Principles Of Marketing

Ambush Marketing

If you associate the word ambush (n. the act of concealing yourself and lying in wait to attack by surprise) with only warfare, then you are mistaken. It also pervades the marketing sphere. What is ambush marketing? What are the issues involved?

India captain Sourav Ganguly and Irfan Pathan ask their sponsor Tata Indicom to withdraw ad campaigns featuring them during the course of the recently concluded International Cricket Council (ICC) Champions Trophy. UNI Report

Strict regulations published by Athens 2004 last week dictate that spectators may be refused admission to events if they are carrying food or drinks made by companies that did not see fit to sponsor the games. Staff will also be on the lookout for T-shirts, hats and bags displaying the unwelcome logos of non-sponsors. Stewards have been trained to detect people who may be wearing merchandise from the sponsors’ rivals in the hope of catching the eyes of TV audiences. Those arousing suspicion will be required to wear their T-shirts inside out.
TOI report, August 10, 2004

What is the link between these two seemingly unrelated sports events. The missing link is the unique marketing technique called, ‘Ambush Marketing’. Ambush marketing has been defined as,”… the practice whereby another company, often a competitor, intrudes upon public attention surrounding the event, thereby deflecting attention towards itself and away from the sponsor”. Often classified as a form of “guerrilla” marketing, the term was coined by the originator of cause-related marketing – Jerry Welsh – when he was at the American Express.

Why this trend?
One of the main reasons for the growth of Ambush Marketing is the hype surrounding mega events like the Olympics, FIFA World Cup or the ICC World Cup. Sports events were not commercialised earlier, this is a relatively recent phenomenon. For e.g. Kapil Dev and Sunil Gavaskar never used to get the kind of sponsorship money and endorsements, which say, Sachin Tendulkar or Saurav Ganguly get these days.

Smaller companies cannot afford the kind of amounts which larger conglomerates and multinationals like LG, Samsung, Coke, Pepsi, Reliance, etc pay for getting the sponsorships, which runs into millions of dollars. This is one of the basic reasons that is perpetrating ambush marketing.

Even larger companies cannot sponsor each and every event considering the colossal spends involved. All sponsorships have to make commercial business sense for the sponsor. Apart from the sponsorship fees the sponsor has to spend on TV, print and outdoor ads and related promotional activities at the point of purchase locations. Mr. Cameron Day estimates that for sponsorship to be successful, a brand needs to spend a lot of extra money on promotion around the event estimated to be around five times the cost of sponsorship.

Also the value of such mega events and mega spends on the brand visibility at times is dubious. After the Sydney Olympics, a published research conducted by CIA Medialab showed that 50 percent of the adults questioned didn’t know the names of any sponsors, even though 80 percent had watched the games. And to add insult to the injury, a number of competitor brands scored equal levels of recognition.

Likely Forms
Ambush Marketing takes many forms. Two of the main forms are-

  • Association Ambushing- the non-sponsor gives the impression of being an official sponsor by using words or symbols associated with the event; and
  • Intrusion Ambushing- the non-sponsor piggybacks on the media and spectator exposure of the event by, for eg, advertising near event venues.

Different Strategies of Ambush Marketing
Researchers have identified five of the most commonly employed ambush marketing strategies:

  • Sponsoring Media Coverage of an Event
    Kodak’s sponsorship of the ABC broadcasts of the 1984 Los Angeles Olympics when Fuji was the official IOC sponsor.
  • Sponsoring a Sub-Category within an Event
    During the 1988 Olympic games at Seoul, Kodak secured the worldwide category sponsorship for the Games, while Fuji obtained sub-sponsorship of the U.S. swimming team.
  • Making a Sponsorship-Related Contribution to a Players’ Pool
    Ian Thorpe being sponsored by Adidas’ when Nike was the official clothing supplier for the Australian Olympic team. Thorpe was even photographed with his towel draped over Nike’s logo at a medal presentation ceremony to protect his personal contract with Adidas.
  • Engaging in Advertising that Coincides with a Sponsored Event
    Intense advertising done by a competitor during or around a sponsored event.

Other Imaginative Ambush Strategies
This could include either one or all of the following:

  • “Hit squads” who target revellers on their way to and from the event implying association thanks to their physical presence near the venue.
  • Associating the image of a winning athlete around the brand.
  • Referring to a sporting event in advertising.
  • Using marketing techniques to mislead the consumer e.g. offering event tickets as prizes
  • Booking billboards near to event venues to fool consumers into thinking there is a link to the event.
  • Handing out unofficial programmes and free merchandise to event attendees – inside and outside the venues.
  • Distributing free samples of a non-sponsor brand product or giveaway items such as t-shirts or flags displaying the brand at the event.
  • Entering and highlighting non-Olympics related sports activities e.g. former Olympic athletes, children’s athletic causes and programs etc. to underscore the non-sponsor’s commitment and dedication to the same generic thematic space which Olympic sports occupy.

