Advanced Marketing
Birgit Hagen
bhagen@eco.unipv.it
Agenda
• Foundations of marketing
• Firm strategic postures
• Developing Marketing Strategies
– A framework for strategic marketing
decisions
– Portfolio analysis
– Product life cycle (case study MOMENT)
– Product diffusion curve
Foundations of Marketing
• What is marketing?
– “meeting needs profitably”
– AMA: “Marketing is the activity, set of
institutions, and processes for creating,
communicating, delivering, and exchanging
offerings that have value for customers,
partners, and society at large.”
Core concepts of marketing
Needs,
wants,
demand
Exchange,
transaction
and
relationship
Value, cost
“products”
markets
transaction
vs
experience
and
satisfaction
Marketing
and
marketers
Foundations of Marketing
• Needs, wants, demands
– Needs are basic human requirements
– become wants when directed to specific objects that
might satisfy needs
– becomes demand when backed by ability to pay
• Who markets?
– Marketers and prospects
• What is marketed?
– goods, services, events, experiences, persons, ideas, places,
properties, organizations, information
Foundations of Marketing
• Offerings and brands
– intangible value proposition is made tangible by an
offering
– Brand is an offering from a known source
• Value and satisfaction
– Value: customer chooses the offering that is perceived
to deliver the most value=sum of the intangible and
tangible benefits – costs – carriers of experience!
– Essentially the combination of quality-service price =
customer value triad
– Satisfaction:person’s judgment of a product’s perceived
performance : expectations
Foundations of Marketing
• Company orientation toward the
marketplace = strategic postures
– The
– The
– The
– The
– The
production concept
product concept
selling concept
marketing concept
holistic marketing concept
Key strategic orientation
constructs
Strategic orientations are investigated in strategic
management, strategic marketing and (international)
entrepreneurship with partially overlapping/synergetic
constructs and operationalisations
Innovation
orientation
Entrepreneurial
orientation
Market
orientation
Strategic
orientations
Selling
orientation
Product(ion)
orientation
Production orientation
• One of the oldest concepts in
business
• Consumers prefer widely available
and inexpensive products
• Companies concentrate on achieving
production efficiencies, low cost,
mass distribution
• Might hurt product quality/innovation
capability
Product orientation
• consumers favor products offering
the most quality, performance or
innovative features
• “better-mousetrap”
Selling orientation
• Aggressive sales & promotion
• High investment in advertising
• Consumers, if left alone, will not buy
enough of the firm’s product
• Practiced most agressively with
unsought goods
Market orientation
• Customer-centered
• Find the right products for your
customers
• Be more effective than competitors
in creating, delivering, and
communicating superior customer
value to target markets
Holistic marketing orientation
• Based on the development, design,
and implementation of marketing
programs, processes, and activities
• Broad and interdependent
• 4 components: relationship
Purpose
marketing, integrated -Endearment
marketing,
internal marketing, socially
-Participation
responsible marketing -prosumer
Product vs market oriented
definitions of business
Xerox:
– we make copying equipment
– we help improve office productivity
Paramount pictures:
– we make movies
Market
definition!!!
– we market entertainment
Take a position
• Does marketing create or satisfy
needs?
Developing Marketing
Strategies
• Value creation and delivery can be
divided in 3 phases:
– segment the market,
– select the targets,
– develop the offering’s value positioning
= 1) choosing the value
2) providing the value
3) communicating the value
The case
www.blacksocks.com
17
The idea
• “During a Japanese tea ceremony with clients I
removed my shoes and, to my embarrassment,
I realize my socks do not match. And even
worse, one of my big toes is poking out”….
“Fate had picked me to remove the personal
humiliation of inappropriate socks from the world”…the
idea of the sock-scription
• Subscription of black socks in different formulas
coupled with an innovative business model
18
Vision & strategy
• “As a service company we invest a lot of time
and effort in customer relation. Therefore
marketing towards existing customers is key.
Marketing should bring people in and
operation should bring them back. The
overall customer experience should be as
good that customers talk about us. Word-ofmouth is a important communication tool for
us!”
19
Customer orientation
…all functions working together to sense, serve, and satisfy the
customer...
