Business Marketing

29 Jun



Akshay Menon, head of SRI’s Dallas operations, was reviewing proposals from three companies for a new scanner. The company had recently been awarded a contract to scan and electronically store the paper files of a large state government agency, and Menon knew he would have to add three to five new scanners. The contract called for the agency to begin shipping files in a week; Menon had to make a decision today.

Margie Cabellero, the production manager, had obtained three proposals at Menon’s request, one for five moderate-speed scanners, one for three high-speed scanners, and one for three moderate-speed scanners and one high-speed scanner. She was pushing for five scanners, because she felt that more scanners meant greater protection in case one broke down. She also believed she had greater flexibility in assigning work if there were more scanners. Currently, her group operated twelve paper scanners, two microfiche scanners, and a microfilm scanner 24 hours per day.

George Whitaker, the chief financial officer, wanted Menon to buy three high-speed scanners. Whitaker thought that the higher cost would be offset by hiring fewer operators, and besides, the company was more likely to have trouble hiring and retaining operators than keeping the machines working. Further, when ‘Whitaker factored in service costs, the higher-speed scanners were cheaper to operate. He recommended to Akshay that he buy the high-speed scanners and run only one shift on the new equipment for now.

Gloria Sigel, human resources manager, agreed that the local employment market made hiring more difficult. She really didn’t care what was bought; she just knew that it was tough to hire new employees. She also told Menon the current operators thought that the high-speed scanners were too unreliable and that paper jams had to be cleared too often. Since their pay was tied to productivity; they didn’t like working the high-speed scanners.


Menon wondered what he should do.

1. List the roles that each person plays in the buying center. Can you identify where Menon is in making a decision, and what he should do next? Other than Menon, who is most important and why?

2. Identify sources of risk for each member of the buying center. ‘What are they risking? How important does that risk seem to be? How would you reduce that risk if you were a scanner salesperson?

3. Assume you market scanners, and this situation is pretty typical of what you find. How would this information influences your marketing activities? Be as specific as possible?




Environmental Services (ES) provides environmental engineering services to architects, construction firms, and government agencies. The company relies heavily on computer-aided engineering software, and its 42 engineers use computers with oversized screens to handle the size of the engineering drawings. A partnership, the company has a management committee that makes most of the important decisions.

The company now needs to completely upgrade its network and workstations. The management committee formed a subcommittee, chaired by Sylvia Kelly, an engineer who has more of an interest in information technology than do most of the engineers. Sylvia is a junior partner, though, and mentioned to her boss that she was concerned about having enough power on the committee to make sure that the organization’s needs were met. For Sylvia, the biggest concern was network reliability followed by ease of use of the engineering software. The last thing she wanted was to be cursed every time the system went down.
Frank Burns is the most senior partner on the committee and really is only an ex-officio member. He was responsible for the purchase of the first network and is proud of his “bringing the firm out of the dark ages.” A self-proclaimed gadgeteer, he is encouraging the committee to meet with Tata Technologies, an offshore computer engineering firm that promises to create a customized system just for ES. Frank has scheduled a trip for the executive committee to Hyderabad, India, to visit Tata’s headquarters. While there, Frank plans to explore the possibility of outsourcing some of the firm’s easier work to Indian environmental engineers.

1. Explain Sylvia’s and Frank’s motivations in terms of the buyer behavior choice model. You may need to make assumptions about their jobs, so be sure to state those?

2. What are the risks that Sylvia and Frank face?

3. Explain their motivation in terms of reward/measurement. Again, state any assumptions you have to make about their jobs?

4. What would you do if you were a salesperson proposing a computer system to the company? Which model would be more helpful to you, and why?




Information technology in the form of data-driven, Customer Relationship Management has enabled Ritz Canton to win a Malcolm Baldrige Quality Award. It has also contributed to Continental Airlines’ climb from “worst to firstin the past decade. But the failed efforts at Citicorp and elsewhere provide telling cases that not every database marketing effort succeeds.

Recently, Debra Zahay and Abbie Griffin, professors at NC State and the University of Illinois, respectively, asked the question: “Are customer information systems worth it?” Their results from a study of 209 B2B service firms provide some provocative insights.

They find that the positioning strategies of low cost and differentiation and the marketing strategies of personalization and customization seem to motivate the development of customer information systems (CIS). They point to the CIS as providing a set of capabilities for learning, and for gaining customer understanding, through (1) generating information, (2) storing information for future use, (3) disseminating information throughout the organization, and (4) processes that yield shared understandings in the B2B organization.

Companies with a good CIS tend to attain higher levels of performance—higher retention rates, greater share of spending, and greater LTV and return on investment for the business unit. Moreover, strategy selection has a greater impact on performance than CIS management. That is, a good strategy can make up for deficiencies in CIS, but CIS without a clear strategy may have no customer-based performance payoffs. CIS may truly help a company to measure customer-based performance and thereby enable managers to improve their programs and grow their organizations.


Q.1) The findings come from a sample of 109 software companies (NAICS code 51121) and 100 B2B property and casualty insurers (NAICS code 524126). Can you think of other industries that might likewise stand to benefit from managing customer information and applying strategies of personalization and customization?

Q.2) Are there companies for which a CIS would be only marginally valuable? That is, what firms are apt to pursue a strategy that calls for resources to be applied elsewhere, not to CIS? What are their alternative means for learning about their customers?




Travis Pruitt looked at the sales report he had to present the next day to the company president. While sales were the highest ever, net income as a percent of sales had declined slightly. He reviewed results by manufacturer to try to figure out where the problem was. Hi-Flier Products is a distributor of electronic components. These components are used in the assembly of computers, stereos, televisions, and all types of appliances, and the company represents six manufacturers in the Pacific Rim and two in India. Pruitt quickly realized that the Konolta products were the biggest drain on profits. Konolta, a Korean manufacturer of connectors, had introduced no new products that year. As a result, Pruitt and his salespeople were unable to raise prices even though their costs had gone up. Pruitt reflected on one sale in particular: over $100,000 of Konolta products that he had to discount 18 percent to get the sale and beat Hibachi, another Korean manufacturer. Without that sale, he would have lost another million in sales to that account, but it still galled him that he lost money on that portion of the overall business. At the same time, however, Pruitt was excited about the possibilities with Singh, the Indian manufacturer of specialty ceramics. These products, used to house certain components and dissipate heat, were launched only eight months ago but already accounted for 12 percent of total sales. Profits weren’t great on the line, however, as Pruitt had to discount them to get people to try them. But the early results were very promising, and he had been certain to make sure customers knew that these initial low prices were temporary.


