MKTG 442 MARKET DEVELOPMENT Lars Perner, Instructor 1 Market Development, Information, and...
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![Page 1: MKTG 442 MARKET DEVELOPMENT Lars Perner, Instructor 1 Market Development, Information, and Bargaining Power Reasons for market development Strategy in.](https://reader035.fdocuments.net/reader035/viewer/2022062800/56649de55503460f94add282/html5/thumbnails/1.jpg)
Market Development, Information, and Bargaining Power
• Reasons for market development
• Strategy in market development
• Tools and outcomes• Participation in
commodities market development
• Bargaining power and market “stabilization”
• Market information
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Promotion: Strategic and Tactical Objectives
• Awareness• Trial• Attitude toward the
product– Beliefs– Preference
• Temporary sales increases
EmergingMarkets/New Products
Mature markets/establishedproducts
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Marketing Strategy
MARKETINGOBJECTIVESWhat we want to
accomplish
TOOLSUse resources such
as distribution, advertising, sales
promotion, demonstrations
TACTICSAND
ADAPTATIONImplementing strategy
as things change.More tough choices!
CONSUMER/MARKET
RESPONSEConsumers or intermediaries
respond
STRATEGYHow to best use
available resourcesto accomplish objectives
under circumstances.Make tough choices!
OUTCOMESales are influenced
(e.g., volume, frequency, switching,
price sensitivity)
ASSESS AND RE-EVALUATE
ASSESS AND RE-EVALUATE
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Market Development Issues
INCREASEDSALES OFPRODUCT
DECREASECONSUMER
PRICE SENSITIVITYGET MORE PEOPLETO BUY PRODUCT
GET CURRENTUSERS TO USE
MORE
GET PRODUCTUSED FOR
NEW PURPOSES
DEVELOP PREFERENCE
RELATIVE TO OTHERPRODUCTS OR BRANDS
DISTRIBUTIONENHANCE-
MENT
ADVERTISING
SALESPROMOTION
JOINTVENTURES/
CO-BRANDING
TRIAL
AWARE-NESS
BUYINGCON-
VENIENCE
.“Big picture only”—details not important!
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Market Development: The Objectives
DECREASE CONSUMER PRICE SENSITIVITY“Costs a little more, but it’s worth it” ● Zachy farms chicken ads ● Campbell’s soup ads
GET MORE PEOPLE TO BUY PRODUCTHungry Man dinners ● Hot Pockets ads ● Variety seeking advertising ● Spam luncheon meets advertising
GET PRODUCT USED FOR NEW PURPOSES“Orange juice—it isn’t just for dinner anymore” ● “Beef—it’s what’s for dinner”
● Spam luncheon meets advertising ● Baking soda ads
DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDSKraft cheese ads suggesting that Kraft has more calcium ● Total cereal ads suggesting vitamins ● “Coke is the real thing” ● “The Pepsi generation” ● “The night belongs toMichelob” ● Florida orange juice “Maxwell—it’s good to the last drop”● Progresso and Campbell’s soup ads
GET CURRENT USERS TO USE MORE“Snickers satisfies you!” ● “Ask for A-1 Steak Sauce” ● “A sandwich just isn’t a sandwich without miracle whip” ● “Beef—it’s what’s for dinner” ● “The Incredible, Edible Egg” ●Fast food restaurant advertising
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Strategy Issues
• Deciding on objectives – Realism– Suitability for
• Company strengths• Competitor positions• Market structure and change
• How much to spend on objectives– Cost of advertising and/or other promotion relative to gains– Most appropriate ways of achieving objectives based on
• Cost• Effectiveness• Synergy
• Consistency of objectives
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Some Tools
• Advertising– Awareness– Trial– Preference– Reminder– New uses
• Distribution– Availability in
retail stores– Quality of
placement within retail stores
• Price/sales promotion– Coupons– Sales– Value– Premium
• Joint ventures/co-branding
• Demonstrations• Product investment
– Quality– Differentiation– Packaging– Usability convenience
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Consumer Adoptions of New Foods or New Food Uses
ADOPTION BYLIMITED GROUP
MEDIACOVERAGE
INCREASINGADOPTION/
ADAPTATION
PROMOTION
WORD OF MOUTH
OBSERVATION
TRIAL
TRIAL
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Effects and Outcomes
SALES VolumesPrices
AWARENESS
PREFERENCE
USED INMORE
SITUATIONS
REDUCEDPRICE
SENSITIVITY
USEDMORE
FREQUENTLY
USE BYMORE
PEOPLE
REPEATPURCHASES
TRIAL
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Market Development
• Levels– Commodity
• Differentiation from competing commodities• Increase in demand for commodity
– Corporate product category (e.g., Coca Cola drinks, including Dasani)
– Product category brand—e.g., Kraft American cheese slices
– Brand (product line)—e.g., Kraft foods
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Commodities Market Development Programs
• Typically regional—e.g., Florida orange juice; Idaho potatoes; Hawaiian sugar cane; Washington Apples; Texas beef
• Intention is to differentiate• Compulsory participation in advertising
programs– Development is not worthwhile for the individual
farmer– The individual farmer is assumed to benefit from
overall campaign
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Definitions
Innovation: “An idea, practice, or product perceived to be new by the relevant individual or group.”
