• Sun. Feb 28th, 2021

Strategic Marketing part 2 – Professor Myles Bassell

ByDonna9376

Dec 7, 2020

all right now let's talking about pockets product market strategies so what are the product market strategies is market penetration basically a market penetration strategy is when we try to increase the sales of our existing products in our existing markets so it's our current products our strategy when we're saying our strategies market penetration what we're trying to do is to increase the sales of the products that we working out on the market in existing markets and we said well what are the ways we could do that he said it's advertising for example so we currently have a product in the market and we sell it in the United States only if we want to increase sales one of the things that we could do is to spend more money on advertising that's a reasonable assumption if you increase your expenditures on advertising that the sales of your products would go up do you agree that seems reasonable what about in terms of market penetration what about introducing line extensions now that you guys know what line extensions are is introducing a line extension a way of increasing sales of your current products yes right because now you're going to take your existing product the product is the same but now you're just introducing it in different flavors like Gatorade for example so Gatorade has lemon a lemon flavor they have a cherry flavor they have an orange flavor so each one of those we would consider to be a line extension for Gatorade market development is another product market strategy which means that we've been increase the sales are on current products the same ice cream the same energy drink Gatorade we're going to increase the sales of those products in new markets and what are some of the ways that we said we could do that one of them we said was licensing the next least risky so if you want to increase the sales or our existing products in new markets for our company that means going global so that means for us selling outside of the United States so I said we already sell our product the United States now we're going to sell our products in Canada in Mexico in Italy in France in Germany in Jamaica in Trinidad in Barbados in Iran so we're gonna go global this is our market development strategy so the question is well how are we going to do that we serve but one of the ways we could do that is through licensing licensing our brand because trying to penetrate a new market is going to be very challenging for us you don't have a sales team there we don't have a distribution network we don't have office space we don't have production a production facility we don't have a distribution center so how are we gonna how are we gonna sell our ice cream there how are we gonna sell shampoo shampoo right I know a lot about shampoo how are we gonna sell shampoo globally so licensing is one way that we could get into a market we license our brand to a company and this company presumably has a distribution network they have a distribution center they have a manufacturing facility they have a sales force but we said that's not the only way we could also export which means we could reduce the product here in the United States and then ship it outside of the United States there's some risk associated with that we could lose the inventory for example what happens if we ship it and then the product gets damaged on the way to market so let's say the ship that it's on is caught in a hurricane and all the freight is destroyed we better ship ten million dollars worth of inventory another option we said it's a joint venture so partnering up with a company in the market we want to penetrate all the markets who want to penetrate and that involves us putting money into the deal so a joint venture we're gonna have an agreement with our company and another company to produce and sell shampoo well if they have the manufacturing equipment and they have the distribution network and they have the Salesforce then what is it that we bring to the market it's got to be the infusion of cash is certainly one thing that we would bring to the joint venture or we might bring some proprietary technology we might have some sort of unique formula for the product maybe it's gonna help your hair grow some people are interested in that making their hair grow so a joint venture is another way that we could pursue our market development strategy and then also foreign direct investment FDI what does that mean we go there we build a manufacturing facility that's not an option in every market so in some markets that's not an option but certainly that's the most risky market development approach because now we're talking about maybe spending a billion dollars to set up a manufacturing facility and have manufacturing equipment installed in that facility both built and installed so manufacturing equipment is typically made to order not made to stock so they're not holding inventory on manufacturing equipment cuz it's very expensive they only make the equipment when they get an order so we'd have to place an order to make specific manufacturing equipment we'd have to build a manufacturing facility we could see this as a sequential process very often companies follow this as a way to kind of train a particular market first licensing what's that first step to kinda learn more about the market then as they learn more about the market the needs of the consumers and the market dynamics they could move forward with exporting the product and then formulating a joint venture and then at some point they might decide to make the investment to build the