MARKETING “BIG PICTURE”
Other
Organizations
Substitutes
Suppliers
Internal
Competitive
Rivalry
Forces
Alliances
Ownership
CONVENIENCE
Intl.
Trends
PRICE
PRODUCT
Partnerships
Social
BUYERS
Target
Customer
PROMOTION
DISTRIBUTION
SERVICE
Environmental
Forces
Economic
Technological
Relationships
Special Interest
Regulatory
Forces Driving International Competition
Threat of
new entrants
Suppliers
Capabilities
&
Ability to
Meet
Needs
Potential
entrants
Industry
competitors
Number and
Economic Ability
Buyers
Rivalry among
existing firms
Threat of
Substitute Products
or Services; Current
and Potential
Developments
Substitutes
Complementors
EVOLUTION OF MARKETING CONCEPT
PRODUCTION
ORIENTATION
PRODUCT
ORIENTATION
SELLING
ORIENTATION
MARKET
ORIENTATION
SOCIETAL
ORIENTATION
The Marketing Concept
Customer
Satisfaction
Total Company
Effort
The
Marketing
Concept
Profit
FOCUS
MEANS
Products
Selling
and
Promotion
ENDS
Profits
Through
Sales Volume
THE SELLING CONCEPT
Products
Integrated
Marketing
Profits Through
Customer
Satisfaction
THE MARKETING CONCEPT
BECOMING MARKET DRIVEN
Internal Orientation
Persuade customer to
have what company
has
Generic product,
production process
and delivery system
Market Orientation
Market
Focus
Persuade company to have
what customer wants
Product
Focus
Augmented product,
customer value and market
niches
Competitive
Advantage
Quality and service
superiority
Volume, costs profit
margins
Objectives
Profitable use of resources,
market position, customer
satisfaction
Short term, reactive
Time
Horizon
Medium and long run view
of threats and opportunities
Lowest delivered
cost
Market-oriented Action










