Defensive Marketing

Marketing is generally perceived as a tool for growth. However, its importance as a defender against new product launches, market entrants, or market share losses, should not be underestimated because, in these cases, incumbents are able to use only marketing to respond to new or anticipated threats.

Defensive marketing begins with an assessment of the advantages that companies have beneficial to protect their market position. These advantages may be due to a strong brand identity or to the mix of products including their pricing, supportive services and advertising. If a company decides that their brand identity needs to be modified in order to retain customers, this may be difficult to realize because researches show that consumers' perceptions of a new entrant are likely to be malleable, whereas their image of an incumbent is likely to be well formed. Despite massive advertising aimed at changing this perception, the defender may be still stuck with the label of its heritage in the market. For this reason, a new entrant can relatively quickly and easily adopt an image from an array of branding alternatives. In these cases, a weapon such as advertising may be more effective in the hands of the defender because of the incumbent's size advantage.

Studies show that a customer defects when the benefits of staying with an incumbent are outweighed by those of switching to a new entrant. For this reason, in order to hold on to customers, there are four different strategies that can be applied by defender companies:

1- Positive strategy: Retain customers by emphasizing the perceived advantages of your product, service, or company.

2- Parity strategy: Retain customers by matching, neutralizing, or blunting the perceived advantages of the new entrant’s product, service, or company.

3- Inertial strategy: Acknowledge that some customers will leave despite your strengths, but offer product or service enhancements that will delay their defection. Emphasize that benefits lost in the switch may be major ones.

4- Retarding strategy: Acknowledge that some customers will leave despite your strengths, but offer product or service enhancements that will delay their defection. Emphasize that benefits gained in the switch may be only minor ones.

A company under threat of a new entrant needs to take a closer look at its customer profile after considering its advantages in the market and relevant defensive marketing strategies. Incumbents need to segment their customers based on two variables: their value to the company and their vulnerability to being poached by the new entrant. According to these variables, we can form four different classes of customer:

1- Valuable-Vulnerable Customers: These profitable customers are unhappy with the company. Defender should work vigorously to retain them.

2- Valuable-Not Vulnerable Customers: These loyal, profitable customers are currently happy with the company. Defender should maintain their margins.

3- Not Valuable-Vulnerable Customers: These unprofitable customers are likely to defect from the company. Defender company may let them go, or even encourage their departure.

4- Not Valuable-Not Vulnerable Customers: These unprofitable customers are happy with the company. Defender should try to make them valuable or vulnerable.

By taking these analyses as a basis, defender companies should choose the most adequate strategies in order to maintain the target customer group.

The article, “Defensive Marketing, How a Strong Incumbent Can Protect Its Position”, by John H. Roberts also reveals a sample: The defensive marketing strategy of Australian telephone company Telstra against a potentially powerful new rival, Optus.

Telstra identified its areas of superiority and weakness relative to Optus by conducting an economic analysis of the competitive landscape and by using a model for predicting customer responses to both companie’s moves.

According to results of this model, Telstra adopted firstly a parity strategy in which it created strategically chosen but limited points of price superiority over Optus. That is, while Optus on average offered lower prices, Telstra's prices were lower on some routes and at certain times of day. This strategy created a muddied situation in which consumers were less likely to take the big step of switching phone companies on the basis of price.

Another area of weakness that Telstra needed to counter, with a retarding strategy, concerned with the "punishment factor." The model suggested that people would switch more quickly to Optus if they were angry with Telstra and wanted to "teach Telstra a lesson." Telstra prepared a television advertisement campaign that emphasized companies willing to improve its services.

An inertial strategy that the company did also use was based on consumers' positive perceptions of Telstra as a homegrown company. As a conclusion, the combination of these three strategies let Telstra to maintain its market share substantially: The company's analysis found that the Flexiplan pricing strategy helped Telstra hold on to roughly 4% of the market - representing $28 million in annual revenue - that the company otherwise would have lost. Telstra's "Good, better, best" advertising campaign, designed to prevent the rapid flight of customers angry with the company's past performance, helped it hold on, at least initially, to an additional 3,5% of the market.

