Tuesday, April 10, 2012

Organizational Strategies Based on Products and Markets

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Organizational Strategies Based on Products and Markets

Organizational Strategies based on products/markets focuses on products offered and markets served. An organization using this strategy has four options available to achieve its objectives. It can grow in a variety of ways by concentrating on present or new products and on present or new customers. These four ways are Market

Penetration Strategies, Market Development Strategies, Product Development Strategies, and Diversification.

Market Penetration Strategies These organizational strategies focus on improving the organizations present products with its present customers. Tactics used to carry out this strategy could include price reductions, advertising that stresses the benefits of a product, making the products more available, or using different packaging. Overall, market penetration strategies concentrate on improving efficiency of various functional areas in the organization.

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1. snack products company trying to get its present customers to purchase more of its product.

. A bank trying to get its present customers to use their cards more often.

. Procter and Gamble used this by slashing prices on over 40% of its product offerings to stimulate consumer demand.

. Market Development Strategies Using this, an organization would seek to find new customers for its present products. Using this, companies must establish a foothold in the market, sometimes spending alot of money educating consumers why they should buy your product.


1. an athletic company deciding to develop a line of fitness clothing for children.

. A automobile manufacturer deciding to sell automobiles in Europe because of a recent transition to a free market system.

. A govt. social service agency trying to get people who have never used their services before.

. Product Development Strategies With this strategy, the new products developed would be directed towards present customers


1. A college developing programs for nontraditional students.

. A soft drink manufacturer developing a midcalorie or clear cola.

. A candy manufacturer offering fat free candy.

4. Diversification When a company seeks new products for customers it is not serving at present.


1. A cigarette manuf. goes into real estate development.

. A cosmetic manuf. acquiring a baby care products company.

. a) What are the differences between the General Electric Portfolio Model and the Boston Consulting Model? Pages 5 to 7.

a. SBU � can be a single product, product line, division or a distinct business

b. All portfolio models can be used to

i. Classify SBUs to determine - future cash contributions

ii. Future resource requirements

iii. Examine the competitive position of the SBU and the chances for improving the SBU’s contribution to profitability and cash flow

c. BCG model classifies Strategic Business Units (SBU) in terms of

i. Based on the assumption that profitability and cash flow are closely related.

ii. Thus, relative market share and the growth rate of the market the SBU is in.

d. GE model emphasizes all potential sources of strength not just market share and all factors that influence the long-term attractiveness of a market not just growth rate.

. b) What are the workings of each model? Under what circumstances should each model be used? Use examples.

a. BCG

i. Stars � high share or high-growth market

1. Attract competitors

. Cash users because they are growing and the firm needs to protect their market share position

ii. Cash Cows � market leaders

1. Market not growing rapidly

. Cash generators of the firm

iii. Dogs � low share of a high-growth market

1. Not large sources of cash

iv. Question marks � low hare of a high-growth market

1. Great potential � require great resources to build market share

b. Management must determine role � 4 objectives

i. Build share � sacrifices immediate earnings - promising question marks to become stars

ii. Hold share � preserve the SBU’s market share �strong cash cows � continue to yield large cash flow

iii. Harvest � increase products short term cash flow w/o concern for long run impact � weak cash cows, weak question marks and dogs

iv. Divest � selling or divesting the SBU � dogs, question marks cannot afford to finance for growth

c. GE � all SBUs are classified in terms of

i. Industry attractiveness-made up of

1. Market size, market growth, profitability, cyclicality, ability to recover from inflation and world scope

ii. Business Strength �

1. Market position � Domestic market share, world market share, share growth and share compared with leading competitor

. Competitive strengths � Quality leadership, technology, marketing and relative profitability

iii. Once classified � placed on a grid

1. Priority A � high in both industry attractiveness and Strength � firm should build share

. Priority B � Medium in ind attract and strength � hold share

. Priority C � low in both � harvest or divest

4. What types of consumer buying situations are there? What type of information is searched at each stage? When is evaluative criteria set? What types of attributes are utilized in this analysis? Illustrate with examples.