Market and customer feedback
Focus on target market
Customer satisfaction orientation
Quality obsession
Innovation
Interfunctional teamwork
Trade partnership
Strong communications program
Green consciousness
Globalization
MARKET ORIENTATION
Customer
Orientation
LONG-TERM
FOCUS
PROFITABILITY
Competitor
Orientation
Interfunctional
Coordination
Customer Orientation: 3 Types of Marketing
Company
INTERNAL
EXTERNAL
Value
Employees
INTERACTIVE
Customers
Designing a Customer-Oriented Organization
Implement the marketing concept
Build a customer-driven organization
Establish a good marketing info system
Marketing plans should be based on
segmentation analysis
Hire the best talent
Stress operational efficiency
Develop customer-centered programs
Continually measure and fine-tune
your customer focus
KOHLI/JAWORSKI MARKET ORIENTATION MODEL
Top Mgt.
- Emphasis
- Risk Aversion
Employees
- Organizational
Commitment
- Esprit de Corps
Interdepartmental
Dynamics
- Conflict
- Connectedness
MARKET
ORIENTATION
- Intelligence Generation
- Intelligence Dissemination
- Responsiveness
Environment
- Market Turbulence
- Competitive Intensity
- Technological
Turbulence
Organizational Systems
- Formalization
- Centralization
- Departmentalization
- Reward Systems
Source: Jaworski, B. and Kohli, A. Journal of Marketing July, 1993
Business
Performance
Key Marketing Trends
1)
END OF INDUSTRIAL AGE
2)
NEW EMERGING MARKETS
3)
GROWTH OF MATURE MARKET
4)
REENGINEERING THE HOME
5)
END TO THE “REIGN OF QUANTITY”
6)
REINVENTING THE STORE
7)
THE DEATH OF “Product Marketing”
Source: Celente, G.Trends 2000 ; Popcorn, F Clicking
10 BIG EMERGING MARKETS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
ARGENTINA
BRAZIL
CHINA
INDIA
INDONESIA
MEXICO
POLAND
SOUTH AFRICA
SOUTH KOREA
TURKEY
Source:: Garten, J. The Big Ten: Big Emerging Markets and How
They Will Change Our Lives, BasicBooks, 1997
Key Marketing Trends (cont.)
8)
TURBO MARKETING
9)
ANCHORING
10) FEMALE-THINK
11)
99 lives
12) MARKET SURPUS VS MARKET SHARE
13) RESPONSE MARKETING
14) EFFICIENT CONSUMER RESPONSE
15) ELECTRONIC COMMERCE
THE QUESTION
 Home Furnishings (94 percent)
 Holidays (92 percent)
 Homes (91 percent)
 Bank Account - New (89 percent)
 Medical Insurance (88 percent)
 Automobiles (80 percent)
and the answer is..
RESPONSE MARKETING
Mode of Promotion
Bases of Communication
Ave. (mass)
Addressable
Non-addressable
Present State
of Database
Marketing
Traditional
Promotion
(TV adv.)
Differential
Area of
Opportunity
MEASURING SHARE OF TOTAL
MARKET SURPLUS
($ Millions)
surplus
Consumer
Price
cost
Net Price
to Retailers
Raw Materials
price to
Manufacturers
Suppliers
Manufacturers
Retailers
Total
Market
Surplus
Key Marketing Trends (cont.)
16) THE “VALUE” IMPERATIVE
17) TRANSPARANCY OF THE CORPORATION
18) CULTURAL, HISTORICAL TOURISM
19) EATING SCARED
20) INTEGRATED MARKETING
CUSTOMER VALUE TRIAD
Value-Based
Prices
CUSTOMER VALUE MAP: LUXURY CARS
Higher
1.25
Inferior Customer
Value
*
Lexus
LS 400
Relative
Price
BMW
5-Series
*
Lincoln
Continental
1.25
*
*
Acura
Legend
Superior Customer
Value
.75
Lower
60
80
Relative Performance: overall score
100
CUSTOMER VALUE BASICS
The customer defines the appropriate
quality, service, and price
Value expectations are relative to the
competition
Value expectations are dynamic
Quality and service delivery are the
responsibility of the whole channel
Maximizing customer value requires total
organizational commitment
THE VALUE MATRIX
High
Well-Intentioned
Value-Creating
Adversarial
Bureaucratic
Low
Low
High
Process
Integrated Marketing
Communications
Integrated Marketing Communications
The concept of designing marketing activities
–
advertising, personal selling, sales
promotion,
and public relations -- to provide a consistent
message across all audiences is referred to
as integrated marketing communications
(IMC).
THE HIERARCHY OF STRATEGY
Corporate Strategy
Business Strategy
Functional Strategy
IRWIN
© Times Mirror Higher Education Group, Inc.
“PLAN IS NOTHING PLANNING IS EVERYTHING”
Executive
Summary
Marketing
Strategies
(S.T.P.)
Current
marketing
situation
Action
Programs
(5 W’s)
Threats and
Opportunities
Budgets
objectives
and Issues
(M.S.A.F.)
Controls
MISSION
- Why are we here?
GOALS
- What should we do?
STRATEGIES - How should we do it?
VISION
LONG-TERM
 SOMETHING TO BE PURSUED
A MOTIVATING STATEMENT
PROVIDES GUIDANCE/INSPIRATION
VISION STATEMENTS
SONY:
Sony is a pioneer and never intends to follow
others. It shall always be a seeker of the
unknown...Sony has a principle of respecting
and encouraging one’s ability... and always
tries to bring out the best in a person
COCACOLA :
To put a Coke within an arm’s reach of every
consumer in the world
JAPANESE AUTO CO.
BELLSOUTH:
“Beat Benz!”
Be Customer’s Best Connection to
Communications, Information, and
Entertainment
MISSION




