Slide1: FM 423 International Marketing of Forest Products Marketing Definition Marketing is a managerial process that facilitates in the evaluation of the needs and wants of potential customers. This results in the delivery of a specific good or service that satisfies those needs and wants while meeting the strategic objectives of the company or organization Overview of Marketing Concepts


Slide2: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Marketing Management Definition Marketing management is the process of regulating demand for a product by developing a strategy based on the marketing variables (often called the marketing mix) to create exchanges that satisfy both the customer and the objectives of the organization.


Slide3: FM 423 International Marketing of Forest Products Overview of Marketing Concepts The Marketing Mix The marketing mix is defined as the set of marketing variables that are available to managers to use in designing and implementing a marketing strategy. In general, the objective of the marketing strategy is to influence demand for a specific product or group of products. Economics measures demand marketing aims to increase demand


Slide4: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Marketing Mix The marketing mix is comprised of the following marketing variables: Product: the combination of goods and services that a firm offers to its customers Price: the amount of money (or equivalent) the customer must pay for the product. Blockbuster example Promotion: activities (such as advertising and promotional campaigns) that provide information on a product and seek to stimulate consumer interest and demand must differentiate product & target segment.


Slide5: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Marketing Mix Place (Distribution): refers to the process of physical distribution associated with transferring a product from the manufacturer to the customer one method is to establish distributor relationships Services: activities, benefits or satisfactions that are used to augment a product (or they can be the product itself). Services are intangible and do not result in physical ownership for the customer.


Slide6: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Markets The set of all current and potential customers for a specific product or service. This set of customers can be segmented by demographic & psychographic (psychographic = opinions, attitudes, and beliefs about various aspects relating to lifestyle) variables. There are two basic types of markets are: business to business (industrial) markets consumer markets


Value Proposition: Value Proposition A value proposition articulates the essential benefits and experiences the client can expect to get, at what cost and how that combination is superior to other choices. Why is a customer going to buy my product or service? Where is the value to the customer Things to do: 1. Customize your value proposition to meet your market segment needs. It is not one size fits all. 2. Show how your solution is a better alternative. 3. Clearly demonstrate the benefits 4. Deliver superior value without sacrificing your profitability It is very important to examine the value proposition thru your customer eyes.


Slide8: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Market Segmentation A market segment consists of a group of customers who share a similar sets of wants. The process of market segmentation involves dividing a large heterogeneous market into smaller, more homogenous market segments using a relevant segmentation variable.


Slide9: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Market Segmentation The purpose of market segmentation is to identify distinct groups of consumers within the overall market who display a greater potential for using or purchasing a specific product or service. The market segmentation process assists the marketer to develop a marketing strategy specifically focused towards each market segment of interest, thus promoting a more effective use of marketing resources. Great tool for small business to compete with the goliaths of industry.


Slide10: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Market Segmentation Requirements for successful segmentation include: The target segment must be measurable and identifiable, The target segment must be accessible, The size of the target segment must be large enough to be profitable, The target segment must be actionable (within the resources and capabilities by the firm), and The target segment should be defensible against competitors.


Slide11: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Product Definition A product is anything that is offered to the marketplace and which satisfies some want or need. The concept of a product can encompass a wide range of things from the physical product (wood I-joist), to services (home mortgages), to organizations (Habitat For Humanity), to ideas (architectural house designs).


Slide12: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Product The two most fundamental product categories are: commodity products and differentiated products. Commodities: a basic product that is offered to the entire market by one or more manufacturer Differentiated product: a product that has been modified in some way by a manufacturer to meet the specific wants of a set of customers or to distinguish its product offering from those of its competitors


Slide13: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Product The four product levels are: generic: the core product that meets the minimum requirements of the market expected: the core product that incorporates a set of basic features that meet the basic expectations of consumers augmented: expanding the expected product by including product features or benefits that exceed consumers expectations potential: the ultimate product that results from addition of all possible product features or benefits Price as basic, gold, silver, platinum


4/6/2006 Lecture: 4/6/2006 Lecture Questions Lecture Class Exercise


Case Study: Case Study Executive Summary Introduction Problem Statement Strategic Alternatives Marketing Strategy -segment the market and define the market segment you are going to target -write up a value proposition that states why potential customers in your market segment will purchase your product. -look at each of the 4 p’s and write a strategy for each one always refer to your market segment


Slide16: Collins Pine


Slide18: Positioning a Product Should Be Based on Product Attributes Importance of 17 Attributes (scale 1 to 7) furniture, cabinets, woodworking


Slide19: Alaska Wood Utilization Research and Development Center How to use these in marketing: 1)     Appearance was the most important attribute. 2)     Low price was 4th from the bottom (of 17) -compete on non-price attributes 3)     Certification 2nd from bottom *when targeting the furniture and cabinet industries appearance, ability to accept finish, and straightness are attributes that should be emphasized.