Diffusion process: “The manner in which innovations spread through the market.”
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To Adopt or Not to Adopt: How Will Consumers Answer the Question?
• Some causes of resistance to adoption– Perceived risk--financial
and social– Self image– Effort to implement
and/or learn to use the product
– Incompatibility– Inertia/overwhelming
existing choices
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Types of Innovations
• Fashions—tastes go back and forth over time—e.g., food fat content
• Fads—product is “in” for a short time and then fades (e.g., ostrich meat)
• Trends—consumption of a food product either increases or decreases consistently over time
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0
10
20
30
40
Num
ber o
f new
adopto
rs
-2.50 -1.50 -0.50 0.50 1.50 2.50
Adoption of Innovations Over Time
Innovators2.5%
Laggards(13.5%)
Earlymajority34%
Earlyadoptors(13.5%)
Late majority34%
Innovators and Imitators: The Lifecycle of A Product
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0
0.2
0.4
0.6
0.8
1
Percent diffu
sio
n
0 5 10 15 20 25 Time
The S-Shaped Diffusion Curve
100% adoptionor saturationpoint
One Diffusion Pattern--Nicely Balanced...
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Implications for Foods
• Many substitutes and individual tastes• Trying new foods for variety is common• Social opportunities for trial• Food tastes tend to be “learned” early in life
– Best opportunities for spread are with younger consumers
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Influences on the Speed of Diffusion
• Risk to expected benefit ratio (relative advantage)—usually not an issue for foods
• Observability—is the product consumed in public
• Product pricing—scarce foods are “rationed” through cost
• Trialability—usually easy for foods• Switching difficulties and learning
requirements/ ease of use—not a problem for foods eaten out but may be for foods to be produced at home
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Pioneering Advantage
• Consumer expectations are usually shaped by the first encountered brand
• Satisficing and awareness by consumers• Order of entry vs. pioneering advantage• Positioning of existing pioneer vs. strategy of
first entry
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Bargaining Power
• Impact– Price– Conditions
• Returns
• Time of payment
• Interest or finance charges
• Quality or other adjustments
• Transportation or other services
• Sources– Size, number, and
concentration of firms– Supply control– Unequal information– Diversification (?)– Product differentiation– Control of resources– Financial resources– Ratio of fixed to variable
costs
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Marketing Orders and Agreements
• Mandates intended to “stabilize” markets• Types of issues
– Grades, size– Packaging– Market allocation (quotas)– Minimum prices– Contributions to research– Advertising (market development)
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Market Information
• Some issues– Crop forecasts
– Demand forecasts—quantity and prices
• Government information programs
• Problems– Price specification
(comparability of location, time, and other factors)
– Net vs. gross prices (allowances and discounts)
– Cost vs. accuracy of information
– Changing market orientation and scope of market (proportion of buyers and sellers involved in open markets)
– Voluntary cooperation