Market Development, Information, and Bargaining Power

• Reasons for market development

• Strategy in market development

• Tools and outcomes• Participation in

commodities market development

• Bargaining power and market “stabilization”

• Market information

Promotion: Strategic and Tactical Objectives

• Awareness• Trial• Attitude toward the

product– Beliefs– Preference

• Temporary sales increases

EmergingMarkets/New Products

Mature markets/establishedproducts

Marketing Strategy

MARKETINGOBJECTIVESWhat we want to

accomplish

TOOLSUse resources such

as distribution, advertising, sales

promotion, demonstrations

TACTICSAND

ADAPTATIONImplementing strategy

as things change.More tough choices!

CONSUMER/MARKET

RESPONSEConsumers or intermediaries

respond

STRATEGYHow to best use

available resourcesto accomplish objectives

under circumstances.Make tough choices!

OUTCOMESales are influenced

(e.g., volume, frequency, switching,

price sensitivity)

ASSESS AND RE-EVALUATE

ASSESS AND RE-EVALUATE

Market Development Issues

INCREASEDSALES OFPRODUCT

DECREASECONSUMER

PRICE SENSITIVITYGET MORE PEOPLETO BUY PRODUCT

GET CURRENTUSERS TO USE

MORE

GET PRODUCTUSED FOR

NEW PURPOSES

DEVELOP PREFERENCE

RELATIVE TO OTHERPRODUCTS OR BRANDS

DISTRIBUTIONENHANCE-

MENT

ADVERTISING

SALESPROMOTION

JOINTVENTURES/

CO-BRANDING

TRIAL

AWARE-NESS

BUYINGCON-

VENIENCE

.“Big picture only”—details not important!

Market Development: The Objectives

DECREASE CONSUMER PRICE SENSITIVITY“Costs a little more, but it’s worth it” ● Zachy farms chicken ads ● Campbell’s soup ads

GET MORE PEOPLE TO BUY PRODUCTHungry Man dinners ● Hot Pockets ads ● Variety seeking advertising ● Spam luncheon meets advertising

GET PRODUCT USED FOR NEW PURPOSES“Orange juice—it isn’t just for dinner anymore” ● “Beef—it’s what’s for dinner”

● Spam luncheon meets advertising ● Baking soda ads

DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDSKraft cheese ads suggesting that Kraft has more calcium ● Total cereal ads suggesting vitamins ● “Coke is the real thing” ● “The Pepsi generation” ● “The night belongs toMichelob” ● Florida orange juice “Maxwell—it’s good to the last drop”● Progresso and Campbell’s soup ads

GET CURRENT USERS TO USE MORE“Snickers satisfies you!” ● “Ask for A-1 Steak Sauce” ● “A sandwich just isn’t a sandwich without miracle whip” ● “Beef—it’s what’s for dinner” ● “The Incredible, Edible Egg” ●Fast food restaurant advertising

Strategy Issues

• Deciding on objectives – Realism– Suitability for

• Company strengths• Competitor positions• Market structure and change

• How much to spend on objectives– Cost of advertising and/or other promotion relative to gains– Most appropriate ways of achieving objectives based on

• Cost• Effectiveness• Synergy

• Consistency of objectives

Some Tools

• Advertising– Awareness– Trial– Preference– Reminder– New uses

• Distribution– Availability in

retail stores– Quality of

placement within retail stores

• Price/sales promotion– Coupons– Sales– Value– Premium

• Joint ventures/co-branding

• Demonstrations• Product investment

– Quality– Differentiation– Packaging– Usability convenience

Consumer Adoptions of New Foods or New Food Uses

ADOPTION BYLIMITED GROUP

MEDIACOVERAGE

INCREASINGADOPTION/

ADAPTATION

PROMOTION

WORD OF MOUTH

OBSERVATION

TRIAL

TRIAL

Effects and Outcomes

SALES VolumesPrices

AWARENESS

PREFERENCE

USED INMORE

SITUATIONS

REDUCEDPRICE

SENSITIVITY

USEDMORE

FREQUENTLY

USE BYMORE

PEOPLE

REPEATPURCHASES

TRIAL

Market Development

• Levels– Commodity

• Differentiation from competing commodities• Increase in demand for commodity

– Corporate product category (e.g., Coca Cola drinks, including Dasani)

– Product category brand—e.g., Kraft American cheese slices

– Brand (product line)—e.g., Kraft foods

Commodities Market Development Programs

• Typically regional—e.g., Florida orange juice; Idaho potatoes; Hawaiian sugar cane; Washington Apples; Texas beef

• Intention is to differentiate• Compulsory participation in advertising

programs– Development is not worthwhile for the individual

farmer– The individual farmer is assumed to benefit from

overall campaign

Definitions

Innovation: “An idea, practice, or product perceived to be new by the relevant individual or group.”

Diffusion process: “The manner in which innovations spread through the market.”

To Adopt or Not to Adopt: How Will Consumers Answer the Question?

• Some causes of resistance to adoption– Perceived risk--financial

and social– Self image– Effort to implement

and/or learn to use the product

– Incompatibility– Inertia/overwhelming

existing choices

Types of Innovations

• Fashions—tastes go back and forth over time—e.g., food fat content

• Fads—product is “in” for a short time and then fades (e.g., ostrich meat)

• Trends—consumption of a food product either increases or decreases consistently over time

0

10

20

30

40

Num

ber o

f new

adopto

rs

-2.50 -1.50 -0.50 0.50 1.50 2.50

Adoption of Innovations Over Time

Innovators2.5%

Laggards(13.5%)

Earlymajority34%

Earlyadoptors(13.5%)

Late majority34%

Innovators and Imitators: The Lifecycle of A Product

0

0.2

0.4

0.6

0.8

1

Percent diffu

sio

n

0 5 10 15 20 25 Time

The S-Shaped Diffusion Curve

100% adoptionor saturationpoint

One Diffusion Pattern--Nicely Balanced...

Implications for Foods

• Many substitutes and individual tastes• Trying new foods for variety is common• Social opportunities for trial• Food tastes tend to be “learned” early in life

– Best opportunities for spread are with younger consumers

Influences on the Speed of Diffusion

• Risk to expected benefit ratio (relative advantage)—usually not an issue for foods

• Observability—is the product consumed in public

• Product pricing—scarce foods are “rationed” through cost

• Trialability—usually easy for foods• Switching difficulties and learning

requirements/ ease of use—not a problem for foods eaten out but may be for foods to be produced at home

Pioneering Advantage

• Consumer expectations are usually shaped by the first encountered brand

• Satisficing and awareness by consumers• Order of entry vs. pioneering advantage• Positioning of existing pioneer vs. strategy of

first entry

Bargaining Power

• Impact– Price– Conditions

• Returns

• Time of payment

• Interest or finance charges

• Quality or other adjustments

• Transportation or other services

• Sources– Size, number, and

concentration of firms– Supply control– Unequal information– Diversification (?)– Product differentiation– Control of resources– Financial resources– Ratio of fixed to variable

costs

Marketing Orders and Agreements

• Mandates intended to “stabilize” markets• Types of issues

– Grades, size– Packaging– Market allocation (quotas)– Minimum prices– Contributions to research– Advertising (market development)

Market Information

• Some issues– Crop forecasts

– Demand forecasts—quantity and prices

• Government information programs

• Problems– Price specification

(comparability of location, time, and other factors)

– Net vs. gross prices (allowances and discounts)

– Cost vs. accuracy of information

– Changing market orientation and scope of market (proportion of buyers and sellers involved in open markets)

– Voluntary cooperation