CHAPTER SIX

MARKETING AND NEW VENTURE DEVELOPMENT

• What is marketing research?

• Explain about marketing intelligence

• Discuss how marketing research and market

intelligence contribute for new venture
development
Marketing research is:
• Systematic:
– methodical planning is required at all the stages of the marketing
research process.
– The procedures followed at each stage are methodologically sound,
well documented, and, as much as possible, planned in advance.
• Objective:
– It attempts to provide accurate, impartial information.
• Accordingly, marketing research involves the
– identification, collection, analysis, and dissemination of information.
• Marketing research gives decision-makers the information
they need to find solutions to business problems, such as the
following:
– How satisfied are customers with your product and
service offering?
– How will customers react to a decision to change a price
or product?
– What are service representatives hearing from customers?

– What responses to competition will bring you success in a

given market?
• Market research is often conducted to address one or
more of the “4 Ps” of marketing
– (product, price, place, and promotion).
• The purpose of market research should be clearly
defined prior to conducting the research.
– This means the problem that needs to be solved and
the information necessary to find the solution
should be outlined before undertaking any research
(Salant & Dillman, 1994).
Thematic areas/issue for MR and MI
 The Roles of Marketing Research in Decision Making

• There are three Functional Roles of Marketing Research.

These are:
1. Descriptive Function - the gathering and presentation of
statements of fact.
2. Diagnostic (analytical) Function - The explanation of data.
3. Predictive Function - to predict the result of a planned
marketing decision.
 Marketing Research Components
 Market size: this deals with the number or value of units
sold to a market in a given period.
 Market Share: corporation’s share of the market size out of
the whole market
 Market penetration: used to know when a company enter/
penetrates a market by lowering the price of a product.
 Brand equity research –conducted to know how favorably
consumers view the brand.
 Buyer decision processes research – used to determine
what motivates people to buy and what decision-making
process they use.
 Marketing Research Classification
a. consumer market research

b. business-to-business (B2B) market research

Different types of research that are used to assess about customers.
• Distribution channel audits - to assess distributors’ and retailers’
attitudes toward a product, brand, or company.
• Marketing effectiveness and analytics - Building models and
measuring results to determine the effectiveness of individual
marketing activities.
• Mystery Consumer or Mystery shopping – used for quality
control or for researching competitors' products.
• Positioning research – this research is mostly conducted to
answer questions like:
– How does the target market see the brand relative to
competitors?
– What does the brand stand for?
• Price elasticity testing –to determine how sensitive customers
are to price changes
• Sales forecasting - to determine the expected level of sales given
the level of demand
• Segmentation research –helps to determine the demographic,
psychographic, and behavioral characteristics of potential buyers.
• Test marketing – this is a small-scale product launch used to
determine the likely acceptance of the product when it is
introduced into a wider market.
 Marketing Research Process

Step 1 Define the research purpose or objectives

• The following questions help to establish objectives:
Where potential customers buy the product?
Why they purchase there?
What is the size of the market? How much of it can
your business capture?
How does your business compare with competitors?
The impact of promotion on customers
What types of products are desired by potential
customers?
Step 2: Research Design Formulation
• Is a blueprint for conducting the marketing research.
• Formulating the research design involves the following
steps
 Study period and place determination
 Qualitative data collection methods
 Methods of collecting quantitative data (survey,
observation, and experimentation)
 Definition of the information needed
 Questionnaire design
 Measurement and scaling procedures
 Sampling process and sample size
 Plan of data analysis
Step 3.Gather secondary data
– such data can be used by the researcher when it is
relevant to the current study
Step 4.Gather Primary Data
• Primary data collection techniques can be categorized
as;
1. Observational techniques-do not involve contact with
respondents
2. Focus groups
3. Experimentation-investigates cause and effect
relationships.
4. Survey techniques- generate data by asking people
questions and recording their responses.
Step 5: Data Processing and Analysis

• Data processing includes the editing, coding,

classifying, and verification of data.

• Data analysis gives meaning to the data that have been

collected (interpretation).
Step 6 Report Preparations and Presentation
– At the end the research results will be written in a report form and
presented to the concerned parties.
The report includes:

– the specific research questions identified,

– describes the approach,

– the research design,

– the data collection, and sampling procedures

 Marketing Intelligence
• Market intelligence is the systematic process of

– gathering, analyzing, supplying and applying information (both

qualitative and quantitative) about the external market
environment.
• Marketing intelligence is used to determine:
– current and future market needs
– changes in the business environment that may affect the size
and nature of the market in the future.
– environment that may affect the size and nature of the market
in the future.
 The Importance of Market and Competitive
Intelligence

• Marketing intelligence provides the following benefits;

– Market and customer orientation – promote external focus

– Identification of new opportunities.

– Smart segmentation
– Early warning of competitor moves

– Minimizing investment risks

– Quicker, more efficient and cost-effective information
 Ways to Undertake Market Intelligence

• Unfocused scan: undefined source and purpose

– Any information that may be useful is gathered without any specific purpose
in mind.