OVERALL DIRECTION FIRMS WANT TO
GO
SOMETHING TO BE ACCOMPLISHED
A BUSINESS PHILOSOPHY
FIRM’S CORE PURPOSE FOR BEING
MISSION STATEMENTS
SEARS:
Sell a broad range of general merchandise
and services through various types of retail
facilities and direct response marketing
channels in the U.S. , Canada, & Puerto Rico
BAXTER :
HEALTH-
We shall be the leading healthcare company by
providing the best services and products for CARE
our customers, emphasizing innovation,
operational excellence, personal and business
ethics, & the highest quality in everything we do
CLASSIFYING CAPABILITIES
Inside-out Process
Spanning Processes
market sensing
customer linking
channel bonding
tech. monitoring
•
•
•
•
•
cust. order fulfill.
pricing
cust serv. delivery
new product dev.
purchasing
•
•
•
•
•
•
financial mgt.
cost control
technology dev.
integrated logist.
mfg/transform
HRM
Source: Day, G. (1994) J. of Marketing (58) October 37-52
Internal Emphasis
External Emphasis
•
•
•
•
Outside-in Process
Generic Strategies



Overall Cost Leadership
Differentiation
Focus
3 Product Augmenting Strategies
Differentiation
Moderate
Incongruencies
Strong
Incongruencies
LEADER





EXPAND TOTAL MARKET
 create new users
 create new uses
 create more usage
FLANKING
BLOCKING
PRE-EMPTIVE STRIKES
BUNDLE/UNBUNDLE
CHALLENGER





FRONTAL ATTACK
 need 3 : 1 advantage in resources
 find weakness in leader’s strength
FLANK ATTACK
BYPASS
GUERILLA
REDEFINE COMPETITIVE SCOPE
MARKET NICHER






BY END USE
BY CUSTOMER SIZE
BY PRODUCT LINE
BY CHANNEL OF DISTRIBUTION
BY GEOGRAPHY
BY SPECIFIC CUSTOMER
MILES & SNOW 4 BUSINESS STRATEGIES
Emphasis on New Product Growth
Prospector
Analyzer
Defender
Risk Taking
Reactor
McKinsey 7-S Framework
Structure
Strategy
Systems
Shared
Values
Skills
Style
Staff
GE’s “SHARED VALUES”
 RULE
OF NO. 1 OR NO. 2
 INTEGRITY - MANAGER IS RESPONSIBLE
FOR HIS/HER ACTIONS
 ONLY STATISFIED CUSTOMERS CAN
PROVIDE JOB SECURITY
 LEADERS SHOULD SHARE KNOWLEDGE
RATHER THAN WITHHOLD IT
 FUNCTION COLLECTIVELY AS ONE FIRM
AND INDIVIDUALLY AS MANY
BUSINESSES
VALUE CHAIN AND GENERIC STRATEGIES
VALUE
CHAIN
Primary
Activities
GENERIC
STRATEGY
Inbound Logistics
Marketing & Sales
Operations
Outbound Logistics
Cost
Leadership
Service
Differentiation
Support
Activities
Procurement
Firm Infrastructure
Technology Human Resource
Management
Development
Focus
Marketing
Quality
Features
Mix
Options
Product
Style
Brand name
Target
Packaging
Sizes
Market
Services
Warranties Price
Returns
List price
Discounts
Allowances
Payment Period
Credit terms
Place
Channels
Coverage
Locations
Inventory
Transport
Promotion
Advertising
Personal selling
Sales promotion
Public Relations
Marketing Mix for the 90s
M A R K E T IN G E L E M E N T
RANK
C u sto m e r S e n sitiv ity
1
P rod u ct
2
C u sto m e r C o n v e n ie n c e
3
S e r v ic e
4
P r ic e
5
P la c e
6
P r o m o tio n
7
WHAT IS RELATIONSHIP
MARKETING?
The creation and retention of profitable
customers through ongoing collaborative
business and partnering activities
between a supplier and a customer on a
one-to-one basis for the purpose of
creating superior customer value
Question: What 3 Factors Lead to Overall Customer
Satisfaction in Industrial Buyer-Seller Relationships?
Practicing Relationship Marketing








