Reflection 10 – Marketing Channels
Marketing channels include firms that have partnered together for their common good. Muddy Buddy bars will be made and distributed by General Mills. While it will be the maker of the product, many companies will have a stake in the final delivery to the consumer. For General Mills to be successful it must establish relationships with raw material suppliers for materials such as packaging and raw ingredients for its recipes. It will have a manufacturing center shared with other General Mills product lines. It will utilize distribution centers nationwide to get its product to wholesalers in various cities. Wholesalers will in turn get its product to assorted retailers who will then sell to consumers.
General Mills Muddy Buddy bar distribution channel with Vertical Marketing System
Individual channel success depends on overall channel success; therefore motivation is strong to encourage all channels work together smoothly. Occasionally, channel conflict can occur. Channel conflicts occur in two fashions and are generally over goals, roles, and rewards. Horizontal conflicts occur among firms at the same level of the channel. In the case of General Mills and the making of Muddy Buddy bars, a horizontal conflict may occur with its competitors if it prices itself below the competition thus driving prices down. Since Muddy Buddy bar’s will be offered at a higher price than its competitors, a possible cause for horizontal conflict may be that Muddy Buddy bars is offering a higher value to its consumers thus making the price and value competition. Vertical conflict occurs between different levels of the same channel. This is when producers, wholesalers, and retailers act as a unified system. One channel member owns the others or has enough power to inflict cooperation. An example of this may be if Wal-Mart will only sell Muddy Buddy bars in bulk and will not carry its product if distribution to other box stores is done in other forms than bulk. Wal-Mart has enough pull to motivate General Mills to eliminate individual bar sales to box stores if it wants to keep Wal-Mart as a retailer.
Reflection 9 – Pricing Strategy
Pricing strategy follows three main strategies: Customer value based pricing, cost based pricing and competition based pricing. Customer value based pricing takes into consideration a buyer’s perception of value as the focus for setting the price. Understanding how much value a consumer places on a product is essential in determining the price point. Value based pricing requires the marketer to consider price prior to the marketing program and as part of the marketing mix. Cost based pricing is generally product driven. The company will design a product, add up the cost of making a product and then determine the price. The goal of marketers will be to convince buyers that the price is justified by the product’s value. Customer value perception will usually set ceiling price of the product whereas the cost based pricing will set the minimum the company can charge. Competition based pricing involves setting prices based on its competitors strategies. Ensuring that a company is comparing itself evenly with its competitor is important in knowing what price point to consider.
Types of costs include variable costs, costs that vary with level of output and production and fixed costs, costs that remain the same regardless of the level of output. The total costs are the sum of the variable and fixed costs for any given level of production. A simple way to determine pricing is cost plus markup. This would include a standard markup on the products costs. Break even analysis is another approach determining price. Analysis can be used to determine what the minimum number of units needed to breakeven or the number in revenue needed to be sold in order to breakeven. Breakeven analysis can be used to set profit at a particular percentage whether its zero or higher.
Muddy Buddy used cost based analysis and competition based analysis to determine its price point. Initially it had priced itself at $1.79 per bar with intent at a higher profit margin, but after a breakeven analysis was conducted, fixed and variable costs were determined, and an analysis of its competition’s price range, it elected to enter the market with the lower cost of $1.49 average per bar. The average cost per bar is due to the difference in prices for single serving vs. packages of six and takes into consideration the number of promotional bars and samples that will be distributed through advertising.
The Muddy Budddy Bar breakeven analysis can be viewed here along with pricing strategy and price costing: http://wp.me/a3UQ1k-2E
Reflection 8 – Product Life Cycle Stages and Strategies
The product life cycle is the course of sales and profits over the lifetime of the product. The product is developed with the expectation that the product will be profitable over the lifetime of its offering and with the knowledge that the product will not sell forever. The product life cycle follows five distinct stages.
Illustration by: Laccabue, S.
