97the components of a marketing information system using data from three sources: the

environment, the company and the consumer. Information is collected from these sources and is fed into four MKIS components: an internal reporting system, a marketing research system, an environmental scanning system and a government information system. Data are then analysed to provide information in one or more of the output areas listed. Analysis requires the application of computer facilities and statistical programs as support. Information output deals with marketing opportunity analysis, performance data (profitability, sales, marketing costs), product-mix evaluation and marketing-mix evaluation (advertising, sales, promotion, price, personal selling activity and distribution).

Information is also provided on overall corporate strategies (product-mix evaluation, assessment of acquisitions, portfolio analysis, resource allocation, etc.). Information is then presented to management in report form for defining opportunity, evaluating performance and developing marketing plans.

Problem

Reilly Confectionery Ltd planned to introduce TARA, an ice-cream cake mix, nationally. This was its first entry into the dairy category market. The mix is composed of milk, sugar, butterfat and fresh eggs, all of which are mixed and freeze dried. The units are encased in a cone-shaped capsule with a candy shell for protec-tion and stability. In 20 minutes each unit freezes into an ice-cream cake. The mix comes in chocolate, lemon, vanilla and coffee, but the consumer can add other flavours when mixing.

Ice-cream cake mix is a new product, with an expected growth rate of 1.5% a year in units consumed. Housewives are the prime purchasers, and the product is consumed in all socioeconomic groups.

Supermarkets sell 63% of all cake mixes and are the dominant channel of distribu-tion. TARA comes in an innovative package that can be used to freeze the ice-cream component. Eight units are packaged in each container. A case of 12 containers sells to the retailer for £6.25. The suggested retail price is £0.80 per container. Costs as a percentage of factory sales were estimated as follows: fixed costs, 38%, variable costs, 12%, media/production costs, 15%, sampling/couponing, 4%, trade allowance, 4%, other promotion, 2%, sales force, 6%, distribution costs, 4%, and administration and market research, 2%. Sales are forecast at 1.6 million cases.

The TARA product manager is required to present an annual marketing plan to the group product manager. Reilly Confectionery Ltd uses a standardised format containing the following items: (1) brand’s current (expected) performance; (2) recommendations;

(3) effect of the recommendations on income; (4) situation analysis; (5) opportunities and problems; (6) marketing strategies; and (7) tests and marketing research.

A sophisticated marketing planner must be able to ask the right questions and must know where to get valid and reliable information to help answer those questions. These planning questions must be related to the problem of building a marketing information system. An information system is based on the answers to five questions:

1 What information is required?

2 How frequently will we need the information?

3 What are the sources of information?

4 How are the resulting data analysed?

5 Is the information worth the cost?

This short case takes the marketing planner’s viewpoint towards marketing research not that of the marketing researcher. The goal is to make the product manager a sophisticated user and contractor of research. The product manager should know his or her needs and the limitations of research. An understanding of the roles and limitations of research will enable a marketing manager to work more effectively with researchers.

Peter Morgan, the product manager in charge of TARA, knew some of the questions that must be asked at each stage of the planning process. He was concerned, though, about the frequency for reviewing these planning questions, which in turn would indicate how frequently the marketing information system must supply data at each stage of the marketing planning process.

He was also wondering about the sources of information and the methods of analysis that should be used. Of course, the informational needs of planners and the sources of data vary so widely across products, services and industries that generalisations are impossible.

At this point, Peter has decided to prepare the following list of planning stages with some critical questions that needed to be answered.

Planning stage Example of critical questions

Environmental analysis, organisation • What are the values and objectives of those persons values, objectives and policies who are in control?

Marketing organisation • How are resources, responsibility and authority organised?

Situation analysis • What are the unmet needs of the market?

• What are the profiles of users and nonusers?

• What are the segments for the product type?

• What are the trends with regard to competitors?

• What are our brand benefits?

• What are the industry success factors, capacities and competitive structures?

Competition • What are our strengths and weaknesses?

Public policy • How do environmental concerns affect our strategies?

Strategy worksheet Marketing-mix strategies

Product • Can costs be reduced?

• Does it meet needs adequately?

Price • What is the price elasticity?

• What price must we charge to break even?

• For a given ROI?

• What are competitor’s costs and prices?

Channels of distribution • Which channels are the most productive?

Advertising • What copy theme should be used?

• Which media should we use? How frequently?

Personal selling • How should we recruit, train, motivate and compensate the sales force?

• How should sales territories be determined?

Marketing research • Are the data worth the cost of research?

Profit plan • What are our forecast sales and costs?

• Do learning and experience curves apply?

• What is the payback period?

Evaluation • Are we achieving our corporate strategic objectives?

• Are we achieving our marketing tactical goals?

Control • How do we implement and control the performance of the marketing plan?

