Marketing Risks – 7

Components of a marketing risk management plan
Marketing management
Supply chain management
Market situation and outlook
Marketing tools
Marketing management tasks
Develop marketing strategies and plans
Capture market insights
Connect with customers
Build strong brands
Shape market offerings
Deliver value
Communicate value
Create long-term growth
Role of prices
Key role in allocating resources among alternative uses
Signal what is relatively scarce/relatively abundant
Provide info to individuals and businesses
How marketing affects customer value
Choosing the value–segment the market, select the appropriate target, develop offerings value proposition

Providing the value–select specific product features, prices, and distribution

Communicate the value–accomplished through the use of sales force, internet, advertising, other communication methods to announce and promote product

Strategic planning focus
Overall strategic plan–lays out broad strategies for entire business on 3-5 year planning horizon
Business plan–outlines organization’s overall financial objectives and explains overall strategy for achieving these objectives; usually 1-year plan
Marketing plan–created at lower level of business plan, more detail about coming year’s marketing strategy and implementation
Key management questions related to strategic planning
Value exploration–how firm identifies new value opportunities
Value creation–how efficiently firm creates more promising new value offerings
Value delivery–how a firm uses its capabilities and infrastructure to deliver the new value offering more efficiently
5 questions for a mission statement
What is our mission?
Who is our customer?
What does the customer value?
What are our results?
What is our plan?
Characteristics of a good mission statement
Focus on limited number of goals
Stress major policies it values
Define major competitive environment
Take a longterm view
Short, memorable, meaningful
Strategies to focus strategic thinking
Cost leadership–seek to achieve lowest production and distribution costs to underprice competitors and gain market share
Differentiation strategy–focus on achieving better performance on an important customer benefit (such as quality or speed)
Focus approach–concentrate on narrow market segment, gaining as much insight about segment as possible, then pursue either a cost leadership or differentiation strategy
What a marketing plan includes
Situation analysis–gather marketing info
Determine your marketing objectives–S.M.A.R.T.
Select marketing strategies to accomplish your objectives (differentiate product or markets, new products, diversification, business positioning)
Implementation: who is responsible for what tasks; timeline for task completion
Monitor, evaluate, modify the marketing plans
Components of situation analysis
Explore who the customers are
Research industry increase the environment
Assess strengths and weaknesses
Investigate current and potential competition
Develop product or service ideas
Determine your target market
Test the market potential
Internal Strength Weakness

External Opportunity Threat

Purposes of a marketing plan
Provide value
Build relationships
Make a difference
4 guiding principles for effective marketing
Suppliers: raw materials suppliers, parts/components suppliers, suppliers of products for resale

Channel members: wholesalers, retailers, agents/brokers, transportation firms, storage firms