Product development begins when a company finds and develops a new product line. During this initial product development, sales do not exist while the investment into the products investment increases. During the introductory phase of there is a period of slow growth as the product is introduced to the market place. Profits are generally non-existing during this phase due to the heavy expenses of the product development. The growth period represents market acceptance and increasing profits as a result of the consumer demand. The maturity phase demonstrates large market acceptance and saturation in the market. During this phase profits tend to level off or decline due to addition costs accumulated in order maintain market share against competition. The final phase is the where profits and sales decline in tandem.
Not all products will follow this model. Some products will be introduced and not accepted by the market. These products will die out before they get started thus eliminating the growth and maturity stage. Other products will move in and out stages. A product may be revived through advertising and promotion sending it from the maturity stage back into the growth stage. Most products will follow the life cycle stages but a variation of how long each stage lasts is dependent on many variables. These variables can include competition, consumer demands and changes in the market.
It is anticipated that Muddy Buddy Bars will follow the conventional stage cycles but with a very short product development and introductory phase. This is due to its existing Muddy Buddy recipe mixes and General Mills substantial position in the market place. Both growth and maturity will be very long stages as the cereal/energy bar market is expanding along with the desire for gluten free products. The final decline stage will also be lasting but imminent once the market reaches full saturation and product repositioning is necessary due to competition in the market.
Reflection 7 – Promotional Mix and Strategies
A company’s promotion mix is referred to as the marketing communications mix. It includes a blend of advertising, public relations, personal selling, sales promotion, and direct marketing. With the implementation of these tools a company can create customer value and build customer relationships. Advertising is any paid form of message to call attention to a product or service by an identified sponsor. Advertising can include broadcast, print, Internet, mobile, billboards, or other forms. Public relations (PR) is the act of establishing good relations with the company’s various publics by building corporate image and thwarting off any unfavorable image. PR includes press releases, sponsorships, events, and Web pages. Personal selling is presentation by a company’s sales force to gain sales revenue and build customer relations. Personal selling includes sales presentations, trade shows, and incentive programs. Sales promotions are used to gain recognition of a product or service and offer short-term incentives for the purchase of the product or service. Sales promotion includes discounts, coupons, displays, and demonstrations. Direct marketing is the establishment of direct connections with targeted markets and individuals to gain immediate response and build lasting relationships. Direct marketing includes catalogs, direct-response TV, kiosks, the Internet, mobile marketing, and other forms.
Red Bull is an example of promotion mix and strategy used in an innovative way to build strong brand recognition and awareness for its product. With a clear focus on its target market, adventure seeking males, and its intent to build “deep emotional connections” it used the promotional mix tools effectively. Its advertising included thrill seeking messages of adrenaline induced activities. It used public relations to its advantage by letting itself stay in the media after question was raised to the health of its product. Personal selling was done from its vehicles by young athletics people driving around in off road vehicles. Sales promotion included the use of demonstrations and displays. Red Bull racing has created and sponsored numerous demonstration events across the country. The attached link is just one event the Red Bull sponsors. These demonstrations can be found throughout the world. http://infinitinews.com/en-CA/infiniti/canada/videos/singapore-red-bull-show-car-event?query&page=5 (Singapore Red Bull show car event, 2013)
Reflection 6 – Brands and Branding
Brand development can occur in four ways. A company can establish line extensions, brand extensions, multibrands, or new brands. Line extensions are established when an existing brand extends itself to a newly developed line of an existing product category. General Mills is the maker of Chex cereal. This is the primary ingredient of the Muddy Buddy bars being developed. Within the category, cereal, General Mills makes the following multibrands: Wheaties, Cheerios, Kix, Fiber One, Chex, Lucky Charms and Trix. A Brand extension will be developed with the making of the Muddy Buddy Bars. This is extending an existing brand name to a new product category. In this case, the new category will be cereal/energy bars. Multibrands are different brands within a product category as used in the cereal example above. Mulitbranding is a way to offer different appeals to different target markets. For example Fiber One cereal will appeal to a consumer looking to increase fiber in their diet, whereas, Lucky Charms and Trix will find appeal from children. New brands are a way for a company to create entry into a new market. For example, General Mills wanted to tap into the yogurt smoothie market. It created a new brand image launch of a Yoplait Smoothie kit. This included convenient pouches that included real frozen fruit and frozen Yoplait yogurt chips. (Successful supplier collaboration, 2013)
Successful supplier collaboration. (2013). Retrieved November 23, 2013, from General Mills: http://www.generalmills.com/en/Company/Innovation/Our_stories/Yoplait_Smoothie.aspx
Understanding Customer Needs – Reflection 1
In order to understand customer needs, we must first define what needs are and the different kinds of needs. True human needs are things we can view as the basics: physical needs, social needs, and individual needs. Physical needs include things such as food, water, clothing, warmth and safety. Social needs include things such as the feeling of belonging and affection. Individual needs include things such as knowledge and self-expression. These basic needs are shaped by wants and demands.