Share Information with Customer
Look for opportunities to “Add Value”
Respond Quickly to Customer Needs
Apply “Mass Customization”
Involve Customer in
product/Service/Process Design
Organize Processes Around Customer
Track Each Relationship - Est. L.T.V.
Deliver Differentiated Messages Based on
Customer Characteristics/Preferences
Reasons for Relationships

Needs and Wants

Customer Retention

Efficiency
Relationship Variables

Trust

Cooperation

Commitment

Dependence

Information Exchange
Core
Product
Augmented
Product
Flaring - Out
Unbundling
Strategy
Added
Augmentation
Strategy
Collaborative
Exchange
Industry Relationship Bandwidth
Pure
Pure
Transactional
Exchange
Continuum of Relationships
Transactions vs. Relationships
• SHORT TERM
• LIMITED INTERNAL
MARKETING
• MARKETING MIX
EMPHASIZED
• BUYER PRICE SENITIVE
• TECHNICAL QUALITY
• FOCUS ON MARKET
SHARE
• RESEARCH IS AD-HOC
• LONG TERM
• SUBSTANTIAL INTERNAL
MARKETING
• INTERACTIVE MARKETING
EMPHASIS
• BUYER LESS PRICE SENSITIVE
• FUNCTIONAL QUALITY
• FOCUS ON “SHARE OF
CUSTOMER”
• RESEARCH IS REAL-TIME
• LIMITED INTERACTION
AMONG FUNCTIONAL
AREAS
• SUBTANTIAL INTERACTION
AMONG FUNCTIONAL
•
AREAS
BUILDING CUSTOMER CENTERED ADVANTAGE
Transactional
Exchanges
Potential
to
Customer
Loyalty
Trust
Relational
Exchanges
Commitment
Marketing
Mix
Elements
Dependence
Customer
Centered
Advantage
Communication
CULTURAL/PROCESS CHANGES REQUIRED FOR PARTNERING
Continuous Business
Processes
Customer
Satisfaction
The Relationship
Marketing Concept
Customer
Retention
The Marketing
Concept
Ad-Hoc Marketing
Programs
CHANGING MARKETING PARADIGM
TRANSACTIONS
REPEATED TRANSACTIONS
LONG-TERM TELATIONSHIPS
BUYER-SELLER PARTNERSHIPS
STRATEGIC ALLIANCES
Key Factors of Successful
Customer-Supplier Relationships
1)
Business Expertise (29 %)
2)
Dedication to Customer (25 %)
3)
Account Sensitivity and Guidance (23 %)
4)
Product Performance & Quality (10 %)
5)
Service Dept. Excellence (9 %)
6)
Confirmation of Capabilities (4%)
VALUE DISCIPLINES
OPERATIONAL
EXCELLENCE
CUSTOMER
INTIMACY
PRODUCT
LEADERSHIP
PRODUCT/MARKET OPPORTUNITY MATRIX
Stages of value
added
Present
PRODUCTS
New
Backward Integration
New Product
Development
Diversification
Product improvement,
line extension
Related
Present
Forward Integration
Market
Penetration
Present
Market
Development
Related
New
Segments
Market Segmentation,Targeting,
and Positioning
Dividing market into distinct
customer subsets
Which buyers to target
Designing the fit between
product offer and needs of the
target mkt.
Criteria for Segmentation
 Responsiveness
 Identification
 Ability
 Profitability
 Stability
BASES FOR MARKET SEGMENTATION
Consumption
patterns
Behavior
Patterns
Psychographic
Socioeconomic
Demographic
Product
User
Price/
Quality
Use or
Application
Positioning
Approaches
Product
Class
Attribute
Competition
High Involvement vs. Low
Involvement Purchasing
High
Involvement
Low
Involvement
Think
Feel
Informative
Affective
(Economic)
(Psychological)
Learn-Feel-Do
Feel-Learn-Do
Habitual
Satisfaction
(Responsive)
(Social)
Do-Learn-Feel
Do-Feel-Learn
Long/
uncertain
New
buy
Modified
buy
Short/
well defined
Decision time and problem definition
Organizational Buying Decisions
Straight
rebuy
Few
Many
Number of people in buying center
and number of suppliers considered
Organizational Buying Center
Initiator
User
Decision
Maker
Influencer
Gatekeeper
Buyer
Comparison of Research Methods
Exploratory
Descriptive
Causal
Comparison of mail, telephone,
and personal interview surveys
Basis of
Comparison
Mail Surveys
Telephone
Surveys
Personal
Interview Surveys
Cost per
completed survey
Usually the least
expensive,
assuming
adequate return
rate
Moderately expensive, assuming
reasonable
completion rate
Most expensive
because of
interviewer’s time
and travel expenses
Ability to probe
and ask complex
questions
Little, since selfadministered
format must be
short and simple
Some, since
interviewer can
probe and
elaborate on
questions
Much, since
interviewer can
show visuals, probe,
establish rapport
Opportunity for
interviewer to
bias results
None, since form
is completed
without
interviewer
Some, because of
voice inflection of
interviewer
Significant, because
of voice and facial
expressions of
interviewer
Anonymity given
respondent
Complete, since
no signature is
needed
Some, because of
telephone contact
Little, because of
face-to-face contact
WHAT’S WRONG WITH THESE QUESTIONS?
1.
What is your income in the nearest hundred dollars?
2.
Are you an occasional or frequent flyer?
3.
Do you like this airline?
4.
How many ads did you see on television last April? This
April?
5.
What are the most salient and determinant attributes in your
evaluation of air carriers?
6.
Do you think it is right for the government to tax airline
tickets
Kinds of samples used in
marketing research
Simple random
samples
Probability
Samples
Stratified random
samples
Cluster
samples
All Samples
Convenience
samples
Nonprobability
Samples
Judgment
samples
Quota
samples
Probability Samples
 Conditions
–
–
List of Population
Equiprobability of
Selection
 Types




