Exam Revision Flashcards
What is marketing?
Marketing is engaging customers and
managing profitable customer relationships.
The twofold goal of marketing is to:
- attract new customers by promising superior value; and
2. keep and grow current customers by delivering satisfaction.
Steps 1-4 broad
Create value for customers and build customer relationships
Step 5 broad
Capture value from customers in return
Step 1
Understand the marketplace and customer needs, wants and demands
Step 2
Design a customer-driven marketing strategy
Step 3
Construct an integrated marketing program that delivers superior value
Step 4
Build profitable relationships and create customer delight.
Step 5
Capture value from customers to create profits and customer equity.
Marketing information and customer insights
When creating value for
customers, marketers must
obtain fresh and deep insights
into their needs and wants.
Marketing research
Systematic design, collection, analysis and reporting of data
relevant to a specific marketing situation facing an
organisation.
• Market research gives marketers insight in customer motivations,
purchase behaviours and satisfaction.
Market research can help assess
– Market potential
– Market share
– Effectiveness of marketing mix activities (pricing, product,
distribution and promotion activities).
Marketing research
Two approaches of market research
Qualitative research
Quantitative research
Qualitative research
Involving a small number of individuals used to get qualitative data on a topic. • Focus groups (traditional and online) • In-depth one to one interviews (traditional and online)
Quantitative research
Involving a large number of individuals* and is used to get quantitative data on a topic. • Use of statistical application
- above 100 people
Consumer Buying Behaviour
The buying behaviour of final consumers (individuals and households) that buy goods and services for personal consumption.
Consumer Markets
Combining all individuals
and households that buy or
acquire goods and services
for personal consumption
Model of consumer behaviour
Companies research consumer buying decisions in great detail in order to answer questions about – what consumers buy – where they buy – how and how much they buy – when they buy and – why they buy.
Characteristics affecting consumer behaviour
Cultural
Social
Personal
Psychological
Cultural
Culture
Cultural group
Social class
Social
Reference groups
Family
Roles and status
Personal
Age and life cycle stage Occupation Economic situation Lifestyle Personality and self-concept
Psychological
Motivation
Perception
Learning
Beliefs and attitudes
The buyer decision process:
Decision stages
Need recognition
Information search
Evaluation of alternatives
Purchase decision
Post-purchase behaviour
Need recognition
The buyer recognises a need, triggered by internal or external
stimuli.
Information search
The buyer seeks out information about products or services
with potential to satisfy the need.
Evaluation of
alternatives
The consumer processes information in order to arrive at
brand choices
Purchase decision
The consumer forms a purchase intention and ultimately
makes the actual purchase.
Post-purchase
behaviour
Following purchase, the consumer will engage in a variety of post-purchase behaviours – including satisfaction, formation
of future purchase intentions and loyalty intentions.
The buyer decision process for new products
Stages in the adoption process
Awareness Interest Evaluation Trial Adoption
Awareness
Consumer becomes aware
but lacks information
Interest
They seek information
about the product
Evaluation
Considers whether trying the new product makes sense
Trial
Tries the new product on a
small scale to improve their
estimate of its value
Adoption
Decides to make full and regular use of the product
Individual differences in innovativeness
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New product adoption process:
Factors influencing the rate of adoption
Relative advantage Compatibility Complexity Divisibility Communicability Other factors
Relative advantage
superiority over existing products
Compatibility
with consumer’s lifestyle, beliefs and attitudes
Complexity
ease of understanding
Divisibility
the ability to undertake trial on a limited basis
Communicability
: the ability to observe and understand the innovation’s benefits or results
Other factors
uncertainty, social approval, risks and costs
Customer-driven marketing strategy
A company must design customer-driven marketing
strategies that build the right relationships with the
right customers
Market segmentation
Buyers in any market differ in their wants, resources,
locations, buying attitudes and buying practices.