Wants are human needs with a personal touch. These needs are impacted by individual personality and shaped by societal culture. Demands, on the other hand, are wants that are requested by people with the purchasing power to command its demand. Products with benefits to match the purchaser’s request generate the most value. The goal is to determine consumer demand as defined by wants which are generated from basic needs.
Our team presented Practicum 2 which covered consumer markets and consumer buyer behavior. In the development of our support for these topics we had to use a company which became the demonstration for presenting the concepts. We chose an auto detail shop. By choosing an auto detail shop we were able to present our points and get back to the basics of understanding basic customer needs. We recognize that people have the need to project a healthy image and the need to belong, because of this, our product became relate-able. It is important to come back to the very basic of needs when selecting and developing a product.
Macro vs. Micro Environments – Reflection 2
Understanding the marketing environment will assist the marketer in its efforts to serve its customers. The marketing environment consists of all the players and forces that are outside of the marketers and its management’s control. Understanding these external forces is imperative in order to follow trends and changes within an industry. By following trends, a marketer can determine if their product is in line with current trends as well as give insight into new opportunities. Marketers use two specific aptitudes for following trends. These two disciplined methods are: marketing research and marketing intelligence. With this careful study, strategies can be developed to meet challenges and seek opportunity. Marketing research and intelligence is gained through understanding of two types more specific types of environments. These include: the micro- and macro-environments.
The micro-environments are the people close to the company that have a direct effect on its ability to serve its customers. They include: the company itself, suppliers, marketing intermediaries, customer markets, and competitors. It is the job of the marketer to build relationships with these groups in order to establish clear understanding of the wants and needs of consumer demands.
The macro-environment includes the larger societal forces that have bearing on the micro-environment. This includes such things as: demographics, economics, natural, technological, political, and cultural forces. The company and these other influences act within the macro-environment. Understanding these relationships help gain insight into the forces that shape opportunity or may pose threats. All companies can be impacted by external forces.
Although are marketing planning assignment is still in the preliminary stages, we are attempting to gain understanding into the macro- and micro-environments through research and field study. Our field study includes a survey. This survey and its results are being analyzed and evaluated in order to determine if our product will be marketed effectively and if our target market is properly identified. Based on preliminary feedback, we have already made some adjustment to our target market and our product specification.
Differentiation and Positioning – World Class Auto Detailing – Reflection 3
Positioning and differentiation are two strategies marketers use to make products stand out. Positioning is where the product fits into a target market. Differentiation is how the product sets itself apart from other products. Not only must a target market be identified, but segments within that market must be determined. Marketers must plan their positions in order to give their product a greater advantage against its competitors, the do this by differentiating themselves.