Consumer Buying Situations

1. Extensive Decision Making

· Requires the most time and effort since the purchase involves a highly complex or expensive product that is important to the consumer (ex car, house)

· Consumers demand a lot of information about product to make the best choice

· Marketers should provide consumers factual info. that highlights competitive advantages

. Limited Decision Making

· More moderate but still involves some time and effort searching for and comparing alternatives (ex buying clothes � go to different stores, compare brands)

· Marketers should use eye-catching advertising and in-store displays

. Routine Decision Making

· Most common type and the way consumers purchase most packaged goods

· Simple, inexpensive, familiar purchases (ex soft drinks, candy bars, soap)

· Usually purchase same brands w/o much deliberation, habitual purchases

· Marketers need to make products readily available for purchase in a variety of outlets and price them competitively, use celebrity spokespeople

Buying Process

1. Need Recognition

· Recognition of unsatisfied need; find out what needs and wants a particular product can and does satisfy and what unsatisfied needs and wants consumers have for which a new product could be developed

· Maslow’s Hierarchy lower-level needs must be attended to before higher-level needs can be satisfied

o Physiological

o Safety

o Belongingness and love

o Esteem

o Self-actualization

. Alternative Search � once need is recognized, individual searches for alternatives for satisfying the need. Sources to collect info. for a purchase

· Internal � previous experience

· Group � communication w/ other people

· Marketing � advertising, salespeople, dealers, packaging, displays

· Public � publicity, newspaper article, ratings of product

· Experiential � handling, examining, trying product

. Alternative Evaluation � consumer evaluates alternatives based on what he has learned

· information, perception, attributes, relevance, brand

4. Purchase Decision

· Make risk-minimizing decisions based on their perceived definition of the particular purchase (weigh possible consequences and uncertainties)

· Cognitive dissonance � uncertainty in purchase decision � the more info. collected by consumer prior to purchase, the less likely postpurchase dissonance will occur

5. Postpurchase Evaluation � if a response does not satisfy the need adequately, the probability that the same response will be repeated is reduced.

Influences on consumer buying

1. Social Influences Culture, Social Class (during need recog./alternative search)

. Marketing Influences Product, price, Promotion, Place (during Alternative _Eval.)

. Situational Influences (during Postpurchase _Eval.)

5. Organizational markets have several characteristics that contrast sharply with consumer market characteristics. What are those distinguishing characteristics of organizational markets? Illustrate with examples.

Organizational consumers purchase for

· further production,

· usage in operating the organization, and/or

· resale to other consumers

Final (or ultimate) consumers purchase for

· personal,

· family, or

· household use


· Producer

o manufacturers

o service producers

· Reseller

o wholesalers

o retailers

· Government

o federal

o state

o county

o local

· Institutional

o charitable

o educational

o community

o other non-business


Organizational markets (Org MRKT) are different in nature from household consumer markets.

· Org MRKT can use goods for further production, operations, or resale. Household, or final, consumers purchase products for personal consumption.

· Org MRKT can purchase equipment, raw materials, and semi-finished goods. Household purchasers almost always purchase finished goods for personal consumption.

· Org MRKT demand is derived from that of final consumers. If you own a machine shop that makes bushings that are used in washing machine motors, then the demand for your products (bushings) is derived from final consumer demand for washing machines. If the economy is poor, and demand for washing machines is down, then so too will be the demand for washing machine motors and for the bearings that are used in them.

· Org MRKT can make items themselves. Competition in organizational markets comes not only from suppliers of similar goods and services, but can come from buying organization itself. If it is not happy with the supplier’s goods, services, or delivery, then it can choose to make those products itself.

Question 6.)

The activities for the Maturity stage in the sales and profit opportunities are that the company would lower prices, have intensive distribution to get the product everywhere, have trade and consumer deals, such as coupons and discounts. For the product and service, the company would offer new features, new styles, or a different type of quality.(ex.campbells soup) This would increase the sales of the products. When adding new features or styles, company could reintroduce their products/services as “new and improved.” In the market, the product/service should be repositioned to gain new markets and customers, and to gain new users of the product, or to gain more frequent users of the product (getting people to repurchase). In entering new markets, the product or service can be introduced for new users,- Examples of this are

Baking Powder � not just used in baking, used for air freshener

Toothpastes � companies have introduced whitening, tarter control, sensitive, ect… for different types of users.

Rogaine � was first used for cholesterol, now used to grow hair

Johnson’s Baby Shampoo- first just baby shampoo, then shampoo was targeted to men, and also the whole family (adult men and women)

The marketing strategy for a product in the maturity stage of the product life cycle use many of the same products that they have in their lines and uses Battle of the Brands, or Competition of the Brands.

The Product Life cycle is used to develop a marketing strategy depending on the industry, product, technology, and the market.

As products mature, profits for the initiating firm do not keep pace with the sales because of competition. The seller may be forced to “remarket” the product, which may involve making price concessions, increasing product quality, or expanding advertising and sales promotions just to maintain market share.

Mature Products also go through product rejuvenations where they are revamped to extend their life cycle. This increases brand recognition, enhances product offering, offering at lower prices, gives superior product and service quality.

Other examples of finding new markets

Bath+ Body works- aromatherapy product introduction, men’s cologne

During this maturity stage, other factors used are penetration pricing, meeting competitions’ pricing, intensive distribution to prolong maturity stage for as long as possible to try and reach everyone.