• Semi-focused scanning: no specific purpose

– The manager is not in search of particular pieces of information that he/she is
actively searching but does narrow the range of media that is scanned.

• Informal search: on specific purpose

– limited and unstructured attempt to obtain information for a specific purpose.

• Formal search: systematic search

– This is a purposeful search for information in some systematic way.
 Competitive Analysis
Meaning
• Competitive analysis refers to determining
– the strengths and weaknesses of competitors and
– designing ways to take opportunities or tackle threats posed by
competitors.
Uses
• It helps management understand its competitive advantages
/disadvantages relative to competitors
• It generates understanding of competitors’ past, present and most
importantly future strategies
• It provides an informed basis to develop strategies to achieve
competitive advantage in the future (e.g. how   will competitors
respond to a new product or pricing strategy?)
• It helps forecast the returns that may be made from future
investments
 It should answer, among other things, the following
questions:

 Who are your competitors?

 What customer needs and preferences are you

competing to meet?

 What are the similarities and differences between their

products/services and yours?

 What are the strengths and weaknesses of each of their

products and services?
• How is their prices compared to yours? How are they doing

overall?

• How do you plan to compete?

• Offer better quality services?

• Lower prices? More support?

• Easier access to services?

• How are you uniquely suited to compete with them?

• Rivalry:
– The competitive struggle between companies in an industry to
gain market share from each other.

• Bargaining power of buyers:

– The ability of buyers to bargain down prices charged by
companies in the industry or to raise the costs of companies in
the industry by demanding better product quality and service.

• Potential competitors:
– Companies that are not currently competing in an industry but
have the capability to do so if they choose.
• Bargaining power of suppliers:
– The ability of suppliers to raise the price of inputs or
to raise the costs of the industry in other ways.

• Threat of Substitute Products

– substitute products: The products of different
businesses or industries that can satisfy similar
customer needs.
 Bargaining Power Of Buyers
• Buyers are most powerful in the following circumstances:
– When the industry that is supplying a particular product or
service is composed of many small companies and the buyers
are large and few in number.
– These circumstances allow the buyers to dominate supplying
companies.
– When the buyers purchase in large quantities.
• In such circumstances, buyers can use their purchasing
power as leverage to bargain for price reductions.
– When the supplying industry depends on the buyers for a large
percentage of its total orders.
– When switching costs are low, so buyers can play off
the supplying companies against each other to force
down prices.
– When it is economically feasible for buyers to
purchase an input from several companies at once, so
buyers can play off one company in the industry
against another.
– When buyers can threaten to enter the industry and
produce the product themselves and thus supply their
own needs.
• This is also a tactic for forcing down industry
prices.
 Bargaining Power Of Suppliers

• Suppliers are most powerful in these situations:

– The product that a supplier sells has few substitutes and is vital
to the companies in an industry.
– The profitability of suppliers is not significantly affected by the
purchases of companies in a particular industry- in other
words, the industry is not an important customer of the
suppliers.
– Companies in an industry would experience significant
switching costs if they moved to the product of a different
supplier because a particular supplier’s products are unique or
different.
• In such cases, the company depends on a particular supplier
and cannot play suppliers off against each other to reduce
price.
– Suppliers can threaten to enter their customers’
industry and use their inputs to produce products that
would compete directly with those of companies
already in the industry.
– Companies in the industry cannot threaten to enter
their suppliers’ industry and make their own inputs
as a tactic for lowering the price of inputs.
 The Intensity of Rivalry is Influenced by the
Following Industry Characteristics:
• A larger number of firms
• Slow market growth
• High fixed costs
• High storage costs or highly perishable products
• Low switching costs
• Low levels of product differentiation
• Strategic stakes are high
• High exit barriers
• A diversity of rivals
In pursuing an advantage over its rivals, a firm can
choose from several competitive moves:

– Changing prices
– Creatively using channels of distribution
– Exploiting relationships with suppliers
 Steps of Competitive Analysis

1. Identify your competitors:

– Determine both local and international
competitors.

– the competitor includes anything that could draw

customers away from your business.
2. Gather information about competitors:
At this stage you need to know:
– What markets or market segments your
competitors serve;

– What benefits your competitors offer;

– Why customers buy from them;

– And as much as possible about their

products and/or services, pricing, and
promotion strategies.
• To gather information about your competitor you can
go either to your competitors’ company site or to the
company's Web site (if any).
• Using which you can learn about:
• promotion strategies by visiting their business
site
• Prices
• your competitors’ customers
• Vendors or suppliers, and their employees
• Trade shows
• Publicly available information - from
Newspapers, magazines, press releases and online
publications.
3. Analyzing the Competition
• After studying the information ,ask yourself these primary
questions:

• How are you going to compete with that company?

– By identifying market niche (a small segment market).

• Is there a particular segment of the market that your

competitors have overlooked?

• Is there a service that customers or clients want that your

competitors do not supply?
4. Develop a pricing model
you will need to do some research and evaluate
 what price levels your market will bear,
 your cost basis for the development of your product,
 how much you need to cover overhead and
marketing costs, and lastly
 how much profit you think is appropriate for what
you are offering.