….through quality of offer, the customer expectations must be
surpassed
and used to build customer loyalty.
And/but: needs are to be correctly interpreted and efficiently
satisfied.....
• Competitive advantage is viewed to be built on
higher quality and service than competition
• Winning difference is combination of socks and
subscription for target: funny, innovative, smart,
easy as well as outstanding after sales service
20
The industry
• Blacksocks is active in male hosiery
• Idea to sell socks on subscription was unique
when blacksocks went online - as of today the
n° of competitors trying to copy the business
idea is about 30
• Biggest players are food retailers
• Market for branded socks is rather limited
• The company sees itself as a service company
and not as a trading enterprise
21
The target
• Business to Consumer market
• Core target is male, office worker in a high
position, more at home in a cultivated
environment and aged between 30 – 50
• Fit with prevalent global Internet consumer
segment: relatively young, well educated, in mid
to upper economic status, male, and in
professions associated with technology
22
The offering
• Combination of service and product
• Subscriptions in different formulas: Socks are black, but
choice between knee-, calf-length socks or shorties in a
high quality cotton version, or calf-length cashmere-silk
socks with delivery cycles of 3,4, or 6 (3 pairs each)
• Sock sizes from 34 to 48
• Starter pack containing 10 pairs of socks.
• Quality of products and quality of service are a n 1
objective of the company.
• Every shipment of socks contains a little surprise aiming
at creating a chuckle and sympathy.
• Blacksocks as a gift: eg Valentine’s Day – Love socks,
women could treat the men in their lives to perfumed
socks.
23
The price
• Socks-subscription: 69 Euro and up
according to formula
• Switzerland: payment via physical
invoice & credit cards
• Foreign countries’ only option are
credit cards.
24
The communication
• The message: Clever contemporaries no longer
need to worry themselves with sock-buying, since
they automatically receive consistently high-quality
socks. Socks become an Internet driven service
saving the consumer valuable time and money.
• Personal touch and value-added, emotional
information to strengthen brand exposure
• Building brand awareness, leveraging mainly (free)
publicity
25
Chronology of the sock-scription
– Sept 2001: Socks do not slip – Berlin Marathon
– Nov 2001: blacksocks gets a Service Design Award at the
Swiss Design Prize.
– May 2002: blacksocks gets an award from Best of Swiss Web
organisation within the Business Model category
– September 2002: new line of white socks called blacksocks
health is launched; life-time subscription
– Feb 2005: blacksocks gets the Swiss Marketing Trophy,
category SME
– April 2005: blacksocks is awarded with the New York
Copernican Award (creation of outstanding emotional
approach in customer experience)
– Fall 2005. blacksocks launches white shirt-subscription
– March 2007: blacksocks launches underwear-subscription/new
shirt collection
26
Recap: The marketing strategy
• Blacksocks is working a niche…with
strong customer orientation
• “Leverages customers”
->
new products for existing customers more than
existing products to new customers/markets
(Retention rate = 70 %, 20 % of new clients are brought
in by existing clients)
• No adaptation of marketing
27
The value chain (Porter, 1985)
Support
activities
Firm infrastructure
HumanResources
R&D
Procurement
Inbound
logistics
28
Operatio
ns/Produ
ction
Outboun
d
logistics
Marketin
g & Sales
Primary activities
Service
Generic strategy
• Core strategy for the company as a
whole – across markets and products
• Differentiation strategy – based on
quality or price differentiation
• Focus strategy
Must be visible and verifiable
Sustained competitive advantage
Corporate, division, business,
product strategic planning
Key for achieving
long-run objectives
• assessing growth opportunities
• assigning resources
Strategic framework for marketing
decisions (Ansoff, 1957)
Markets
31
existing
Products
new
existing
Develop
products
Increase
penetration
new
Widen
activities/
diversification
Extend
markets
Corporate
strategy
Environment
Product/
market
strategy
Marketing
strategy _
segmentation/
positioning
Marketing mix
Logic of portfolio analysis
Environment
Performance
prospects
Objectives
Firm
Goals
Strategy
Capabilities/
resources
Stakeholders
Firm
The BCG Matrix
Market Growth (Cash usage)
High
Select a few
invest
Liquidate
Low
Milk/maintain
Relative Market Share
(Cash generation)
High
Pros and cons
• Portfolio at a glance
• Helps understand a frequently made
mistake – one size does not fit all
• Link between market share and
profitability?