References:

Defensive Marketing. Roberts, John H.. Harvard Business Review, Nov2005, Vol. 83 Issue 11, p150-157, 6p, 2 diagrams, 2 color; (AN 18777217)

Başak Karatoprak

109604065

Using Business Intelligence to discover new market opportunities.

Wikipedia defines BI like this;

… a business management term which refers to applications and technologies… used to gather, provide access to, and analyze data and information about…company operations. Business intelligence systems… help companies have a more comprehensive knowledge of the factors affecting their business, such as metrics on sales, production, [and] internal operations…[BI systems] can help companies… make better business decisions.

Business intelligence helps business understand their customers better, looking at their preferences, helping business adapt to their customers demand. It is used to collect data from customers usually within the marketplace. There are many ways to collect data from your customers . Company must gather data for the purpose of helping users make business decision.

The article aims to analyze business intelligence to discover new market opprtunities According to the article it is often about avoiding surprises and minimizing exposure to risk. In marketing however, the unexpected can be a good thing because it can be lead to the discovery of new customers and through them new market opportunities.

The majority of customers do not bother to register their dissatisfaction . They just walk away and find another solution. The company thus loses both that customer and an opportunity to improve its service quality. Some ways to gather data to develop new marketplace
Learn from product failures: The repair and technical assistance functions offer a variety of opportunities for product enhancement, feature risk reduction and customer reactions.
Examine value chain access points: Distributors, suppliers, salespeople, customer service representatives, and repair personnel all gain information from their interactions with customers.
Customer to customer communication: The Internet provides new opportunities for companies to learn more about consumers’ needs, values and preferences from the communications they have with each other in online discussion groups.
Invite customer feedback: In addition to eliciting and measuring explicit expressions of customer satisfaction, a company can study implicit communications from consumers that it receives in the form of inquiries, return and refund requests.
Recognize Complaints as Gifts: A few companies have developed “service recovery” programs that not only train staff to listen and respond empathetically to complaints but empower them to authorize reimbursements to correct a mistake or to resolve a customer’s problem
Customer product development: This method is very creative application for some products. Companies collect data about this product from different channels like websites, newspapers

Discovering atypical customer
Leveraging surprise for competitive advantage requires using business intelligence . For external environmental assessment, it is important to scan for signals of market change outside the known competitive arena and traditional industry boundaries. For internal strategic development, it is vital to examine the firm’s customer base to identify non-typical users with potential to become or lead the company to a new market segment. Here are some important way for understand the customers;
· Look Beyond the Usual Suspects
· Walk in the Customer’s Shoes
· Pay Attention to Customer Behavior
· Identify What Customers Need and Value
· Redefine the Competitive Arena
· Convert Problem Customers into New MarketSegments
Why doesn’t every company already know about and apply this simple concept? Barriers to the use of BI include traditional marketing and management conventions as well as psychological, organizational cultural and political factors.
· Challenge to Conventional Wisdom
· Weak, Unclear Signals
· Organizational Culture and Politics

Expanding the use of business intelligence and applying it more creatively enables companies to leverage a key asset, their customer base, to identify, explore and expand new markets at minimal cost. To continually discover new customers requires both attitudinal and behavioral changes in a company’s business intelligence function and in the way it obtains information from and about its customers.

Business intelligence is very broad topic of study. If companies would like their business to succed, it is extremely important to understand the factors of business intelligence and learn how analyse and use the data created by this methodology

References:
Using Business Intelligence to Discover New Market Opportunities
Janice Frates California State University Long Beach
Seena Sharp, Sharp Market Intelligence

