Project SEM IV
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Transcript of Project SEM IV
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8/3/2019 Project SEM IV
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1.1 What is strategy?
"Strategy is thedirection andscope of an organization over
thelongterm: which achieves advantage for the organization through its
configuration ofresources within a challenging environment, to meet the
needs ofmarkets and to fulfillstakeholderexpectations".
Strategy is about:
Where is the business trying to get to in the long-term (direction)
Which markets should a business compete in and what kinds of activities
are involved in such markets? (markets; scope)
How can the business perform better than the competition in those
markets?
(Advantage)?
What resources (skills, assets, finance, relationships, technical
competence, facilities) are required in order to be able to compete?(Resources)?
What external, environmental factors affect the businesses' ability to
compete? (Environment)?
What are the values and expectations of those who have power in and
around the business? (stakeholders
Strategy at Different Levels of a BusinessStrategies exist at several levels in any organization - ranging from the
overall business (or group of businesses) through to individuals working in
it.
Corporate Strategy- is concerned with the overall purpose and scope of
the business to meet stakeholder expectations. This is a crucial level since it
is heavily influenced by investors in the business and acts to guide strategic
decision-making throughout the business. Corporate strategy is often stated
explicitly in a "mission statement".
Business Unit Strategy - is concerned more with how a business
competes successfully in a particular market. It concerns strategic decisionsabout choice of products, meeting needs of customers, gaining advantage
over competitors, exploiting or creating new opportunities etc.
Operational Strategy- is concerned with how each part of the business is
organized to deliver the corporate and business-unit level strategic direction.
Operational strategy therefore focuses on issues of resources, processes,
people etc. Strategy is the process of planning & executing various
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maneuvers or actions in an attempt to reach a goal.Strategy is often
associated with business, politics,& military planning, but individuals can
alsostrategized towards achievingtheir career, health . Strategy is essentially
akin to planning but implies a maximization of resources with logical
thinking, intelligence (acquired knowledge) & leverage.
Strategy is differentiated from tactics in that tactics are micro strategies that
contribute to large goal. Opening a successful business would fall under
strategy achieving financing or an important client would be considered
tactics
towards strategy.
Issues for marketing strategy
Product
What product do customers use
now?
What benefits does consumer want
from the product?
Promotions
What promotions appeals would influence consumer to purchase & use of
our product?
What advertising claims would beeffective for our product?
Pricing
How important is price to the consumer in various target markets?
What effect will a price change have on purchase behavior?
Place
Where do consumers buy this product?Would a different distribution system change consumer purchasing
behavior?
People
What type of people is desired by the consumer to deliver the service?
Would differentiation by people help in gaining competitive advantage?
7Ps 7CsProduct Customer value
Promotion Communication
Price Cost
Place Convenience
People Capable
Process Convergent
Physical Evidence Conductive
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Process
Would different procedure, mechanism, routine, and helps in satisfying the
customer needs?
Physical Evidence
Can we have different physical evidence?
1.2 Marketing Strategy
Achieving objectives requires the marketer engage in marketing decision-
making which indicates where resources (e.g., marketing funds) will be
directed.
However, before spending begins on individual marketing decisions (e.g.,
where to advertise) the marketer needs to establish a general plan of actionthat summarizes what will be done to reach the stated objectives.
Tactical Programs Marketing strategy sets the stage for specific actions
that will take place. Marketing tactics are the day-to-day actions that
marketers undertake and involve the major marketing decision areas. As
would be expected, this is the key area of the Marketing Plan since it
explains exactly what will be done to reach the organizations objectives.
Marketing Budget Carrying out marketing tactics almost always means
that money must be spent. The marketing budget lays out the spending
requirements needed to carry out marketing tactics. While the marketingdepartment may request a certain level of funding they feel is required, in
the end it is upper-management that will have final say on how much
financial support will be offered.
Types of Marketing Strategy:
One of the most important concepts of the marketing planning process is the
need to develop a cohesive marketing strategy that guides tactical programs
for the marketing decision areas.
In marketing there are two levels to strategy formulation:
1.General Marketing Strategies
2.Decision Area Strategies.General Marketing Strategies:
These set the direction for all marketing efforts by describing, in general
terms, how marketing will achieve its objectives.
