Showing posts with label March. Show all posts

May 28, 2019

Direct Marketing and Its Management - Kotler's Chapter - Topic Summary

Direct Marketing - Definition by Direct Marketing Association (DMA)

"Direct marketing is an interactive marketing system that uses one or more advertising media to effect a measurable response and/or transaction at any location."

The response of direct marketing is measurable as the marketing messages are sent to expected marketing decision makers and the messages are so designed that responses can be clearly identified.

Direct marketing messages are now being used to build relationships also. Examples would be sending birthday cards and information booklets.

Direct marketing is growing at higher rate than that of retail sales. Even in business-to-business to sales direct marketing is delivering results.

Direct marketing accounts for almost 48% of total advertising spending, and companies spend more than $161 billion on direct marketing per year (2005 year).

Direct marketing produced $2.05 trillion in sales in 2012.

Personalizing communications and providing information about the products about which they have interest at the right time increases marketing communication effectiveness. Right information about the right product (which he intends to buy) to the right person at the right time is the focus of direct marketing. Databases are used to pick the potential right customers and the things they may be interested in.

Benefits Reported by Users

Consumers short of time and tired of traffic and parking headaches appreciate direct marketing. Significant number of persons report benefits from direct marketing methods. Consumers report that home shopping is convenient and also allows them to compare catalogues and order. Even business buyers report that they can go through relevant literature and make better choices without tying up time in meeting salespeople.

The growth of next-day delivery via FedEx, Airborne, and UPS has made delivery fast and easy.

Benefits Reported by Sellers

Sellers are reporting benefits. Sellers can buy targets mailing lists like recently married people, people who had a child birth recently, people who bought a home recently etc. They can customize and personalize messages. Direct marketing can be so designed that the message reach the prospects at the right moment and hence read by more-interested persons. The cost effective approaches can be determined among the direct marketing approaches. Direct marketing approach becomes less visible to competitors.

For every $167 spent on direct mail, U.S. marketers sell $2,095 in goods. (Figure of 2014 or 2015)
http://squidcircle.com/cool-stats/

Direct Mail

In direct marketing, an offer, announcement, reminder or other item is sent to an individual customer. Highly selective mailing lists are used for the purpose. Letters, flyers, foldouts, CDs, DVDs, and computer discs and pen drives are sent through direct mail and parcel services. Although the cost per thousand people is higher than mass media, the people reached are better selected participants, But direct mail is already a saturated channel as the response rates are falling in recently in financial services industry as compared to earlier days.

In the design of direct-mail campaigns or programs, marketers have to decide on their objectives, target markets, and prospects, offer elements, means of testing the campaigns and measures of campaign success.

Objectives

In the case of expected orders, a response rate of 2% is normally considered good. The response rate is determined by the product category, price and the nature of offer. Direct mail can also be used to produce prospect leads, strengthen customer relationships.

Direct Mail Offer Elements

The direct mail offer strategy has five elements - the product, the offer, the medium, the distribution method, and the creative strategy. All can be tested. The mail itself has five components: the outside envelope, sales letter, circular, reply form, and reply envelope.

Some important findings of researchers related to direct mail communications.

1. The envelope should contain an illustration, and it must have a catchy reason to open it such as the announcement of a contest or benefit. Sometimes a nonstandard shape or size of envelope also attracts the attention.

2. The sales letter has to be brief on a good quality paper. It must start with a personal salutation and a headline in bold type. It should be signed by someone whose title is important. Computer-typed or printed letters are getting better response compared to printed letters. A pithy P.S. also increases response rate.

3. A colorful brochure or circular with detailed explanation of the offer accompanying the letter increases the response rate and offsets the increased cost.

4. The mailers must have a toll-free number for giving clarifications and bookings and a supporting website from which coupons etc. can be printed.

5. A postage free-reply envelope dramatically increases response rate.

Once again it is important to stress that all can be test marketed.

Direct marketing has effect on awareness, intention to buy and word of mouth apart from the actually buy order.

Direct marketers can calculate life time value of customers and campaign break-even response rate can be determined.

Direct Mail Target Selection

Recency, frequency and monetary amount are the criteria based on which targets are selected for sending direct mail. Point systems are used to select potential buyers. The potential targets are also determined by demographic segmentation to decide the products which are offered to certain segments.