Sample Random
Stratified Random
Systematic Random
Area
A SHORT TABLE OF RANDOM NUMBERS
1986
3254
0230
8751
0344
4598
6507
0089
6621
2655
0790
4404
7203
0045
1792
0636
2301
5556
1119
0010
3876
5904
4122
0926
1497
9452
0771
6501
8934
1039
1643
5588
0050
1270
4610
7629
1. Number each item in the universe serially
2. Begin at a preselected place in the table and proceed
systematically utilizing as many rows as are needed; if the
universe is between 10-99, take two digits; if universe is
between 100-999, take three digits at a time
SYSTEMATIC (EXAMPLE)
1
Determine Sampling Interval (N/n)
Population: 500 MBA Students
Sample:
N/n
2
50 MBA Students
500/50 = 10
Draw a Random Number Between 1 - 10
(say the Number is 3)
3
Include students numbered: 3, 13, 23 . . . .
STRATIFIED SAMPLE
(EXAMPLE)
Miami Population
Hispanic 65%
Anglo
25%
Black
10%
Need to Draw a Sample of 1,000
Hispanic
650
Anglo
250
Black
100
1,000
Sample Size/Sampling Error
Sampling error diminishes in inverse
proportion to the square root of the sample
size.
EXAMPLE:
Sampling error is reduced by half if
the sample size is QUADRUPLED.
A sample of 100 produces a sampling
error of 5 percent. To reduce the sampling
error to 2.5 percent, we must increase the
sample size to 400.
Example of “Error Potential”
Question 6: Does this firm purchase Widgets?
( ) Yes
( ) No
Sample Size:
200
Population Size:
10,000
Results: Yes - 50%
No - 50%
Error Potential + 7%
True Population Figure:
Yes 43% - 57%
No 57% - 43%
Percent of Error for Various Samples Sizes
Assume: - “Infinite” Population
- 95% Confidence Level
Sample Size
Error Potential
50
14%
100
10%
200
 7%
300
 6%
400
 5%
600
 4%
800
3.5%
2,500
 2%
Product Life Cycle and Strategic Marketing Decisions
Sales revenue
or profit
Stage of the product life cycle
Introduction
Growth
Maturity
Decline
Total industry
sales revenue
+
0
–
Total industry profit
Marketing
objective
Gain
Awareness
Stress
differentiation
Maintain
brand loyalty
Harvesting,
deletion
Competition
None
Growing
Many
Reduced
Product
One
More versions
Best sellers
Price
Skimming or
penetration
Gain share, deal
Full
product line
Defend share,
profit
Promotion
Inform, educate
Stress
competitive
differences
Reminder
oriented
Minimal
promotion
Place
(distribution)
Limited
More outlets
Maximum
outlets
Fewer outlets
Stay profitable
Growing Your Existing Business