Q.1) What factors should Hi-Flier take into account when considering whether to drop Konolta?

Q.2) At what stage of the PLC is the Konolta line? The Singh line?  What can Pruitt do to speed acceptance of the Singh products? When will he know that discounting is no longer needed?

Q.3) Pruitt’s company is a distributor—they don’t make anything. What does this mean in terms of new product development? What role should Pruitt play in identifying and building relationships with lead users?

Q.4) What strategies can Pruitt take to stabilize his relationships with customers and grow account share?




The conference room was filled with the friendly buzz of chatter between colleagues when Marisa Hernandez entered. As she sat, she noticed that she was the last of the marketing staff to arrive for the budget meeting.

“OK, now that Marisa is here, we can get started,” smiled Tom Davis, director of marketing. “The purpose of this meeting is to review the budgets you have all submitted and then chop off 15 percent.” This remark was met with nervous laughter, as Tom smiled ruefully. “Sorry gang, but it’s true. If we can’t improve our profitability by another 5 percent, it seems that our parent company will sell us off after this year. So top management has asked everyone to reduce their costs by 15 percent without losing sight of their sales goals.”

Marisa groaned. She was relatively new and was responsible for managing trade shows and other special events, but she had been there long enough to know that the company had been wasting its trade show money in the past. With a little rearranging of the show schedule and the increase in budget she had asked for to build a new booth, she felt sure that she could increase the number and quality of leads enough to handle the 12 percent increase in sales that management had already asked for. Cutting 15 percent of the budget, though, eliminated the new booth.

Tom passed out copies of the summary budgets of each department. “Whoa, here’s the culprit right here,” exclaimed Shelly Tap, national sales manager. She slammed the copies to the table, saying, “Our trade show budget request is 30 percent higher than last year.” Turning to Marisa, she said, “I can’t cut our budget 15 percent and expect to reach the sales target, but if you cut yours to 5 percent less than last year’s, that’ll equal 5 percent of my budget.”

“But if I can upgrade the quality of leads you get, as well as the quantity, you can still achieve your sales targets,” replied Marisa, trying to hide her irritation. For some reason, she didn’t hit it off with Shelly.

“Oh, sure. Everyone knows that trade shows are just a wild party. We haven’t closed a lead from one in years.” Shelly, along with all of the other staff; laughed. “Look, Tom, let’s put our money where the results are, and that’s in sales.”

“Yeah, Tom, and you know how important advertising is to our image,” added Brian Black, director of advertising. “We can’t possibly cut 15 percent.”

At this point, Marisa began to worry about keeping her job.

Q.1) What type of information does Marisa need to justify her proposed budget? Where would she go to get that information?

Q.2) Similarly, how would any other marketing managers justify their budget requests?

Q.3) What type of budgeting does it seem the company does now? What should the company do? What challenges will Tom face in implementing a different budgeting process? How should Tom go about that implementation?




NanoViz is a new company started by Billie Jean Hudak and Martin Wilkomen, two former tech heads, to develop and market small projection equipment for computer-driven presentations. For example, the current product line features four models ranging in price from $1,399 to $1,899. The firm’s leading seller, the NanoV, sells for $1,599 and allows a presenter (a salesperson, professor, seminar leader, etc.) to connect the sandwich-sized projector to the video-out port on almost any VCR or notebook computer. Clear images are then projected on an ordinary screen or—in a pinch—even a wall. One leading computer magazine recently reviewed the NanoV in its new products feature, calling it “the next best thing to buying a cinema.”

Hudak and Wilkomen don’t want to sell through intermediaries, having been burned in their earlier days by a large department store that reneged on a large order of another home entertainment product. The partners have asked you to pick up the pieces of the marketing plan begun by Billie’s father, just before he had a near-fatal heart attack.
NanoViz is working with little cash right now. Over 90 percent of its $500,000 in assets are tied up in parts (30 percent) and finished goods inventory (70 percent). Product costs run about $330 at the bottom end of the line to about $710 at the top end. Direct costs on the NanoV are $759. About $40,000 is on hand now for marketing, but crisp and early sales could fund substantially more marketing activities.

The following costs illustrate a number of the media options available (M 1,000; MM = I million):

Four-color ad in PC Tec magazine (circ. = 1.1 MM)                               $ 14000

Black-and-white ad                                                                                   $  8000

Four-color ad in Sales & Marketing Tips mag. (circ. = 2.6 MM)            $ 18000

Black-and-white ad in Wall Street Today (circ. 21 MM per column inch> $600

Mailing lists: “Big Business’ (n 125,407)                                                 $80/M

University info Technology directors (n = 27 M)                                     $70/M

Razor Image catalog six-mo. hot list (n = 49,379)                                    $90/M

Trade show exhibit and receptions/demo                                         $5K to 15000

Website development: $5M-$25M; $10,000/mo. for upkeep

Postal charges as low as $20

Telephone service bureau: outbound calls @$1.50 ea.; inbound calls @ $4.50 ea.


1. Outline communication objectives against targets, appeals, media, and expenditures over the coming year.




Terry Hespers had just returned to campus from the Mother’s Day weekend when the call came. It was / the head of client services, Bud Franklin, offering her an entry position on his team—a competitive salary; plus 5 percent commission. AD verb is a growing marketing agency specializing in serving companies in the building trades. Terry was delighted to land this job. In the semester-long internship at AD verb, she so impressed the founder and president, Char Franklin, with her resourcefulness and attention to detail he dubbed her head of the “Department of Class.”

Two months have now passed since Terry graduated from Landgrant State with a degree in marketing and supporting course work in information systems. She was one of two new corners to AD verb in the training program and enjoyed both the client interaction and excellent mentoring from the Franklins. Chas was the visionary, and time and again he painted the picture for Terry He saw the early promise of CRM a decade ago and left an executive position at a major ad agency to build the IT platform to allow his new company to manage customer databases for its clients: He called it AD verb because he thought the term simply conveyed the dynamic capabilities so necessary in the new marketing environment. “Ad” spoke to the firm’s ability to reach a target market in the right medium with copy and art that delivered a message. The “verb” component of the name meant action.