manufacturing facility questions about that another strategy another product market strategy is new product development new product are you offering development so what does that mean that means that we're going to create a new product we're going to create a new product for our existing market so a new product for our existing market that's the product development what would be an example of that what would be an example of new product development a new product for an existing market so a cereal company that has that currently makes dry cereal cold cereal introducing a product that's nice that gives a hot cereal microwavable what do you think so do you think to ensure private product development is that an example of my attention or is that more of a brand extension alright next what again brand extension line extension whose scent line extension who says brand extension so new product development so we can introduce a new product into an existing market so if we if we follow the logic that something you're suggesting then is there a difference between market penetration and your product development is that the same is increasing the sale of the existing products that needs us they market the same thing as new product development which is so what is the new offering so but if you're going to change the form of the product if it's going to be instead of liquid it's gonna be powder or it's if it's going to be instead of a solid it's gonna be a gel or an aerosol right so we think about deodorant it could be a solid it could be a gel it could be an aerosol those are examples of line extensions there's the same product just we change the form of the product same thing is changing the flavor of the product what was that so Gatorade candidate would that be an example of a new product well Gatorade candy you don't think that's a food category one is which I'm Bob traditionally Gatorade is known as a beverage right is selling beverages selling these rehydrating beverages I done it but now Jimmy is saying well what about it Gatorade comes out with candy okay so it's running out to me so it depends on how we're going to find the category if we're going to find it very Natalie or it's going to be very broad so somebody's suggesting that it's very fluid anything has to do an energy regardless of whether it's an average or it's a candy or not right so I'm sorry butts are making the exception the assumption that Gatorade is an energy drink like Red Bull it gives you wings okay that's what I should have brought tonight red dough Red Bull Red Bull it gives you wings it gives you wings well you know when they introduced Pepsi into China you know that the way that they translated the Pepsi brand name what it meant in Chinese was because it's a phonetic translation so when you see the the Pepsi packaging when you see Pepsi on this shelf and you say oh can you read what that says well yes you could leave it because what it is is it's a phonetic translation so when it says in trend in Chinese its Pepsi but the thing is that in China they don't use an alphabet it's a group of symbols and no symbols together form a concept so am i right Jimmy right so when they introduced Pepsi they didn't do a linguistic search in marketing we do a linguistic search but that means that you want to find out what that brand name translates to in another language so make it bother to do that just like when they introduced the Chevy Nova into Mexico it sounded like a good idea to want to sell a relatively inexpensive car in Mexico the economy was severely depressed make sense to try to sell a inexpensive car there but the thing is that they never bothered to figure it out that Nova right regardless of what Spanish dialect it is Nova basically in Spanish means no go so how many Chevy no-goes do you think you're going to sell in that market so big companies make big mistakes so sir that really happened yes it did and soon it's always when they want to defend their position they say well this company did this that doesn't mean that it's right you know why because they didn't hire Brooklyn college students I told them how I booked the colleges but did they no they went in hired students of all other colleges and there what do you think happens the Chevy Nova that's what happens that's what happens but perpetually it translated to your gonna copy it translates to we bring your ancestors back from the dead now that goose that gives all entirely new meaning to the value proposition of an energy drink right so if you drink this it doesn't just give you ways right Aleksey it doesn't just give you wings if you drink this it'll bring your ancestors back from the dead maybe we should go with this you should you should do this right come on with our own energy drink but the problem is that in that market the Chinese people didn't think that was funny because their culture has a lot of respect for ancestry and family and that was a major mistake on the part of Pepsi so we need to be aware of the branding of our product when we bring it into uh into a new market alright so in terms of Gatorade it depends it depends on how we define the market we're gonna come back to that let me talk about the different branding strategies yes we're gonna we're gonna come back to that but we get of it on that side so diversification is when we introduce a new product into a new market that's diversification so a good example when we talked about Sears we said Sears what they do they acquire dean witter they acquire Discover Card they acquired Allstate Insurance this is the company that fits the definition what if we say is retail so what is it that they do right