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IBA Year 1 Marketing Management Literature Summary
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Marketing Management Literature NotesWeek 1
Marketing Strategy= a plan of action that is specifically created to achieve certain objectives (e.g.
sales volume, growth rate, return on investments).
Strategies are developed on the level in the organization of: corporate, divisional, business unit
and department.
The Elements of Marketing Strategy
-Product/market selection= what markets will be served with what product lines
-Price= what price will be set for individual products, discounts, rental options
-Distribution systems= channels through which products and services move to end-users
-Market communications= e.g. direct mail, trade shows, telemarketing
Furthermore: product service, technical service, plant location (geographic market boundaries)
Marketing Mix
1. Product/market selection
Choosing the right target market, right product and right production technology
Product= the total package of attributes the customer obtains when making the purchase
Perceived value: resembles the value customers already see in the product
Potential value: realizing the potential value requires educating the customer about the product
benefits -> market communications
Market= a pocket of latent demand (consumer incomes, trends, new technologies and others
affect market demand).
Market segment= a set of potential customers that are alike in the way they perceive and value
the product, their buying behavior and in the way they use the product.
Market can be segmented by the variables
-Demographic (income, age, sex ethnicity)
-Geographic (market potential, trade regulations, economical shipping distance)
-Psychographic (lifestyle decisions, attitudes toward self, work, home, family and group identity)
-Use/application (how it will be used bu consumers/industrial purchasers)
Factors that influence the product/market selection: value of the product, long-run growth
potential, resource commitments, competitive positioning, product/market fit.
2. Price
Pricing decisions are affected by five factors
-Supply/demand (fluctuate the price)
-Production and overhead costs (set the floor in pricing decisions)
-Intensity of competition (price pressure-> intrabrand competition puts pressure on price levels as
resellers of the same brand compete for market share, price competition generates interbrand
competition and market prices decline)
-Bargaining power of buyers (able to put a downward press on prices)
-The value the product can offer (to maximize profits, pricing the product according to the values
of the product given by consumers)
Black-market phenomenon= the low-price products sold in one market will make their way across
segments into markets where higher prices would normally prevail.
, Skimming= introducing the product first with a high price tag and after bringing the price down.
Penetration pricing= quickly invading the market by setting low prices ->replaces competition.
Conditions: the product must be defect-free, have sufficient production capacity, distribution
channels must be available for potential buyers and product adoption should be quick.
Factors lifting the price: price-leadership, high switching costs, high product value
Factors reducing the price: high buyer bargaining power, brand competition, black-market trade
3. Place/Distribution Channels
Channel support is essential to successful distribution, it is important for the supplier to make
sure the retail prices and margins do not decline.
Direct sales reps: employees that call directly on its customers.
Sales agents: independent operators who generally carry the lines of several suppliers.
Distributor: those who buy from many suppliers and have differentiated product lines.
Retail outlets: large infrastructure that supplies end-products and services to consumers and
business buyers.
Successful distribution depends on how effectively suppliers support the channels through which
their products move to markets.
Factors that help the supplier gain strength in between the channels: selective distribution instead
of intensive distribution, superior quality and breadth of the product line, high supplier-reseller-
interdependency.
4. Promotion/market communications
Media advertising, personal selling
Push-strategy: involves pushing the product to end-users, e.g. encouraging the resellers to
promote the product, effective when the way the product is presented at the point-of-sales is
important.
Pull-strategy: focus on creating end-market demand, effective if the brand name is meaningful to
the buyer and if the benefits can be communicated through mass media.
Marketing Myopia
Business managers often make the mistake of incorrectly defining the industry they are operating
in. This sets restrictions to managerial thinking and strategy formulation, leading to the loss of
customers or even the extinction of the company.
Perceived growth industries are actually industries in a phase of growth, but inevitably heading to
decline.
Cycle
1. Assumption that the expanding population will assure future growth
2. Lack of perceived and credible substitutes for the product
3. Too much faith in mass production and the advantages of reducing unit costs as output rises
4. Risks involved in research & development
Customer needs: the most important customers wants or
needs
Company’s offerings: how customers perceive what the
company offers
Competitive offerings: how customers perceive what
competitors offer
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