Issues
Ambush marketing, often dubbed parasitic marketing, has raised several issues. The most important of which is the ethical aspect. Is it ethical on the part of companies to indulge in such activities? An IOC official dubbed the Fuji-Kodak episode as, “breaching one of the fundamental tenets of business activity, namely truth in advertising and business communications. The debate assumes greater significance because companies are alternating between sponsoring an event and indulging in ambush marketing. For instance, Pepsi sponsored the 1999 Cricket World Cup, but Coca Cola put hired people in the stadium and made them furl Coke flags, drink Coke, wear Coke tee-shirts etc., in full view of the world-wide TV audiences. In 2004, the tables were turned. Coca Cola sponsored Euro 2004, but Pepsi used its association with David Beckham and other players to produce a celebrity ad that successfully deflected and diverted viewers’ attention from Euro 2004.

Tackling the Problem
Despite the weakness of the existing legal system, organisers are increasingly turning to it for protection. Thus the organising committee for the Sydney 2000 Olympic Games successfully got approved the Sydney 2000 Games (Indicia and Images) Protection Act 1996. The Act was the centrepiece of the action plan to reduce the incidence of ambushing at the 2000 Olympic games. Similarly, the International Cricket Council (ICC) lobbied with the South African government to get the Merchandise Marks Amendment Act 2002 passed. The legislation even contained provisions to jail directors of companies that engage in ambushing activities. ICC has also incorporated a clause which mentions that players are not allowed to endorse products that are in direct conflict with the ICC’s official sponsors for a period of 45 days before, during and after an ICC tournament is held. While educating the public on the real sponsors could be a solution, there is the possibility of actually reinforcing awareness of the rival.

Event organisers and sponsors can curb ambush marketers by:

  • Preventing tickets from being used as competition prizes;
  • Policing the event more strictly for “ambushers” and denying them access;
  • Using event regulations and participation agreements to restrict the rights that participants can grant their own sponsors (e.g., what athletes may wear or carry when they compete).
  • Following a spectator ticketing policy that prevents people from bringing certain items into the viewing areas.
  • Entering into additional sponsorship contracts with or securing exclusive rights from key participants and major stakeholder groups (athletes, teams, event organisers and broadcasters); and,
  • Controlling the manufacture and distribution of licensed merchandise.

The labels ambusher and sponsor are not moral labels. The marketing decision to sponsor or not is a commercial decision based on the cost-benefit or trade-off analysis of the whole commercial proposal. So, today’s sponsor is tomorrow’s ambusher as seen in the Pepsi-Coke example above. Ambush marketing is the practical reality when companies routinely compete in the market place for the mind and wallet share and the loyalty of the consumers in the same thematic space day in and day out.

As a perceptive analyst wrote, “There is no limit to human ingenuity. As such, ambush marketing at the margins will arguably always occur.”

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Marketing Process

The process of (1) analyzing marketing opportunities; (2) selecting target markets; (3) developing the marketing mix; and (4) managing the marketing effort.

Marketing Segmentation

Dividing a market into distinct groups of buyers on the basis of needs, characteristics, or behavior who might require separate products or marketing mixes.

Market Targeting

After a company has defined market segments, it can enter one or many segments of a given market. Marketing targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it can generate the greatest customer value and sustain it over time. A company with limited resources might decide to serve only one or a few special segments. This strategy limits sales but can be very profitable.

Market Positioning

Marketing Positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Thus, marketers plan positions that distinguish their products from competing brands and give them the greatest strategic advantage in their target markets.

In positioning its product, the company first identifies possible competitive advantages on which to built the position. To gain competitive advantage, the company must offer greater value to chosen target segments, either by charging lower prices than competitors do or by offering more benefits to justify higher prices.

Then if the company positions the product as offering greater value, it must deliver that greater value. Thus, effective positioning begins with actually differentiating the company’s marketing offer so that it gives consumers more value than they are offered by the competition. Once the company has chosen a desired position, it must take strong steps to deliver and communicate that position to target consumers. The company’s entire marketing program should support the chosen positioning strategy.

