1.3.5 Marketing Strategy Flashcards
Niche marketing
Where a business targets a smaller segment of a larger market, where customers have specific needs and wants
Mass marketing
Where a business sells into the largest part of the market, where there are many similar products offered by competitors
Niche market features
- clear focus
- low profit margin
- less competition
- specialist skills and knowledge
Mass market features
- low unit costs
- products have broad appeal
- high profit margin
- allows heavy promotion
- caters for all consumers
What is the marketing strategy for mass market?
- selling to people regardless to any segmentation features
- generic and product marketed in the same way
- large quantities produced mean lower average costs which maximises EOS resulting in high profits
- maximise above the line of promotion
What is the marketing strategy for niche markets?
- caters to a small subset of a market segment and will target consumers in a very specific way
- products have a USP and are designed for a specific purpose
- marketing tends to be quite tailored - market is small scale so businesses rely on high value of sales
- customers are price inelastic demand meaning higher prices can be changed due to products being unique
- media used will be targeted media - specialist magazines, trade fairs, websites
Niche strategies used in marketing
product:
-product differentiation
-value added is important to both, but achieved in different way
price:
-premium or skimming
-Influence price through USP and other distinct features
Promotion:
-may rely on more word of mouth and more targeted promotion
place:
-may sell direct or use traditional method
-value added may be achieved through physical location
Mass strategies used in marketing
product:
-branding helps differentiate within competitive markets
-value added
price:
-competitive, psychological, loss leader
-mass market brands may have a degree of influence depending on the size or popularity of the brand
promotion:
-rely on above the line methods
-sales promotion
Business to business market
where one business sells to another business
Features of B2B
- advertising needs to be informative rather than persuasive or clever
- focus on cost effectiveness
- Involve larger transactions
- suppliers to build up close relationships with customers to try and understand needs
- offering a quality product and service
Business to customer
where a business sells to a consumer
Features of B2C
- consumers need to be convinced that the benefits of a product will meet their needs
- not looking to build up longterm relationships with the supplier
- consumers want a variety of distribution channels;s for convenience
- short message which clearly points out the benefits
- emotional connection with the product or supplier
B2B marketing strategies
- competitive pricing
- marketing mix = promotion
- design mix = function
- marketing mix = product
B2C marketing strategies
- design mix = aesthetics
- psychological pricing
- emotional branding
- product design carefully follows fashion
- price skimming
- use of social media
Product portfolio analysis
assesses the position of each product or brand in a firm’s portfolio to help determine the right marketing strategy for each
Product lifecycle
a theoretical model which describes the stages a product goes through over its life
-measures in terms of sales and cash flows
What are the stages of the product life cycle?
- introduction
- growth
- maturity + saturation
- deline
Why is cash flow the lowest during the introduction stage?
- just spent lots of money researching and developing product and haven’t had time to recoup that investment
- sales are low as product is not very unknown
- lots of money spent on advertising and promotion to try and break into the market
Research and development stage level of sales product promotion distribution price cashflow
- no sales
- Innovative new design
- no promotion
- no distribution
- no price
- negative cashflow
Introduction level of sales product promotion distribution price cashflow
- low sales
- new product launched in market
- heavy promotion to make consumers aware of product
- may be reluctant to take an unproven product
- skimming or penetration pricing
- negative cashflow
Growth level of sales product promotion distribution price cashflow
- fast growing sales
- Improve products and its features
- advertising to promote and increase brand awareness
- Increase distribution outlets
- market penetration or price leader
- positive or negative cash flow
Maturity and saturation level of sales product promotion distribution price cashflow
- slower sales due to increased competition
- develop new uses
- focus on differentiation
- Intensive distribution
- price falls
- positive cash flow
Decline level of sales product promotion distribution price cashflow
- falling sales
- failure to innovate and develop
- aim to retain loyal customers loyalty schemes
- narrowed distribution
- price cutting to remain competitive
- weaker cash flows
Research and development - features
- often complex
- absorbs significant resources
- may not be successful
- may involve long lead time before sales are achieved
Research and development - How is it done?
- time-consuming but CAD is reducing product development times
- cost of development rises as it approaches launch
- market research to reduce risk of product failure
- most new product ideas don’t reach launch phase
Why may new products be scrapped before launch?
- inadequate demand
- production problem
- high costs
- actions of competitors
- change in external environment
- doesn’t fit with product range
Introduction stage - features
- new product launched on market
- low level of sales
- low capacity utilisation
- high unit costs
- usually negative cash flow
- distributors may be reluctant to take an unproven product
- heavy promotion to make consumers aware of the product
Strategies at the marketing introduction stage
- aim is to encourage customer adoption
- high promotional spending to create awareness and inform people
- skimming or penetration pricing
- limited, focusses distribution
Growth stage - features
- expanding market but arrival of competitors
- fast growing sales
- rise in capacity utilisation
- product gains market acceptance
- unit costs fall due to economies of scale
Strategies in the growth stage
- advertising to promote brand awareness
- Increase in distribution outlets
- market penetration and price leadership
- target the early majority of potential buyers
- continuing high promotional spending
- Improve product - new feature, improve styling, more options
Maturity stage - features
- slower sales growth as rivals enter the market = intense competition and fight for market share
- high level of capacity utilisation
- high profits for those with high market share
- cash flow should be strongly positive
- prices and profit fall
Strategies for mature products
- manage capacity and production
- promote focusses on differentiation
- persuasive differentiation
- persuasive advertising
- Intensive distribution
- attract new users
- repositioning
- enter new segments
Decline stages - features
- falling sales
- market saturation and competition
- decline in profits and weaker cash flows
- more competitors leave the market
- decline in capacity utilisation - switch capacity to alternative products
Strategies for the decline stage
- maintain market share
- harvest by spending little on marketing the product
- rationalise by weeding out product variations
- price cutting to maintain competitiveness
- promotion to retain loyal customers
- distribution narrowed
Reasons why products enter the decline phase
- technological advance
- changes in consumer tastes and behaviour
- Increased competition
- failure to innovate and develop the product
Extension strategies
ways in which a business modifies a product to appeal; to more customers and maintain sales in maturity and delay decline
Aims of extension strategies
- extend maturity
- Increase sales
- differentiate product not new product
- appeal to a new segment
Promotional extension strategies
- change the image
- change packaging
- reduce price/discounting
- change the advert campaign
- target a new segment
- Increase usage
- change the name
Product extension strategies
- change the size
- moderated/improved product
- new use for product
What is the use of the product life cycle?