Lead to action – the strengths of direct mail

https://www.ipc.be/sector-data/direct-marketing/research-analysis/articles/lead-to-action-with-dm

8 tips for a winning direct mail sales letter

https://www.ipc.be/sector-data/direct-marketing/research-analysis/articles/dm-sales-letter

Now you can reveal powerful insights for your sector, using the latest JICMail data – and plan more effective mail campaigns to really deliver on your targets. Best of all, it’s free - MD of Royal Mail MarketReach, Jonathan Harman.

The data giving marketers new insight into direct mail
https://www.marketingweek.com/2018/06/13/royal-mail-insight-direct-mail/
https://www.marketreach.co.uk/toolkit/performance

Catalog Marketing

In catalog marketing, catalog containing all items offered by sale by the firm is given to customers. The marketing method is used in both business to business sales as well as business to consumer sales.

Read Catalog Strategists Tool Book
http://www.nmoa.org/catalog/catalogtoolkit.htm
NMOA - National Mail Order Association

The catalog marketing is an important segment of sales in USA. The internet and catalog retailing industry includes 20000 companies with annual revenue of $350 million sales. The companies operate special call centers to answer questions related to items covered in the catalogues, send free gifts and sales promotion vouchers, operate ecommerce sites to make buying more convenient and even organize exhibitions to provide a chance to see and feel the products. More detailed catalogs are uploaded on the websites to make more information accessible to interested persons.

Dell is the leading catalog marketer in USA.
http://www.encyclopedia.com/economics/economics-magazines/industry-profiles-catalog-and-mail-order-houses-0

Print versus Digital Catalogs

Why the Print Catalog Is Back in Style

Denise Lee Yohn
Harvard Business Review, FEBRUARY 2015
https://hbr.org/2015/02/why-the-print-catalog-is-back-in-style

http://blog.catalogmachine.com/marketing/digital-catalogs-best-product-marketing-sales-tool-small-businesses-online-stores/

https://www.bakergoodchild.co.uk/the-role-of-print-in-direct-marketing/

http://www.prnewswire.com/news-releases/ricoh-engagement-marketing-executive-symposium-fosters-conversations-on-prints-role-in-an-omnichannel-world-300390148.html

http://squidcircle.com/cool-stats/

May 2, 2019

Competitive Strategies for Followers and Nichers

Marketing Management Revision Article Series

Follower companies do not challenge the market leader. But market followers have to know how to hold on current customers and win a fair share of customers in the growing market. The follower firms have a certain advantages for its target market in terms of location, services offered or financing offered. Followership also involves stategic thinking to be on the growth without inviting competitive retaliation by the leader

Kotler described four follower strategies.

Imitator
The imitator is not an innovator. He provides products that had market acceptance (put into the market by innovators), but maintains differentiation in packaging, advertising, pricing and so on. Market leaders tolerate followers imitating to the extent, there is adequate competition to avoid monopoly market regulation.

Adapter
The adapter takes the leader's products and adapts or improves them. He normally sells in different market than leader to avoid direct confrontation with the leader.

Counterfeiter
The counterfeiter duplicates the leader's product and packaging and sells it through disreputable dealers. But leaders keep making efforts to check counterfeiting.

Cloner
The cloner emulates the leader's products and distribution and other features. But the brand name will be made slightly different.

The last two strategies have negative connotation.

Nichers

Nichers are small firms that target small markets of little or no interest to larger firms. But, these firms can be highly profitable through smart niching. In a study of hundreds of business units, the Strategic Planning Institute found that return on investment average 27 in small markets, but only 11% in larger markets. (E.R. Linneman and L.J. Stanton, Making Niche Marketing Work, McGraw-Hill, 1991)

The niche specializations include:
(Note: In all cases the segments selected by nicher are ignored by leaders and broad market firms)

End user segments: Specialising on particular end user segments. Example software firms supplying law firm related software.

Vertical segments: Concentrated at a level in the production-distribution value chain

Customer size segments: Selling either to small, medium size or large customers. Generally, niche firms supply to small customers neglected by large companies.

Specific customer servicing: Selling to some major customers. Even only one or two customers.

Geographic segments: Selling only in certain localities not served well by broad market firms

Specific products: Selling only one product or only one product line, but giving a big choice to choose in that product or product line to the buyers.

Specific product features: Specializing and offering a particular product feature

Job shop production: Customized manufacture for individual customers.

Quality segment: Operating at low- or high- quality segments.

