Purpose of SWOT Analysis, Value-driven Marketing and Market Segmentation - Assignment Example

16 March Marketing Assignment 11 SWOT analysis is a useful tool to find out the strengths, weaknesses, opportunities and threats. It was originated by Albert S Humphrey in the 1960s and it helps to analyze the new emerging trends like business opportunities, technologies as well as changes in the competitors’ business operations. Purpose of SWOT analysis: To identify core competencies of a business, thus enabling it to strengthen these competencies To identify weaknesses of the business and to minimize or improve them before they become a problem. To grab the opportunities, which are created by external factors like new customer trends and changes in the market. To find ways to counteract threats like changes to the market, a competitor’s new advertising campaign, new government policy and so on. It can also be used to analyze specific issues like staffing, advertising etc in order to improve those specific areas. Strength for one issue might be a weakness for another, so it is better to consider the issues combined with other areas of the business. Marketing, a powerful tool, plays a vital role in today’s world and it acts as a bridge from the producer to the consumer. It has to perform the following activities for providing consumers an opportunity to purchase the products and services they need: Buying Selling Financing Storage Transportation Processing Risk-Taking Market Information Grading and Standardizing Satisfaction of a person by using either a product or a service is known as utility and marketing has four types of utilities named form (the producer has to produce in the form required by the consumer), place (transport and deliver wherever the product is required), Possession (Provides legal ownership) and time (Perishable items to be delivered in time). The below listed examples will help to know the impact of marketing. Example 1: The Ode-nil product had been introduced with ordinary packing as well as a lower price, but sales volume is not up to the expected level, so they made a market survey, after which the product was released in a deluxe packing with higher price. They also increased margin for the retailers to push their products, leading a rise in sales volume. Example 2: The Chik shampoo company was in a position to boost up their sales and they do not want to increase their promotional expenses in terms of paying higher margin to the retailers. So they announced a scheme, “One Chik shampoo packet at free of cost for four empty shampoo packets of any brand.” It boosted up their sales, later they modified the scheme by accepting empty packets of their own instead of other brands. Market Segmentation is the process of dividing the market into several groups or segments based on demographic facts, geographic locations, psychographic reasons and behavioral aspects. Demographic facts can be classified based on age, family size, family life-cycle, gender, income, occupation, education, religion, race, generation, social class and nationality. A market segment is comprised of individuals who possess similar interests, mindset and react in similar way for the market changes. Each segment differs from the other. Targeting: Once the market segment is identified, then the marketer has to decide which customer groups or segments to target. There are three types of marketing strategies: Undifferentiated marketing is also known as mass marketing and usually involves targeting the whole market with one product. Differentiated marketing- In this type of marketing, a firm develops products and services with separate marketing mix strategies for each of the segments chosen by the firm. Concentrated marketing- In this a firm develops a product that caters for the needs of that particular group. Positioning is the third step in marketing. The seven factors involved while developing strategies for positioning are listed below: Using product characteristics of customer benefits Pricing Based on use or application Based on product process Based on product class Based on cultural symbols Based on competitors BCG (Boston Consulting Group) Matrix It was developed by Bruce Henderson in the early 1970s. Based on this, the businesses or products are classified as low or high performers based on their market share (sales compared with competitors) as well as the market growth rate (possibility of market share expansion). It is simple, easy to understand and helps to screen the opportunities very quickly. Based on the market growth and market share, BCG matrix is divided into four categories namely stars, cash cows, dogs and question marks. Based on the sales figures of a manufacturing company, the BCG matrix is drawn below: Based on the above matrix, suggestions given to the company are as follows: SBU A and B fall in the question mark category. For these units, market growth is high but market share is low as compared with competitors, so the company has to invest more and move these units into star category. SBU D falls in cash cow portion, for this unit market growth is low but market share is high. Since the unit is in a mature stage, the company can invest less and extract more from this. SBU C and SBU E fall in the dog category, for these units both market growth and market share are low and the business is under a declining stage. So the company can wind up these units and concentrate more on SBU A, B and D. Strategic planning in an organizational management activity and is used to set goals and ensure that everybody in the organization works towards achieving common organizational goals. It gives clear shape and idea about what an organization is, and who it serves, why it does so, with a focus on future in terms of long term objectives. Reasons to form marketing strategy: To form a long term and short term goal for the organization To get an internal analysis and competitive analysis For targeting the right customers To have a tactical advantage To implement the vision of the organization. Major components involved in strategic planning process are: Analysis of assessment – To understand the current internal and external environment factors. Strategy formulation – Initially high level strategy is developed, and every aspect is documented from basic level. Strategy execution – Strategy planning in the document is converted into operational planning and is later executed. Evaluation – It is done by the management after evaluation of performance based on data reporting and communication, if necessary refinement activities can take place. The figure shown above illustrates strategy planning of a manufacturing company, first they formulated their high level strategy as: Vision, mission, values and strategy Team orientation, creativity and continuous learning To increase shareholder’s value To achieve this, mindset, culture and passion is required. The company can be categorized as various departments based on their work, nature as well as the tasks assigned to them. They are as follows: Work environment Asset management Supply chain management Market and Customer orientation Quality management People management Information and system Innovation and Technology. These departments together work to achieve the organizational goals like regarding quality, quantity, cost, delivery speed, innovations and intellectual capital as well as productivity and goodwill. Value-driven Marketing How the clients determine the “value” of one’s products or services is a major point in value-driven marketing. There are two types of values, namely, perceived value and real value. One should make efforts to create both these values. Perceived value converts prospects into clients and real value helps to maintain the existing clients. To create values one must understand the customer’s need, preferences, mindset and emotions as accurately as possible. Marketing is a continuous process in which each step offers an opportunity to add values to create greater customer loyalty. In order to meet customer needs, marketers use marketing mix, to sell products at affordable price in the right place with suitable promotion. With an example one can clearly understand how marketing mix enhances the customer’s perception of value. Product online game was designed, which enabled easy usage, and the jackpot prize attracted many people and, thus, the overall number of users increased. Price was reduced in order to increase number of users. Game tickets are sold by retailers and the game sites are designed in a way that they can handle 400,000 requests per minute. Millions of dollars were spent for launching the game site, to create awareness about this site and, therefore, the number of users rose. In all the cases, the marketer is trying to reach more number of users and enhance the customer’s perception of value. Appendix 1. Breakdown of costs for a pair of Nike shoes from an Indonesian plant, 1995 (Behind the Swoosh). Production labour Materials Rent, equipment Suppliers operating profit Duties Shipping Cost to Nike $2.75 $9.00 $3.00 $1.75 $3.00 $0.50 $20.00 Research and development Promotion and advertising Sales, distribution, admin. Nikes operating profit Cost to retailer $0.25 $4.00 $5.00 $6.23 $35.50 Retailers rent Personnel Other Retailers operating profit Cost to consumer $9.00 $9.50 $7.00 $9.00 $70.00 (Breakdown of Costs for a Pair of Nike Shoes from an Indonesian Plan, p.1) One learns from the above information that the purchase cost to Nike is $20, but cost to consumer is $70, which is more than 200% of cost price. So one needs to identify the elements for this high price and suggest possible alternatives to reduce the cost of Nike. Nike is already spending $9.00 for promotion and advertising, sales, distribution and admin expenses, so it can reduce part of its operating profit to reduce the cost of its product. Retailer is taking $9.50 for his personnel, $7.00 for others and $9.00 as operating profit. He can reduce part from the above listed cost in order to minimize the price further. Works Cited Breakdown of Costs for a Pair of Nike Shoes from an Indonesian Plan. 1995. Web. 9 March 2013. Read More