There are many different General Marketing Strategies, though most can be
viewed as falling into one of the following categories:
Market Expansion :
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This strategy looks to grow overall sales in one of two ways:
Grow Sales with Existing Products With this approach the marketer
seeks to actively increase the overall sales of products the company
currently markets. This can be accomplished by: 1) getting existing
customers to buy more; 2) getting potential customers to buy (i.e.,
those who have yet to buy); or 3) selling current products in new
markets.
Grow Sales with New Products With this approach the marketer
seeks to achieve objectives through the introduction of new products.
This can be accomplished by: 1) introducing updated versions or
refinements to existing products; 2) introducing products that are
extensions of current products; or 3) introducing new products not
previously marketed.
Market Share Growth This strategy looks to increase the marketers
overall percentage or share of market. In many cases this can only be
accomplished by taking sales away from competitors. Consequently, this
strategy often relies on aggressive marketing tactics.
Niche Market This strategy looks to obtain a commanding position
within a certain segment of the overall market. Usually the niche
market is much smaller in terms of total customers and sales volume
than the overall market. Ideally this strategy looks to have the product
viewed as being different from companies targeting the larger market.
Status Quo This strategy looks to maintain the marketers current
position in the market, such as maintaining the same level of market
share.
Market Exit This strategy looks to remove the product from the
organizations product mix. This can be accomplished by: 1) selling
the product to another organization, or 2) eliminating the product
Decision Area Strategies: These are used to achieve the General Marketing Strategies by
guiding the decisions within important marketing areas (product,
pricing, distribution, promotion, target marketing).
For example, a General Marketing Strategy that centers on entering a
new market with new products may be supported by Decision Area
Strategies that include:
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Target Market Strategy employ segmenting techniques
Product Strategy develop new product line
Pricing Strategy create price programs that offer lower pricing
versus competitors
Distribution Strategy use methods to gain access to important
distribution partners that service the target market
Promotion Strategy create a plan that can quickly build awareness of
the product
Achieving the Decision Area Strategies is accomplished through the
development of detailed Tactical Programs for each area. For instance, to
meet the Pricing Strategy that lowers cost versus competitors products, the
marketer may employ such tactics as: quantity discounts, trade-in
allowances or sales volume incentives to distributors.
1.3 Segmentation, Targeting, Positioning
Differentiation
Segmentation: grouping consumers by some criteria
Targeting: choosing which group(s) to sell to
Positioning: select the marketing mix mostappropriate for the target
segment(s)
Segmentation:
Grouping consumers by some criteria, such that those within a group will
respond similarly to a marketing action and those in a different group willrespond differently.
FORMULATION OF MARKETING STRATEGIES TO IMPROVE
MARKET SHARE OF LG MICROWAVE OVENS
Potential segmentation variables:
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Sex
Age
Race Income
Educational level
Marital status
No of children
Introvert / extrovert z
Usage history
Which segment
Mass market,
Multiple segments, Single segment
Mass market high volumes low margins goods-example confectionery,
clothing
Multiple segment- appealing to wider range of groups example 4x4
vehicles, towns, country, gender, lifestyle, social class
Single segment often a specialized product, example machinery,
exclusive goods.
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MARKET SEGMENTATION STRATEGY:
The need for market segmentation
Marketers understand they cannot do all things to all people ,all the time
Buyers& markets are too complex & diverse for onesimplemarketing
formula to adequatelyaddress the needs of all.
Target market identifying market segment that are bite size chunks
that organization can manage
Market segmentation - identifying markets with common traits
Market targeting -process of evaluation of selectedsegmentation& then
deciding which market segment to operate within.
Market Positioning process whereby market positions the product to
occupy a clear & distinctive position relative to other competing brands.
Market segmentation - markets are composed of buyers & they differ in
wants, resources, locations, & buying patterns.
Market segmentation is processthat marketer use to dividethe market in to
smaller segments' that can be efficiently addressed.