Price segment: Operating at low- or high- price segments

High service segment: Offering features not offered by other firms

Channel segment: Serving only one or two distribution channels

Related Research

Rapid Growth through Niche Marketing - Startup to Fortune 500 Company (16 cases) 2009 paper
http://sbaer.uca.edu/research/icsb/2009/paper1.pdf

Related Articles

Strategic Choices for Market Leaders

Marketing Strategies for Challenger Firms

Updated on 14 April 2019, 3rd June 2014

April 13, 2019

Marketing Strategies for Challenger Firms

Marketing Management Revision Article Series

Firms take the role of challengers when they make aggressive efforts to further their market share.
___________________________________________________________________

Introduction

Firms that are not market leaders in their industry or product category are trailing firms. One or two of them could be close competitors to the market leader and they can be termed as runner-up firms. These firms can take the role of challengers when they make aggressive efforts to further their market share or they can be termed followers when they keep quiet and maintain their market share.

There are successful trailing firms which challenged and became industry No. 1 firms. Canon is one such example in copiers. Toyota is now the world No. 1 company in automobiles; it displaced General Motors.

The challenger companies have to attack the leader, other comparable firms, and smaller firms in their bid to gain market share.

Attack has a greater probability of success when there is customer dissatisfaction with the current leader. There is a gap in the market which the leader is not serving. Comparable firms can be successfully attacked when they are underfinanced and are charging excessive prices and customers are showing dissatisfaction. Similarly, underfinanced smaller firms can be attacked to gain market share.

With each attack, the challenger may hope to gain a reasonable increase in its market share.

The following attack strategies are possible.

Frontal Attack

An attack is called a frontal attack when the opponent’s strength is challenged head on. In marketing, the fight is done all fronts in market segments and areas where the opponent is currently strong. The general idea is that to win in a frontal attack, the challenger requires three times the fire power of the opposite side. What is fire power in marketing? Price of the product, quality of the product, sales effort, advertising effort, and service effort etc. are the various types of fire power in marketing. The challenger must be able to deploy superior fire power in the markets he is challenging.

Modified Frontal Attack

Price is the challenging dimension.

A modified frontal attack uses price as the challenging dimension. The challenger matches the opponent in other dimensions but will charge a lower price over an extended period.

Flank Attack

Attacking a weak position in the opponent’s force is flank attack. Challenger identifies the weak areas in the offering as well as marketing territories of the opponent and attacks those areas. A front attack may also be launched simultaneously, but the frontal attack is only to engage the opponent. But the real victory is won in the flanks. Market share gain in weak territories is the objective, but the opponent is forced to defend his share even in his strong territories and products.

Encirclement Attack

In this attack both strong areas and weak areas attacked simultaneously. This type of attack is more often done by a leader when challenged. When the leader makes an aggressive attack to gain market share from the trailing firms, he can use this strategy. Even other firms, can use this strategy when they are attacking a much smaller firm’s market share.

Guerrilla Attack

Guerrilla attacks consist of waging small, intermittent attacks on different marketing territories of the opposing firm for smaller periods of time. The aim is to harass and demoralize the opponent initially before launching the main attack.

Bypass Attack

In a bypass attack to gain market share, a firm identifies segments not served by the existing firms and makes efforts to gain market share.

The Marketing Firepower

Price discounts: The challenger can sell a comparable product at a lower price.

Cheaper goods: The challenger can come out with economy goods with lesser number of features. The strategy will succeed when there is significant number of buyers in need of lower priced product.

Prestige goods: A challenger can launch a higher quality product with more features.

Product proliferation: The challenger can offer a greater product variety.

Product innovation: the challenger can come out with an improve product.

Service innovation: Improvement in service offered to the buyers.

Distribution innovation: a new distribution outlet that offers additional convenience to buyers.

Process innovations: The challenger may have done a process innovation that gives better quality or lower cost and it is passed on to buyers.

Advertising innovation: The challenger may have innovative communications strategy that reaches and motivates larger number of potential customers resulting in higher sales.

Challenger needs to have a product-service offer or marketing mix advantage that is of value in the market place. Then he can use that advantage to gain market share by employing a suitable attack strategy.

References

Kotler, Philip (1997), Marketing Management, 9^th Ed., Prentice Hall, New Jersey.