• Companies divide large, heterogeneous markets into
smaller segments:
- Segmenting consumer markets
- Requirements for effective segmentation
Segmenting consumer markets
Dividing the market into segments based on various variables • Bases for identifying and analysing consumer market segments are: • Geographical • Demographic • Psychographic • Behavioural
Geographic segmentation
Dividing a market into different segments based on: region, city size, density and climate
Demographic segmentation
Dividing a market into different segments based on: age, sex, family size, family life cycle, income (annual), occupation, education, religion and nationality
Psychographic segmentation
Dividing a market into different segments based on socioeconomic, status, values, attitudes, lifestyle groupings and personality. Marketers often segment using these variables
Behavioural segmentation
Dividing a market into segments based on consumer knowledge, attitudes, uses or responses to a product. Includes
Purchase occasion (regular or special)
Benefits sought (quality or economy)
User status (ex-user, regular user)
Usage rate (light user, heavy user)
Loyalty status (medium, strong)
Readiness stage (unaware to intending to buy)
Attitude towards product (enthusiastic to hostile)
Requirements for effective segmentation
To be useful, market segments must be:
Measurable Accessible Substantial Differentiable Actionable
Creating Segments
Combine variables to create specialised and differentiated segments
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Market targeting
Evaluating market segments
A company must look at three factors:
- Segment size and growth
- Segment structural attractiveness
- Company objectives and resources
After evaluating different segments, the company must decide which
and how many segments it will target.
- Segment size and growth
Sales, growth rates, expected profitability
- Segment structural attractiveness
Number of strong competitors, substitute product, power of buyers,
power of suppliers
- Company objectives and resources
Company objectives and resources.
Target Market
A set of buyers sharing common needs or characteristics that the
company decides to serve.
It can be carried out at several different levels:
The continuum of market targeting from targeting broadly to targeting narrowly
Undifferentiated (mass marketing)
Differentiated (segmented marketing)
Concentrated (niche marketing)
Micromarketing (local or individual marketing)
Undifferentiated marketing
A market-coverage strategy where the company decides to ignore market segment differences and go after the whole market with one offer.
This mass-marketing strategy focuses on the common needs of consumers, rather than on what is different.
Differentiated marketing
A market-coverage strategy in which a firm decides to target several segments and designs separate offers for each segment. The company must weight up the increased costs against the
potential revenues
Concentrated marketing
A market-coverage strategy where a company targets a large share of one or a few segments or niches.
• The company achieves a stronger market position due to its understanding of the customer needs. Niches tend to attract fewer competitors
Micromarketing
The practice of tailoring products and marketing programs to
the needs and wants of specific individuals and local customer
segments – includes local marketing and individual marketing.
Local marketing:
Tailoring brands and promotions to the needs and wants of local
customer segments – cities, neighbourhoods and even specific
stores.
Individual marketing:
Tailoring products and marketing programs to the needs and
preferences of individual customers – also labelled ‘one-to-one
marketing’, ‘customised marketing’ and ‘markets- of-one
marketing’.
Differentiation and positioning
• Consumers are overloaded with information about
products and services
• To simplify the buying process, they organise products,
services, and companies into categories and ‘position’
them in their minds.
Choosing a differentiation and positioning strategy
Positioning is essential
• Each company must differentiate its offer by building a
unique bundle of benefits to appeals to a substantial
group within a segment
• Differentiation and positioning involves three tasks:
- Identify a set of differentiating competitive advantages
- Choose the right competitive advantages
- Select an overall positioning strategy
Differentiation and positioning
Competitive advantage
To build profitable relationships with target customer, marketers
must understand customer needs better than competitors and
deliver more customer value.
• A company can differentiate and position itself by providing superior
customer value and gains competitive advantage.
competitive advantage
An advantage over competitors gained by offering greater customer value, either through lower prices or by providing more benefits that justify higher
prices.
Competitive advantages
A company can differentiate itself or its market offer on
five dimensions of differentiation:
Product Services Channel (coverage/expertise) People Image
Differentiation and positioning
Choosing the right competitive advantages
How many differences to promote?
• Many marketers think that companies should aggressively promote only one benefit to the target market – using a Unique Selling Proposition (USP)
Others think companies should position on more than one differentiator. – Particularly where two or more companies are claiming to be the best on the same attribute
Differentiation and positioning
Choosing the right competitive advantages
Mass marketing today is fragmenting into many small segments.
• Companies are attempting to broaden their positioning strategies to
appeal to more segments.
• Companies must be careful not to have too many claims, or they risk
disbelief and loss of a clear positioning.
• Which differences to promote?
Which differences to promote?
Not all brand differences are meaningful or worthwhile
– Not every difference makes a good differentiator.
– Each difference has the potential to create company costs as
well as customer benefits.
