with master brand.
3. Brand extension
Using your brand to expand into a new product category. (i.e. cosmopolitan newspaper
selling yogurt).
It can be a qualified extension (new product targets a different segment) or pure extension
(new product targets a similar segment).
► Higher success of the new product (also reflects on the parent brand)
► Effective image transfer (emotional association with brand)
► Higher customer loyalty and satisfaction
► Better expoliting the market (targeting different/more segments)
► Brand dilution (if new product category is too distant from usual one)
► Potentially harmful for parent brand positioning
► Low perceived consistency
4. Brand sponsorship
Strategy that involves the brand supporting an event, activity, person or organisation.
Different types:
▪ Private labels: a product is manufactured by a third-party for and under the name of a
specific retailer (i.e. Coop products).
Advantages: for customers lower prices (no adv cost) + quality check. For manufacturers
better exploiting production capacity + bargaining power over retailers(so better
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better exploiting production capacity + bargaining power over retailers(so better
agreements). For retailers more store brand loyalty + could develop more product lines (in
the same category of products).
▪ Licensing: company allows third-parties to exploit brand name and so brand equity. The
manufacturer has to pay royalties and get the possibility to commercially exploit the
brand. (i.e. clothes with disney characters printing). It has to be monitored because of
quality standard to be maintained, fit with brand, pricing strategy used.
▪ Co-branding: companies agree to produce and sell products that aim at both brands'
interests. Could be functional (gillette razor + nivea cream); symbolic (fragrance + national
geographic style); ingredient branding.
▪ Co-marketing: different from co-branding. Two brand that promote each other products
without creating a new joint one. It is based on marketing mix and objectives, even though
it's difficult to match two parties' goals. They share cost and risk. (i.e. uber+spotify, create
playlist to listen while riding).
SALES PROMOTION
- Sales promotion is an action-focused strategy aiming at directly influencing customers'
behavior (to purchase).
- 3 types of sales promotion:
1. Consumer-oriented
2. Trade promotions (B2B)
3. Retailing promotions
- Consumer-oriented promotions can be:
▪ Price-oriented: coupons, in-store discounts, refunds and rebate, interest rate…
Coupons are the dominant form used and redemption is low. They're effective (easy to
target price-sensitive customers and can be used to price-discriminate) and flexible (one way
to achieve different purposes like disocunt on price, product trial etc.). Nonetheless, coupons
need too much engagement and often profit don't cover cost.
Coupons objectives: attract new customers (or brand switchers), increase product consumption, inducing and
increasing repeated pruchase, increase distribution, stimulate sales force, price discriminate, balance increases
in price, reach the right target.
Price-oriented may have a negative effect, because if too many promotions are done,
customers will always refuse to pay the full price (poltrone&sofà).
Objectives:
 Current consumer: buy more, buy again, buy now. (short run)
 Occasional customer (brand switchers): involve in next purchase (short run)
 Non-customers: try the product (short run)
 Increasing awareness (long run , relationship building)
 Image enhancement (long run, relationship building)
Product-oriented: usually giving away the product or a related one. Usually samplings are
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▪ Product-oriented: usually giving away the product or a related one. Usually samplings are
used for new products.
▪ Premiums: buying something and getting something for free or discounted.
▪ Special events: contests and sweepstakes (need to be easy otherwise customers won't
participate); Tie-ins (sporting events, movies).
▪ Place-oriented: displays
- Trade promotions: activity to increase demand from retailing customers, or to consolidate
intermediaries of the manufacture company, to create partnership with businesses.
(groceries, restaurants, retailers, distributors…). Provide incentives to channel members.
Such promotions can be:
▪ Displays
▪ Pricing discounts
▪ Bulk discounting
▪ Financial rebates (earn some of the payment back)
▪ Marketing contests
▪ Clubs
Advantages: sales increase, increase of consumers and loyalty ones, minimize rish of trade
buyers
- Retailer promotions: to make retailers stock product and promote the brand. Involve both
price and special displays.
- Evaluation: very important. Usually evaluating promotions is about comparing before and
after situation. Also, the frequency of promotions is considered.
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