Halil TAKA
108604130

Social Media Marketing

Social media is a new outstanding channel that companies use to reach their customers. Millions of people are spending their time on social networks to communicate. Most companies saw the oppurtunity to reach a new and effective way to reach those people.In order to be in customer’s minds, brands need to be where their customers are. The importance of TV commercials starts to fall off. New areas such as Facebook, Twitter and Friendfeed for advertising emerged. It is also relatively less costly than TV commercials. Nowadays, since knowing social media trends and applications is important for marketing, I chose this topic.
Julie Wright,president of (W)right On Comminications, a communications and consulting firm with offices in California and British Columbia, says, “The biggest advantages social networking tools offer are their ability to target markets extremely narrowly, produce real-time feedback and resuldts, and generate word-of-mouth.” If you know your real target group so you can choose your own social media to focus on. You have to know where your target audience hang out on internet. For example, Facebook have a younger population than Twitter.People use MySpace for entertainment purposes. Linkedin is a channel for B2B marketers. Youtube gives oppurtunity to brands to share their video messages to audience if they want to see what is new about your brand. And also, Twitter is more viral effective and fast-moving channel than facebook. Brands create fan pages to update their loyal customers for their news.
However, it is not enough to create a fan page and leave it. You have to give an interesting content to keep your followers to engage your fan page. Since all of your brands fans and followers are one click away from un-fanning or un-following, you have to choose a decent strategy, spend a significant time and create a interesting content for them to catch their attention.
Julie Wright also explains,” The reason these tools are becoming essential to business communications is that word-of-mouth continues to be perceived as more credible than paid messages.” People use this websites to collect ideas and recommendations. Just like we do by gathering somewhere outside to socialize to eachother and share our lives to our friends, colleagues and peers, social mesia make it more easier and more affordable. Wrigt says, “140 characters(the maximum length of a Tweet) is highly efficient and focused communication that actually be a more convenient way to stay in touch and connected with your network than seeing folks a few times a year at trade shows or conferences – and it’s alot more affordable!”
A new job title emerged social media experts who studies social network trends and communication applications for brands. Companies spend thousands maybe millions of dollars for social media consultants. And many companies shifts their marketing activities from TV to social networks. Here some statistics from Facebook:
· More than 350 million active users
· Average user spends more than 55 minutes per day on Facebook
· More than 1.6 million active Pages on Facebook
An for Twitter:
eMarketer.com states, “In 2009, there will be 18 million US adults who access Twitter on any platform at least monthly. That represents a 200% increase over 2008 levels. Usage will reach 26 million US adults in 2010, a further 44.4% climb.”

These numbers illustrate a little how big enough the social media is and how much people spend their time on social networks and make social media attractive channel for marketers all over the world .
Every marketing professional should learn using social media effectively for being successfull on their sector. There are many of researches and articles about this topic on internet and on print materials.

REFERENCES
Foster, J.. (2009, November). SOCIAL MEDIA: Communicate The Important Stuff. Agency Sales, 39(10), 52-55. Retrieved January 11, 2010, from ABI/INFORM Global. (Document ID: 1917048261).
http://www.emarketer.com/Article.aspx?R=1007271
http://www.facebook.com/press/info.php?statistics


Tuğçe Karlı

MARKETING MANAGEMENT FOR THE DIGITAL FUTURE

I have chosen the topic of Marketing Management for the digital future because the digital market demands new marketing management competencies.
It advances new marketing management competencies to meet the challenges of an evolving digital market. Digital marketing strategy has focused on information control and the advantages of computing technology. Future strategic value, however, will be largely derived from collaborative intelligence and applications of intelligent digital content.

Marketing is undergoing a period of intense change, and there are several inflection points on the horizon which will have a transformational effect, so that by the middle of the next decade every facet of marketing will have been changed radically by the digital revolution. To date, the emergence of digital technology has caused great debate, and in some sectors has led to revolutionary change.

While ‘small advertising’ such as classifiers and personals has moved online in a wholesale way, brand advertising has been affected in a more marginal way. Most innovation has been in the form of ‘media firsts’ – finding new places to stick advertising. Until very recently there has been little progress in targeting. The proliferation of media has in some ways made demographic targeting easier. But it has done this at precisely the same time that demographics have been declining in relevance as a predictor of consumer behaviour

It is interesting because marketing plays a vital business function in connecting consumers with things they want to buy. For marketing to service the new needs of business, and for it to profit from rather than suffer from the changing world of media, it will have to adapt in a radical way.

The broad themes of the new media consumption landscape and the new age of marketing will be about:

Relevance; will be key to ensuring that yours is among the few marketing messages with which your target consumer will truly engage.

Interaction; will offer individual consumers unique experiences, feeding back information to the brand.

Relationships; will be the vital pathways by which marketers reach consumers, including relationships with media, with brands and with fellow consumers.