_________________________________________________________________________________

For Further Reading

Eating the Big Fish: How Challenger Brands can compete against Brand Leaders, Book by Adam Morgan

Book Review

http://advertisingstrategy.marketingplanblog.com/2011/04/03/advertising-strategy-eating-the-big-fish-how-challenger-brands-can-compete-against-brand-leaders-adweek-book-s/

Strategy of Market Leader

Marketing Management - Review - Revision Articles List

______________________________________________________________________________

.14 April 2019

Applications of Challenger Marketing Strategies by Congress and Other Opposition Parties in 2019 Parliament Elections

Frontal Attack

A frontal attack and flank attack are launched simultaneously, but the frontal attack is only to engage the opponent. But the real victory is won in the flanks.

The strong points of BJP Government - Free of Big Corruption charges and Determination to show force against Pakistan were both attacked. Rafale issue was highlighted and the Prime Minister himself was shown as involving in negotiations with secrecy clauses. The Balakot attack was questioned for proof and the ruling was put on backfoot for the casualities claimed.

Flank Attack

The flank attack was launched on Jobs and economic distress due to demonetization.

Modified Frontal Attack

A modified frontal attack uses price as the challenging dimension. The challenger matches the opponent in other dimensions but will charge a lower price over an extended period.

Nyay Scheme

In the case of Indian election, this dimension is related to income subsidies to lower sections of the society. BJP announced a scheme of Rs. 6000 income transfer per annum. Congress attacked by announcing Rs. 72,000 as possible money transfer.

Bypass Attack

In a bypass attack to gain market share, a firm identifies segments not served by the existing firms and makes efforts to gain market share. In a by-pass attack weak areas of the market leaders that provide strong attack possibilities for the challenger are identified. The alliances of opposition parties is being done to attack in only those place where they have strength. The opposition is playing the strategy that BJP used last time. Identifying winnable seats and using their cadre effectively in those constituencies. This time opposition may be using the same strategy.

Definitely, opposition is not using encirclement attack and guerrilla attack will not give any benefit to the combined opposition in these general elections.

Is BJP using the market share gaining strategies effectively in the 2019 Parliament Elections?

Strategic Choices for Market Leaders
https://nraomtr.blogspot.com/2011/12/strategy-of-market-leader.html

Article Originally posted in
http://knol.google.com/k/ marketing-strategies-for-challenger-firms
Knol not available for public access after 30 April 2012

Updated 14 April 2019, 3 March 2015, 3 June 2014

March 3, 2019

Marketing Strategy for New Industry Products

Marketing Management Revision Article Series

Pioneer in a Product - Issues

When a product is new in the industry life cycle, the firm starting the production and sale is the pioneer. Normally the growth is slow in the introduction of phase of a new industry product as the technical problems with the product are to corrected, production capacities have to be built up based on market acceptance and growth, distribution capacity is to be built up from scratch when distributors have no familiarity with the product, and customer may have reluctance to change his old behavior. If the product is an expensive high technology one, only small number of buyers can afford it.

Companies have choice to be a pioneer or a follower. A pioneer has to initiate every thing connected with the product. A follower has the benefit using various firms that helped the pioneer for his venture. Also he has the opportunity of studying the pioneer’s product and market response to it. He can examine the distribution channels used by the pioneer and gauge their effectiveness and he can evaluate various marketing strategies employed by the pioneer. Thus an early follower has some extra knowledge about the product and the market.

Is there any Advantage to the

Pioneer?

Some studies indicate that the market pioneer if it can capture the leadership position gains the most advantages. Some studies dispute the finding that pioneers have sustained their leadership. Robertson and Gatignon give the opinion that an alert pioneer-leader can pursue various strategies to prevent later market entrants from wresting away leadership. Being a pioneer has an advantage that can be capitalized. The pioneer has to dynamically compete in the market place to exploit his pioneering advantage. He needs to have a grand plan for life-cycle of marketing of the product and launch strategy has to be the first step in that grand plan.

The pioneer may start from a specific product-market segment his launch but must have plans to cover the larger part of the market over a period of time by launching appropriate product variations and covering more market segments.

The competitive Cycle – The Pioneer’s Challenge

Initially, the pioneer is the sole supplier with 100% production capacity and market share.

In the second stage, there is competitive penetration as competitors build capacities and enter market.

In the growth phase, capacity tends to be overbuilt and any cyclical downtrends will impact margins for all. After some time share stability may happen.

Then a commodity competition stage will come where returns are average.

The final stage will be a decline for the industry and firms withdraw from the industry. The pioneer needs to steer through all the stages of the industry life cycle.

Pricing and Promotion Strategies for

Pioneers

Pioneer has the alternative of Skimming pricing or Penetration pricing.