Customers and community: consumers, business

Purpose of a SWOT analysis
Provides structured understanding of external and internal environments for strategic plan: conduct for both your own firm and for key competitors
Why we study supply chain management
To discover the nature of the alliances between various players along food supply chain
Successful Supply Chain Management (SCM) requires:
Mutual trust among supply chain members
Effective communication
Access to data (inventory, shipping, delivery time, etc.)
Ability to detect, manage, and correct unplanned events
Need to measure performance metrics, related to quality, delivery times, inventory turnovers
Breakdown of the food dollar (according to the notes… which are wrong, just saying)
Farm production–9.7
Food processing–15.8
Wholesale trade–9.3
Retail trade–13
Food services–31.1
Finance & insurance–3.3
Major societal forces
Information technology
Consumer information
Increased competition
New company capabilities
Differentiate goods
Collect information
Communicate with customer
Name your own price
Instant price comparisons
Get something for free
Negotiate prices
Engage in selective pricing
Monitor customers
Trends in food at home
***See page 2 of notes
Major trends in retail food marketing
–move toward differentiation as marketing strategy
–simultaneous shift towards vertical integration between food suppliers and buyers
As result of changes in retail food marketing, suppliers must focus on merchandise that:
-Helps retailers tell customers origin of food and production methods
-Enables retailers to differentiate themselves from competition, as with locally graded products and exclusive private label items
-Appeals to growing consumer demand for quality, variety, innovation
-Addresses emerging needs of Asian, Hispanic, African American consumers
Ways to market stuff
-Same-company: brands owned by same company are used together (General Mills launched Trix branded Yoplait yogurt)
-Joint venture co-branding: brands owned by different companies are combined (American Airlines and Citibank launching Citibank AAdvantage credit card)
-Multi-sponsor: alliance between three or more partners
-Retail co-branding: two establishments use same location to optimize space and profits (Pizza Hut/Taco Bell/KFC)
Marketing tool options
-Strategic buying/selling
-Crop/livestock insurance
-Government programs
-Hedging (purchase or sale of commodity futures contract, purchase contracts between season)
-Options (purchase right–but not the obligation– to purchase underlying futures contract, allows them to set minimum price in exchange for paying a set fee or premium)
-Direct marketing
Strategic buying/selling
Purchase inputs for future use
Store commodities until prices improve
Sell via cooperative
Crop/livestock insurance
Help reduce risk of falling commodity prices, yield variations, farm revenue
Government programs
Producer price support programs
Disaster assistance
Farm revenue support programs
legal arrangement between buyer and seller that can reduce risk with puts and outputs–growers sign contract with buyer or processor before planting crop so price is known at planting time
Hedging–reducing input risk (producer buys input commodity futures contract
-Obligates producer to buy contract amount of input at expiration date of contract
-Before contract expires, producer resells contract and purchases input on cash market
-If input prices had risen over contract time period, producer would pay higher price for inputs on cash market but receive higher price on futures contract sale
Hedging–reducing output risk (produce sells output commodity futures contract)
-Obligates producer to sell contracted amount of output at expiration date of contract
-Before contract expires, producer re-buys output futures contract (otherwise would be obligated to deliver commodity) and sells his output on cash market
-If input prices rise, producer can exercise option and purchase underlying futures contract and then sell that contract at higher price to capture gain
-If input prices fall, producer not obligated to purchase contract or bear offsetting loss in futures contract–only cost to producer is option premium
Direct marketing (producers/processors sell direct to end users of food or food product)
Selective targeting
Market declassification
Personalized message
Measure effectiveness
4 P’s of marketing
Consumer goods classification
-Convenience goods: frequent, immediate, minimal effort
-Shopping goods: suitability, quality, price, style; wide assortment; informs and advise advisors
-Specialty goods: unique characteristics, brand identification; buyers make special effort
-Unsought goods: not normally purchased; require advertising, personal selling
Branded differentiation
-Form: size, shape, color, timeliness
-Feature: supplement basic function (need to prioritize how many, how long to introduce, added costs)
-Customization: customers know how to express preferences, or, seller provides assistance
-Performance quality: level at which product’s primary characteristics operate–design at level appropriate to target market and competition, manage over time
-Durability: measure of expected life under all conditions
-Reliability: measure of probability that product will not malfunction or f ail within specified time
-Style: product look and feel; hard to copy
Purpose of marketing channels
-Convert potential buyers into profitable orders
-Marketing channels must serve and create markets
-Channel choices affect all other marketing decisions:
–Pricing (depends on whether it uses mass-merchandisers or high-quality boutiques)
–Sales force and advertising decisions (depend on how much training and motivation dealers need)
Two types of marketing strategies
-Push strategy: use sales force and trade promotion money to induce intermediaries to carry, promote, sell product to end user
-Pull strategy: use advertising and promotion to induce consumers to ask intermediaries for product, thus inducing intermediaries to order it
Definition of marketing channels
sets of interdependent organizations (intermediaries) involved in the process of making product/service available for use or consumption
Definition of promotion
Marketing communications are means by which firms attempt to inform, persuade, remind consumers about products and brands they sell; in sense, represent voice of company and its brand
Purpose of marketing communications
-Help firms establish dialogue and build relationships with consumers and strengthen customer loyalty, and thus contribute to customer equity
-work for consumers by shooing how and why a product is used, by whom, where, and when
7 major modes of communication that the marketing communications mix includes:
Sales promotions
Events and experiences
Public relations and publicity
Direct and indirect marketing
Word of mouth
Personal selling
Business readiness stage:
early adopters
early majority
late majority
Product life cycle stages
Research and development
Factors to consider in setting product price
Select pricing objective
Determine demand
Estimate costs
Competitor analysis
Price method
Select final price
Select pricing objective
-maximize current profits (MR>MC)
-other objectives: nonprofit and public organizations may have other pricing objectives
Determine demand
-Consumers are less price sensitive to low-cost items or items they buy infrequently
-Few or no substitutes or competitors
-They don’t really notice the higher price
-They slow to change to buying habits
-They think higher prices are justified
Competitor analysis
Must take competitors’ costs, prices, possible price reactions into account
Price method
Prices fall between price floor (costs) and price ceiling (customer demand based on their assessment of unique features). Price of competitive offerings and substitute goods serve as an orientation point
Select final price
-Determine variable costs of production
-Determine desired gross margin
-Selling price = variable costs / (100% – %gross margin desired)

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