Slide20: Student Ratings of Class Topics


Slide21: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Product Branding A name, sign, symbol, or design that identifies the seller, differentiates the product from competitors offerings, connotes a product image and promotes the development of customer loyalty Successful brands are a key to long-term performance. Creates TRUST with consumers and reduces their purchase risk. Brand Equity is the value of the brand (as below) The median price for the number one brand was 40% more than a store brand The median price for the number one brand was 10% more than the number two brand


Slide22: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Product Branding Brand Knowledge – Are consumers aware of the brand what it stands for? Brand Identification – How do consumers identify with the product? Price Premium – Are customers willing to pay more for the product? Customer Loyalty – Do consumers become less price sensitive? Market Share – Does branding provide a competitive advantage?


Slide23: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Product Branding Brand Equity The positive differential effect that knowing the brand name has on customer response to the product or service. 5 Levels of customer attitude towards the brand (Aaker) 1. Customer will change brands, especially for price reasons. 2. Customer is satisfied. No reason to change the brand. 3. Customer is satisfied & would incur a cost by changing brands. 4. Customer values the brand & sees it as a “friend”. 5. Customer is devoted to the brand.


Slide25: FM 423 International Marketing of Forest Products Overview of Marketing Concepts The Product Life Cycle (PLC) The PLC describes how the sales of a product vary over time. The PLC consists of five stages and marketing strategies vary for each stage. The PLC is conceptual, and while not all products follow the same PLC, virtually all products have a life cycle.


Slide26: FM 423 International Marketing of Forest Products Overview of Marketing Concepts The five stages of the PLC are: New Product Development: the PLC begins when the new product is developed. During this stage, sales are zero and product development costs result in a loss for the firm. Introduction: the product is introduced into the market. Traditionally this stage is characterized by slow sales growth as consumers become familiar with the product and its benefits. Increased use of mass marketing technologies have contributed rapid sales growth and a shortening of the introduction stage for some types of products.


Slide27: FM 423 International Marketing of Forest Products Overview of Marketing Concepts The five stages of the PLC (con’t.): Growth: during this stage of the PLC, market acceptance for the product begins to grow, leading to increasing sales and profitability. Maturity: sales growth begins to level off and profitability stabilizes or begins to decline as new competitors enter the market, promotional costs increase, and the size of the market stabilizes. Decline: sales and profitability begin to decline for the industry. Some companies decide to leave the market and consolidation begins. The decline phase may occur due to technological advances, changing consumer tastes, changes in the business environment or as a result of regulatory constraints.


Slide28: The 4P’s: Product The Product Life Cycle for Structural Panels in the US


Slide29: The 4P’s: Product The PLC and Product Type


Slide30: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Analyzing Product Performance/Potential Boston Consulting Group Matrix The Boston Consulting Group growth-share matrix provides marketing managers with a tool to evaluate the performance and potential of specific products relative to other product offerings in the market.


Slide31: The Boston Consulting Group Growth-Share Matrix


Slide32: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Marketing Implications of the BCG Growth-Share Matrix Star: products that possess a high market share in a fast growing market. These products often require high promotional expenditures to maintain or expand their market positions. As the market begins to mature and market growth declines, these products can be transitioned into cash cows. Cash Cow: these successful and established products have a dominant market position. This dominant market position results in above average profits. As a result, these profits can be used to develop new products or support the market development expenses of other products.


Slide33: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Marketing Implications of the BCG Growth-Share Matrix (con’t.) Problem Child: these products are competing in high growth markets but have low market shares. Large expenditures are required to maintain market share. These products have some potential to be converted into stars if managers can identify the factors that are constraining their sales growth and successfully implement marketing strategies that improve their market performance. Dog: these products have a low market share in a low growth market. Managers must consider whether to divest these products or attempt to reposition them in another segment of the market.


Slide34: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Distribution Channel Definition: A distribution channel is comprised of a series of channel intermediaries whose function it is to direct and facilitate the flow of goods and services from the producer to consumers. Channel intermediaries are important because they can increase the efficiency of the distribution function by reducing transaction costs and by performing a range of useful tasks. Most manufacturers produce a limited range of products in very large quantities while most retailers stock a wide selection of products in small quantities. Channel intermediaries help to bridge the inventory gap between manufacturers and retailers.