- forecast future sale trends - helps marketing budget and help assess demand
- help with market targeting and positioning
- help to analyse and manage the product portfolio
- when to invest in marketing
- what cash flow is like
- decision making
Weaknesses of the product life cycle model
- the shape and duration of the cycle varies from product to product
- strategic decisions can change the life cycle - can cause product to move into stage through marketing managers decisions not naturally (determinism) - moves quicker than it may have
- It is difficult to recognise exactly where a product is in its life cycle
- decline is not inevitable
- doesn’t consider any other external factors
- length cannot be reliably predicted
The boston matrix
a tool to analyse a products share and growth within a market
What are the axes of boston matrix?
- relative market share
- market growth
x axis of the boston matrix
Relative market share
- In relation to other firms in the market
- a measure of the products strength in the market
y axis of the boston matrix
market growth
- % rate of growth of sales in the market
- measure of market attractiveness
Question market or problem child products
- low share of rapidly growing market
- cash flow is negative due to low demand and fierce competition
- have potential but future is uncertain
- need heavy promotion
- could become either a star or a dog
Strategy for question markets
-invest to increase market share
-substantial investment to achieve growth at the expense of powerful competitors
-Invest in promotion or other aspects of marketing
-build selectively
BUILIDING
Star products
- high share of a rapidly growing market
- fierce competition
- position of leadership in a high growth market
- product is relatively strong and market is growing
- require high market spending
- net cash inflow is neutral or at best modestly positive
Strategy for star products
-invest to sustain growth
-build sales/ market share
-spend to keep competitors at bay
-Invest to maintain or increase leadership position
-repel challenges from competitors
-heavy promotion
HOLDING
Cash cow products
- high share price of a slowly growing market
- mature stage in product life cycle
- mature, successful product
- dominant share
- little potential for growth
- large positive cash inflow
- little threat from competition
- established products
Strategy for cash flows
- defend market share
- aim for short term profits
- little need for investment
- little potential for further growth
- reduce investment in order to maximise short term cash flow and profits
- use profits from cash cows to invest in new products
Dog products
- either products that have failed or products that are in the decline phase of their life cycle
- low share of a slow growth market
- not going anywhere, no real potential
Strategy for dog products
- phase cut or sell off (divest)
- not worth investment
- any profit made has to be re-invested just to maintain marketshare
- uses up more management time and resources than needed
- divest or focus on a defendable niche
Boston matrix compared to product life cycle
TBM
-Is concerned with the firm’s portfolio of products
-focuses on cash flow from products
PLC
-Is concerned with with individual products
-sales over time
Benefit of the boston matrix
- a useful tool for analysing product portfolio decisions
- compare product with one performance to another
Drawbacks of the boston matrix
- only a snapshot of the current position - things can change all the time particularly in dynamic markets
- can’t use to forecast, no predictive value
- focusses on market share and market growth ignores issues such as developing a sustainable competitive advantages - one that is going to last
How is customer loyalty is developed?
marketing strategy and customer loyalty
Marketing strategy
- the methods chosen to achieve marketing objectives
- related to pricing, product, promotion and place
Customer strategy
-means a preference for a product or brand, based on experience and emotional attachment, which inclines buyers to repeat purchase away from rivals
Methods of customer strategy
- loyalty schemes, cards
- saver schemes
What are the three main ways that a business tries to build customer loyalty?
- customer service
- physical environment
- loyalty schemes
What are the three main ways that a business tries to build customer loyalty? - customer service
- employees involved in dealing with customers before, during and after a sale
- customer service is extremely important in today’s service sector
- staff must be appropriately trained, motivated and show good communication and interpersonal skills when dealing with customers
- people are an important aspect of all business, they are the ones interacting with customers
What are the three main ways that a business tries to build customer loyalty? - physical environment
- the design and features of the actual place where a transition takes place
- can directly influence the customers shopping experience and therefore their level of satisfaction as well as willingness to return
What are the three main ways that a business tries to build customer loyalty? - aspects of physical environment
- cleanliness
- aesthetically pleasing
- facilities
- ambience
- design - ease of movement around premises or ability to find what you’re looking for
What are the three main ways that a business tries to build customer loyalty? - loyalty schemes
-reward cards - collect points, stamps for a free product
-saver schemes
Loyalty cards
-focusses on incentivising purchases by reward spending
e.g. odeon premiere club, tesco clubcard
