Marketing Management 2
Assessment 1
Length: Approximately 4000 words
Barry Crossan has contracted your services to provide information relating to the analysis of performance of his business and the strategic position that is held. Barry does not have much knowledge of this area and would like you to produce a summary of and discussion as to the importance of each of the following points:
1. The concept of competitive position with an outline of six factors that can be used to assess it and the concept of market attractiveness. Provide a suitable model, which Barry can use to assess the attractiveness of potential markets.
2. Discuss the importance of market segmentation.
3. Barry would like to know how marketing could contribute to his market share and potential market growth.
4. Why should Barry undertake the forecasting of sales?
5. Barry would like to know how strategies that are implemented within the new market entries, growth and maturity/decline stages of the lifecycle would impact on profits.
6. Provide a suitable framework to assess the external environment that Barry’s business operates within.
7. Provide a short discussion as to the importance of performance measurement within the business.
8. Finally identify the impact the resources will have on the strategic marketing decisions taken by Barry.
Business Assessment for Crossnan, Ltd.
SUMMARY OF DISCUSSION
I. COMPETITIVE POSITION
Based on our discussion, we have to determine what sets Crossnan, Ltd. apart from its competitors.
Competitive positioning is about defining how you’ll “differentiate” your offering and create value for your market. (Marketing [mo.o], 2010). This can be based on at least five factors, on your offering whether be it a product or service, namely: Features, Benefit, Usage, Price/Quality and Endorsements.
Feature is a characteristic of your offering. Benefit is the solution this characteristic provides. Identifying the features will give you an idea on how to improve of your offering. These characteristics should be actively providing the solutions your customers need, thereby making a difference to them every time they use your offering. This difference must set you apart from your competitors. In order to achieve this, your offering must be unique – which could be a challenge to claim and substantiate. We must be able to identify how your offering positively affects the daily lives of your customers. This is how they benefit from your offering. This is also how we can identify which value added service to include. In order to identify which value added services to include, look at your competitors with the same offering. IN your offering, include those that your competitors do not carry.
Next factor to consider is the usage of your offering. Who use your offering (demographics: age, location, income bracket, etc.)? How often do they use it (awareness/frequency)? Why do they use it (importance/value)? By determining these, we are actually identifying a market segment for your offering.
Demographics will identify your existing and potential customers with regard to:
� age range,
� the capacity to pay for your offering,
� positions/stages in life (i.e. the employed, housewives, children, retirees, etc)
� socio-economic class (i.e. household income)
� the area where most of them live (it could be the proximity to your office or distribution channels)
All of the above will identify where to focus and how to implement your marketing strategy to maximize profit.
Awareness / frequency will identify how popular and convenient your offering is for your customers. This will point out areas for improvement with regard to brand-consciousness, which will further improve the loyalty to and the rate your customers actually use your offering. We should also take into consideration the accessibility for your customers and the convenience of how to avail of your offering.
Importance/Value is highly relevant. We must be able to drive this message across to your customers that your offering plays an important aspect in their lives: such as it makes their life easier, it relieves them of stress, they find enjoyment in using it, they appreciate the help they derive from it. These factors will influence your customer’s behaviour in deciding if they can or cannot do without your offering.
Of course, the most important consideration these days is the price and quality of your offering. People are willing to pay more if they believe that they get good value for money they pay. However, we must also remember, most especially in times of economic crises, people put great consideration in options that are most affordable for them. They will always be on the lookout for cheaper but good quality offering. We have to factor in your costs (materials, labour, etc.) including your marketing budget in your pricing without having to end up more expensive than your competitors price. The ideal scenario here is to at least be of the same price, but definitely be of quality that is more superior.
Endorsement is one of the best competitive positioning tools we can use. This will be through the testimonials of your satisfied customers, who would be thrilled to share their great experiences using your offering. Happy customers are more than willing to spread the word within their communities and circle of influences. This is also a very strong proof of how your offering is far superior to your competitors. It would also help if you have celebrities of famous/popular people among your loyal customers. Their words carry more weight if they are credible in the community. However, you have to be wary of being identified with a political party, or a faction in the community. This could be limiting instead of enhancing.