Information Found in handout on product strategies (/17/0)

In text � pg6 (chapter 6)

Also may want to look at chart on pg 6 figure 6.

7. What are the bases for market segmentation? Which factors would affect the selection of bases? Illustrate with examples.

There are many different bases for market segmentation. Here is what the book had for examples of consumer markets. Geographic, Demographic, Social, Thoughts and feelings, Behavior, Combined approach.

1. Geographic

a. Continents

b. Global regions

c. Countries

d. Country regions

e. City, country, or SMSA size

f. Population density

. Demographic

a. Age

b. Gender

c. Family size

d. Family life cycle

e. Income

f. Education

g. Marital status

. Social

a. Culture

b. Subculture

c. Religion

d. Race

e. Nationality

f. Social class

4. Thoughts and feelings

a. Knowledge

b. Involvement

c. Attitude

d. Benefits sought

e. Innovativeness

f. Readiness stage

g. Perceived risk

5. Behavior

a. Media usage

b. Specific media usage

c. Payment method

d. Loyalty status

e. Usage rate

f. User status

g. Usage situation

6. Combined Approaches

a. Psychographics

b. Person/situation

c. Geodemography

Examples of this would be if you wanted to know how many people may buy baby food. Then you would look at the demographic base. You would use things like age and family size to see how many babies there are.

It is pretty much self explanatory in the way what ever you want to know about you would look at what bases have the information that you need. And then use it to make a decision.

8. Positioning strategy when an organizations target their customer market by positioning a certain product through different market segments.

· First crucial thing that needs accomplished is the determination of the consumer needs and wants.

For example a company like Verizon may seek more efficient methods for servicing consumer’s long distance telephone needs.

Three important topics need to be considered next.

1. Prior segmentation approach is one in which the marketing manager has to decide on the appropriate basis for segmentation in advance of doing any research on the market. Post hoc segmentation is an approach in which people are grouped into segments on the basis of research findings.

. Relevance of segmentation dimensions or bases on which to segment particular markets. This can be determined from previous research, purchase trend, and managerial judgment.

. Choosing a basis for segmentation, which are several variables that represent some useful bases and categories, such as benefit and psychographics segmentation. Benefit segmentation is approach that benefits people in seeking certain products in the market. For example relating certain colors to certain products like in the bottled water industry with the color blue. Psychographic segmentation focuses on consumer personal attributes such as certain activities, interests, and opinions. Finally geodemographic segmentation does identify specific households within a market by focusing on local neighborhood geography (such as zip codes) to create classifications of actual, addressable, map able neighborhoods where people live and shop.

· Using decision-making tools with these segmentations are critical. One of the most popular and widely used tools is known as the “Values and lifestyles” test which is used in variety of companies such as SRI International located in California. This is a survey test of 4 lifestyle questions that place consumers in one of nine categories depending on the outcome. From there they can target different products based on the category.

· Another is called positioning mapping, which is a visual depiction of customer perceptions of competitive products, brands, or models. It is constructed by surveying customers about various product attributes and developing dimension and a graph indicating the relative position of the competitors. Figure 5-6 on page 80 in the test has a great example.

. What are the three segmentation alternatives? What type of marketing strategy is used for each alternative?

Thee three market segmentation alternatives that are available are mass marketing, concentrated, and differentiated marketing. (Page 8)

1. Mass marketing involves

§ Lack of differentiation

§ Very broad range of consumers

§ Limited number of products under one brand for many types of consumers

§ One popular price range

§ Use all possible outlets of distribution

§ Use mass media promotions

§ Appeal to various types of consumers through a uniform marketing program

§ Creates the largest potential market which leads to lower costs

§ Hard to create a simple product for all markets

§ EX. Henry Ford Model T Black Cars

. Concentrated marketing involves

§ One well defined consumer group

§ One brand tailored to one consumer group

§ One primary price range tailored to the consumer group

§ Use all suitable outlets of distribution

§ Use all suitable medias for promotion

§ Appeal to one specific consumer group through a highly specialized marketing program

§ Focuses on specific subgroups

§ EX. American Express Gold Card, or Corporate Card

. Differentiated marketing involves

§ or more well defined consumer groups

§ Distinct brand for each consumer group

§ Distinct price range for consumer group

§ Use all suitable outlets or distribution-differs from segment

§ Use all suitable media for promotion-differ from segment

§ Appeal to or more distinct market segments though different marketing plans catering to each segment

§ EX. Hotels-business travelers, or families, or other

10. What is a total product concept? How do companies use different


of this for strategy development purposes? Illustrate with examples.

