Market Development, Information, and Bargaining Power

Reasons for market development Strategy in market development Tools and outcomes Participation in commodities market development Bargaining power and market stabilization Market information
MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

define
Market development involves creating or expanding a market for new or existing products and/or increasing the value of these products few consumers today are aware of the prickly pear, however, but farmers who grow this cactus plant

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

Promotion: Strategic and Tactical Objectives

Awareness Trial Attitude toward the product
Beliefs Preference
Emerging Markets/ New Products

Temporary sales increases

Mature markets /established products
MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

Marketing Strategy
ASSESS AND RE-EVALUATE

MARKETING OBJECTIVES
What we want to accomplish

STRATEGY
How to best use available resources to accomplish objectives under circumstances. Make tough choices!

TACTICS AND ADAPTATION

Implementing strategy as things change. More tough choices!

TOOLS
Use resources such as distribution, advertising, sales promotion, demonstrations

OUTCOME
CONSUMER/ MARKET RESPONSE
Consumers or intermediaries respond MARKET DEVELOPMENT Sales are influenced (e.g., volume, frequency, switching, price sensitivity)

ASSESS AND RE-EVALUATE MKTG 322

Sabry Shehata professor

Strategies, Objectives and the Hierarchy of effects

The promotional activities needed for a given product will depend on factors such as its current stage in the product life cycle. Once more people know, a significant challenge is going to get more people to actually try the product This may be difficult to accomplish because of the high cost of the product and the vast number of choices of other products that consumers can consume. There is simply not enough time or money to try everything available.

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

Strategies, Objectives and the Hierarchy of effects

If a product category catches on, emphasis may then need to switch to brand differentiation and the firm may need to work on getting consumers to hold favorable beliefs about their brand. In later stages of the product life cycle, where most consumers opinions have largely been set, temporary sales increases, usually through price promotions, may be the only realistic objective.

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

Market Development: The Objectives

GET CURRENT USERS TO USE MORE Snickers satisfies you! Ask for A-1 Steak Sauce A sandwich just isnt a sandwich without miracle whip Beefits whats for dinner The Incredible, Edible Egg Fast food restaurant advertising

GET MORE PEOPLE TO BUY PRODUCT Hungry Man dinners Hot Pockets ads Variety seeking advertising Spam luncheon meets advertising GET PRODUCT USED FOR NEW PURPOSES Orange juiceit isnt just for dinner anymore Beefits whats for dinner Spam luncheon meets advertising Baking soda ads DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDS Kraft cheese ads suggesting that Kraft has more calcium Total cereal ads suggesting vitamins Coke is the real thing The Pepsi generation The night belongs to Michelob Florida orange juice Maxwellits good to the last drop Progresso and Campbells soup ads DECREASE CONSUMER PRICE SENSITIVITY Costs a little more, but its worth it Zachy farms chicken ads Campbells soup ads

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

Market Development Issues

GET MORE PEOPLE TO BUY PRODUCT DECREASE CONSUMER PRICE SENSITIVITY

Big picture . onlydetails not important! ADVERTISING

TRIAL AWARENESS

DISTRIBUTION ENHANCEMENT

INCREASED SALES OF PRODUCT

BUYING CONVENIENCE

JOINT VENTURES/ COBRANDING

GET CURRENT USERS TO USE MORE

GET PRODUCT USED FOR NEW PURPOSES

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DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDS MARKET DEVELOPMENT

SALES PROMOTION

Sabry Shehata professor

Strategy Issues
Deciding on objectives
Realism Suitability for
Company strengths Competitor positions Market structure and change

How much to spend on objectives

Cost of advertising and/or other promotion relative to gains Most appropriate ways of achieving objectives based on
Cost Effectiveness Synergy

Consistency of objectives
MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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Some Tools
Advertising
Awareness Trial Preference Reminder New uses

Price/sales promotion
Coupons Sales Value Premium

Distribution
Availability in retail stores Quality of placement within retail stores

Joint ventures/cobranding Demonstrations Product investment

Quality Differentiation Packaging Usability convenience

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

11

Setting strategy.

Improving quality, for example, might be achieved either by increased research and development, the use of higher quality materials, or by investing in new manufacturing technology. The most appropriate choice will depend on factors such as cost and effectiveness, but may also depend on risk.

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

12

Tactics and implementation.

If a decision as been made to position a product as a premium brand through advertising, specific ads must be developed and tested and appropriate media and advertising schedules should be resolved. When implementation begins, results need to be monitored.

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

13

Consumer adoption of new food products.

One way to spread new foods is through massive advertising. This strategy has been used in marketing the Hot Pockets convenience products. Many foods also spread as some groups of consumers imitate others they see consuming them, and some are encouraged to try new foods based on word-ofmouth communication.