For example, in our team’s practicum presentation we created an auto detailing company called World Class Auto Detailing (WCAD.) This product was marketed to the service oriented image conscious consumer. There are other auto detailing shops to choose from, but WCAD is the only one that offers a host of services at an affordable cost, provides fleet service discounts, and offers pickup and delivery service. By promoting quality affordable service we create the idea that our service will fulfill a consumer’s budget and convenience needs.
We are also positioned on image. We say, “[we] will not only transform the look of your automobile, but [we] will also transform how you feel when you’re driving.” By promoting the position of image, we can create the idea in the minds of the consumer that their well-being is tied to a clean car. We tie their perceptions, impressions, and feelings about their image to our service. With this psychological and behavioral impact, they are more inclined to have their car detailed and to do it quite often.
Factors of Consumer Buying Behavior – Reflection 4
The four main factors that affect consumer buyer behavior are: cultural, social, personal, and psychological. By understanding the needs of the culture, subculture and social class a marketer can target specific needs of a particular culture. Since human behavior is for the most part learned, where and how one grows up has an impact on their consumer choices. A consumers wants, values and perception is all shaped by their upbringing.
Consumers buying behavior is also impacted by their peers, family ties, and their roles and status in society. Social class is determined by a combination of factors and is usually broken down their class within society. Class can be broken down into seven categories: Upper Upper, Lower Upper, Upper Middles, Middle Class, Working Class, Upper Lowers, and Lower Lower Class. (Kotler, 2014, p. 141) In the United States, the lines are not as rigid as in other countries and people can move between classes. It is important for a marketer to understand what class they are targeting as behavior patterns are often similar within a class.
Personal factors such as age, occupation, lifestyle and personality also play a role in determining consumer buyer behavior. As peoples personal position changes, their buying needs and wants change too.
Psychological factors also have an impact. These include four major forces: motivation, perception, learning, and beliefs and attitudes. The motive is the drive that pushes a consumer to act. Perception is the way we organize and interpret information about our options and choices. Learning is the effect of information and changes that occur from personal experience. And lastly, the belief one has is an explanatory thought about something.
I’ll apply this concept using gym membership to a California health club as an example. More than likely this product would appeal to most every culture. The social groups it is likely to appeal to are those in the working classes and above. Since membership costs money and is not considered a need, I suspect most of those in the lower classes would deem this type of expense worthy in their budget. The personal factors are likely to be people in their 20’s and above, with most between the ages of 20 to 50. Their occupations will vary, but mostly they will be in sedentary are corporate type jobs. Their economic circumstances will fluctuate and affect their ability to going. Their lifestyle will be health conscious people, and their personalities will be varied among the primary traits of such as: self-confidence, dominance, sociability, autonomy, defensiveness, adaptability, and aggressiveness. Their psychological profile will be varied as well.
Sustainable Marketing – Reflection 5
Sustainable marketing promotes products that are beneficial to the consumer and society as a whole. These beneficial products can either have an immediate appeal or long term benefit. Products that have an immediate appeal do not necessarily have a beneficial long term benefit.
These products are referred to as pleasing products. An example of this may be the Sprite example that was used by the group who presented practicum 4. Sprite may quench the thirst in the short term, but its sugary content may put on unwanted weight.
Products that have lower immediate benefit, but are beneficial in the long term are called salutary products. A good example of this might be vitamins and supplements. These have no immediate benefit, but taken over time, it could have a positive effect on ones physical well-being.
A deficient product is one that has no immediate appeal or long term benefits. An example of a deficient product would be a poorly constructed wrench that breaks apart on its first use.
A desirable product is the goal of the marketer. This is a product that produces both high immediate pleasure and high long term benefits. A good example of this would by our teams Muddy Buddy bars. Because Muddy Buddy’s are both delicious and nutritious they meet the requirement of a desirable product. Our marketing campaign has been geared toward making Muddy Buddy not just a tasty treat, but also appealing to the health minded consumer. We have made our product gluten free and organic in order to promote long term benefit.