Marketing I: Concept, Mix, Strategic Planning, STP, Product and Pricing Decisions

Strategic marketing planning happens at three levels — corporate, business-unit and product — and the corporate level does four things: defines the mission, establishes strategic business units, assigns resources to them, and assesses growth opportunities. The two portfolio tools the paper asks are the BCG growth-share matrix, which places SBUs by market growth rate and relative market share into stars, cash cows, question marks and dogs, and the GE-McKinsey nine-cell matrix, which uses industry attractiveness and business strength. Ansoff's product-market grid gives four growth routes — market penetration (existing product, existing market), market development (existing product, new market), product development (new product, existing market) and diversification (new product, new market). Porter's generic strategies — overall cost leadership, differentiation and focus — describe how a business unit competes once it has chosen where.

1. Business mission — the specific purpose of the unit within the corporate mission.
2. SWOT analysis — external environment for opportunities and threats, internal for strengths and weaknesses.
3. Goal formulation — objectives made specific, measurable and time-bound.
4. Strategy formulation — the game plan for reaching the goals, chosen from Porter's generic strategies and alliances.
5. Programme formulation — the marketing programmes that carry the strategy out.
6. Implementation, then feedback and control — measuring results and correcting the plan.

Segmentation, targeting and positioning is the sequence at the heart of target marketing. Segmentation divides a heterogeneous market into groups that are internally similar and externally different. Consumer markets are segmented on four bases — geographic, demographic (age, gender, income, family life cycle, social class), psychographic (lifestyle, personality, values) and behavioural (occasions, benefits sought, user status, usage rate, loyalty). A usable segment must be measurable, substantial, accessible, differentiable and actionable. Targeting then chooses which segments to serve, on a spectrum from undifferentiated (mass) marketing through differentiated, concentrated (niche) and micromarketing down to marketing to the individual. Positioning is the act of designing the offer and image so that it occupies a distinctive place in the mind of the target customer, summarised in a value proposition and drawn on a perceptual map.

A product is anything offered to a market to satisfy a want — a physical good, a service, an experience, an event, a person, a place, a property, an organisation, information or an idea. Kotler's five product levels build outward: the core benefit (rest, for a hotel), the basic product (a bed and a bathroom), the expected product (clean sheets, a working lamp), the augmented product (what exceeds expectation) and the potential product (all possible future augmentation). Consumer goods are classified by shopping habit into convenience goods (staples, impulse and emergency goods), shopping goods, specialty goods and unsought goods; industrial goods into materials and parts, capital items, and supplies and services.

A product line is a group of closely related products; line decisions include line stretching — downmarket, upmarket or two-way — line filling, line modernisation and line pruning. The product life cycle describes sales and profit over four stages. Introduction has slow sales growth, negative or minimal profit, heavy promotion to build awareness and a choice between skimming and penetration pricing. Growth has rapid acceptance, rising profit and entry of competitors; the firm improves quality, adds features and enters new segments. Maturity, the longest stage, has slowing growth, peak-then-declining profit and intense competition; the firm modifies the market, the product or the marketing mix. Decline has falling sales and profit; the choices are to maintain, harvest or drop.

1. Idea generation — from customers, scientists, competitors, employees, channel members.
2. Idea screening — dropping poor ideas early; the two errors are the drop-error (rejecting a good idea) and the go-error (advancing a poor one).
3. Concept development and testing — turning the idea into a consumer concept and testing it with target customers.
4. Marketing strategy development — target market, positioning, sales and profit goals, the mix.
5. Business analysis — sales, cost and profit projections against company objectives.
6. Product development — the concept becomes a physical prototype.
7. Market testing — the product and programme are tried in a real setting.
8. Commercialisation — full launch: when, where, to whom and how.

Price is the only element of the mix that produces revenue; the others produce costs. Kotler's six-step procedure sets prices by selecting the pricing objective (survival, maximum current profit, maximum market share, market skimming, product-quality leadership), determining demand and its price elasticity, estimating costs, analysing competitors' costs, prices and offers, selecting a pricing method, and selecting the final price. The factors that shape the decision are internal — objectives, the rest of the mix, costs, organisation — and external — the nature of the market (pure competition through monopoly), demand, competitors' prices, and legal and social constraints. Price floors come from cost and price ceilings from the customer's perception of value; competitors' prices sit between them.

Price adaptation adjusts the list price by geography, discounts and allowances (cash, quantity, functional or trade, seasonal, and allowances such as trade-in), promotional pricing (loss-leader, special-event, cash rebates, low-interest financing, psychological discounting) and differentiated or discriminatory pricing, where the same product is sold at different prices by customer segment, product form, image, channel, location or time. Discriminatory pricing works only where the market is segmentable, the segments show different elasticities, and resale between them can be prevented.