Developing the Marketing Mix

Once the company has decided on its overall competitive marketing strategy, it is ready to begin planning the details of the marketing mix, once of the major concepts in modern marketing. We define marketing mix as the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its product. The many possibilities can be collected into four groups of variables known as the “four Ps”: product, price, place, and promotion.

Product means the goods-and-service combination the company offers to the target market. Thus, a Ford Taurus product consists of nuts and bolts, spark plugs, pistons, headlights, and thousands of other parts. Ford offers several Taurus styles and dozens of optional features. The car comes fully serviced and with a comprehensive warranty that is as much a part of the product as the tailpipe.

Price is the amount of money customers have to pay to obtain the product. Ford calculates suggested retail prices that its dealers might charge for each Taurus. But Ford dealers rarely charge the full sticker price. Instead, they negotiate the price with each customer, offering discounts, trade-in allowances, and credit terms to adjust for the current competitive situation and to bring the price into line with the buyer’s perception of the car’s value.

Place includes company activities that make the product available to target consumers. Ford maintains a large body of independently owned dealerships that sell the company’s many different models. Ford selects its dealers carefully and supports them strongly. The dealers keep in inventory of Ford automobiles, demonstrate them to potential buyers, negotiate prices, close sales, and service the cars after the sale.

Promotion means activities that communicate the merits of the product and persuade target customers to buy it. Ford spends almost $600 million each year on advertising to tell consumers about its Ford cars and trucks. Dealership salespeople assist potential buyers and persuade them that Ford is the best car for them. Ford and its dealers offer special promotions – sales, cash rebates, low financing rates – and added purchase incentives.

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What is market segmentation? Explain market segmentation strategies.

Segment Marketing

A company that practices segment marketing recognizes that buyers differ in their needs, perceptions, and buying behaviors. The company tries to isolate broad segments that make up a market and adapts its offers to more closely match the needs of one or more segments. Thus, General Motors has designed specific models for different income and age groups. In fact, it sells models for segments with varied combinations of age and income. For instance, GM designed its Buick Park Avenue for older, higher-income consumers. Marriott markets to a variety of segments – business travelers, families, and others – with packages adapted to their varying needs.

Segment marketing offers several benefits over mass marketing. The company can market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best. The company can also market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. The company may face fewer competitors if fewer competitors are focusing on this market segment.

Geographical Segmentation

Geographical segmentation dividing a market into different geographical units such as nations, states, regions, countries, cities, or neighborhoods.

Demographic Segmentation

Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race and nationality. Demographic factors are the most popular bases for segmenting customer groups, largely because consumer needs, wants, and usage rates often vary closely with demographic variables. Also, demographic variables are easier to measure than most other types of variables. Even when market segments are first defined using other bases, such as personality or behavior, their demographic characteristics must be known in order to assess the size of the target market and to reach it efficiently.

Age and Life-Cycle Segmentation

Dividing a market into different age and life-cycle groups.

Gender Segmentation

Dividing a market into different groups based on sex.

Income Segmentation

Dividing a market into different income groups.

Psychographic Segmentation

Dividing a market into different groups based on social class, lifestyle, or personality characteristics.

Behavioral Segmentation

Dividing a market into groups based on consumer knowledge, attitude, use, or response to a product.

Occasion Segmentation

Dividing the market into groups according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item.

Benefit Segmentation

Dividing the market into groups according to the different benefits that consumers seek from the product.

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Product Mix & Product Line

Product Line

A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. For example, Nike produces several lines of athletic shoes, Motorola produces several lines of telecommunications products, and AT&T offers several lines of long-distance telephone services.

Product Mix

A product mix (or product assortment) consists of all the product lines and items that a particular seller offers for sale. Avon’s product mix consists of four major product lines: cosmetics, jewelry, fashions, and household items. Each product line consists of several sublines.

A company’s product mix has four important dimensions: width, length, depth, and consistency. Product mix width refers to the number of different product lines the company carries. For example, Procter & Gamble markets a fairly wide product mix consisting of many product lines, including paper, food, household cleaning, medicinal, cosmetics, and personal care products. Product mix length refers to the total number of items the company carries within its product lines. Procter & Gamble typically carries many brands within each line. For example, it sells eleven laundry detergents, eight hand soaps, six shampoos, and four dishwashing detergents.

Product line depth refers to the number of versions offered of each product in the line. Thus, Procter & Gamble’s Crest toothpaste comes in three sizes and two formulations (paste and gel). Finally, the consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. Procter & Gamble’s product lines are consistent insofar as they are consumer products that go through the same distribution channels. The lines are less consistent insofar as they perform different functions for buyers.