Choosing the right competitive advantages
Differences must satisfy the following criteria:
Important Distinctive Superior Communicable Pre-emptive Affordable Profitable
Product position
A product position is the complex set of perceptions,
impressions and feelings that consumers have for the product
compared with competing products.
perceptual positioning maps,
In planning their differentiation and
positioning strategies, marketers often prepare perceptual positioning maps, which show consumer
perceptions of their brands versus competing products
on important buying dimensions.
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Positioning maps
Positioning maps can be visually represented in two ways -
they both represent the same positioning
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Differentiation and positioning
Selecting an overall positioning strategy
More for more More for the same The same for less Less for much less More for less
More for more
positioning involves providing the most prestigious product or service and charging a higher price to cover the higher
costs.
More for the same
Companies can attack a competitor’s more-formore
position by introducing a brand offering comparable quality but
at a lower price.
The same for less
Offering ‘the same for less’ can be a powerful value proposition – everyone likes a good deal.
Less for much less
A market almost always exists for products that
offer less and therefore cost less. Few people need, want or can afford ‘the very best’ in everything they buy.
More for less
Of course, the winning value proposition would be to offer ‘more for less’. Many companies claim to do this.
Differentiation and positioning
Selecting an overall positioning strategy
2
The full positioning of a brand is called the brand’s value proposition – the full mix of benefits upon which the brand is differentiated and positioned.
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Differentiation and positioning
Developing a positioning statement
A positioning statement, is a statement that summarises
the company or brand positioning.
It takes this form:
To (target segment and need) our (brand) is (concept)
that (point of difference).
Levels of products and services
At the most basic level, the company asks,
“what is the customer really buying?”
Example: people who are buying be HTC one smart
phone are buying more than a wireless communication
device. They are buying freedom and on the go,
activity. Each additional product level helps to build this
core value
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Product Mix
A product mix (or product portfolio) consists of all the product
lines and items that a particular seller offers for sale.
An organisation with several product lines has a product mix.
Four (4) Dimensions of a product:
Product mix width
Product mix length
Product mix depth
Consistency
Product mix width
- the number of different product lines the company
carries.
Product mix length
- the total number of items the company carries within
its product lines.
Product mix depth
the number of versions offered of each product in the line.
Consistency
- how closely related the various product lines are in terms of end use, production requirements, distribution channels or some other way.
Product life cycle and strategies
After launching a product, the company wants to earn a decent
profit to cover all the effort and risk that went it went through
in launching.
• Management is aware that each product will have a life cycle, although its
exact shape and length is not known in advance.
The product life cycle is a helpful concept and can describe:
– the product class
– the product form; or
– a brand
Product life-cycle strategies
The product life cycle has 5 distinct stages:
Product development Introduction Growth Maturity Decline
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Product development
A period of: • slow sales • no profits • high investment costs.
Introduction
A period of slow sales
growth but non-existent
profits due to expense
of introduction
Growth
A period of
market acceptance
and increasing profits
Maturity
A period of
• slowdown in sales growth
• a levelling off or
decline in profits
Decline
Both sales and
profits fall off
Product life cycles:
Objectives and strategies
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Why pricing is important
• Price is the only element in the marketing mix that produces revenue. It is one of the most flexible marketing mix elements – can be changed
quickly Prices have a direct impact the bottom line. Part of the overall value proposition - key role in creating customer value
and building customer relationships.
Considerations in setting price
The price will fall somewhere between
a price that is too high to produce any demand, and
a price that is too low to produce a profit.
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Three main approaches to pricing
1. Customer-value based pricing – Good value pricing – Value-added pricing 2. Cost-based pricing 3. Competition-based pricing
Customer value-based pricing
Setting the price based on buyers’ perceptions of value, not the seller’s cost
Good-value pricing
Offering just the right combination of quality and good service at a fair
price.
– Introducing less expensive versions of established brand
– Redesigning existing brands to offer more quality
(or same quality for less)
– Every-day-low-price (EDLP) vs High-low pricing
Value-added pricing
Rather than cutting prices to match competitors’ prices,
marketers adopting this strategy attach value-added features and
services to differentiate their offerings, and this supports higher prices.
Cost-based pricing
Setting prices based on the costs of producing, distributing and selling product, plus a fair rate of return.
– Companies with lower costs can set lower prices that result in smaller margins but greater sales and profits (low cost producer).
– Other companies intentionally pay higher costs so that they can add value and claim higher prices and margins (differentiator).