Skimming is entering the market layer by layer in the order of value exchange. Initially buyers who are willing to pay a high price are serviced. This strategy is feasible if market is unaware of the product and special efforts are to be done by firms to make the potential buyers aware of the product.

Pioneer will do rapid skimming if the potential competition is imminent. In this strategy he will spend substantial amount on promotion to enlarge the sale quickly. If the potential competition is not imminent, the pioneer can undertake slow skimming. He can expand sales slowly by limiting promotion expenditure.

Penetration is entering a large market with a lower price. It is done for price sensitive products. Rapid penetration is preferred when the market is unaware of the product. The pioneer spends a good deal on launch and advertising. A slow penetration approach is used when market is aware of the product, but potential competition is limited.

Thus price and promotion are the two alternative dimensions which the pioneer has to use in his strategy.

The Marketing Firepower

The Marketing Firepower as a concept was discussed by Kotler in competitive dynamics chapter. But it is relevant to new product marketing strategy. The marketing strategist has to understand the marketing firepower that he has and has to use it appropriately in appropriate target segments, in proper media against proper competitors in proper products. So in marketing battles, right firepower has to be used in right places, against appropriate opponents.

Price discounts: Are you selling a comparable product at a lower price.

Cheaper goods: Are you offering economy goods with lesser number of features. The strategy will succeed when there is significant number of buyers in need of lower priced product.

Prestige goods: Are you launching a higher quality product with more features.

Product proliferation: Are you planning to offer a greater product variety.

Product innovation: Are you offering an improve product.

Service innovation: Improvement in service offered to the buyers.

Distribution innovation: a new distribution outlet that offers additional convenience to buyers.

Process innovations: Is your enterprise based on a process innovation that gives better quality or lower cost?

Advertising innovation: Do you have innovative communications strategy that reaches and motivates larger number of potential customers resulting in higher sales.

You have to develop the marketing fire power that allows you to succeed in the market. Enter the market with adequate marketing firepower to succeed.

References

Kotler, Philip (1997), Marketing Management, 9^th Ed., Prentice Hall, New Jersey.

___________________________

News Item - Amazon cuts Kindle Price

Amazom.com has trimmed $40 off the price of its Kindle e-reader. The price cut means the entry level Kindle with a six inch display is now available at $259. It is still higher by $60 when compared to the entry level model offered by Sony Corporation, the principal rival. Amazon accounts for 60% of the US market and Sony has 35% of the market.

The forecast is that three million e-book readers will be sold in US during 2009. According to Amazon, for books available in both digital and physical editions, the company sells 48 kindle editions for every 100 physical copies of the book.

What is to be noted in this news item is the price cuts that pioneer companies have to provide as market expands and competitors emerge. New product marketers have to continuously support value engineering work in their companies and take decisions regarding price cuts made possible by value engineering.

_

Migration from Knol
All management knols are being collected in http://nraomtr.blogspot.com/ .
Marketing articles are available under the label http://nraomtr.blogspot.com/search/label/Marketing%20Management
Article on differentiating and positioning http://nraomtr.blogspot.com/2011/11/marketing-strategy-differentiating-and.html

----------------------------------------------------------------------------------------------------------------------------------------------------------

Article originally posted in
http://knol.google.com/k/ marketing-strategy-for-new-industry-products
Knol number 117

Updates on 3 March 2019, 4 March 2015, 4 June 014, 3 Dec 2011

Recommended reading on 3 March

Pages

May 28, 2019

Direct Marketing - Definition by Direct Marketing Association (DMA)

Benefits Reported by Users

Benefits Reported by Sellers

Direct Marketing Channels

Direct Mail

Objectives

Direct Mail Offer Elements

Direct Mail Target Selection

Catalog Marketing

Print versus Digital Catalogs

Why the Print Catalog Is Back in Style

More Articles related to Direct Marketing

May 2, 2019

Nichers

April 13, 2019

Introduction

Frontal Attack

Modified Frontal Attack

Flank Attack

Encirclement Attack

Guerrilla Attack

Bypass Attack

The Marketing Firepower

References

Related Articles

Applications of Challenger Marketing Strategies by Congress and Other Opposition Parties in 2019 Parliament Elections

Frontal Attack

Flank Attack

Modified Frontal Attack

Bypass Attack

Is BJP using the market share gaining strategies effectively in the 2019 Parliament Elections?

March 3, 2019