1. Explain how Marketing affects the outcome of the financial equation: Sales-Expense=Profit. What risk the company might be facing in this equation with regards to marketing? Expound on the importance of marketing in sustaining business growth. (5 points.)
In the equation, Sales-Expense=Profit, activities done in Marketing can be said or considered as marketing expenses that includes advertising costs, promotions, PR events and Marketing Research costs (e.g. FGD, etc.). Through the income statement, we can get the Profit or Revenue and costs or expenses. These may include the costs of marketing the product or services with other costs that is deducted from the amount of sales or total sales.
The idea is to increase the revenue while costs are incurred through marketing activities. However, in order to achieve this, marketing activities must be done effectively and the costs or expenses should be managed correctly in order to create good results. Marketing activities that are not managed properly may incur additional costs to the company and continue on to increase. This is especially applicable to companies with different product portfolios and margins, wherein they can incur losses once the profitability of a product decreases.
2. Why do companies resort to market segmentation? Explain why or how segmentation can be an effective market entry/penetration strategy. Give an example not discussed in the class. (10 points)
Better matching of customer needs
Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution.
Enhanced profits for business
Customers have different disposable income. They are, therefore, different in
how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits
Better opportunities for growth
Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being introduced to a particular product with an introductory, lower-priced product
Retain more customers
Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to competing products and brands
Target marketing communications
Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost
Gain share of the market segment
Unless a business has a strong or leading share of a market, it is unlikely to be maximizing its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.
3. What can be a good segment to target for a facial care product? Why? What can be a compelling consumer insight and your corresponding value proposition? Illustrate your brand DNA diagram and prepare a positioning statement and a tagline. Outline your IMC campaign. (15 points)
Segment – Facial products made especially for men
Customer insight – There are many facial products available in the market but focused only on female needs, including anti-ageing products. Facial care products for men are very limited as not all facial care companies delve into the market. However, due to the growing number of men getting more conscious of their appearance, they look for products that are made especially for us. This is also because Men’s skin differs from Ladies thus their skin needs differ. Value proposition – “Complete men’s facial care regime line: products range from facial soaps, scrubs, non-alcohol based cleansers, and facial lotions. Brand DNA:
Category – Facial care for men
Character – Clear and Clean for the real man
Credibility – Should be tested and approved by Dermatologists and Dermatological Institutes Benefit – Complete men facial regimen: Cleans and Clears the face, while moisturizing he skin. Difference – Made especially for men and men’s skin.
Positioning statement – The Product For men of different ages and skin types which provides clear and moisturized skin. Taglin – “Complete facial regimen for the new man” IMC campaign: TV Advertisements, Newspapers, Men’s Magazines, Bus posters.
Storyboard – A construction worker, after a long day building a wall is then seen by his co-workers using a facial wash for women. Co-workers laugh when they see the man has a white face after washing. Co-worker gives the man the facial care product for men.
4. Assuming that you are hired as a marketing manager of a publication company. Your primary task is to develop a new magazine that has a strong market potential.
a. What type of magazine will it be?
b. Who will be your target market?
c. Estimate or extrapolate the market value potential. What should be the subject mix (topics) of your magazine to attract and sustain readers?
d. How will you promote this new magazine?
e. What can be a good name for your new magazine?
f. Develop DNA diagram and the positioning statement including the tagline.
g. What are your pricing and distribution strategies? (20 points)
5. Hair Salons are almost in every corner, be it commercial or residential area. David’s Salon is one of the successful salon chains in the country that is targeting the mid-end of the market. A new phenomenon however took shape in recent years in the form of F Salon Chain and Reyes Cutters that are charging very low fee for a haircut (45.00-50.00 pesos only). For a while the two salons have mushroomed until they suddenly lost esteem. Assuming, you have the capital to establish a hair salon chain, how will you build your brand? Discuss your 7-P strategies. Make sure you provide a brand name and a tagline for your hair salon chain. (20 points.)
Brand name: “Hairline, Careline”
Tagline: “hairline, gone in 60 minutes”
People: Adults with receding hairlines. Only a handful of salons or barbershops really focus on people with hairloss or receding hairlines. Product: A line of hair salons especially for individuals losing hair – services would involve scalp treatments, scalp massages and mainly haircuts that hide hair-loss and receding hairlines. Price: Haircut – Php 150; Massage – 200; Scalp treatments – 200-300 (depending on the treatment: e.g. spa or menthol) Placement: SM Malls, Robinsons malls (non-high end malls)
Process: Customers come in and is assisted by the front desk for introduction of services. Customer chooses the service. An expert to that service is provided to the customer. Promotion: Newspaper ads, TV commercials, Flyering activities and on-line advertisements and postings on websites like SULIT.COM, and/or Coupon websites like CASHCASHPINOY.
6. Illustrate the Marketing process that was introduced to the class. Discuss each of the steps in this process including their respective decision points/criteria. (20 points)
Discovering / Identifying the Value
Segmenting: Identify all possible segments
Profiling: Determine the most vulnerable and profitable segment Targeting: Choose your target market
Consumer Insighting: Gain consumer insights through research, focus group discussions and/or surveys. Value Offering: Determine your value which is relevant and distinct. This becomes your unique selling proposition.
Creating the Value
Product Concept: Determine product type, line, depth.