Slide35: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Distribution Channel Factors that promote the need for channel intermediaries most retailers have limited warehouse space the high cost of carrying large inventories inventory ties up capital that could be better used elsewhere can result in spoilage for certain products (e.g., fresh fruits, vegetables, meats, drugs…) changes in style can render inventory obsolete complicated logistics of supplying numerous retailers located in geographically diverse and dispersed locations can minimize transaction costs for manufacturers and retailers


Slide36: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Distribution Channel Although the services of channel intermediaries increase the selling price of a product and reduce the total potential revenue of manufacturers, these costs are more than offset by the services they provide to manufacturers, retailers, and consumers. There are two basic types of distribution channels: Direct channels: goods move directly from the manufacturer to the final customer Indirect channels: goods move through a series of channel intermediaries to facilitate the distribution of products through the channel


Slide37: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Distribution Channel Channel intermediaries introduce greater efficiency into the distribution process by performing the following functions: facilitate the flow of information between retailers and manufacturers provide retailers with assistance in developing and implementing promotional campaigns identify and communicate with new customers transport and store products provide credit to customers assume most of the risks associated with the distribution process break-bulk and assort large shipments of single products into smaller, mixed shipments


Slide38: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Distribution channel management The various members within a distribution channel have differing perceptions of their roles within the channel and specific expectations of the other channel members. Differences between members perceptions and expectations regarding each others roles can lead to conflict if a channel member is perceived to be deviating from their role. Channel conflicts can also result from overlap between two distribution areas or from asymmetric relationships or from shifting balances of power.


Slide39: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Distribution channel management Power within a distribution channel refers to the ability of one channel member to influence or coerce the decision-making process of other channel members. Historically, manufacturers have tended to have more power within a distribution channel. However, in recent years, wholesalers and retailers in some industries have begun to exert more influence within distribution channel relationships.


Slide40: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Price Pricing is the only variable in the marketing mix that generates revenue for the firm. All of the other variables (product, promotion, distribution, services) generate costs for the firm. Pricing is a dynamic variable and too often is treated as being static. That is, prices should be constantly evaluated in a dynamic manner to ensure that they accurately reflect changes in the marketplace, changes in the marketing mix, prices of competing products and the value of the product from the consumers point of view.


Slide41: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Price The nature of competition within a market can influence the pricing decision. Competition can be either cost-based or market-based. Cost-based competition occurs when a firm adopts a strategy of relying on price to differentiate its product from its competitors. This strategy does not provide most firms with a sustainable competitive advantage as other firms can easily modify their price levels in response.


Slide42: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Price Market-based competition seeks to utilize factors other than price for developing a sustainable competitive advantage. Factors such as product features, service, quality, packaging, and promotion can be used to not only differentiate a product, but they can often allow a firm to charge a price premium and attempt to develop customer loyalty.


Slide43: FM 423 International Marketing of Forest Products Overview of Marketing Concepts


Slide44: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Price Market-based Pricing The fundamental problem with cost-based pricing is that it does not necessarily reflect the market value of the product. Thus, pricing decisions are made independently of how the market values the product. However, over time a company should pursue unit cost reductions to increase their competitiveness as new products and competitors enter the market. This is particularly important in a competitive market in order to maintain profitability at lower price levels and/or to increase competitiveness.


Slide45: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Price The pricing strategy considered depends upon the level of demand that exists for the product as well as having some idea of what price consumers are willing to pay for the product and how they value the product. Two strategies that are appropriate for patent protected or new-to-market products are: market skimming and market penetration.


Slide46: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Price Market skimming involves setting the initial price of a new product high enough that only consumers of a specific market segment will buy the product. As sales to this segment begin to mature, the price is lowered to a level that will attract buyers from the next market segment. This strategy is repeated to allow the firm to successively skim sales from each market segment.


Slide47: The 4P’s: Pricing


Slide48: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Price Market penetration involves establishing a low initial price in order to penetrate the target market quickly and maximize sales and market share. This strategy also helps to increase levels of production, thus reducing unit costs, and helps to deter competitors from entering the market. It also allows the firm to capitalize on the first-to-market advantage. When a firm adopts a penetration pricing policy, it sets the price low enough to appeal to consumers across all of the targeted market segments. This type of pricing policy is used to promote rapid market penetration and to gain as large a market share as possible. This strategy also allows a firm to take advantage of production economies of scale, reducing unit production costs and increasing unit profit margins.


Slide49: The 4P’s: Pricing


Slide50: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Promotion Promotion consists of the specific activities that an organization employs to communicate information about itself, its activities, and its products to its customers (specifically) and the public (in general). The components of the promotional mix include: Advertising: non-personal communication that is paid for and transmitted to the target audience through the mass media. Personal selling: personal communication between the seller and the buyer. Sales promotion: short-term incentives that encourage interest, trial, or purchase activities by consumers or channel members. Publicity: a free, non-personal form of communication regarding an organization, its activities or its products that is provided by an unrelated organization.


Slide51: FM 423 International Marketing of Forest Products Overview of Marketing Concepts Promotion The objective of a promotional strategy is to communicate information about an organization or product that increases the consumer’s or public’s knowledge about the product or organization. From a company’s perspective, the fundamental purpose of a promotional campaign is to inform, persuade, or remind consumers about the product and ultimately influence their purchase decision.


Slide52: FM 423 International Marketing of Forest Products Overview of Marketing Concepts


Slide53: FM 423 International Marketing of Forest Products Overview of Marketing Concepts


Slide54: FM 423 International Marketing of Forest Products Overview of Marketing Concepts