KEEP IN TOUCH
REORGANIZE YOUR SALESFORCE
(“Farmers” & “Hunters”)
ADD VALUE FOR CUSTOMERS
CONDUCT SEMINARS
THINK AND ACT LIKE A PARTNER
THE
FOUR
PRODUCT
LEVELS
POTENTIAL PRODUCT
AUGMENTED PRODUCT
EXPECTED PRODUCT
CORE BENEFIT
Determinants of Service Quality
Reliability
Responsiveness
Competence
Assurance
Courtesy
Communication
Credibility
Empathy
Know the customer
Tangibles
PREFERENCE BUILDING MODES
 NEED ASSOCIATION
 MOOD ASSOCIATION
 SUBCONSCIOUS MOTIVATION
 BEHAVIOR MODIFICATION
 COGNITIVE PROCESSING
 MODEL EMULATION
BRAND EQUITY
Perceived Quality
Name Awareness
Brand Associations
Other Proprietary
Brand Loyalty
Brand Assets
BRAND EQUITY
Name Symbol
Stages in the new product process
Idea generation
Screening and evaluation
Concept Development
Strategy development
Business Analysis
Product Development
Market Testing
and
Commercialization
New Product Adoption Process
Awareness
Interest
Evaluation
Trial
Adoption
•Relative Advantage
•Compatibility
•Complexity
•Divisibility
•Communicability
Diffusion Process and Profiles of Product Adopters
Early adopters
13.5%
Innovators
2.5%
Laggards
16%
Early majority
34%
Late majority
34%
Time
Innovators:
Venturesome, higher
educated, use multiple
information sources
Laggards:
Early majority:
Deliberate, many
informal social contacts
Early adopters:
Leaders in social setting,
slightly above average
education
Fear of debt, neighbors
and friends are
information sources
Late majority:
Skeptical, below average
social status
REASONS NEW PRODUCTS FAIL
1. TOO SMALL A TARGET MARKET
2. TARGET WRONG DEMOGRAPHIC
3. INSIGNIFICANT POINT OF DIFFERENCE
4. NO ACCESS TO MARKET
5. BAD TIMING
6. POOR EXECUTION
7. OFFENDS SPECIAL INTEREST
8. NO SUPERIOR PRODUCT ADVANTAGE
The communication process
Fields of experience
Noise
Channel of
Source
Encode
Message
Communication
Noise
Feedback loop
Noise
Decode
Receiver
Steps in Developing Effective
Communications
 IDENTIFY TARGET MARKET
 DETERMINE COMMUNICATION
OBJECTIVES
 DESIGN MESSAGE
 AIDA, HIERARCHY OF EFFECTS
 TYPES OF APPEALS
 HIGH IMPACT WORDS
 MESSAGE FORMAT
 SELECT COMMUNICATION
CHANNEL
 ESTABLISH BUDGET