 Do not immediately think you have to price your

products below your competition some people value
your products according to its price
 Marketing Strategy

• It is a process that can allow an organization to

concentrate its limited resources on;
– the greatest opportunities to increase sales, and
– achieve a sustainable competitive advantage.

• It determines the choice of,

– target market segments,
– positioning, 
– marketing mix, and
– allocation of resources.
  Pricing Strategy

• Price is the value placed on what is exchanged.

• It takes into account different environmental changes
• Price is often the only element the marketer can change
quickly in response to demand shifts.

• It relates directly to total revenue TR = Price * Quantity

Profit = TR - TC
• This pricing structure changes through time as products
pass through their life cycles.
o The strategies are:

• Price Skimming:
– firms use by charging the highest possible price that
buyers who most desire the product will pay

• Penetration Pricing:
– keeping quality as of competitors, prices of products are
reduced compared to competitors’ price for the same
product to penetrate into markets and to increase sales.
• Mark-up pricing:
– Certain percentage of sales price is added to cost.

Markup = Sales price – Cost

mark up +cost= sales price
• Competition Oriented Pricing:
– Considers competitors prices primarily; but the market type
matters- monopolistic competition or oligopoly?
• Odd-even pricing:
– This is Psychological pricing method based on the belief that
certain prices or price ranges are more appealing to buyers.
– This method involves setting a price in odd numbers (just
under round even numbers) such as $49.95 instead of $50.00
  Promotion Strategies/Communication

Promotion is the communication of the company and its products

to customers.
• An organization’s promotional strategy can consist of:
1. Advertising:
• It is any paid form of non personal, one-way, mass communication
about an organization, good, service, or idea by an identified
sponsor.
2. Personal selling
• This is the two-way flow of communication between a buyer and
seller, often in a face to face encounter
3. Public relations
• Seeks to change the perceptions of customers, share holders,
suppliers, employees and other publics about a company and its
products.
  Distribution Strategies
• Marketing Channels:
– These are individuals/organizations involved in the process of
making the product available for use or consumption by
consumers.
– Channels are used to improve exchange efficiency.
Direct and Indirect channels:
– Direct channels:
In this type of channel, producers and end users directly interact.
– Indirect channels:
• In this type of channel intermediaries are inserted between seller
and buyer.
• Intermediaries include Merchant Wholesalers, retailers, dealers,
agents, brokers; and manufacturer’s branches and offices.
• The following factors should be considered to select the
best channel under the condition of using best
distribution strategy.
– Company Factors: financial, human and
technological capabilities of a company to do its
business activities.
– Market Characteristics: Geography, market density,
market size, target market
– Product Attributes – perishability, value and
sophistication of the product
– Environmental Forces – those forces that affect the
business like competition, technology and culture.
 
 International Markets
 Discuss Scope and Challenge of International Marketing
• International marketing
– is simply the application of marketing principles to more than
one country.
– It refers to marketing carried out by companies overseas or
across national borderlines.
– The performance of the business activities that direct the flow
of a company’s goods and services to consumers or users in
more than one nation for a profit .
• International Business conducts business transactions all over the
world.
– These transactions include the transfer of goods, services,
technology, managerial knowledge, and capital to other
countries.
– International business involves exports and imports.
• An international business has many options for doing
business, it includes,
– Exporting goods and services
– Giving license to produce goods in the host country
– Starting a joint venture with a company
– Opening a branch for producing & distributing goods
in the host country
– Providing managerial services to companies in the
host country
 Modes of Entry into International Markets
 How does an organization enter an overseas market?
• A mode of entry into an international market is the
channel which your organization employs to gain entry to
a new international market.
 Licensing
– Licensing is where your own organization charges a
fee or royalty for the use of its technology, brand and
expertise.
– Franchising involves the organization (franchiser)
providing branding, concepts, expertise that are
needed to operate in an overseas market, to the
franchisee.
 International Agents and International Distributors
– Agents are individuals or organizations that are
contracted to your business, and market on your
behalf in a particular country.
– They rarely take ownership of products, and more
commonly take a commission on goods sold.
– Distributors are similar to agents, with the main
difference that distributors take ownership of the
goods.
– Therefore, they have an incentive to market products
and to make a profit from them.
 Strategic Alliances (SA)
– Strategic alliances is a term that describes a whole
series of different relationships between companies
that market internationally.
– Essentially, Strategic Alliances are non-equity based
agreements i.e. companies remain independent and
separate.
 Joint Ventures (JV)
– Joint Ventures tend to be equity-based i.e. a new
company is set up with parties owning a proportion
of the new business.
• The Internet, Exporting, Overseas Manufacture or
International Sales Subsidiary
 Reasons For Entering In International Market
• There are numerous reasons why to proceed
internationally,
» Expansion of business,
» searching new market and expand its
customer base,
» Growth and Profitability,
» Introducing new products,
» Economics of Scale,
» Risk Diversification,
» Uniqueness of Product or Services,
» Spreading R& D costs
 END
OF
CHAPTER SIX