Six stages in market segmentation, targeting, positioning-
Identify for segmenting the market
Develop profiles of resulting segment
Develop measure of segment attractiveness Select the target segment
Develop position for each target segment
Develop marketing mix for each target segment
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Market Segmentation:
With a large country
Many different types of peopleit is too difficult to create a product that will
satisfy everybody, that is why we focus on a segment of the total market
Market Segmentation-def
Grouping people according to their similarity related to a particularproduct category
4 commonly used bases for Segmentation
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Geographic location - based upon where people live (historically a popular
way of dividing markets)
Demographic - based upon age, gender and income level (very often
used)
Psychographic / lifestyles - based on peoples opinions, interests,
lifestyles eg, people who like hard rock music probably prefer beer to
wine
Benefits - based on the different expectation that customers have about
what a product/service can do for them eg. People who want to but lite
food cause it will help them lose weight.
Positioning Strategy:
A Positioning Strategy results in the image you want to draw in the mind
of your customers, the picture you want him/her to visualize of you whatyou offer, in relation to the market situation, and any competition you
may have".
While designingyour positioning strategy you will be faced with three
main options:
Positioning your product against your competitors, " Our prices are half
of that you may find else where for similar products"
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Emphasizing a distinctive unique benefit "the only book keeping system
that instantly calculates your taxes"
Affiliating your product with something the customer knows and values
"the same archiving system used by the library of university "
A positioning statement should have:
Your customer: The type of customer you target.
The benefits: What you can do for your customers.
The method: How you do it.
The USP: Why you do it better than the competitors. (As you may know,
USP stands for "unique selling proposition".)
You will need to write down the following
Our product offers the following benefits:--------------- To the following customers (your target market_:----------
Our product is better than the competitors in the following manner:--------
We can prove our product is the best because (evidence, differences,
testimonials..etc)--------------------
Your positioning statement reflects what you need to communicate about
a specific product, and to whom, so you will always hit the right button,
communicating the right message to the right customer at the right time.
Every marketing program should cover only one product, hence must not
reflect more than one clearly stated positioning strategy, So:
1 product = 1 marketing program = 1 positioning statement.
Generally, there are six basic strategies for product positioning:
By attribute or benefit- This is the most frequently used positioning
strategy. For toothpaste, it might be the mint taste or tartar control.
By use or application- The users of Apple computers can design and use
graphics more easily than with Windows or UNIX. Apple positions its
computers based on how the computer will be used.
By user- Face book is a social networking site used exclusively bycollege students. Face book is too cool for MySpace and serves a smaller,
more sophisticated cohort. Only college students may participate with
their campus e-mail IDs.
By product or service class- Margarine competes as an alternative to
butter. Margarine is positioned as a lower cost and healthier alternative to
butter, while butter provides better taste and wholesome ingredients.
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By competitor- BMW and Mercedes often compare themselves to each
other segmenting the market to just the crme de la crme of the
automobile market. Ford and Chevy need not apply.
By price or quality- Jewelers sell diamonds.
Positioning is what the customer believes and not what the provider wants
them to believe. Positioning can change duetothe counter measures taken
at the competition.
Managing your product positioning requires that you know your customer
and that you understand your competition; generally, this is the job of
market research not just what the entrepreneur thinks is true.
1.4 MARKET SITUATION STRATEGY
What is market dominance? Market dominance is a measure of the strength of abrand , product,
service or firm, relative to competitive offerings.
There is often a geographic element to the competitive landscape. In
defining market dominance, you must see to what extent a product ,
brand, or firm controls a product category in a given geographic area.
Market Dominance Strategies:
These calculations of market dominance yield quantitative metrics,
butmost business strategists categorize market dominance strategies in
qualitative terms.
Typically there are four types of market dominance strategies that a
Marketer will consider:
There are -market leader, market challenger, market follower, and market
nicher.
MARKET DOMINANCE STRATEGIES :
Market Leader
Market Challenger Market Follower
Market Nicher
Defense Strategy :
A market leader should generally adopt a defense strategy
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Six commonly used defense strategies
Position Defense
Mobile Defense
Flanking Defense
Contraction Defense
Pre-emptive Defense
Co u n t e r-O ffe n si v e
Defense
Some of the options open to a market challenger are:
Price discounts or price cutting
Line extensions
Introduce new products
Reduce product quality
Increase product quality
Improve service Change distribution
Cost reductions
Intensify promotional activity
Market Challenger Strategies :
The market challengers strategic objective is to gain market share and to
become the leader eventually How?