% OF SALES
COMPETITIVE PARITY
OBJECTIVE TASK
 DECIDE ON PROMOTIONAL MIX
 MEASURE RESULTS
 MANAGE & COORDINATE PROCESS
Hierarchy of Effects
AWARENESS
KNOWLEDGE
LIKING
PREFERENCE
CONVICTION
PURCHASE
Advantages and Disadvantages
of Major Advertising Media
Medium
Advantages
Disadvantages
Television
Large audience
High cost
Radio
Low cost
No visual component
Magazines
High quality color
Requires long lead
time
Newspapers
Coverage of local
market
Short life span
Direct Mail
Targeted audiences
“Junk mail” image
Outdoor
Repeat exposures
Must be short, simple
Internet
Interactive
Keeping Site “Fresh”
Developing Effective Web
Advertising

HAVE A REASON FOR BEING THERE

PROVIDE ORIGINAL CONTENT

USE “EYE-POPPING” GRAPHICS

MAKE SITES “INTERACTIVE”

SITES MUST BE DYNAMIC AND
CONSTANTLY “REFRESHED”

OFFER “RESPONSE MECHANISMS”
Distribution Intensity Illustrations
A
Trading area
B
+
+
+
+
+
C
+++
++++
++++
++++
+++
Exclusive
distribution
Selective
distribution
Intensive
distribution
Cadillac automobiles
Caterpillar equipment
Illustrations
Ethan Allen furniture
EstJe Lauder cosmetics
Revlon cosmetics
Timex watches
What Promotions Must Offer to Win with Retailers
1.
HELP DIFFERENTIATE RETAILER FROM
COMPETITORS
2.
BUILD CATEGORY SALES
3.
BE EASY TO EXECUTE
4.
ON
FOLLOW LONG LEAD TIME TO SECURE POSITION
RETAILER’S PROMOTIONAL CALANDER
5.
GIVE SHOPPERS VALUE WITHOUT TOO MUCH WORK
FACTORS INFLUENCING
DEMAND ELASTICITY







UNIQUE VALUE EFFECT
SUBSTITUTE AWARENESS EFFECT
DIFFICULTY OF COMPARISON EFFECT
TOTAL EXPENDITURE EFFECT
SHARED COST EFFECT
SUNK INVESTMENT EFFECT
BUYERS ARE SLOW TO CHANGE
BUYING HABITS
PRICING TACTICS MATRIX
SELLER
MARGINAL
NEED
MODERATE
NEED
ACUTE
NEED
ACUTE
NEED
MODERATE
NEED
MARGINAL
NEED
NOTE PRICE ELASTICITY OF DEMAND:
INVERSELY
RELATED TO THEACUTENESS OF NEED. WHEN THE
NEED IS MARGINAL, PRICE ELASTICITY IS HIGH;
WHERE NEED IS ACUTE, PRICE ELASTICITY IS LOW.
PERCEIVED VALUE
(Caterpillar Example)
+
+
+
+
$ 90,000 - Price of Competitor’s Tractor
$ 7,000 - Premium for Superior Quality
$ 6,000 - Premium for Superior Reliability
$ 5,000 - Premium for Superior Service
$ 2,000 - Premium for Longer Parts Warranty
$110,000 - Price to cover Value Package
-
$ 10,000 - Discount
$100,000 - FINAL PRICE
Sources of Pricing Pressures
Changes in technology
Increase in the number
of competitors
Increased internal
expectations (forecast)
and sales force
reactions
Customer
experience
Price driven
competition or
changes in
competitive
management
Equilibrium Price
Price deflectors
(structural changes
Inflation
FUD
Product enhancements
Product extensions
Major Challenges Facing
International Marketers
 Cultural
Misunderstanding
 Political Unrest
 Barriers in Entering Foreign Markets
 Exchange/Ownership Restrictions
 Shifting Economic Conditions
 Selection of Local Partners
 Proper “Local” Positioning
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