“We’re not just here to build awareness, sprinkle happy thoughts,” he told Terry when he stopped by one afternoon as she proofread some copy. “This is about getting our clients’ prospects to show up at the trade show, or pick up the phone, or log on and reorder. ACT! Once that behavior becomes part of the customer database, we want to maximize it—up-sell, cross-sell, refer. Retain that customer. We help our clients be proactive in customer retention. It’s all about ACTION.”

All of Terry’s training and wits were being tapped the next Wednesday over lunch with Earl Crossworth. Adverb’s client services people had been pursuing the architectural firm Schniky, Bilge and Crossworth (SBC) for years. SBC had enjoyed a decade of 15 percent average annual growth as a result of a strong and spreading reputation for school design. The firm had a lackluster website, and for years its only advertising has been a quarterly ad on the back of New School magazine. In his own frustration with SBC, Bud once said the whole firm was “nearsighted from too much time at the drafting table.” Crossworth tended to dub it “professionalism” rather than myopia. “Our concepts, renderings, and the completed structures themselves are worth more than all the ads in the industry,” he once told the local paper.

Terry happened to achieve this breakthrough appointment after some careful research sparked by her reading of a brief article that described a SBC project that had soured in Memphis. Ongoing investigations have yet to determine whether design flaws or contractor negligence caused the foundation to collapse in the renovation of an historic urban school. Two workers were seriously injured in the collapse. When she called Crossworth to ask for the appointment, he confided,

I take about two calls a day from school superintendents or board members. About half are former clients, the others from schools where we have proposals in the works. I think I put their mind at ease about the tragedy in Memphis, but I worry about some of our contacts that haven’t called. Frankly, I sometimes wonder f we haven’t become too dependent on academic projects.

 Terry didn’t intend to linger on the negative over lunch. She saw this as an opportunity to sow a customer orientation at SBC. She estimated that nearly 65 percent of its business each year was with school districts or universities for whom it had designed previous school buildings. She planned to print a few screen captures of the websites of SBC’s top rivals. She wondered what else she should bring up or show briefly over lunch in order to get Crossworth to invite AD verb to make a formal presentation next month. If Terry could lead the team from AD verb to win this account, she’d not only make the Franklin brothers proud, she would have a strong business base for years to come, and those pesky college loans might soon go away.

Terry wanted Bud to come too, but he just rolled his eyes at the suggestion and said, “I’ve already had my cracks at SBC; I’d be a liability.”


1. Help Terry prepare a one-page agenda for introducing IMC to Crossworth over lunch.




Kevin Cage, general manager of Wind Technology, sat in his office on a Friday afternoon watching the snow fall outside his window. It was January 1991 and he knew that during the month ahead he would have to make some difficult decisions regarding the future of his firm, Wind Technology. The market for the wind profiling radar systems that his company designed had been developing at a much slower rate than he had anticipated.
During Wind Technology’s 10-year history the company had produced a variety of weather-related radar and instrumentation. In 1986, the company condensed its product mix to include only wind-profiling radar systems. Commonly referred to as wind profilers, these products measure wind and atmospheric turbulence for weather forecasting, detection of wind direction at NASA launch sites, and other meteorological applications (i.e., at universities and other scientific monitoring stations). Kevin had felt that this consolidation would position the company as a leader in what he anticipated to be a high- growth market with little competition.

Wind Technology’s advantages over Unisys, the only other key player in the wind-profiling market, included the following: (1) The  company adhered stringently to specifications and quality production; (2) Wind Technology had the technical expertise to provide full system integration. This allowed customers to order either basic components or a full system including software support; (3) Wind Technology’s staff of meteorologists and atmospheric scientists provided the customer with sophisticated support, including operation and maintenance training and field assistance; (4) Finally, Wind Technology had devoted all of its resources to its wind-profiling business. Kevin believed that the market would perceive this as an advantage over a large conglomerate like Unisys.

Wind Technology customized each product for individual customers as the need arose; the total system could cost a customer from $400,000 to $5 million. Various governmental entities, such as the Department of Defense, NASA, and state universities had consistently accounted for about 90 percent of Wind Technology’s sales. In lieu of a field sales force, Wind Technology relied on top management and a team of engineers to call on prospective and current customers. Approximately $105,000 of their annual salaries was charged to a direct selling expense.

The Problem

The consolidation strategy that the company had undertaken in 1986 was partly due to the company being purchased by Vaitra, a high-technology European firm. Wind Technology’s ability to focus on the wind-profiling business had been made possible by Vaitra’s financial support. However, since 1986 Wind Technology had shown little commercial success, and due to low sales levels, the company was experiencing severe cash-flow problems. Kevin knew that Wind Technology could not continue to meet payroll much longer. Also, he had been informed that Vaitra was not willing to pour more money into Wind Technology. Kevin estimated that he had from 9 to 12 months (until the end of 1991) in which to implement a new strategy with the potential to improve the company’s cash flow. The new strategy was necessary to enable Wind Technology to survive until the wind- profiler market matured. Kevin and other industry experts anticipated that it would be two years until the wind- profiling market achieved the high growth levels that the company had initially anticipated.

One survival strategy that Kevin had in mind was to spin-off and market component parts used in making wind profilers. Initial research indicated that, of all the wind-profiling system’s component parts, the high-voltage power supply (HVPS) had the greatest potential for commercial success. Furthermore, Kevin’s staff on the HVPS product had demonstrated knowledge of the market. Kevin felt that by marketing the HVPS, Wind Technology could reap incremental revenues, with very little addition to fixed costs. (Variable costs would include the costs of making and marketing the HVPS. The accounting department had estimated that production costs would run approximately 70 percent of the selling price, and that 10 percent of other expenses—such as top management direct-selling expenses—should be charged to the I-DIPS.)

High-Voltage Power Supplies

For a vast number of consumer and industrial products that require electricity; the available voltage level must be transformed to different levels and types of output. The three primary types of power supplies include linears, switchers, and converters. Each type manipulates electrical current in terms of the type of current (AC or DC) and/or the level of output (voltage). Some HVPS manufacturers focus on producing a standardized line of power supplies, while others specialize in customizing power supplies to the user’s specifications.

High-voltage power supplies vary significantly in size and level of output. Small power supplies with relatively low levels of output (under 3 kV’) are used in Anne that produce seemed Wind money from to improve necessary communications equipment. Medium-sized power supplies that produce an output between 3 and 10 kV are used i9 a wide range of products including radars and lasers. Power supplies that produce output greater than 10 kV are used in a variety of applications, such as high- powered X-rays and plasma-etching systems.