By attacking the market leader
By attacking other firms of the same size By attacking smaller firms
Types of Attack Strategies:
Frontal attack
Flank attack
Encirclement attack
Bypass attack
Guerrilla attack
PORTERS
FIVE FORCES MODEL
A framework for the industry analysis and business strategy The Porter's 5 Forces tool is a simple but powerful tool for understanding
where power lies in a business situation. This is useful, because it helps
you understand both the strength of your current competitive position,
and the strength of a position you're looking to move into.
The five forces come from Porter's famous framework and are:
Power of Buyers
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Power of Suppliers
Threat of substitutes
Barriers to entry
Competitors
It uses concepts developed in Industrial Organization Economics to derive
five forces which determine the competitive intensity and therefore
attractiveness of a market. Attractiveness in this context refers to the overall
industry profitability
An "unattractive" industry is one where the combination of forces acts to
drive down overall profitability. A very unattractive industry would be one
approaching "pure competition".
Porter referred to these forces as the micro environment, to contrast it
with the more general term macro environment. They consist of those forces
close to a company that affect its ability to serve its customers and make a
profit. A change in any of the forces normally requires a company to re-
assess the marketplace. The overall industry attractiveness does not implythat every firm in the industry will return the same profitability.
Firms are able to apply their core competence s, business model or
network to achieve a profit above the industry average. A clear example of
this is the airline industry. As an industry, profitability is low and yet
individual companies, by applying unique business models have been able to
make a return in excess of the industry average.
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Porter's five forces include three forces from 'horizontal' competition:
Threat of substitute products, the threat of established rivals, and the
Threat of new entrants; and two forces from 'vertical' competition: the
Bargaining power of suppliers, bargaining power of customers.
Firms that compete in a single industry should develop, at a minimum,
One five forces analysis for its industry.
Porter makes clear that for diversified companies, the first fundamental
Issue in corporate strategy is the selection of industries (lines of business)
In which the company should compete; and each line of business should
develop its own, industry-specific, five forces analysis
The idea is that change in your market is likely to come as the basis of one
of these five areas. For instance, buyers may distort the market by forcing
prices down, or by deciding to take build products in-house. In considering how these "forces" act on your markets, you get a picture
of issues such as channel conflict, threats from vertical integration, the
impact of regulatory change or the advent of new technology. You can also
take a view as to how you are or can affect the competitive situation for your
own benefit, rather than statically accepting the status quo
1.5 Sustainable Competitive Advantage,
Porters Generic Strategy
What is Competitive advantage?When two or more firms compete within the same market, one firms
possesses a competitive advantage over its rivals when it earns a persistently
higher rate of profit (or has the potential to earn a persistently higher rate of
profit)
Competitive Advantage Definition
A competitive advantage is an advantage over competitors gained by
offering consumers greater value, either by means of lower prices or by
providing greater benefits and service that justifies higher prices.
An advantage that a firmhasover its competitors, allowing itto generate
greater sales or margins and/or retains more customers than itscompetition.
There can be many types of competitive advantages includingthe
firm'scost structure, product offerings,distribution network and customer
support.
Competitive advantage comes from performing better than competitors
Sustainable competitive advantage comes from performing better than
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competitors for a long time
Competitive Advantage Examples
Focus on a narrow market niche
eBay Online auctions
McAfee Virus protection auctions
Develop expertise, resource strengths, and capabilities not easily imitated
by rivals
FedEx Next-day delivery of small packages
Walt Disney Theme park management and family entertainment
Toyota Sophisticated production system
Strive to be the industrys low-cost provider
Wal-Mart
Outcompete rivals on a key differentiating feature Johnson & Johnson Reliability in baby products
Harley-Davidson King-of-the-road styling
Rolex Top-of-the-line prestige
Mercedes-Benz Engineering design and performance
Amazon.com Wide selection and convenience
There are two main types of competitive advantages:
Comparative advantage and
Differential advantage.