Product Development: Determine the features and attributes of your products and how to improve it so that your value proposition will be realized. Branding: Determine Category, Character, Credibility, Benefit and Difference and an appropriate brand name. Positioning: Formulate what you want your target market to perceive about your product and how you want them to understand and accept your value proposition. Create a tagline. Pricing: Determine if higher, parity or lower based on mark-up, targeting or value pricing.
Making the Value Accessible
Distribution: Determine how you want to go to market (i.e. channels of distribution)
Communicating the Value
IMC: Determine how you want to promote your product.
7. Discuss Ansoff’s Growth Matrix. Give examples. (10 points)
The Ansoff Matrix, designed by Igor Ansoff, classifies and explains different growth strategies for a company. This matrix is used by companies which have a growth target or a strategy of specialization. This tool, crossing products and markets of a company, facilitates decision making. The Ansoff matrix offers four strategies to achieve the objectives.
Trying to make a greater share of an existing market with an existing product. This could involve product re-launch or increasing brand awareness. For example, Ipods can be used for file storage as well, this gained them market share in the storage devices market.
Develop new products to target the company’s existing market segments. For example, Coca Cola introduced Coke Zero and Coke Cherry.
Finding or creating new markets by targeting new parts of the market or by expansion into different markets. For example, San Miguel introduced San Mig Zero targeting the health conscious people that wanted lesser calories but still enjoy beer.
Seeking to create or develop new products, lines or product ranges for new markets. For example, when Apple introduced the IPad tablet, which revolutionized how people work and manage taske with tap and swipe on the screen.
8. Discuss BCG Matrix/Grid (10 points)
The Boston Consulting Group (BCG) Matrix is a simple tool to assess a company’s position in terms of its product range.
Question marks are products that grow rapidly and as a result consume large amounts of cash, but because they have low market shares they don’t generate much cash. The result is a large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If it doesn’t become a market leader it will become a dog when market growth declines. Question marks need to be analyzed carefully to determine if they are worth the investment required to grow market share.
Stars generate large sums of cash because of their strong relative market share, but also consume large amounts of cash because of their high growth rate. So the cash being spent and brought in approximately nets out. If a star can maintain its large market share it will become a cash cow when the market growth rate declines.
Dogs have a low market share and a low growth rate and neither generate nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture.
As leaders in a mature market, cash cows exhibit a return on assets that is greater than the market growth rate – so they generate more cash than they consume. These units should be ‘milked’ extracting the profits and investing as little as possible. They provide the cash required to turn question marks into market leaders.
9. Discuss Product Life Cycle (10 points)
The Product Life Cycle (PLC) is used to map the lifespan of a product. There are generally four stages in the life of a product. These four stages are the Introduction stage, the Growth stage, the Maturity stage and the Decline stage.
The Four Stages of the Product Life Cycle
1. Introduction: The Introduction stage is probably the most important stage in the PLC. In fact, most products that fail do so in the Introduction stage. This is the stage in which the product is initially promoted. Public awareness is very important to the of a product. If people don’t know about the product they won’t go out and buy it.
There are two different strategies you can use to introduce your product to consumers. You can use either a penetration strategy or a skimming strategy. If a penetration strategy is used then prices are set very high initially and then gradually lowered over time. This is a good stategy to use if there are few competitors for your product. Profits are high with this strategy but there is also a great deal of risk. If people don’t want to pay high prices you may lose out. The second pricing strategy is a skimming strategy. In this case you set your prices very low at the beginning and then gradually increase them. This is a good strategy to use if there are alot of competitors who control a large portion of the market. Profits are not a concern under this strategy. The most important thing is to get you product known and worry about making money at a later time.
2. Growth: If you are lucky enough to get your product out of the Introduction stage you then enter this stage. The Growth stage is where your product starts to grow. In this stage a very large amount of money is spent on advertising. You want to of telling the consumer how much better your product is than your competitors’ products.
There are several ways to advertise your product. You can use TV and radio commercials, magazine and newspaper ads, or you could get lucky and customers who have bought your product will give good word-of-mouth to their friends/family.
If you are successful with your advertising strategy then you will see an increase in sales. Once your sales begin to increase you share of the market will stabilize. Once you get to this point you will probably not be able to take anymore of the market from your competitors.
3. Maturity: The third stage in the Product Life Cycle is the maturity stage. If your product completes the Introduction and Growth then it will then spend a great deal of time in the Maturity stage. During this stage sales grow at a very fast rate and then gradually begin to stabilize. The key to surviving this stage is differentiating your product from the similar products offered by your competitors. Due to the fact that sales are beginning to stabilize you must make your product stand out among the rest.
4. Decline: This is the stage in which sales of your product begin to fall. Either everyone that wants to has bought your product or new, more innovative products have been created that replace yours. Many companies decide to withdrawal their products from the market due to the downturn. The only way to increase sales during this period is to cut your costs reduce your spending.
10. How can Marketing help in nation building? What marketing concept(s) can be more useful for nation building? (5-point bonus)
Nation building can be done through promotion of the wonders of the Philippines using advertisements that can be shown using international programs such as CNN and BBC. Commercials that would emphasize the talents of the people, as well as promote investments of foreign companies or
http://www.tutor2u.net/business/marketing/segmentation_why.asp http://www.nku.edu/~issues/internet_marketing/newwebpage1.html http://www2.accaglobal.com/documents/boston_consulting.pdf
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