Course structure

716

Identifying

problems

Analysing

customers

Analysing

context

Analysing

distribution

Analysing

resources

Strategy

develop

–

ment

Strategy

evaluation

Implement

–

ation

Introduc

–

tion

Today

Learning objectives

1.

Analysing market data

2.

Learning about segmentation, targeting and

positioning

3.

Learning about distribution

4.

Explain pricing

4

Agenda

•

Who is the customer?

•

Segmentation

•

Positioning

•

Distribution channels

•

Pricing and margins

Customers

Who and how many?

6

Classic strategy mistake:

“We don’t want to overly define our customers because many people could use our products”

Customer in ‘small red car market’

Jaguar F typeToyota Corolla

NZ RRP $144K – 255KNZRRP $29K – 39K

7300 Corolla
;	7%

“Jaguar 548 new vehicles “sold in registrations in 2021 up from 2021of new 140 in 2007 – a 291% growth passenger car sales in in 14 years”NZ”

8

Market data: Yoghurt example

Source: Passport

28.5

29.0

29.5

30.0

30.5

31.0

31.5

32.0

32.5

2014

2015

2016

2017

2018

2019

Volume (000 tonnes)

Yoghurt

24,000.0

24,500.0

25,000.0

25,500.0

26,000.0

26,500.0

27,000.0

2013

2014

2015

2016

2017

2018

Volume (tonnes)

New Zealand Milk Yoghurt

82.8

83.2

83.6

84.0

84.4

84.8

2013

2014

2015

2016

2017

2018

Percentage of total

New Zealand Milk Yoghurt

0

5

10

15

20

25

2013

2014

2015

2016

2017

2018

Volume (tonnes)

New Zealand Non

–

Animal Derived

Proteins Yoghurt

Target market process

Four bases for market segmentation

Graphic source: https://surabhiudas91.wordpress.com/2014/09/26/nestle

–

slim

–

milk

–

segmentation

–

targeting

–

and

–

positioning/

Application to small car market

The market segments differ for the two ‘small red cars’

Examples

Market size – estimation

· Market size can be estimated based on the size of the targeted market segment, frequency of purchase, and price paid each time.

· E.g., 1000 customers; buys 1 set of shampoo/conditioner per month; $20 each purchase = $20,000 per month (or $240,000 per year) – customer profile can help!

· Once we select the target market, we can decide how to position our product – reach out to them and make them perceive the uniqueness of product and how it meets their needs.

Caution: making sense of the market data

BEWARE:

· Market boundaries (what is included in the definitions)

· Wholesale or retail $; or volume?

· Market share? (share of what and long-run?)

· Data sources and calculation methods?

· Market growth by segment?

Target market size estimates are important for sales forecasts

· It is not straight forward to find specific market size data for your product, especially for SMEs

Positioning map

–

competitors

•

Map your product or service relative to alternatives

•

Dimensions

based on what is important to

target

customer

•

Identify gaps

4

Ps or 7 Ps of marketing?

Not theories but taxonomies

–

activities and a checklist for

strategy

Who is the primary customer?

•

“Averaged”

or

individual customers?

•

End

–

user

or

distribution channel?

Important: Product

–

market fit

•

Aligning ‘product offering’ to ‘customer needs’ of

the target market is critical

•

Need to regularly check the STP process

•

Is there a creative way of identifying target

customers?

Customer focused strategy – main points

1. Identify the customer that best matches your firm’s values and capabilities – and offers the best profit potential

2. Understand what that customer values – in detail

– and track the customer’s purchasing behaviour

3. Implement a business model that allows your firm to best satisfy the primary customer’s needs and preferences

4. Build systems to flag changes in customer needs

Source: Simons (2014)

Distribution Channels

21

Distribution channels

–

Consumer products

Graphic source: https://courses.lumenlearning.com/marketing

–

spring2016/chapter/putting

–

it

–

together

–

place

–

distribution

–

channels/

Distribution channels

–

another diagram

Graphic source: http://www.pjmconsult.com/index.php/services/distribution

–

channels

Distribution channels

–

Push vs Pull

Source: http://rachanachadha.blogspot.com/2014/09/distribution.html

How to use distribution details?

•

To find out the main distributors or specialized

distributors

•

To know which channels are being used by your

main rivals.

•

You may choose the same channel or find one with

no (or less) competition for your product

Pricing

–

different types

•

Source: https://www.mbaskool.com/business

–

concepts/marketing

–

and

–

strategy

–

terms/18091

–

pricing

–

strategy.html

Simple channel pricing model

Manufacturer

Wholesaler

Distributor

Buyer

RRP

$ 10.00

Actual price paid $ 7.50

)

% discount

(25

Cost to distributor $ 5.00

% margin of $

2.50

33

Cost to wholesaler $ 3.40

32

1.60

% margin of $

Variable cost to produce $ 2.50

% margin of $

0.90

26

Covers

:

Sales

Promotion

Overheads

ROI

Covers

:

Distribution

Promotion

Wastage

Overheads

ROI

Covers

:

Warehousing

Logistics

Overheads

ROI

Note: Goods and services tax not included

Logical errors in pricing

· Cost plus (lazy or wasted opportunity)

· Low prices are an obstacle in future (reduction is easy but increasing is tricky)

· Discounting too quickly & frequently (are you targeting the right customers?)

· The “lower price = higher volume” delusion

· Assuming that competitors will not reduce their prices

· May not translate to higher demand/volume – see example

Example: Reduce price 20% to achieve

40

% increase in volume

Unit price:

$10

Reduce 20%

$8

Unit

c

ost:

$5

$5

Contribution margin:

$5

$3

Unit sales:

10000

Increase 40%

14000

Revenue:

$100,000

$112,000

Total contrib. margin:

$50,000

$42,000

Digital Marketing

· Promotion of products or brands using different forms of electronic media

· E.g., 71 per cent of consumer more likely to purchase from brands they follow on social media

Graphic source: https://fourweekmba.com/distribution

–

channels/

Search engine

SEO or SEM?

Social media

SMO or SMM?

Preparing for your workshops

· Identifying your customer by market segmentation process – segmenting, targeting, positioning

· Use of reliable databases and other sources is important – may need more than one source

· Create a customer persona that best represents the targeted market segment (humanize it with characteristics)

· Estimate the market size – price x units sold in a period

· Identify the main distribution channels to reach the target customer?

· What digital strategies are most appropriate?