Market attractiveness
Market Attractiveness is the degree to which a market offers opportunities to an organisation, taking into account the market size, growth rate, the level of competition and other constraints. (Monash University, 2010)
Research is done in order to identify the areas suitable for your offering in the market place. This research should be an objective assessment using external data to the organisation. (McDonald, 2007).
Included in this research are the strengths / position of your offering, where we can determine your offering’s ability to satisfy the market needs relative your competitors.
In application to your business, Porters Five Forces Model can used to assess the market attractiveness of your offering. Through this framework, five known forces that affect your business are the following:
The five forces are interchangeably applicable as guide to your business: as a supplier (for your offering), a buyer (when you deal with suppliers) and as a competitor (rivalry).
I. Threat of entrants
In your industry, having the potential of high profitability, there will always be threat from new players coming into the market. This contributes to decreasing market share and profit. We will need to find out how to strengthen your competitive position, through the factors we have been discussing. This will buffer the potential significant impact on your offering, both in your productivity and overall performance.
However, we should also take advantage of the factors that could limit new entrants in the market, such as: high start up cost, the decreasing market share, access to distribution, government policies, customer loyalty, brand equity, learning curve advantages, etc. (Wikipedia, 2010). We must also be aware of new legislations regarding your industry that could deter new players.
II. Threat of substitutes
We have to check the existing substitutes for your offering. If there are competitors offering what you have at a lower cost and similar quality, it can definitely affect your business. By becoming aware of this fact, we can address it by constantly improving both products and services. We need to put a marketing strategy and operational procedures, based on accurate research, which would guarantee continuous improvements on you offerings. This will serve as your guide to consistently checking your competitive position in the market place.
III. Bargaining power of suppliers
Let us face it; big supplier can also affect your offering by directly affecting your pricing and quality of product/service. We need to be foster very good relationship with them, so we will not be at their mercy. Although loyalty to suppliers also help, it is best to keep an eye on their competition, in case things turn sour with your original suppliers. We cannot afford to be off guard. As we are striving to keep our share in the marketplace, so will the suppliers vie to get more f the market share for themselves. We can turn the threat of substitutes on the supplier’s part, to your advantage. This is definitely food for thought.
IV. Bargaining power of buyer
With a lot rivalry and substitutes around, the bargaining power of buyers is very clear. Competitive business and substitutes arise from buyers demand. Pricing is greatly affected by patterns set by buyers in terms of frequency, brand loyalty, price considerations and the demand for high quality products/ service. All of these will greatly influence profitability of your offering.
We must take into consideration in our marketing strategy the following drivers for buyers: concentration, degree of dependency upon existing channels of distribution, bargaining advantage, particularly in industries with high fixed costs, volume, information availability, existence of substitute products, buyer price sensitivity, etc. (Wikipedia, 2010)
V. Rivalry among existing firms
Competition in the market place abounds. Rivalry will surface due to the size of the marketplace. We should determine which competitor is directly influencing the decrease of sales volume for your offering. With this, we can study your competitor and see how we can improve on the things they fail to offer, relative to your offering. We must also check other aspects such as delivery of products/services (distribution channels), customer service and other areas where we can make your offering more attractive to the market.
Check the diagram below. (Quick MBA, 2010)
Diagram of Porter’s 5 Forces
SUPPLIER POWER
Supplier concentration
Importance of volume to supplier
Differentiation of inputs
Impact of inputs on cost or differentiation
Switching costs of firms in the industry
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases in industry
BARRIERS
TO ENTRY
Absolute cost advantages
Proprietary learning curve
Access to inputs
Government policy
Economies of scale
Capital requirements
Brand identity
Switching costs
Access to distribution
Expected retaliation
Proprietary products
HREAT OF
SUBSTITUTES
-Switching costs
-Buyer inclination to
substitute
-Price-performance
trade-off of substitutes
BUYER POWER
Bargaining leverage
Buyer volume
Buyer information
Brand identity
Price sensitivity
Threat of backward integration
Product differentiation
Buyer concentration vs. industry
Substitutes available
Buyers’ incentives
DEGREE OF RIVALRY
-Exit barriers
-Industry concentration
-Fixed costs/Value added
-Industry growth
-Intermittent overcapacity
-Product differences
-Switching costs
-Brand identity
-Diversity of rivals
-Corporate stakes
II. Market segmentation and your business
“Market segmentation is the process by which a market is divided into distinct subsets of customers with similar needs and characteristics that lead them to respond in similar ways to a particular product offering and marketing program” (Walker et al 2006) In other words, in order to be effective, we need to know your market.