Background on Wind Technology’s HVPS

One of Wind Technology’s corporate strategies was to control the critical technology (major component parts) of its wind-profiling products. Management felt that this control was important since the company was part of a high-technology industry in which confidentiality and innovation were critical to each competitor’s success. This strategy also gave Wind Technology a differential advantage over its major competitors, all of whom depended on a variety of manufacturers for component parts. Wind Technology had successfully developed almost all of the major component parts and the software for the wind profiler, yet the development of the power supply had been problematic.

To adhere to the policy of controlling critical technology in product design (rather than purchasing an HVPS from an outside supplier), Wind Technology management had hired Anne Ladwig and her staff of HVPS technicians to develop a power supply for the company’s wind-profiling systems. Within six months of joining Wind Technology, Anne and her staff had completed development of a versatile power supply which could be adapted for use with a wide variety of equipment. Some of the company’s wind-profiling systems required up to ten power supplies, each modified slightly to carry out its role in the system.
Kevin Cage had delegated the responsibility of investigating the sales potential of the company’s HVPS to Anne Ladwig since she was very familiar with the technical aspects of the product and had received formal business training while pursuing an MBA. Anne had determined that Wind Technology’s HVPS could be modified to produce levels of output between 3 and 10 kV. Thus, it seemed natural that if the product was brought to market, Wind Technology should focus on applications in this range of output. Wind Technology also did not have the production capabilities to compete in the high-volume, low-voltage segment of the market, nor did the company have the resources and technical expertise to compete in the high-output (10 kV+) segment.

The Potential Customer

Power supplies in the 3—10 kV range could be used to conduct research, to produce other products, or to place as a component into other products such as lasers. Thus, potential customers could include research labs, large endusers, OEMs, or distributors. Research labs each used an average of three power supplies; other types of customers ordered a widely varying quantity.
HVPS users were demanding increasing levels of reliability, quality, customization, and system integration. System integration refers to the degree to with other parts of a system are dependent upon the HVPS for proper functioning, and the extent to which these parts are combined into a single unit or piece of machinery.

Anne had considered entering several HVPS market segments in which Wind Technology could reasonably compete. She had estimated the domestic market potential of these segments at $237 million. To evaluate these segments, Anne had compiled growth forecasts for the year ahead and had evaluated each segment in terms of the anticipated level of customization and system integration demanded by the market. Anne felt that the level of synergy between Wind Technology and the various segments was also an important consideration in selecting a target market. Exhibit 1 summarizes this information. Anne believed that if the product was produced, Wind Technology’s interests would be best served by selecting only one target market on which to concentrate initially.

To gather competitive information, Anne contacted five HVPS manufacturers. She found that the manufacturers varied significantly in terms of size and marketing strategy (see Exhibit 2). Each listed a price in the $5,500—$6,500 range on power supplies with the same features and output levels as the HVPS that had been developed for Wind Technology.  After she spoke with these firms, Anne had the feeling that Wind Technology could offer the HVPS market superior levels of quality, reliability, technical expertise, and customer support. She optimistically believed that a one-half percent market share objective could be achieved the first year.

Promotion If Wind Technology entered the HVPS market, they would require a hard-hitting, thorough promotional campaign to reach the selected target market.

Three Factors made the selection of elements in the promotion mix especially important to Wind Technology: (1) Wind Technology’s poor cash flow, (2) the lack of a well- developed marketing department, and (3) the need to generate incremental revenue from sales of the HVPS at a minimum cost. In fact, a rule of thumb used by Wind Technology was that all marketing expenditures should be about 9 to 10 percent of sales. Kevin and Anne were contemplating the use of the following elements:

1. Collateral Material

Sales literature, brochures, and data sheets are necessary to communicate the product benefits and features to potential customers. These materials are designed to be (1) mailed to customers as part of direct-mail campaigns or in response to customer requests, (2) given away at trade shows, and (3) left behind after sales presentations.

Because no one in Wind Technology was an experienced copywriter, Anne and Kevin considered hiring a marketing communications agency to write the copy and to design the layout of the brochures. This agency would also complete the graphics (photographs and artwork) for the collateral material. The cost for 5,000 pieces (including the 10 percent markup for the agency) was estimated to be $5.50 each.

2. Public Relations

Kevin and Anne realized that one very cost-efficient tool of promotion is publicity. They contemplated sending out new product announcements to a variety of trade journals whose readers were part of Wind Technology’s new target market. By using this tool, interested readers could call or write to Wind Technology, and the company could then send the prospective customers collateral material. The drawback of relying too heavily on this element was very obvious to Kevin and Anne—the editors of the trade journals could choose not to print Wind Technology’s product announcements if their new product was not deemed newsworthy.

The cost of using this tool would include the time necessary to write the press release and the expense of mailing the release to the editors. Direct costs were estimated by Wind Technology to be $500.

3. Direct Mail

Kevin and Anne were also contemplating a direct-mail campaign. The major expenditure for this option would be buying a list of prospects to whom the collateral material would be mailed. Such lists usually cost around $5,000, depending upon the number of names and the list quality. Other costs would include postage and the materials mailed. These costs were estimated to be $7,500 for a mailing of 1,500.

4. Trade Shows

The electronics industry had several annual trade shows. If they chose to exhibit at one of these trade shows, Wind Technology would incur the cost of a booth, the space at the show, and the travel and incidental costs of the people attending the show to staff the booth. Kevin and Anne estimated these costs at approximately $50,000 for the exhibit, space, and materials, and $50,000 for a staff of five people to attend.

5. Trade Journal Advertising

Kevin and Anne also contemplated running a series of ads in trade journals. Several journals they considered are listed in Exhibit 3, along with circulation, readership, and cost information.

6. Personal Selling

(a)  Telemarketing (Inbound/Inside Sales)2. Kevin and Anne also considered hiring a technical salesperson to respond to HVPS product inquiries generated by product announcements, direct mail, and advertising. This person’s responsibilities would include answering phone calls, prospecting, sending out collateral material, and following up with potential customers. The salary and benefits for one individual would be about $50,000.
(b) Field Sales. The closing of sales for the HVPS might require some personal selling at the customer’s location, especially if Wind Technology pursued the customized option. Kevin and Anne realized that potentially this would provide them with the most incremental revenue, but it also had the potential to be the most costly tool. Issues such as how many salespeople to hire, where to position them in the field (geographically), and so on, were major concerns. Salary plus expenses and benefits for an outside salesperson were estimated to be about $80,000.