• Overemphasizes growth
• Is market growth a given?
The Product Life Cycle (PLC)
• Sequences of stages from introduction
to growth, maturity, and decline
• No fixed length of a PLC
• Associated with changes in market(ing)
situation – impact on marketing
objectives, strategy and marketing
mix
• Related to product revenue and profits
Product Life Cycle
• Introduction stage
– Create brand awareness & trial, develop
the market
– Marketing mix:
• Offer a basic product/product branding
• Quality levels are established
• Distribution is selective
• Communication targets innovators and early
adopters – build product awareness
• (Use heavy sales promotion to entice trial)
Product life cycle
• Growth stage
– Build brand preference and increase market
share
– Marketing mix:
• Product quality is maintained/additional features product extensions, service, warranties
• Pricing maintained as firm enjoys increasing demand
with little competition - penetration
• Distribution channels are added with increasing
demand and customer acceptance
• Promotion aims at broader audience: awareness and
interest in mass market
Product life cycle
• Maturity stage
– Strong growth in sales diminishes; competition increases
– Defend market share while maximizing profit
– Marketing mix:
• Product features might be differentiated – diversify brands
and models
• Pricing might be decreased to match or beat competitors
• Distribution becomes more intensive/incentives might be
offered to encourage preference over competing products
• Communication emphasizes product differences and
benefits
• Sales promotion encourages brand switching
Product life cycle
• Decline stage
– Maintain the product, rejuvenating it by adding new
features and finding new uses
– Harvest the product – reduce costs and continue to offer
it, possibly to a loyal niche segment
– Discontinue the product, liquidating remaining inventory
or selling it
– Marketing mix: depends on the chosen option-eg
product changed if rejuvenated or left unchanged if
harvested/liquidated; price maintained if product is
harvested/reduced drastically if liquidated.
Product life cycle
• Decline cont’d: reduce expenditure
and milk the product
– Phase out weak items
– Cut price
– Go selective
– Reduce advertising to level for hardcore
loyals
– Minimum sales promotion
Product Life Cycles and the
BCG Matrix
Sales/Profits
Introduction
Growth
Maturity
Decline
PLC
Profits
Time
Losses
Break Even
The Product Life Cycle and the BCG
Matrix
Importance of
(3)
Cash
from
(2)
Cash
from
‘B’
maintaining
a ‘C’
(1)
‘A’
is
at
maturity
The
product
used
support
balance
of
products
used
to
support
stage to
– cash
cow.
portfolio
–
four
growth
of funds
‘D’
and
in
the
portfolio
atfor
Generates
‘C’
through
growth
products
in finance
the
possibly
to
different
stages
the
development
stage
and
to ofof
portfolio
the
PLC ‘D’.
– Boston
extension
strategy
‘D’
launch
‘A’ now
Matrix
with the
for
‘B’?helps
possibly
a dog?
analysis
Sales
(1)
(2)
(3)
D
A
B
C
Time
Rate of adoption
• Perceived benefits over alternative products =
relative advantage
• Communicability of the product benefits
• Simplicity of use
• Promotional effort - Distribution intensity
• Perceived risk
• Compatibility with existing standards and values
(assimilation into daily life)
• Divisibility (the extent to which a new product
can be tested on a limited basis) –the ability to
observe and try the innovation
The Product Diffusion Curve
• Consumers can be grouped according
to how quickly they adopt a new
product
• Two ends of a continuum
– Innovators - laggards
New product diffusion curve
5 product adoption groups
• Innovators: well-informed risk-takers, willing to
try an unproven product; the first who adopt the
product;
• Early adopters: based on the positive response
of innovators, early adopters begin to purchase;
tend to be educated opinion leaders;
• Early majority: careful consumers who tend to
avoid risk; rely on recommendations from others
who have experience with the product;
5 product adoption groups
• Late majority: somewhat skeptical
consumers who acquire a product only
after it has become commonplace;
• Laggards: avoid change; may not adopt
a new product until traditional alternatives
no longer are available.