“The purpose for segmenting a market is to allow your marketing/sales program to focus on the subset of prospects that are “most likely” to purchase your offering. If done properly this will help to insure the highest return for your marketing/sales expenditures. Depending on whether you are selling your offering to individual consumers or a business, there are definite differences in what you will consider when defining market segments.” (Centre for Business Planning, 2010)
Not all markets are the same. Most are made up of groups, sub-groups or segments. We need to be able to differentiate each one and tailor our marketing approach for each of them. Your market can be segmented geographically (regional, location differences), demographically (gender, age, lifecycle, family size, income bracket, etc.), psychographically (the personality type or lifestyle) and behaviouristically (patterns, buying habits, how often do they buy), as we have discussed earlier (under USAGE). (Moi Ali. 2003)
Once we have determined this, we can then identify each segments requirements and its corresponding marketing strategy. We can also ascertain which segment is more profitable and find ways to keep it happy and satisfied. Along with this comes the identification of rival companies and the assessment of how our marketing approach differs from theirs or vice versa. This process cannot be taken for granted, as this will save your business a lot of money in implementing the right marketing strategy for the right segment.
III. Growing you market share through MARKETING
After we have identified your business competitive position, marketing attractiveness and market segment, we now have a workable amount of information to determine what your customers want. We can now develop your offering according to their requirements, avoiding potential mismatch. Your offering would then be customer-led rather than product-led. In other words, we are now focused on making what is sellable and in-demand, rather than selling what you can make. This is effective MARKETING – the best way to grow your market share. The growth in your market share will come from new customers, retaining old loyal customers and winning over the customers of your competition. We must also give importance to the marketing mix, which consist of product, price, promotion and distribution. Remember value added service in the development of your offering in order to entice customers to switch to your offering. This is the recommended marketing strategy to implement. (Hooley et al, 2008)
IV. The value of SALES FORECASTING for your business
Regarding marketing strategy, we must also be able to measure progress and profitability of your business through sales forecasting.
“Sales forecasting is a self-assessment tool for a company. You have to keep taking the pulse of your company to know how healthy it is. A sales forecast reports, graphs and analyzes the pulse of your business. It can make the difference between just surviving and being highly successful in business. It is a vital cornerstone of a company’s budget. The future direction of the company may rest on the accuracy of your sales forecasting.” (Virtual Advisor Inc, 2009)
The following are some of the benefits of sales forecasting:
* improved cash flow
* determining expenses regarding timeliness and budget
* information about the buying patterns of customers, what they always order and other sales trends
* planning for maximum production
* establishing the worth of a business versus its current assets
* knowing how much and anticipating return on investment
V. Assessing strategies that could impact your profit
Before implementing a marketing strategy in any business, it is an important to assess the impact it will have on its profitability. Here are the three areas to look into, namely:
1. New market entries
This is advantageous in introducing new offerings (products or services) in the market. It can also be effective in re-introducing an existing offering that have been “re-engineered” or had addition to its existing line. This strategy is also effective when we cut down in cost, thereby reducing the price, in repositioning an existing product (with all its improvements) to a new market segment or market place.
2. Growth
There is great potential to explore in the growth market. A growth market is where the size of the market is constantly increasing, which is suitable in growing and developing the market share. We can also look into combining the advantages of a new market entry into the growth market. However, we must ensure advertising and promotion budget in order to raise the awareness of your offering in the marketplace.
3. Maturity/decline stages
Change is constant in every industry. Any offering will reach its maturity and decline stages. Strategies implemented on these stages will aim to maximize the profits from a declining good or on the other hand, might just focus on withdrawing the good from the marketplace. When we withdraw your offering from the market place, we need replacement offering or continue with current ones in the marketplace. It is uncertain to pour in advertising and promotional budget on a product that has declining profits. However, you have the choice to do so. We will have two possible results, which are: re-generating awareness to this offering could increase sales and profits for a limited time, or it could also fail to deliver what is expected.