Questions

1 What other planning questions should the TARA product manager consider as his most important informational needs for the marketing planning process?

2 Define the appropriate frequency of review that Peter Morgan should consider for each critical planning question.

3 Describe the most appropriate sources of information to be used for each planning question.

4 What methods of data analysis should the product manager apply in order to answer each marketing planning question?

(I) Problem 4.3 Strategies for market leaders Introductory comments

Although a position of market leadership has undoubted attractions both in terms of the scope that often exists to influence others and a possibly higher return on invest-ment, leaders have all too often in the past proved to be vulnerable in the face of an attack from a challenger or when faced with the need for a major technological change.

If therefore a market leader is to remain as the dominant company, it needs to defend its position constantly. In doing this, there are three major areas to which the marketing strategist needs to pay attention:

1 how best to expand the total market;

2 how to protect the organisation’s current share of the market;

3 how to increase market share.

A summary of the ways in which leaders might do this appears in Figure 4.4.

Of these, it is an expansion of the overall market from which the market leader typically stands to gain the most. It follows from this that the strategist needs to search for new users, new uses and greater usage levels of his or her firm’s products. This can be done in a variety of ways. For example, Honda increased its sales by targeting groups that traditionally had not bought motorcycles. These groups, which included commuters and women, were seen to offer enormous untapped potential. The company unlocked this by developing a range of small, economic and lightweight machines which they then backed with a series of advertising campaigns giving emphasis to their convenience and style. The strategy began to change yet again as the company recognised the potential for selling motorcycles almost as an adjunct to fashion. Styling therefore became far more important. This repositioning was then taken several steps further as Honda, along with other manufacturers, began targeting the middle-aged executive market with a series of larger motorcycles that were supported by advertising campaigns giving emphasis to the re-creation of youthful values.

As a second stage the strategist might search for new uses for the product. Perhaps the most successful example is Du Pont’s Nylon which was first used as a synthetic fibre for parachutes and then subsequently for stockings, shirts, tyres, upholstery and carpets.

The third approach to market expansion involves encouraging existing users of the product to increase their usage rates, a strategy pursued with considerable success by Proctor & Gamble with its Head & Shoulders brand of shampoo which was promoted on the basis that two applications were more effective than one.

Strategic Marketing

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At the same time as trying to expand the total market, the market leader should not lose sight of the need to defend its market share. It has long been recognised that leaders represent a convenient target as, because of their size, they are often vulnerable to attack. Whether the attack is successful is often determined largely by the leader’s ability to recognise its vulnerability and position itself in such a way that the challenger’s chances of success are minimised. The need for this is illustrated by examples from many industries including photography (Kodak having been attacked in the film market by Fuji and in the camera market by Polaroid, Minolta, Nikon and Pentax); soft drinks (Pepsi Cola attacking Coca-Cola); car hire (Avis against Hertz); potato crisps (Golden Wonder attacking Smiths, and then subse-quently both companies being attacked by Walker’s); razors (Bic and Wilkinson Sword attacking Gillette); and computers (IBM being attacked by, among others, Apple and Amstrad).

Figure 4.4 Strategies for market leaders.

Market leadership

Although there are obvious dangers in generalising, the most successful strategy for a leader intent on fighting off attacks such as these lies in the area of continuous innovation. This, Kotler (2000: 235) argues, involves the leader refusing

to be content with the way things are and leading the industry in new-product ideas, customer services, distribution effectiveness, and cost cutting. It keeps increasing its competitive effec-tiveness and value to customer. The leader applies the ‘military principle of the offensive’: the commander exercises initiative, sets the pace, and exploits enemy weaknesses. The best defence is a good offence. The dominant firm even when it does not launch offensives, must at least guard all of its fronts and not leave any exposed flanks. It must keep its costs down, and its prices much be consonant with the value customers see in the brand. The leader must ‘plug holes’ so that attackers do not jump in.

Among the ways in which this can be done in the consumer goods sector at least is by producing a product in several forms (e.g. liquid soap as well as bars of soap) and in various sizes (small, medium, large and economy) to tie up as much shelf space as possible.

Although the cost of ‘plugging holes’ in this way is often high, the cost of failing to do so and being forced out of a product or market segment can often be infinitely higher. As an example of this, Kotler cites the camera market and the way in which Kodak withdrew from the 35 mm sector because its product was losing money. The Japanese subsequently found a way of making 35 mm cameras profitably at a low price and took share away from Kodak’s cheaper cameras.

The third course of action open to market leaders intent on remaining leaders involves expanding market share. This can typically be done in a variety of ways including by means of heavier advertising, improved distribution, price incentives and new products.

It should be apparent from what has been said so far that leadership involves the development and pursuit of a consistently proactive strategy.