The importance of these three factors will compel marketers to exploit more fully than at present the inherent advantages of digital media, including: the addressability of individual consumers rather than a broadcast model interactivity rather one way communication learning about individuals and their behaviour and using this information to determine what information and entertainment to service them with in the future.

The core attributes of successful digital marketing are increasingly being centered around relevancy and personalization being delivered on-demand, whether reaching someone via email, mobile or the Web.
Software as a service platforms execute on-demand deliverability while taking into account relevance, personalization and other targeting metrics along the way. In addition, Software as a service platforms contain seamless integration between all digital marketing mediums such as e-mail, mobile and the Web. It is easy to use, easy to implement, cost-efficient and can adapt to changing market conditions with inherent scalability and unlike most previous proprietary methods.
In literature the earliest independent mode of the digital market availed access to customer data to support traditional marketing management strategies, using interactive” techniques (Hegel and Rayport 1997). Digital ethics at this juncture enforced fairness principles regarding consumer rights and proprietary company data (Nowak and Phelps 1997; Malone 1997; Milberg, et al. 1995). These protections constitute “data bank” competency, because they safeguard autonomous and independent digital market activity (Carter and Goel 2005). This independent mode of the digital market is clearly chronicled by the marketing management literature.
The contributions evolve incipient digital marketing strategies, such as e-tailing and online relationship management programs. Consumer information privacy constituted a wedge issue between enterprise strategies relying on data mining and ethics stakeholders regulating data manipulation. By protecting the “data base,” the benefits of digital markets to support traditional market exchanges are preserved. (Chen, et al.‟s 2001) Later research examined time and location free interaction in the digital market‟s immersive or marketspace mode (Hoffman, et al. 1999b; Rayport and Sviokla 1996, 1994). Greater acceptance of electronic presence made market participants accustomed to exchanges that transpire entirely in digital space. Traditional marketing mix elements were recast for an immersive digital context commonly referred to as a “hypermedia computer-mediated environment” (Hoffman and Novak 1996). Marketspace theory transforms marketing management functions into digital network competencies for operating cybermediaries (Sarkar, Butler and Steinfield 1998).
The digital marketing strategy literature combines networking, agency, and transparency/ authentication competencies in the property of interactivity. Digital market success depends on the strategic coding of interactivity into electronic commerce networks, online websites, and virtual communities (Song and Zinkhan 2008). In fact, enhanced interactivity is an essential for digital customer relationships to thrive. The strategic viability of web-based relationships (Yoon, et al. 2008), as well as entirely “virtual customer environments” such as Second Life have been linked to competencies for coding advanced “interaction facilities” (Nambisan and Baron 2007).


In my opinion digital marketing is a significant part of marketing because the world is changing and people are using the technology in their daily lives. Also in marketing, things are starting to change: companies are moving online across the spectrum of marketing activities, from building awareness to after-sales service, and they see online tools as an important and effective component of their marketing strategies.
In conclusion it is easy to marketers to deliver real-time, personalized services and content, one consumer at a time. Digital marketing leverages the unique and powerful characteristics of interactive media: it is addressable, meaning that each user can be identified and targeted separately; it allows for two-way interaction; services can be tailored for each individual customer; and purchases can be made and influenced on line. However, to capture the benefits of digital marketing, companies must integrate interactive media into their existing businesses and marketing programs.

REFERENCES

SARATHY, R. and C.J. ROBERTSON (2003),
“Strategic and Ethical Considerations in Managing Digital Privacy”

E. VINCENT CARTER, California State University, Bakersfield,
“Competency Codes for marketing management”

BRIAN DEAGAN, “Digital Marketing Trends”

ALEXA KIERZKOWSKI, SHAYNE MCQUADE, ROBERT WAITMAN, and MICHAEL ZEISSER “Marketing to the digital consumer”




KRİSTOFER LİAZE
109604013

Rediscovering Market Segmentation

Rediscovering Market Segmentation

Introduction
Market segmentation is helping to identify the target customers’ profiles and it influences the company at almost every phases. Besides segmentation can be change rapidly and we have to re-identify and/or rediscover it very often.