Q.1) Analyze the case in detail.




Texas Instruments (TI) is a large ($12 billion sales in 1995), global, technology-based corporation with R&D manufacturing operations throughout the world. Although it is well known for its consumer products (calculators and laptop computers), these products represent a relatively small part of TI’s business worldwide.

The central business (and core technologies) of Texas Instruments are

Semiconductor components: This represents over half of Ti’s annual sales volume worldwide. This business designs, develops, manufactures, and delivers integrated circuit chips for a wide variety of applications to original equipment manufacturers (OEMs) worldwide. These components are the heart of the intelligent products from computers and industrial equipment to high-end 7½ and stereos.

Defense systems: TI is a world-leading supplier of tactical defensive products for the US. and allied military services.

Materials and controls: Texas Instruments has a proprietary “clad metal” process, which enables the molecular bonding of two dissimilar materials. This technology is at the core of a large business in thermostatic controls and protectors, automotive trim and coinage metal, and other specialty material products.

Information technology: TI is developing and marketing a variety of “client—server” software applications for use in a spectrum of business situations.

Personal productivity products: This TI line includes calculators, mostly sold in large sets to schools for classroom use, as well as laptop computers and other “personal” digital products.

With manufacturing facilities in over 40 countries and nearly 50,000 employees worldwide, Texas Instruments represents a major force in most of the markets it serves. The general public throughout the globe knows TI for its consumer products, but individual target segments know the products TI produces for that specific segment. Texas Instruments sells everything from ordnance to the military, to calculators for classroom use, under the parent “Texas Instruments” brand name.

Texas Instruments Semiconductors

The core of Texas Instruments’ business, representing the bulk of its annual revenues and the largest share of its employee base, are semiconductor integrated circuit products. As mentioned, these products are the working chips that power everything from today’s computers, to intelligent products such as answering machines, stereos, and medical technologies—anything with logic and memory. Texas Instruments manufactures one of the broadest lines of semiconductor product families.

One element of the Texas Instruments business mix is the dynamic random access memory (DRAM) business. Dynamic random access memories—the heart of the working memory of many computer systems—are especially in demand when the desktop personal computer business is on the upswing. Because of the entry of manufacturers around the world, DRAM pricing is largely market driven.
The price for building a new factory to produce DRAMs is quite high ($500 million per factory). The inherent volatility in this business, coupled with its commodity like pricing, makes it a difficult business to be in over the long haul.

Texas Instruments has significant capacity in DRAMs, but over the past few years has moved most of its DRAM capacity into joint venture arrangements with customers having a large and stable demand such as Acer Computer, Hitachi, Cannon, and Hewlett-Packard.
Digital Signal Processors (DSPs)

Over quite a few years, Texas Instruments had developed core technologies and competencies in the processing of electronic signals. Learning to understand and process signals from various sorts very rapidly as well as to compress, store, manipulate, and retrieve signals is a core competency of Texas Instruments. Building on this competency Texas Instruments was working to develop a lead in the more custom-oriented, less volatile, digital signal processing (DSP) market.

DSPs enable many exciting features in the electronic products of which they are a part. Digital answering machines, high-end stereophonic receivers, computer workstations processing video signals, and special color displays—all rely on digital signal processing technology. DSPs enable electronic design engineers to put much more “sizzle” into the products they design at low cost. However, because DSPs are more of a custom than a commodity product, DSP designers need to be cautious about their source of supply. If they commit to a DSP in a piece of equipment they are designing, such as a stereo, they need to be absolutely certain that the supplier can meet their demand with the right parts at the right price at the right time. In addition, developments in DSP technology are very rapid, so staying at the state of the art can be difficult in this area.

Because of its critical competencies in this area, the opportunity for better profitability and less volatility, Texas Instruments has decided to focus its semiconductor business around digital signal processing.

Digital signal processors are finding their way into a wide variety of products including

  • High-end TVs
  • Stereos
  • TV cameras
  • Video recorders
  • Answering machines
  • Automobiles (in braking systems, engine control, traction control, entertainment, and heating and cooling systems)
  • Digital cellular telephones
  • Digital pagers

The DSP Market

Texas Instruments sells its DSP and other semiconductor products largely through a direct sales force who are typically focused on larger national accounts, where a full profile of “silicon, software, service, and support” can be provided. In addition, such manufacturers, once a Texas Instruments IC is “designed in,” often require very strict (JIT) delivery ground rules and a direct electronic connection (electronic data interface [EDI]) to their manufacturing operation.

The remainder of the customers for these products are treated through a two-tier distribution scheme, working through large, value-added distributors and a variety of smaller value-added resellers who develop specific “solutions” that incorporate TI digital signal processors. The value-added resellers produce full printed circuit boards that accomplish a specific application, which are then sold to companies that incorporate them in their products.

Because of their importance to the OEM using the DSPs, the decision to buy and use digital signal processors is an important one. First of all, not all companies are aware of digital signal processing technology and what it can bring to their products. Some would rather utilize a standard off-the- shelf microprocessor, such as Intel’s Pentium processor, and build the application that they require using software solutions that run on a more general-purpose chip. The digital signal processor has advantages over the general- purpose processor for many applications, because it’s more customized to the sorts of end equipment solutions that are required. DSPs are faster, more versatile, and more economical in many applications than the general- purpose processor or other approaches to a solution. The “value-in-use” of the DSP in many design solutions can be three to five times higher than alternatives. To some leading- edge companies this is a well-known fact; to many companies who have not yet explored the use of DSPs, this was not fully known.

Perceptions of TI in the Marketplace

TI was investigating the possibility of repositioning itself in the marketplace around becoming the leading supplier of digital signal processing solutions. Before beginning to do this, TI market research was conducted in major regions of the world in 1993. At that time the current perceptions of the company were as follows:

Sixty-seven percent of design engineering managers think of TI as an “off-the-shelf—oriented” company.
Only 31 percent believe that TI supplied the integrated circuits that allow customers to differentiate their design.
Focus groups consistently generated statements such as “TI is all over the place. They don’t seem to have a focus.”

“They have a 1970s image.”

“TI is a jigsaw puzzle that no one has put together.”