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

14

Consumer Adoptions of New Foods or New Food Uses

TRIAL
ADOPTION BY LIMITED GROUP PROMOTION

WORD OF MOUTH

TRIAL

INCREASING ADOPTION/ ADAPTATION

OBSERVATION

MEDIA COVERAGE

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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Levels of market development.

Development efforts may center at several different levels. Florida orange growersmay want to promote their food, hoping that preference will be developed relative to other food categories Alternatively, development efforts can focus on a branded product (e.g., Diet Coke), a brand (e.g., all Coca Cola branded products),

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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Commodities Market Development Programs

Typically regionale.g., Florida orange juice; Idaho potatoes; Hawaiian sugar cane; Washington Apples; Texas beef Intention is to differentiate Compulsory participation in advertising programs
Development is not worthwhile for the individual farmer The individual farmer is assumed to benefit from overall campaign
MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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Level of Market Development

Levels
Commodity
Differentiation from competing commodities Increase in demand for commodity

Corporate product category (e.g., Coca Cola drinks, including Dasani) Product category brande.g., Kraft American cheese slices Brand (product line)e.g., Kraft foods

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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Effects and Outcomes

AWARENESS

TRIAL

SALES Volumes Prices

REPEAT PURCHASES PREFERENCE

REDUCED PRICE SENSITIVITY

USED IN MORE SITUATIONS

USE BY MORE PEOPLE

MKTG 322

USED MORE FREQUENTLY

MARKET DEVELOPMENT
Sabry Shehata professor

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Definitions
Innovation:
An idea, practice, or product perceived to be new by the relevant individual or group. The manner in which innovations spread through the market.

Diffusion process:

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

20

To Adopt or Not to Adopt: How Will Consumers Answer the Question? Some causes of resistance to adoption
Perceived risk--financial and social Self image Effort to implement and/or learn to use the product Incompatibility Inertia/overwhelming existing choices

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MARKET DEVELOPMENT

Sabry Shehata professor

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Types of Innovations
Fashionstastes go back and forth over timee.g., food fat content Fadsproduct is in for a short time and then fades (e.g., ostrich meat) Trendsconsumption of a food product either increases or decreases consistently over time

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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Adoption of Innovations Over Time

N u m b er o f n e w
40 30 20 10 0 Innovators -2.50
2.5% Late majority 0.50 34%

a d o p to rs

Innovators and Imitators: The Lifecycle of A Product

Early -1.50 adoptors (13.5%)

Early -0.50 majority 34%

Laggards 1.50 (13.5%)

2.50

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MARKET DEVELOPMENT

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One Diffusion Pattern--Nicely Balanced...

P e r c e n t d if f u s io n

The S-Shaped Diffusion Curve

1

0.8 0.6 0.4 0.2 0 0 5 10 Time 15

100% adoption or saturation point

20

25

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MARKET DEVELOPMENT

Sabry Shehata professor

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Implications for Foods

Many substitutes and individual tastes Trying new foods for variety is common Social opportunities for trial Food tastes tend to be learned early in life
Best opportunities for spread are with younger consumers

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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Influences on the Speed of Diffusion

Risk to expected benefit ratio (relative advantage)usually not an issue for foods Observabilityis the product consumed in public Product pricingscarce foods are rationed through cost Trialabilityusually easy for foods Switching difficulties and learning requirements/ ease of usenot a problem for foods eaten out but may be for foods to be produced at home
MARKET DEVELOPMENT

MKTG 322

Sabry Shehata professor

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Pioneering Advantage
Consumer expectations are usually shaped by the first encountered brand Satisfying and awareness by consumers Order of entry vs. pioneering advantage Positioning of existing pioneer vs. strategy of first entry

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

27

Bargaining Power
Impact
Price Conditions
Returns Time of payment Interest or finance charges Quality or other adjustments Transportation or other services

Sources
Size, number, and concentration of firms Supply control Unequal information Diversification (?) Product differentiation Control of resources Financial resources Ratio of fixed to variable costs

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

28

Marketing Orders and Agreements

Mandates intended to stabilize markets Types of issues
Grades, size Packaging Market allocation (quotas) Minimum prices Contributions to research Advertising (market development)

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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Market Information
Some issues
Crop forecasts Demand forecastsquantity and prices

Problems
Price specification (comparability of location, time, and other factors) Net vs. gross prices (allowances and discounts) Cost vs. accuracy of information Changing market orientation and scope of market (proportion of buyers and sellers involved in open markets) Voluntary cooperation

Government information programs

MKTG 322

MARKET DEVELOPMENT

Sabry Shehata professor

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