Total costs
Fixed costs + variable costs
Fixed costs AKA overhead costs are costs that do not vary with production level
Variable costs are costs that tend to vary with production level
Breakeven pricing
Breakeven pricing (or target return pricing) is setting the price to break even on the costs of making and marketing a product, or to make the desired profit
Competition based pricing
• Setting prices based on competitor’s strategies, costs, prices and market offerings. Consumers make their judgements of product value by comparing the prices that competitors charge for similar products. The goal of competition based pricing is not to match or beat competitors’ prices, rather to set prices according to the relative value created versus
competitors.
Competition based pricing
Actions available
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New-product pricing strategies
Market skimming
Market penetration
Market Skimming pricing
Setting a high initial price for a new product to skim maximum revenue
from the segments willing to pay the high price; the company makes
fewer but more profitable sales
• Market-skimming pricing makes sense only under certain conditions.
– HIGH QUALITY
– HIGH DEMAND
– LACK OF LOW PRICE COMPETITORS
-SHOPPING AND SPECIALTY
Market penetration pricing
Setting a low price for a new product in order to attract a large number of
buyers and a large market share. The high sales volume results in falling costs, allowing the companies to cut
their prices even further.
Market-penetration pricing makes sense under the following conditions.
– PRICE SENSITIVE MARKET – LOW BULK PRODUCTION COSTS – MAINTAIN LOW PRICE SHORT PURCHASE INTERVALS CONVENIENCE GOODS
Product-mix pricing strategies
Product-line pricing Optional-product pricing Captive-product pricing By-product pricing Product-bundle pricing
Product-line pricing
Setting prices across an entire product line
Optional-product pricing
Pricing optional or accessory products sold with the main product
Captive-product pricing
Pricing products that must be used with the main product
By-product pricing
Pricing low-value by-products to get rid of them or to make money on them
and the main products
Product-bundle pricing
Pricing bundles of products sold together
Public policy and pricing
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Supply chains and the value delivery
Marketing logistics (physical distribution) are the tasks involved in planning, implementing and controlling the physical flow of materials and final goods from points of origin to points of consumption in order to meet the needs of customer at a profit
Right product, to the right customer, at the right time!
Value delivery network
Value delivery network is the network made up of the marketing
organisation, suppliers, and distributors and, ultimately, customers who
partner with each other to improve the performance of the entire system.
Supply chains and the value delivery
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Multichannel distribution system
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Trends in channel organisation
Key trends in channel organisation:
- Growth in online marketing
- Growth in direct marketing
- Disintermediation
Disintermediation
The removal of marketing channel intermediaries by goods or service
producers, or the displacement of traditional resellers by new and
different types of intermediaries.
Channel design and management decisions
Marketing channel design
- Analysing consumer needs
- Setting channel objectives
- Identifying major channel alternatives:
- Evaluating the major alternatives
The promotion mix
A company’s total promotion mix also called its marketing communications mix
It is a blend of • Advertising • Public Relations • Sales Promotion • Personal Selling • Direct & Digital Marketing
Advertising
Any paid form of presentation and promotion of
ideas, goods or services by an identified sponsor.
- Television
- Outdoor
- Radio
- Internet
Advertising
Advantages
• Broad geographic reach • Relatively low cost per exposure • Creative & expressive formats • Useful for creating awareness and long term image • Can trigger quick sales
Advertising
disadvantages
• Lacks persuasive power /
impersonal
• One-way communication
• High cost of main advertising media (eg TV)
Promotion mix strategies
Marketers can choose from two basic promotion mix strategies:
Push
Pull
Most companies use some combination of both push and pull.
Push
Directs marketing activities
(primarily personal selling and trade promotion) towards channel members
to induce them to carry the product and to promote it to final consumers.
Pull
Directs marketing activities (primarily advertising and consumer promotion)
towards final consumers to induce them to buy the product
Public Relations
Building good relationships with the company’s various public by obtaining favourable publicity, building up a good corporate
image, and handling or heading off unfavourable rumours, stories or events.
Press / Media releases • Sponsorship • Special events • Experiential • Networking
Public relations advantages
• Highly credible • Able to reach many prospects • Can “dramatise” the message • Is very effective when used with other types of promotion
Public relations disadvantages
- Tends to be under-utilised
* Used as an after-thought
Public Relations
Public relations uses several tools.
- News
- Special events
- Written materials
- Audio visual materials
- Corporate identity materials
- Storytelling and engaging using online materials
Personal Selling
Personal presentation by the firm’s sales force for the
purpose of making sales and building customer
relationships.