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Industrial Products

Thus, the distinction between a consumer product and an industrial product is based on the purpose for which the product is bought. If a consumer buys a lawn mower for use in a landscaping business, the lawn mower is an industrial product.

The three groups of industrial products and services include materials and parts, capital items, and supplies and services. Materials and parts include raw materials and manufactured materials and parts. Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and natural products (fish, lumber, crude petroleum, iron ore). Manufactured materials and parts consist of component materials (iron, yarn, cement, wires) and component parts (small motors, tires, castings). Most manufactured materials and parts are sold directly to industrial users. Price and service are the major marketing factors; branding and advertising tend to be less important.

Capital items are industrial products that aid in the buyer’s production or operations, including installations and accessory equipment. Installations consist of major purchases such as buildings (factories, offices) and fixed equipment (generators, drill presses, large computer systems, elevators). Accessory equipment includes portable factory equipment and tools (hand tools, lift trucks) and office equipment (fax machines, desks). They have a shorter life than installations and simply aid in the production process.

The final group of business product is supplies and services. Supplies include operating supplies (lubricants, coal, paper, pencils) and repair and maintenance items (paint, nails, brooms). Supplies are the convenience products of the industrial field because they are usually maintenance and repair services (window cleaning, computer repair) and business advisory services (legal, management consulting, advertising). Such services are usually supplied under contract.

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Product and Brand

Product

We define a product as anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Products include more than just tangible goods. Broadly defined, products include physical objects, services, persons, places, organizations, ideas, or mixes of these entities. We use the term product broadly to include any or all of these entities.

Brand Equity

Brands vary in the amount of power and value they have in the marketplace. A powerful brand has high brand equity. Brands have higher brand equity to the extent that they have higher brand loyalty, name awareness, perceived quality, strong brand associations, and other assets such as patents, trademarks, and channel relationships.

A brand with strong brand equity is a very valuable asset. Measuring the actual equity of a brand name is difficult. However, according to one estimate, the brand equity of Marlboro is $45 billion, Coca-Cola $43 billion, IBM $18 billion. Disney $15 billion, and Kodak $13 billion. The world’s top brands include super-powers such as Coca-Cola, Cambell’s, Disney, Kodak, Sony, Mercedes-Bez, and McDonald’s.

High brand equity provides a company with many competitive advantages. A powerful brand enjoys a high level of consumer brand awareness and loyalty. Because consumers expect stores to carry the brand, the company has more leverage in bargaining with resellers.

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Classification of wholesaling

Types of Wholesalers

Wholesalers fall into three major groups. Merchant wholesalers, brokers and agents, and manufacturers’ sales branches and offices. Merchant Wholesalers are the largest single group of wholesalers, accounting for roughly 50 percent of all wholesaling. Merchant wholesalers include two broad types: full-service wholesalers and limited-service wholesalers. Full-service wholesalers provide a full set of services; whereas the various limited-service wholesalers offer fewer services to their suppliers and customers. The several different types of limited-service wholesalers perform varied specialized functions in the distribution channel.

Brokers and agents differ from merchant wholesalers in two ways: They do not take title to goods, and they perform only a few functions. Like merchant wholesalers, they generally specialize by product line or customer type. A broker brings buyers or sellers on a more permanent basis. Manufacturers’ agents (also called manufacturers’ representatives) are the most common type of agent wholesaler. Together, brokers and agents account for 11 percent of the total wholesale volume.

The third major type of wholesaling is that done in manufacturers’ sales branches and offices by sellers or buyers themselves rather than through independent wholesalers.

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Brand Name Selection

Desirable qualities for a brand name include:

(1) It should suggest something about the product’s benefits and qualities. Examples: DieHard, Easy-Off, Craftsman, Sunkist, Spic and Span, Snuggles, Merry Maids, NationsBank.

(2) It should be easy to pronounce, recognize, and remember. Short names help. Examples: Tide, Aim, Puffs. But longer ones are sometimes effective. Example: “Love My Carpet” carpet cleaner; “I Can’t Believe It’s Not Butter” margarine, Better Business Bureau.

(3) The brand name should distinctive. Examples: Taurus, Kodak, Exxon.

(4) The name should translate easily into foreign languages. Before spending $100 million to change its name to Exxon, Standard Oil of New Jersey tested several names in 54 languages in more than 150 foreign markets. It found that the name Enco, when pronounced in Japanese, referred to a stalled engine.

(5) It should be capable of registration and legal protection. A brand name cannot be registered if it infringes on existing brand names.