This general perceptual pattern had resulted from the fact that up to this point, most of TI’s market communications had been fairly diffuse and run on a division-by-division basis. So although TI had leadership products across many product categories in the semiconductor business, no one central unifying position had surfaced for Texas Instruments. As a result, the sales team was having trouble positioning TI in this emerging field of digital signal processing. It was not easy to convince engineers to design a product into their end equipment or to get purchasing agents to pay a price premium for TI DSPs.
Texas Instruments’ “Total Integration”

TI had experimented with a theme of “Total Integration” for a couple of years, which essentially may be summarized as follows:

Satisfying the needs of today’s electronic original equipment manufacturer (OEM) requires more than leading edge semiconductor components and solutions. It requires “That Integration.”

Total integration is TI’c ability to bring together the best of

  • Silicon technologies
  • Service
  • Information
  • Software application tools

TI’s approach to integration includes more than the ability to put more functions on a single integrated circuit silicon chip. Total integration brings together the necessary technologies, tools, information, and talents needed to help TI customers—designers of computers, stereos, TVs, cellphones, and so on—to move on to their next level of integration faster and with a better product.

A communications campaign based on this essential proposition was implemented and tested, but results were not as powerful in creating a position for TI as desired. There wasn’t a single, focused benefit that could be associated with the name Texas Instruments that was crisp, clear, and tightly defined.

Texas lnstruments” Digital Signal Processing Solutions”

In 1994, Texas Instruments decided to focus its semiconductor market communications on a more concentrated proposition: Texas Instruments is the leading provider of “Digital Signal Processing Solutions.” Basically, TI wanted to reach its more critical customers— design engineers in certain original equipment manufacturers—with the message that if their application was of a certain (very demanding) category; a special sort of integrated circuit called a digital signal processor (DSP) was the best solution, and TI DSPs were the easiest to use, state of the art, and overall best value.
The Role of the Design Engineer
The design engineer is the most critical component of the buying chain for TI digital signal processors. The design engineer inside a large company, such as Sony, is responsible for the overall design of a consumer electronic product, such as a TV radio, or answering machine. As they’re working their design, if they decide to “design in” an integrated circuit from Texas Instruments, Texas Instruments then has the chance to deliver many integrated circuits over the life of the manufacture of that product. Capturing the design engineer at the design-in phase of the product life cycle is crucial to the selling process.

Digital signal processors are not the easiest technology to use. To enable designers to simulate what DSPs will do as part of their product designs, a suite of software tools is necessary Extensive documentation, applications information, and other technical support may be required as part of a design-in. Sometimes DSPs represent a more risky; although potentially much more cost-effective, solution than more conventional means. Design engineers are not rewarded for taking great risks, especially manufacturing risks in OEM products. They want solutions that position their products as leading edge, get the product to market quickly at competitive prices, and assure them of never being held up because of lack of supply of parts they had specified in the design.

Because of the strategic nature of a DSP design-in, design engineers often could not make the decision to employ DSPs on their own. If they specified a specific part from a specific company, and that company—for any reason—couldn’t live up to specifications, deliver or just- in-time standards, the results could be disastrous for their product. Therefore, DSP design-ins often involved other “influentials” in the purchase chain, both up and down. Senior management, engineering management, and product managers were often involved in the process, although most lacked full knowledge of what this product family could do. In addition, the purchasing department inside the OEM often played a key role.
Design engineers tend to be sponges for information of use to them in doing their job. Recent surveys have shown that they gain information from wherever they can: the Internet, trade magazines, conferences, journals, peer networks, university contacts, and manufacturers’ representatives.
For a group of design engineers who had embraced the digital signal processing product family, the whole notion of DSPs as part of their solution was cool. They seemed to take great joy in pushing the envelope of what the DSP could do, which in turn enabled them to load their products with a wide variety of features and benefits beyond what was typically expected—at very reasonable prices.

Integrated Market Communications

At the beginning of 1994, Texas Instruments began the design and implementation of an integrated market communications program, targeted at building a leadership share of the market in the high-growth digital signal processing business. TI already had a significant share of this market, but TI’s target was clear: to be number one in this market in less than a two-year period. Key competitors in this area could be viewed as quite formidable. Motorola, Analog Devices, and AT&T Microelectronics all were suppliers of DSPs.

Beyond that, a powerful force in the semiconductor industry, Intel, was beginning to discuss how its general- purpose processors were becoming so powerful and so cost effective that it might be possible in the future to do what today’s DSPs do, at a better price with more flexibility, by utilizing general-purpose processors such as Intel’s Pentium. Intel has a great reputation and the enviable position of being the virtual standard in the industry for general-purpose microprocessors. Standards had not yet emerged for digital signal processors, although because of their use in a variety of special-purpose applications, it was unclear how standards could or should be established.

Q.1) What questions would you need to ask further to begin building an integrated market communications program for TI digital signal processors?

Q.2) What are the most important things you know now?

Q.3) What would you need to know?

Q.4) What are the key audiences who should be considered?

Q.5) Build a behavioral timeline that begins to address the desired beliefs and behaviors of each of these Audiences?
Q.6) Outline a brief IMC plan to accomplish the tasks set down in your behavioral timeline?

Q.7) How would you begin to compute the ROI on the program you’re beginning to build?

Business Marketing Management

29 Jun



NIVEA® is an established name in high quality skin and beauty care products. It is part of a range of brands produced and sold by Beiersdorf. Beiersdorf, founded in 1882, has grown to be a global company specialising in skin and beauty care.

In the UK, Beiersdorf’s continuing goal is to have its products as close as possible to its consumers, regardless of where they live. Its aims are to understand its consumers in its many different markets and delight them with innovative products for their skin and beauty care needs. This strengthens the trust and appeal of Beiersdorf brands. The business prides itself on being consumer-led and this focus has helped it to grow NIVEA into one of the largest skin care brands in the world.

Beiersdorf’s continuing programme of market research showed a gap in the market. This led to the launch of NIVEA VISAGE® Young in 2005 as part of the NIVEA VISAGE range offering a comprehensive selection of products aimed at young women. It carries the strength of the NIVEA brand image to the target market of girls aged 13-19. NIVEA VISAGE Young helps girls to develop a proper skin care routine to help keep their skin looking healthy and beautiful.