Sustainable Competitive Advantage: However, we said the primary objective of business-level strategy was to
create sources ofsustainable competitive advantage (SCA).
How do we know SCA when we see it?What is it?When is it considered
sustainable?
To produce SCA, the capability must:
1. Produce value
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2. Be rare
3.Imperfectly imitable, i.e. not be easily imitated or substituted
4.Be exploitable by the organization
Competencies vs.Core Competencies vs.Distinctive Competencies
Acompetency is an internal capability that a company performsbetter
than other internal capabilities.
A core competency is a well-performed internal capability that iscentral,
not peripheral, to a companys strategy, competitiveness, and
profitability.
A distinctive competence is a competitively valuable capability that a
company performs better than its rivals.
Examples: Distinctive Competencies
Toyota, Honda, Nissan
Low-cost, high-quality manufacturing capability and short design-to-market cycles
Intel
Ability to design and manufacture ever more powerful
microprocessors for PCs
Motorola
Defect-free manufacture (six-sigma quality) of cell phones
SCA is an element (or combination of elements) of the business strategy
that
provides a meaningful advantage over both existing and future competitors. An SCA needs to be meaningful, sustainable and substantial.
An SCA needs to be supported and enhanced over time.
The assets and competencies of an organization represent the most
sustainable element of a business strategy, because these are usually difficult
to copy or counter.
An SCA should be visible to customers and provide or enhance a value
proposition.
The key is to link an SCA with the positioning of a business.
A solid value proposition can fail if a key ingredient is missing (e.g.,Pringles).
Sustainable Competitive Advantages vs. Key Success Factors
A KSF is an asset or competence needed to compete, whereas, an SCA is
an
asset or competence that is the basis for a continuing advantage.
An SCA is analogous to a Point of Differentiation (POD), whereas a KSF
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can be analogous to either a Point of Parity (POP) or a POD.
Frameworks for Sustainable Competitive Advantage
Knowledge-based strategy
Generic strategy
Hybrid strategy
Core competence/distinctive capability/resource based strategy
Knowledge-based Strategy
Superior Knowledge
(Compared to Competitors)
Core Competences
Competitive Advantage
Porters Generic Strategy Framework:
Porters generic strategy is based on answering 2 questions:
Should strategy be differentiation or cost leadership?
Should the scope of strategy be broad or narrow?
Generic Strategy
According to Porter, competitive advantage, and thus higher profits will
result either from:
Differentiation of products and selling them at a premium price, OR Producing products at a lower price than competitors
In association with choosingdifferentiation orcost leadership, the
organization must decide between:
Targeting the whole market with the chosen strategy, OR
Targeting a specificsegment of the market
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PORTERS GENERIC STRATEGIES
1.6 PORTFOLIO ANALYSIS
What is a portfolio?
A business portfolio is the collection of Strategic Business Units that
together form a corporation. The optimal business portfolio is one that fits perfectly to the company's
strengths and helps to exploit the most attractive industries or markets.
What is Business Portfolio Analysis?
Business portfolio analysis is anenterprisestrategy development tool based
primarily on the market share of your business and the growth of market in
which
your business exists
Most Popular Business Portfolio Tools
Three most popular business portfolio tools are - TheBCGGrowth -Share Matrix ,
The GE Multifactor Portfolio Matrix,.
The GE Multifactor Portfolio Matrix was deliberately designed by
General
Electric Company (GE) and McKinsey and Company to be more complete
that the BCG Growth-Share Matrix.
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Portfolio Analysis
Definition
Analyzing elements of a firms product mix to determine the optimum
allocation of its resources.
Two most common measures used in a portfolio analysis are market
growth
rate and relative market share.
The BCG matrix
It is a chart that had been created by Bruce Henderson for the Boston
Consulting
Group in 1970 to help corporations with analyzing their business units or
product
lines .
This helps the company allocate resources and is used as an analytical tool
in Brand marketing,
Product management
Strategic management and
Portfolio analysis
Portfolio Analysis
Definition
Analyzing elements of a firms product mix to determine the optimum
allocation of its resources. Two most common measures used in a portfolio analysis are market
growth
rate and relative market share.