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New-Product Development process

Idea Generation (Most Important)

New-product development starts with idea generation – the systematic search for new-product ideas. A company typically has to generate many ideas in order to find a few good ones.

The search of new-product ideas should be systematic rather than haphazard. Otherwise, although the company may find many ideas, most will not be good ones for its type of business. Top management can avoid this error by carefully defining its new-product development strategy. Major sources of new-product ideas include internal sources, customers, competitors, distributors and suppliers, and others.

Idea Screening

The purpose of idea generation is to create a large number of ideas. The purpose of the succeeding stages in to reduce that number. The first idea-reducing stage is idea screening, which helps spot good ideas and drop poor ones as soon as possible. Product-development costs rise greatly in later stages, so the company wants to go ahead only with the product ideas that are most likely to turn into profitable products.

Concept Development and Testing

An attractive idea must be developed into a product concept. It is important to distinguish between a product idea, a product concept, and a product image. A product idea is an idea for a possible product that the company can see itself offering to the market. A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way consumers perceive an actual or potential product.

Concept Testing

For some concept tests, a word or picture description might be sufficient. However, a more concrete and physical presentation of the concept will increase the reliability of the concept test. Today, some marketers are finding innovative ways to make product concepts more real to consumer subjects. For example, some are using virtual reality to test product concepts. Virtual reality programs use computers and sensory devices (such as gloves or goggles) to simulate reality. For example, a designer of kitchen cabinets can use a virtual reality program to help a customer “see” how his or her kitchen would look and work if remodeled with the company’s products. Although virtual reality is still in its infancy, its applications are increasing daily.

Marketing Strategy Development

The marketing strategy statement consists of three parts. The first part describes the target market; the planned product positioning; and the sales, market share, and profit goals for the first few years.

The second part of the marketing strategy statement outlines the product’s planned price, distribution, and marketing budget for the first year:

The third part of the marketing strategy statement describes the planned long run sales, profit goals, and marketing mix strategy:

Business Analysis

Business analysis involves a review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives. If they do, the product can move to the product-development stage.

Product Development

If the product concept passes the business test, it moves into product development. Here, R&D or engineering develops the product concept into a physical product. The product-development step, however, now calls for a large jump in investment. It will show whether the product idea can be turned into a workable product.

The R&D department will develop and test one or more physical versions of the product concept. R&D hopes to design a prototype that will satisfy and excite consumers and that can be produced quickly and at budgeted costs.

Test Marketing

If the product passes functional and consumer tests, the next step is test marketing, the stage at which the product and marketing program are introduced into more realistic market settings. Test marketing gives the marketer experience with marketing the product before going to the great expense of full introduction. It lets the company test the product and its entire marketing program – positioning strategy, advertising, distribution, pricing, branding and packaging, and budget levels.

Standard Test Markets

Using standard test markets, the company finds a small number of representative test cities, conducts a full marketing campaign in these cities, and uses store audits, consumer and distributor surveys, and other measures to gauge product performance. The results are used to forecast national sales and profits, discover potential product problems, and fine-tune the marketing program.

Controlled Test Markets

Several research firms keep controlled panels of stores that have agreed to carry new products for a fee.

Controlled test markets usually cost less than standard test markets and take less time (six months to a year). However, some companies are concerned that the limited number of small cities and panel consumers used by the research services may not be representative of their products’ markets or target consumers.

Simulated Test Markets

Companies can also test new products in a simulated shopping environment. The company or research firm shows ads and promotions for a variety of products, including the new product being tested, to a sample of consumers. It gives consumers a small amount of money and invites them to a real or laboratory store where they may keep the money or use it to buy items. The researchers note how many consumers buy the new product and competing brands. This simulation provides a measure of trial and the commercial’s effectiveness against competing commercials.

Commercialization

Test marketing gives management the information needed to make a final decision about whether to launch the new product. If the company goes ahead with commercialization – introducing the new product into the market.

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What is Price? And what types of Pricing strategies are used by the companies?

Marketing Skimming Pricing

Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

Market Penetration Pricing

Rather than setting a high initial price to skim off small but profitable market segments, some companies use market-penetration pricing. They set a low initial price in order to penetrate the market quickly and deeply – to attract a large number of buyers quickly and win a large market share. The high sales volume results in falling costs, allowing the company to cut its price even further.

Several conditions favor setting a low price. First, the market must be highly price sensitive so that a low price produces more market growth. Second, production and distribution costs must fall as sales volume increases. Finally, the low price must help keep out the competition, and the penetration pricer must maintain its low-price position – otherwise the price advantage may be only temporary.

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