Literature
Market segmentation’s original and true purpose is discovering customers whose behavior can be changed or whose needs are not being met. There are many different kinds of people and they display about as many different buying patterns. That simple truth is well understood by those responsible for market research, product development, pricing, sales and strategy.

Traditional demographic traits such as age, sex, education levels, and income no longer said enough to serve as a basis for marketing strategy.
Nondemographic traits such as values, tastes, and preferences were more likely to influence consumers’ purchases than their demographic traits were.
Sound marketing strategy depended on identifying segments that were potentially receptive to a particular brand and product category.

The idea was to broaden the use of segmentation so that it could inform not just advertising but also product innovation, pricing, choice of distribution channels, and the like. Yet today’s segmentations do very little of this, even though markets and media are, if anything, even more fragmented today than they were in 1964 and consumers even more diverse and accustomed to following their own tastes and impulses.

Segmentation can do vastly more than serve as a source of human types, which individually go by such colorful monikers as High-Tech Harry and Joe Six-Pack and are known collectively by the term “psychographics.” Psychographics may capture some truth about real people’s lifestyles, attitudes, self-image, and aspirations, but it is very weak at predicting what any of these people is likely to purchase in any given product category. It thus happens to be very poor at giving corporate decision makers any idea of how to keep the customers they have or gain new ones.

Good segmentation is identify the groups most worth pursuing-the underserved, the dissatistied, and those likely to make a first-time purchase, for example. They are dynamic –they recognize that the first-time purchaser may become underserved or dissatisfied if his or her situation changes. And they tell companies what products to place before the most susceptible consumers.

Segmentations meant to strengthen brand identity and make an emotional connection with consumers differ from those capable of telling a company which markets it should enter and what goods to make. “Gravity of decision spectrum” is a tool which focuses on the form of consumer behavior that should be of greatest interest to merketers-the relationship of consumers to a product or product category, not to their jobs, their friends, their family, or their community, all of which lay in the realm of psychographics.

As time went on, gradually, the focus of creative departments shifted from the product to the consumer: If, by the 1970’s, products had become less distinctive, people seemed to be bursting with the unprecedented variety.

One way companies found to convince particular groups of consumers that a product was perfect for them was to place in the advertising message a person whom they resembled or wished they did. Another way, which followed from the consumer orientation of the first, was to emphasize the emotional rather than the functional benefits products offered – pride of the ownership, increased status, sex appeal.

Different Segmentations for Different Purposes

Psychographics, it should be said, proved to be effective at brand reinforcement and positioning. The Pepsi Generation campaign of decades ago, for example, did coalesce a wide assortment of consumers into a group that identified with the youth culture emerging at the time. But even though campaigns built on psychographics are good at moving viewers emotionally, the characteristics and attitudes that such ads invoke are simply not the drivers of commercial activity. Those tend to be things like purchasing history, product loyalty, and a propensity to trade up, all of which are informed by attitudes and values that lead consumers to view particular offerings differently. What's more, psychographic segmentations have done little to enlighten the companies that commission them about which markets to enter or what kinds of offers to make, how products should be taken to market, and how they should be priced. Despite its disappointing performance, market segmentation is still widely used.

If meaningful segmentations depend on finding patterns in your customers' actual buying behavior, then to construct one properly, you need to gather the relevant data. Depending on the question your exercise is ultimately aimed at answering, you would want information about, say, which benefits and features matter to your customers. Or which customers are willing to pay higher prices or demand lower ones. Or the relative advantages and disadvantages customers identify in your existing offerings. You'll also need data on emerging social, economic, and technological trends that may alter purchasing and usage patterns.
Armed with such data, you can then fashion segments that are both revealing and applicable.

Such segments will:
• Reflect the company's strategy;
• Indicate where sources of revenue or profit may lie;
• Identify consumers' values, attitudes, and beliefs as they relate specifically to product or service offerings;
• Focus on actual customer behavior;
• Make sense to top executives;
• Accommodate or anticipate changes in markets or consumer behavior.

Unfortunately, few marketing chiefs know or have thought about which of their company's strategic decisions would benefit from the guidance of a segmentation. Segmentations designed to shed light on these questions won't try to explore the personalities of customers; they will try to identify groups of potentially interested or susceptible customers sufficiently numerous and lucrative to justify pursuit. Subsequent strategic moves will, of course, call for new and different segmentations.