- Sales presentation
- Trade shows
- Tele-sales
Personal selling advantages
• Effective for building preference, conviction and action • Interpersonal communication • Retains consumer interest for longer • Cost effective in markets with high ticket items or where there are few buyers
Personal selling disadvantages
• Requires long term management commitment • Cost: US & Australian companies spend 3 times as much on personal selling as on advertising
Salesperson
An individual representing a company to customers by performing one or more of the following: • Prospecting • Communicating • Selling • Servicing • Information gathering • Relationship building
Sales Promotions
Short-term incentives to encourage the purchase or
sale of a product or service.
- Discounts
- Coupons
- Demonstrations
- Point of sale
- Incentive programs
- Merchandising
Sales Promotions advantages
• Varied tool includes coupons, POS materials, premiums and more • Attracts consumer attention and provide incentives to purchase • Invites and rewards quick sales
Sales Promotions disadvantages
• Sales promotion effects
are often short lived
• Not as effective as
advertising or selling
Consumer promotions
- Free samples
- Premium offers
- Loyalty programs
- Contests
- Coupons
- Discounts
- Refunds
- Rebates
- Point of purchase
- Event sponsorship
Other forms of promotion
Ambush marketing
Guerrilla marketing
Product placement
Plug
Ambush marketing
presenting marketing messages at an event that is
sponsored by an unrelated business or a competitor
Guerrilla marketing
tactical use of an aggressive and unconventional
marketing approach to grab attention
Product placement
paid inclusion of products in movies, television shows,
video games, songs and books
Plug
When the media overtly promotes a product within a program rather than as a separate advertisement
Direct marketing
Interacting directly with carefully targeted individual
consumers and communities to both obtain an immediate response and build lasting customer relationships.
- Catalogues
- Telemarketing
- Electronic marketing
- Network marketing
Direct Marketing advantages
• Highly personalised form of communication • Immediate and customised • Interactive • Suited to highly targeted communications and relationship building
Direct Marketing disadvantages
Can be ignored
• Getting the frequency
right can be difficult
Direct marketing methods
Direct print and reproduction
Direct response TV and radio
Telemarketing and telesales
Kiosks and electronic dispensing
Digital marketing methods
Paid
Owned
Earned
Paid
Paid refers to any digital advertising that a
business pays for. This can include
• online advertising • search engine marketing (SEM) • mobile marketing • influencer marketing • public relations that is used to stimulate publicity
Owned
Owned refers to any digital channel owned by a business where content is controlled and governed by the organisation. This can include: • company websites and microsites (SEO) • branded blog sites • database and email marketing
Earned
Earned refers to content that is generated via people outside of the company by customers, consumers and key media figures.
This can include: • social media networks • word of mouth (buzz) • viral marketing (reposting and sharing) • review sites and testimonials
Problems of mass marketing
• Mass-marketers often have trouble competing with more-focused
firms that do a better job of satisfying the needs of specific segments
and niches.
Drawbacks of differentiated marketing
- Differentiated marketing increases the costs of doing business.
- Developing separate marketing plans for the separate segments requires extra marketing research, forecasting, sales analysis, promotion planning and channel management.
Risks of concentrated marketing
• It does have risks due to
– the reliance on one or a few segments if the market shifts
– larger companies decide to enter the niche
2 Approaches of competition based pricing
• Two approaches:
– High price-high margin
– Low price-low margin
• If a company creates greater value for customers, higher prices are justified.
Define the product life cycle (PLC)
The product life cycle consists of five stages: product development, introduction, growth, maturity and
decline.
Product development stage
During the product development stage, the company is developing and testing their marketing mix.
This is a period of slow sales due to a test market, no profits and high investment costs.
Introduction stage
After the company has fine-tuned their offering, the introduction stage, profits are negative,
awareness is low, promotional efforts are intense, and distribution is a work in progress.
Growth stage
The company should break even as the growth stage is reached, as customers and demand increase.
The intense promotional effort continues where branding messages are heavily reinforced.
Distribution gaps need to be identified and corrected as do any product problems. Profits should
increase rapidly and show the highest profit-to-sales ratio during late growth.
Maturity stage
However, profits decline during maturity and therefore, competition based on price arrives.
Repositioning may occur to extend the product life cycle which will take the product back through
introduction and growth curves except now the product and brand is established therefore the
promotional intensity may not be as high as initially.