The BCG matrix
It is a chart that had been created by Bruce Henderson for the Boston
Consulting
Group in 1970 to help corporations with analyzing their business units or
product
lines .This helps the company allocate resources and is used as an analytical tool
in
Brand marketing,
Product management
Strategic management and
Portfolio analysis
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1.7 New Product Strategy Innovation,
Market Entry, Product Line Extension
Introduction
Product (or service) is the main element of the marketing mix
Therefore, need to determine the Product Strategies before deciding on
the
remaining marketing mixProduct Hierarchy
Need
Product family
Product class
Product Line
Product type
Brand
Item
7-Levels of Product Hierarchy
Product needto satisfy a need e.g. feet protection
Product classa family of products having similar function e.g. all shoes
Product linea group of products with closely related functions e.g.
sports
shoes
Product typeproducts within a line having similar form e.g. foot ball shoes
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Branda name representing a product or line e.g. Nike
Item (Stock Keeping Unit)a unit item e.g. one pair of Nike football
shoe
What is product?
A product can be defined as a collection of physical, service and symbolic
attributes which yield satisfaction or benefits to a user or buyer.
A product is a combination of physical attributes say, size and shape; and
subjective attributes say image or "quality".
Product-Mix Decisions
Decisions on the product mix (the number of product lines and items in each
line) that the company may offer:
A single product
Most firms started off as a single-product company
Multiple products
e.g. Creative Technology markets sound cards as well as MP3 players A systems of products
e.g. Nikon sells camera, lenses, filters & other options
New Product Strategy:
New products are critical to survival
New-product development (NPD) is essential for companies seeking
growth
It should be an on-going, well organized NPD process having top-management support
What is a new product?
From a firm's perspective, a new product is a product that it is
unfamiliar in any way
Product Innovation:
Product innovation means different things to different people.
A modified version of an existing product range
A new model in the existing product range
A new product outside the existing range but in a similar field of
technologyA totally new product in a new field of technology
Promotional
Strategy
Key Factors to Consider
Promotion strategy should be developed to
Reach your target market
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Meet your goals and objectives
Tailor Promotion Strategy to:
Specific Objective:
To provide information about the product/service
To stimulate demand
To differentiate product/ service or build brand image
To counter competitors
To respond to news
1.8 BRAND STRATEGY
Definitions of Brand Strategy:
A plan for the systematic development of a brand to enable it to meet its
agreed objectives.
The strategy should be rooted in the brand's vision and driven by the
principles of differentiation and sustained consumer appeal.
The true brand is the sum total of the perceptions of all the constituencies
which contribute to revenues and profits.
BRAND VISION
A clean articulation of strategic, financial & brand goals that management
has created for the brand. A first step to strategic success as to where the brand can & cannot go.
Provides a vision that forces management to articulate what they want the
brand to do for the organization over the next five years, relative to brand
value, revenue & profit contributions
BRANDS POSITIONING IS
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The place in the consumers mind that you want your brand to own the
benefit you want them to think of when they think of your brand.
A strong position means the brand has a unique, credible, sustainable, &
valued place in the customers mind.
Good positioning gives you the direction required to focus the
organization& focused your strategic moves.
A good positioning is a single idea to be communicated to your
customers.
It revolves around a benefit that helps your product or service stand apart
from the competition.
Disney- family fun entertainment
Wall Mart low price & good value
McDonalds food & fun
1.9PRICING STRATEGYPricing is one of the 4 Ps of the marketing mix. The other three aspects are
product, promotion, andplace. It is also a key variable inmicroeconomic
price
allocation theory. Price is the only revenue generating element amongst the
4ps,
the rest being cost centers.
Definitions:
Pricing is the process of determining what a company will receive in
exchange for its products. Pricing factors are manufacturing cost, market
place, competition, market condition, Quality of product.
The effective price is the price the company receives after accounting for
discounts, promotions, and other incentives.
Promotional pricingrefers to an instance where pricing is the key
element
of the marketing mix.
Pricing Process:
1.Set Pricing Objectives
2. Analyze demand
3.Draw conclusions from competitive intelligence4.Select pricing strategy appropriate to the political, social, legal and
economical environment
5.Determine specific prices