Which customers drive profits? Companies can rank their own customers by profitability so as to concentrate the right amount of attention on them. But to grow revenues, a company should understand what makes its best customers as profitable as they are and then seek new customers who share at least a couple of those characteristics.

What are my customers actually doing? While relevant attitudes, values, and expressed preferences can bring color and insight to a segmentation, they lack the predictive power of actual purchase behavior, such as heaviness of use, brand switching, and retail-format or channel selection. If you want to understand how a consumer would respond to products or features that have not yet been introduced, you can elicit the next best thing to actual behavior by creating laboratory simulations to which special analytic techniques can be applied. One of them, called "conjoint analysis," involves presenting consumers with combinations of features. It then asks the consumers how willing they would be to purchase the product in question if particular attributes were added or removed, or if the price changed.

Will this segmentation make sense to senior management? Modern marketing practitioners view their field as outward facing -- that is, focused on listening and communicating to consumers and markets. In fact, marketing may do itself harm by failing to make itself understood by its internal constituency: senior management. As marketing has become more scientific and specialized, its practitioners have increasingly turned to advanced statistical techniques for dissecting segments into ever finer slices containing improbable combinations of traits. The masters of these techniques are often tempted to flaunt their technical virtuosity instead of defining segments that make intuitive sense to senior managers. If the segments seem inconsistent with managers' long experience, and managers cannot grasp how they were derived, the research they yield is unlikely to be accepted and applied.

Can our segmentation register change? Segmentations should be part of an ongoing search for answers to important business questions as they arise. Consequently, effective segmentations are dynamic -- in two senses. First, they concentrate on consumers' needs, attitudes, and behavior, which can change quickly, rather than on personality traits, which usually endure throughout a person's life. Second, they are reshaped by market conditions, such as fluctuating economics, emerging consumer niches, and new technologies, which in today's world are evolving more rapidly than ever. In short, effective segmentations focus on just one or two issues, and they need to be redrawn as soon as they have lost their relevance.

The Gravity of Decision Spectrum: The most common error marketers commit is applying segmentations designed to shed light on one kind of issue to some other purpose for which they were not designed. But which kinds of segmentations are best for which purposes? We suggest marketers begin by evaluating the expectations consumers bring to a particular kind of transaction. These can be located on our gravity of decision spectrum, which will tell you how deeply you need to probe consumers' motives, concerns, and even psyches.

Some decisions people make, such as trying a new brand of toilet paper or applying for a credit card, are relatively inconsequential. If the product is unsatisfactory, at worst a small amount of money has been wasted and a bit of inconvenience incurred. But decisions such as buying a home or choosing a cancer treatment have momentous significance given their potential for benefit or harm and the expense associated with them.

At the shallow end of the spectrum, consumers are seeking products and services they think will save them time, effort, and money. So segmentations for items such as toiletries and snacks try to measure things like the price sensitivity, habits, and impulsiveness of the target consumer. Segmentations for big-ticket purchases like cars and electronic devices, in the middle of the spectrum, test how concerned consumers are about quality, design, complexity, and the status a product might confer. At the deepest end, consumers' emotional investment is great, and their core values are engaged. Those values are often in conflict with market values, and segmentations need to expose these tensions. Health care is the archetypal high-gravity issue. The exhibit, "What Is at Stake?" maps out the differences in business decisions, consumer decisions, and approaches to segmentation that emerge as the gravity of a consumer's buying decision increases.

What Is at Stake?

Segmentation initiatives have generally been disappointing to the companies launching them. Their failures have mostly taken three forms. The first is excessive interest in consumers' identities, which has distracted marketers from the product features that matter most to current and potential customers of particular brands and categories. The second is too little emphasis on actual consumer behavior, which definitively reveals their attitudes and helps predict business outcomes. And the third is undue absorption in the technical details of devising segmentations, which estranges marketers from the decision makers on whose support their initiatives depend.

by Daniel Yankelovich & David Meer
Harvard Business Review / Feb 2006

F. Şebnem Kürşat
108604004