The market can be developed by creating a good product/range and introducing it to the market (product-orientated approach) or by finding a gap in the market and developing a product to fill it (market-orientated approach). Having identified a gap in the market, Beiersdorf launched  NIVEA VISAGE Young using an effective balance of the right product, price, promotion and place. This is known as the marketing mix or ‘four Ps’. It is vital that a company gets the balance of these four elements correct so that a product will achieve its critical success factors. Beiersdorf needed to develop a mix that suited the product and the target market as well as meeting its own business objectives.

The company re-launched the NIVEA VISAGE Young range in June 2007 further optimising its position in the market. Optimised means the product had a new formula, new design, new packaging and a new name. This case study shows how a carefully balanced marketing mix provides the platform for launching and re-launching a brand onto the market.


The first stage in building an effective mix is to understand the market. NIVEA uses market research to target key market segments which identifies groups of people with the same characteristics such as age/gender/attitude/lifestyle. The knowledge and understanding from the research helps in the development of new products. NIVEA carries out its market research with consumers in a number of different ways. These include:

  • using focus groups to listen to consumers directly
  • gathering data from consumers through a variety of different research techniques
  • product testing with consumers in different markets.

Beiersdorf’s market research identified that younger consumers wanted more specialised face care aimed at own age group that offered a ‘beautifying’ benefit, rather than a solution to skin problems. NIVEA VISAGE Young is a skin care range targeted at girls who do not want medicated products but want a regime for their normal skin.

Competitor products tend to be problem focussed and offer medicated solutions. This gives NIVEA competitive advantage. NIVEA VISAGE Young provides a unique bridge between the teenage market and the adult market.

The company improved the product to make it more effective and more consumer-friendly. Beiersdorf tested the improved products on a sample group from its target audience before finalising the range for re-launch. This testing resulted in a number of changes to existing products. Improvements included:

  • Changing the formula of some products. For example, it removed alcohol from one product and used natural sea salts and minerals in others.
  • Introducing two completely new products.
  • A new modern pack design with a flower pattern and softer colours to appeal to younger women.
  • Changing product descriptions and introducing larger pack sizes.

Each of these changes helped to strengthen the product range, to better meet the needs of the market.

Some of these changes reflect NIVEA’s commitment to the environment. Its corporate responsibility approach aims to:

  • reduce packaging and waste – by using larger pack sizes
  • use more natural products – by including minerals and sea salts in the formula
  • increase opportunities for recycling – by using recyclable plastic in its containers.


Lots of factors affect the end price of a product, for example, the costs of production or the business need to maximise profits or sales. A product’s price also needs to provide value for money in the market and attract consumers to buy.

There are several pricing strategies that a business can use:

  • Cost based pricing – this can either simply cover costs or include an element of profit. It focuses on the product and does not take account of consumers.
  • Penetration price – an initial low price to ensure that there is a high volume of purchases and market share is quickly won. This strategy encourages consumers to develop a habit of buying.
  • Price skimming – an initial high price for a unique product encouraging those who want to be ‘first to buy’ to pay a premium price. This strategy helps a business to gain maximum revenue before a competitor’s product reaches the market.

On re-launch the price for NIVEA VISAGE Young was slightly higher than previously. This reflected its new formulations, packaging and extended product range. However, the company also had to take into account that the target market was both teenage girls and mums buying the product for their daughters. This meant that the price had to offer value for money or it would be out of reach of its target market.

As NIVEA VISAGE Young is one of the leading skin care ranges meeting the beautifying needs of this market segment, it is effectively the price leader. This means that it sets the price level that competitors will follow or undercut. NIVEA needs to regularly review prices should a competitor enter the market at the ‘market growth’ point of the product life cycle to ensure that its pricing remains competitive.

The pricing strategy for NIVEA is not the same as that of the retailers. It sells products to retailers at one price. However, retailers have the freedom to use other strategies for sales promotion. These take account of the competitive nature of the high street. They may use:

  • loss leader: the retailer sells for less than it cost to attract large volume of sales, for example by supermarkets
  • discounting – alongside other special offers, such as ‘Buy one, get one free’ (BOGOF) or ‘two for one’.

NIVEA VISAGE Young’s pricing strategy now generates around 7% of NIVEA VISAGE sales.


Place refers to:

  • How the product arrives at the point of sale. This means a business must think about what distribution strategies it will use.
  • Where a product is sold. This includes retail outlets like supermarkets or high street shops. It also incl des other ways in which businesses make products directly available to their target market, for example, through direct mail or the Internet.

NIVEA VISAGE Young aims to use as many relevant distribution channels as possible to ensure the widest reach of its products to its target market. The main channels for the product are retail outlets where consumers expect to find skin care ranges. Around 65% of NIVEA VISAGE.

Young sales are through large high street shops such as Boots and Superdrug. Superdrug is particularly important for the ‘young-end’ market. The other 35% of sales mainly comes from large grocery chains that stock beauty products, such as ASDA, Tesco and Sainsbury’s. Market research shows that around 20% of this younger target market buys products for themselves in the high street stores when shopping with friends. Research also shows that the majority of purchasers are actually made by mums, buying for teenagers. Mums are more likely to buy the product from supermarkets whilst doing their grocery shopping.

NIVEA distributes through a range of outlets that are cost effective but that also reach the highest number of consumers. Its distribution strategies also consider the environmental impact of transport. It uses a central distribution point in the UK. Products arrive from European production plants using contract vehicles for efficiency for onward delivery to retail stores. Beiersdorf does not sell direct to smaller retailers as the volume of products sold would not be cost effective to deliver but it uses wholesalers for these smaller accounts. It does not sell directly through its website as the costs of producing small orders would be too high. However, the retailers, like Tesco, feature and sell the NIVEA products in their online stores.


Promotion is how the business tells customers that products are available and persuades them to buy. Promotion is either above-the-line or below-the-line. Above-the-line promotion is directly paid for, for example TV or newspaper advertising.

Below-the-line is where the business uses other promotional methods to get the product message across:

  • Events or trade fairs help to launch a product to a wide audience. Events may be business to consumer (B2C) whereas trade fairs are business to business (B2B).
  • Direct mail can reach a large number of people but is not easy to target specific consumers costeffectively.
  • Public relations (PR) includes the different ways a business can communicate with its stakeholders, through, for example, newspaper press releases. Other PR activities include sponsorship of high profile events like Formula 1 or the World Cup, as well as donations to or participation in charity events.

Branding – a strong and consistent brand identity differentiates the product and helps consumers to understand and trust the product. This aims to keep consumers buying the product long-term.