how did we define that business we would say that they were a retailer that they were a retailer of apparel and other household goods but they acquired they diversified and they acquired these other companies which were in financial services including insurance credit card that's a good example of diversification why because they were very successful in their retail business and they had an excess amount of cash like Jimmy said well what you have all this cash flow this was a company that had an excess amount of cash and so what they doing that they decided they were going to diversify that was their product market strategy decided we're going to diversify and extend themselves into other categories now when we introduce a new product ideally our sales are going to be incremental that means that our expectation from introducing a new product inside of ourselves last year was 100 million dollars that this year have to introduce a new products ourselves are going to be a hundred and twenty five million dollars that means that the sales are incremental all other things being equal so for example in other words assuming that we didn't land a new big account and now we have distribution in Walmart because that could be the reason our sales increased 25 million dollars but assuming all other things being equal if our sales are now I've been 25 million dollars then and we would know if it's specifically coming from those new products that would be an example of incrementality but we touched upon this last time and I want to make sure that we cover this now is cannibalization I'm not talking about Lord of the Flies okay I'm talking about cannibalization and marketing so let's take a look at what that is so with cannibalization what that means is that with our ice cream company let's say that last year last year we sold 20,000 cartons of vanilla 40,000 cartons of strawberry now 20,000 pounds of strawberry and 60,000 cartons of chocolate how many cartons of ice cream did we sell everybody got that calculator knock come on business students Ben this is 30 Kevin how much 120,000 Cotton's but then we did market research we did we looked at some secondary research qualitative and quantitative we did some primary research we did some qualitative focus groups we did a questionnaire we got all this research at our fingertips and what is our conclusion after spending $150,000 on focus groups and $125,000 on a question there we found out that there's a demand in the marketplace for a new flavor of ice cream what flavor mango now this is what happened so we introduced my load and this is what happened now we introduce mango we sold 10,000 cartons of mango wow maybe that was the right thing to do we did all this research we introduced a new flavor based on what consumers said not what we thought but based on what the consumers told us that is a strong preference the purchase intent the purchase intent for mango a mango flavored ice cream was very high in fact 89 percent of consumers said that they would purchase mango flavored ice cream but then look what happened so how many cartons of ice cream did we sell the next year we still we sold the same number of carbons we sold 120,000 cars last year and now we introduced this new flavor and we still only sold 120,000 Carney's so it means that there's no incrementality right Regina its we cannibalize our own selves and a fitting in thetic we don't cannibalize our own sales somebody else will a competitor will so we don't introduce mango these 10,000 cartons presumably are still going to go away in our scenario it's just that they're gonna buy mango flavored ice cream from our competitor so questions so this would be an example of capitalization we cannibalize her own sales we introduce a new flavor and we saw 10,000 cards of that which is great but as a result we sold we're assuming that has result we sold 10,000 less cartons of chocolate so now we only sold 50,000 cartons of chocolate ice cream yeah absolutely so we would argue that it's better that we cannibalize our own sales then having our competitors do that so it's open overall we sold the same number of cartons of ice cream so there's no incrementality but even though he catalyzed our own sales but Shanae is reminding us is that it's better that we do that and we cannibalize our own sales because if we don't our competitors are going to do that our competitors would introduce a mango flavored ice cream they would beat us to market and they would get 10,000 cartons of ice cream so their company questions alright let's keep going the marketing mix also known as the four piece he said includes product price place and promotion so the marketing mix those four variables those are the controllables factors that we're going to use to craft our our marketing plan on our marketing strategies questions at the end of chapter one there's a sample marketing plan there I also uploaded a sample marketing plan to blackboard to you okay so by the end of the semester you'll be able to get you a portfolio a twenty page marketing plan that you're gonna write you can do it yes you can mine come on Ariel Murphy Murphy Murphy Tia come on Murphy no I'm gonna tell you the category and give me a background from a hard case study oh you guys you saw it but you pretended you didn't see it right this one hangs like oh no he's drunk and too much tequila you put the lime in the coconut yeah alright we could do it coach is gonna be there with you we're gonna make this happen yes yes yes and you can have a marketing plan as part of your portfolio all right we're gonna do this thing

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