VI. Assessing the external environment of your business
While we assess marketing strategies before its implementation, we must also assess the external environment that may affect your marketing strategy. These could include the political (P), economic (E), social (S), technological (T), environmental (E) and legal (L) factors. Let us then tackle the “PESTEL” framework with regard to your business.
Political
This may include legislations and the changing political environment. Legislation can consist of taxes, regulations, price restrictions, and other business regulations (like export & import). Political influences such as a change in government could also affect the strategy we may choose to implement. This covers both the local and international business settings.
Economic
We must assess the Gross Domestic Product (GDP), life cycle trends local and international (depression, recession, recovery and prosperity), inflation and deflation trends, monetary and banking policies, etc. The economic trend will give us a clear indication of the appropriateness and timeliness of the marketing strategy we will implement for your business.
Socio-cultural factors
This will include the values, attitudes and behaviour of the community/society. Here, market segmentation play a huge part by identifying demographics, lifestyles, social mobility, education levels, income brackets etc, that will directly impact the demand (sale) of your offering.
Technological factors
The impact of technology in your offering is also a major consideration. We would need to keep up with the constant advances and use it to our advantages, such as delivering prompt and better customer service and concise and useful information. We need to keep abreast and integrate this technological changes into our marketing strategy (i.e. internet, online marketing, search engine optimization, etc.) or we will be left behind and unable to compete.
The Environment
The environment has become a major factor in doing business these days. Companies, governments and individuals are now gearing towards patronizing business that practice sustainability and the responsible use of natural resources. Therefore, the long-term and short-term impact on our marketing strategy and business operations makes us really consider including this factor in the equation.
Legal environment
This is very similar to the political factor we have discussed earlier. However, it is highlighting the changing laws and legislations due to the change in government or political influences. We must always follow these laws and integrate it in our marketing strategy, in order to avoid future repercussions from ignoring them. When we abide by the laws, we are also protected.
VII. The importance of Performance Measurement to your business
It is very important to measure performance in a business. This measurement serves as the indicator of how your business is doing. It is also important to note that managing something we cannot measure is difficult.
By measuring our performance, we see improvements internally and compare how we fare with competitors (externally). We can also determine customer response through sales and positive feedback (customer service) which are performances we must measure. Measuring performance will identify the strengths and weaknesses of a business, which serve as guidelines on how and where to improve. These are all vital when forming marketing strategies for implementation.
The following are other reasons why we should measure performance in your business:
“� To ensure customer requirements have been met
� To be able to set sensible objectives and comply with them
� To provide standards for establishing comparisons
� To provide visibility and a “scoreboard” for people to monitor their own performance level
� To highlight quality problems and determine areas for priority attention
� To provide feedback for driving the improvement effort” (Business Balls, 2010)
Standards for measuring performance must comply with the SMART framework:
� SPECIFIC – Objectives must be specific (i. e. 10% increase in sales)
� MEASURABLE – Performance must be measurable (i. e. sales, market share)
� ATTAINABLE – Performance objectives must be realistic and achievable
� RELEVANT – Performance objectives must be significant to the goals of the organisation and the organisation itself
� TIME BOUND – There must be a timeline in which to complete the performance objectives (i. e. increase market share by 5% in 12 months)
VIII. Resources on your strategic marketing decisions
Finally, to be able to implement your marketing strategy, we should look into your business resources. We would need a budget for research, testing, planning and implementation (finance). We must also look into the labour support needed for this project (labor). We would also need to upgrade the technological aspect of your business as a backbone for the project (equipments). Most importantly, we need to utilize efficient the most valuable resource we have, which is time (project duration).
The bottom line is that before we do start, we need to assess your organisation’s resource to ensure completion of this project.
REFERENCE LIST
Business Balls (2010). Perfomance Measurement. Retrieved from the internet from http://www.businessballs.com/dtiresources/performance_measurement_management.pdf
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Hooley et al, (2008). Marketing Strategy and Competitive Positioning, 4th Ed
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http://www.va-interactive.com/inbusiness/editorial/sales/ibt/sales_fo.html#1
Walker et al 2006
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