A total product concept is everything that adds value to a sellers

offering. A

seller usually starts out with a generic product or service, from this


product or service the client expects some level of service from the


after it is bought. Sellers then try to figure out how to augment the


or service. The next level is intangibles, what can the seller do that


above and beyond the buyers expectations.

The four levels of total product concept are

-generic product

-clients expectations from product or service

-product augmentation


Anyone can sell a generic product once, but it is the other three

levels that

keep a customers coming back. For example, if you bought Energizer


for your camera and they stopped working an hour later, you would

probably not

buy Energizer batteries again. The Energizer batteries did not pass

stage #,

they did not meet your expectations. The higher up the list a seller


willing to go, the more likely that chances are that buyers will come

back to

buy again. The next time you buy batteries you decide to buy Duracell.


batteries exceed their expectations and Duracell has taken the time to

send you

coupons for your next Duracell purchase. Why would you buy anything


11. How does integrated marketing communications work? How do various

promotion tools contribute to the purchase of a beer product?

· Integrated Marketing Communications � Marketing communications program that coordinates and integrates all elements of promotion so that the organization presents a consistent message.

· The elements of promotion are advertising, sales promotion, personal selling and publicity.

· IMC seeks to manage all sources of brand or company contacts with customers.

· Potential buyers go through a process of

1. Awareness of the product.

. Comprehension of what it can do and its important features.

. Conviction that it has value for them.

4. Ordering on the part of potential buyers.

· Marketing communications tools must allow buyer to experience the stages (see page 11, figure 8-1 for a chart).

· Implementation of Integrated Marketing Communications is difficult because

o Internal “turf” battles within organization.

o Reluctance of advertising agencies to broaden role beyond advertising.

Promotion Tools Contributing to the purchase of a beer product

· Advertising

o Any paid form of non-personal presentation of ideas by an identified sponsor that can reach large numbers of people and persuade them.

o Strategic device for gaining competitive advantage in market place.

o Example - Beer Commercials

· Sales Promotion

o Media and non-media marketing pressure applied for a predetermined, limited period of time at the level of a customer in order to stimulate trial, increase consumer demand or improve product availability.

o Examples of Sales Promotions aimed at final consumers

Ø Contests

Ø Coupons

Ø Aisle Displays

Ø Samples

Ø Banners and Streamers

Ø Sponsors

1. Distribution Coverage Required Because of characteristics of product, the environment needed to sell the product, and the needs and expectation of the potential buyer, products will vary in the intensity of distribution coverage they require. Distribution coverage can be viewed along a continuum ranging from intensive to selective to exclusive distribution.

· Intensive Distribution when the manufacturer attempts to gain exposure through as many wholesalers and retailers as possible. Products with low unit value and high frequency of purchase and convenience such as your every day products. (Food, cosmetics).

· Selective Distribution is when the manufacture limits the use of intermediaries to the ones believed to be the best available in a geographic area.

For example large appliance or clothes such as General Electric would use this.

· Exclusive Distribution is when manufacture severely limits distribution, and intermediaries are provided exclusive rights within a particular territory. The determining factor here would be the characteristics of the product. Retail paint stores are an example of the distribution arrangement.

Product life cycle is made up of four stages � introduction, growth, maturity and decline. Staying focused on the distribution channels of this cycle. The first stage, which is the introduction stage there is normally a limited number of channels mostly due to the early life of the product and promotion. The growth state has a growing number of channels to meet the increasing demand of the consumer. Next is maturity state where sales and total market profit peek out, so this is giving more incentive to the resellers. Last state is known as decline that is pretty much self-explainable. This is decrease in channels and time to decide on possible new product features, new markets, or new uses. The overall usefulness of the product life cycle concept is primarily that it forces management to take a long-range view of the marketing planning.

1. What are the differences between cost and demand-orientated pricing strategies? Illustrate with examples.

Cost based pricing begins with the costs and works towards the selling prices. The price of the product must cover costs of production, promotions, and distribution plus a profit. In cost based pricing a standard markup is made to the cost of the product. This is the simplest pricing method that is available. Cost based pricing ignores both demand and competition. There are three common forms of cost based pricing. They are markup pricing-a percentage is added to the retailers invoice to determine the final cost. The next method is cost-plus pricing-costs of producing a product are totaled and a profit amount is added. The last method is rate of return or target pricing-price is determined by adding a desired rate of return to the total costs.


Ex. Pharmaceutical products

Demand-orientated pricing begins with the selling price and then works towards the cost. The final price is obviously affected by the demand for the product. There is a relationship with what people will pay for the product. If the product is not very popular a lower price is set. However, if the product is popular a higher price is set.


Ex. Beanie Babies


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