Decline stage
Profits usually drop further during the decline
stage and so any investment in the product is no longer viable
Marketers and producers have many choices when deciding on the ideal marketing channel
structure. Under what conditions is a producer most likely to use more than one marketing
channel?
A producer uses more than one marketing channel to reach diverse target markets, such as when the
same product is directed to both consumers and organisational buyers. A producer may use more than one channel when they need to be available to a large number of customers, and at as many convenient locations as possible. By using more than one intermediary, the producer benefits from a lower number of transaction than if they were to deal directly with each customer or consumer. They are also able to increase the value to the customer by improved
accessibility to the product. Overall, using a multi-channel intermediary structure should improve the
efficiency and effectiveness of the supply chain and thereby increase value and satisfaction for the
customer.
The three typical distribution channels are:
Producer direct to the consumer or end user
Producer to retailer to consumer
Producer to wholesaler to retailer to consumer:
Producer direct to the consumer or end user
this channel is the shortest channel. It is growing in
use as many producers take advantage of the improvement in technology and choose to sell directly to consumers via the internet. An example of a consumer product that uses this channel of distribution is Domino’s pizza, who sell directly to the consumer via their website
Producer to retailer to consumer
This method is often used by producers of shopping goods such as clothing that requires to be fitted (such as jeans) or home appliances. Department stores are
an excellent example for this type of product
Producer to wholesaler to retailer to consumer:
this is a common choice for producers who have
products that are suitable for intensive distribution and would struggle to deal with all retailers that could potentially sell their product. This method is often applied by convenience goods producers such as a chewing gum producer.
Easy access to information
The glut of information available on the internet and elsewhere means that most companies, regardless of size, have reasonable access to low cost or no cost information. Gathering information no longer requires big budgets or special skills. Simple access to volumes of information is no longer unique and does not confer a competitive advantage.
Easy access to information
The process of converting information into customer insights
The process of converting information into customer insights, on the other hand, is a value adding
activity that requires real skill on the part of the researcher. Data can be interpreted in many ways.
Therefore, companies with access to similar data inputs are likely to arrive at very different customer
insights. While ability to turn simple facts and figures into deep insights is more important in the digital age, it remains a skill that is rare. Companies with highly developed skills in this area obtain competitive
advantage.
PATAGONIA
CONSUMER DECISION MAKING PROCESS
Need Recognition
The buyer recognises a need, triggered by internal or external stimuli. The buyer has an outdoors trip planned and realises they will need outdoor-adventure apparel.
PATAGONIA
CONSUMER DECISION MAKING PROCESS
Information search
The buyer seeks out information about products or services with potential to satisfy the need. The buyer will discover that Patagonia “build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis”.
PATAGONIA
CONSUMER DECISION MAKING PROCESS
Evaluation of alternatives
“before a consumer purchases a Patagonia product, he or she can explore what materials the product is made from, how it is made, how it is transported and ultimately made available for him or her to purchase. Patagonia provides consumers with opportunities to gain product knowledge and interact via its website and communication campaigns. Providing this information offers a pathway to create value via educating and sharing knowledge with consumers in the pre-consumption phase.”
The consumer processes information in order to arrive at brand choices. The consumer will decide on Patagonia due to their commitment to quality and CSR.
PATAGONIA
CONSUMER DECISION MAKING PROCESS
Purchase Decision
The consumer forms a purchase intention and ultimately makes the actual purchase. The consumer purchases a Patagonia product.
PATAGONIA
CONSUMER DECISION MAKING PROCESS
Post-Purchase behaviour
Following purchase, the consumer will engage in a variety of post-purchase behaviours –including satisfaction, formation of future purchase intentions and loyalty intentions. Patagonia ensure satisfaction, formation of future purchase intentions and loyalty intentions as “once a consumer purchases a product, Patagonia’s main goal is to deliver a premium quality product for the consumer to experience. Maintaining a level of premium quality allows Patagonia to achieve a high standard of value while consumers use (value-in-use) its products. The craftsmanship of its products is guaranteed. Patagonia believes in the quality of its products so much that it offers consumers the option (and actually prefers they take up that option) to fix products that have simply worn out, rather than having them buy new products. Through its ‘Repair is Radical Act’ and ‘Worn Wear’ initiatives, Patagonia builds more value with consumers by providing them with instructions on how to maintain, care for and repair their products. To many consumers, this is a sign of a high-quality”.
PATAGONIA
Segmentation
Patagonia have segmented its market through a variety of bases. They have conducted demographic segmentation using variables such as income. They have conducted psychographic segmentation using variables such as values. They have conducted behavioural segmentation using variables such as user status.
PATAGONIA
Profile of a typical consumer
Age: 18+ (mainly adulthood) Income: Medium and above Socioeconomic status: Medium and above Values: Quality, CSR, Environmental protection Personality: Adventurous
Pros of focusing on quality
- Allows the business to focus on quality and develop quality leadership. Antz Inya Pants can cater to the Coffee connoisseur by creating the “perfect coffee” and there by differentiate in this market.
- It allows for the development of technology that can be then used for other related products. Development of other related products based on the perfected technology/process kombucha, Kiefer, bubble tea etc
- Scale economies are possible as the focus in on getting that one product right.
- It allows for outsourcing or in this case franchising opportunities based on the development of one perfect product.
Cons of focusing on quality
Leads to Marketing Myopia and missed opportunities. There may not be a market large enough for your product.
• Obsolescence: If you focus too much on product features and not on the benefits, you are more
vulnerable to a new competitor, change in technology or other market actors.
• Makes it difficult to launch related products as there is no image building for the brand that can be transferred over to other products.
What do you understand by Integrated Marketing Communication? What promotion mix would you suggest for Antz Inya Pants if it decides to expand its business in to franchising.
Integrated marketing communication is the careful integration of a company’s many communications
channels to deliver a clear, consistent and compelling message about the organisation and its brands. The answer requires the selection of the most appropriate promotional mix to recommend. Answers will carefully select a balance from a few elements of the promotional mix - advertising, sales promotion, direct and digital marketing, personal selling, and/or public relations. The answer will contain a strong rationale (advantages and disadvantages) of using the promotional element, as well as address case specifically (generic answers that could be applied to any situation would be considered to be a weaker answer).
PATAGONIA
Patagonia overview
● Founded in Ventura, California, USA ● Global with 32 stores in the US, and 36 internationally ● Annual turnover USD 750 million ● Outdoor-adventure apparel
PATAGONIA
FOUNDER QUOTE
“make the very best product,
make it as durable as possible”
PATAGONIA
Marketing approach and value creation
“Marketing success of any company’s products
centres on creating value with consumers”
Patagonia excels at creating value with consumers across the entire consumption experience. ● the materials used ● manufacturing processes ● transport and logistics ● promotional communication ● purchase ● disposal of its products
PATAGONIA
Mission and strategy
Philosophy of a product-oriented strategy: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions
to the environmental crisis.
Patagonia’s strategy is to restrain growth by only making decisions that are good for the planet.
● Diversified into outdoor excursion foods
● Invested in Yerdle
● Listed as a ‘B-corp’ or benefit corporation
PATAGONIA
Targeting
Rather than cutting back marketing investment or reduce quality of products during the GFC, Patagonia increased its communication of its philosophy - tapping into: ● Frugality ● Value for money ● Reusing ● Repairing ● Recycling
The strategy was met with some scepticism and whether it was genuine and authentic.
PATAGONIA
Corporate Social Responsibility (CSR)
Along with well-positioned value propositions and consumer value creation opportunities, Patagonia’s corporate social-responsibility initiatives are often considered exemplary.
Initiatives include: ● Sustainable Apparel Coalition ● Footprint Chronicles ● Worn Wear ● 1% for the planet ● Environmental Grants Department ● Cleanest Line Common Thread ● Tools Conferences
PATAGONIA
Competitors
North face
Helly Hansen
Kathmandu
North Face
Positioning:
Product: High quality
Price: High
Promotion: Focus on higher quality at higher prices
Targeting/Place/Segmentation: towards college students, climbers, mountaineers, skiers, snowboarders, hikers, and endurance athletes.
Helly Hansen
Positioning:
Product: Medium quality
Price: Slightly cheaper
Promotion: Focus on medium quality at medium prices
Targeting/Place/Segmentation: Sports, survival, mountain, ocean, slightly more casual
Kathmandu
Positioning:
Product: High quality but casual too
Price: Very Slightly cheaper
Promotion: Focus on high quality general travel. Club memberships and sales
Targeting/Place/Segmentation: Outdoor and travel apparel, gear and accessories, high quality but casual too