  • Sales promotions, for example competitions or sampling, encourage consumers to buy products in the short-term.

NIVEA chooses promotional strategies that reflect the lifestyle of its audience and the range of media available. It realises that a ‘one way’ message, using TV or the press, is not as effective as talking directly to its target group of consumers. Therefore NIVEA does not plan to use any above-the-line promotion for NIVEA VISAGE Young.

The promotion of NIVEA VISAGE Young is consumer-led. Using various below-the-line routes, NIVEA identifies ways of talking to teenagers (and their mums) directly.

  • A key part of the strategy is the use of product samples. These allow customers to touch, feel, smell and try the products. Over a million samples of NIVEA VISAGE Young products will be given away during 2008. These samples will be available through the website, samples in stores or in ‘goody bags’ given out at VISAGE roadshows up and down the country.
  • NIVEA VISAGE Young launched an interactive online magazine called FYI (Fun, Young & Independent) to raise awareness of the brand. The concept behind the magazine is to give teenage girls the confidence to become young women and to enjoy their new-found independence. Communication channels are original and engaging to enable teenagers to identify with NIVEA VISAGE Young. The magazine focuses on ‘first time’ experiences relating to NIVEA VISAGE Young being their first skincare routine. It is promoted using the Hit40UK chart show and the TMF digital TV channel.
  • In connection with FYI, NIVEA VISAGE Young has recognised the power of social network sites for this young audience and also has pages on MySpace, Facebook and Bebo. The company is using the power of new media as part of the mix to grow awareness amongst the target audience.


NIVEA VISAGE Young is a skincare range in the UK market designed to enhance the skin and beauty of the teenage consumer rather than being medicated to treat skin problems. As such, it has created a clear position in the market. This shows that NIVEA understands its consumers and has produced this differentiated product range in order to meet their needs.

To bring the range to market, the business has put together a marketing mix. This mix balances the four elements of product, price, place and promotion. The mix uses traditional methods of place, such as distribution through the high street, alongside more modern methods of promotion, such as through social networking sites. It makes sure that the message of NIVEA VISAGE Young reaches the right people in the right way.

Answer the following questions:

1. Describe what is meant by a business being ‘consumer led’.

2. What are the key parts of the marketing mix? Explain how each works with the others.

3. Explain why the balance of the marketing mix is as important as any single element.

4. Analyse the marketing mix for NIVEA VISAGE Young. What are its strongest points? Explain why you think this is so.




In 1895 in Czechoslovakia, two keen cyclists, Vaclav Laurin and Vaclav Klement, designed and produced their own bicycle. Their business became Škoda in 1925. Škoda went on to manufacture cycles, cars, farm ploughs and airplanes in Eastern Europe. Škoda overcame hard times over the next 65 years. These included war, economic depression and political change. By 1990 the Czech management of Škoda was looking for a strong foreign partner. Volkswagen AG (VAG) was chosen because of its reputation for strength, quality and reliability. It is the largest car manufacturer in Europe providing an average of more than 5 million cars a year – giving it a 12% share of the world car market. Volkswagen AG comprises the Volkswagen, Audi, Škoda, SEAT, Volkswagen Commercial Vehicles, Lamborghini, Bentley and Bugatti brands. Each brand has its own specific character and is independent in the market. Škoda UK sells Škoda cars through its network of independent franchised dealers.

To improve its performance in the competitive car market, Škoda UK’s management needed to assess its brand positioning. Brand positioning means establishing a distinctive image for the brand compared to competing brands. Only then could it grow from being a small player. To aid its decision-making, Škoda UK obtained market research data from internal and external strategic audits. This enabled it to take advantage of new opportunities and respond to threats.

The audit provided a summary of the business’s overall strategic position by using a SWOT analysis.

SWOT is an acronym which stands for:

  • Strengths – the internal elements of the business that contribute to improvement and growth
  • Weaknesses – the attributes that will hinder a business or make it vulnerable to failure
  • Opportunities – the external conditions that could enable future growth
  • Threats – the external factors which could negatively affect the business.

This case study focuses on how Škoda UK’s management built on all the areas of the strategic audit. The outcome of the SWOT analysis was a strategy for effective competition in the car industry.


To identify its strengths, Škoda UK carried out research. It asked customers directly for their opinions about its cars. It also used reliable independent surveys that tested customers’ feelings. For example, the annual JD Power customer satisfaction survey asks owners what they feel about cars they have owned for at least six months. JD Power surveys almost 20,000 car owners using detailed questionnaires. Škoda has been in the top five manufacturers in this survey for the past 13 years. In Top Gear’s 2007 customer satisfaction survey, 56,000 viewers gave their opinions on 152 models and voted Škoda the ‘number 1 car maker’. Škoda’s Octavia model has also won the 2008 Auto Express Driver Power ‘Best Car’.

Škoda attributes these results to the business concentrating on owner experience rather than on sales. It has considered ‘the human touch’ from design through to sale. Škoda knows that 98% of its drivers would recommend Škoda to a friend. This is a clearly identifiable and quantifiable strength. Škoda uses this to guide its future strategic development and marketing of its brand image.

Strategic management guides a business so that it can compete and grow in its market. Škoda adopted a strategy focused on building cars that their owners would enjoy. This is different from simply maximising sales of a product. As a result, Škoda’s biggest strength was the satisfaction of its customers. This means the brand is associated with a quality product and happy customers.


A SWOT analysis identifies areas of weakness inside the business. Škoda UK’s analysis showed that in order to grow it needed to address key questions about the brand position. Škoda has only 1.7% market share. This made it a very small player in the market for cars. The main issue it needed to address was: how did Škoda fit into this highly competitive, fragmented market?

This weakness was partly due to out-dated perceptions of the brand. These related to Škoda’s eastern European origins. In the past the cars had an image of poor vehicle quality, design, assembly, and materials. Crucially, this poor perception also affected Škoda owners. For many people, car ownership is all about image. If you are a Škoda driver, what do other people think?

From 1999 onwards, under Volkswagen AG ownership, Škoda changed this negative image. Škoda cars were no longer seen as low-budget or low quality. However, a brand ‘health check’ in 2006 showed that Škoda still had a weak and neutral image in the mid-market range it occupies, compared to other players in this area, for example, Ford, Peugeot and Renault. This meant that whilst the brand no longer had a poor image, it did not have a strong appeal either. This understanding showed Škoda in which direction it needed to go. It needed to stop being defensive in promotional campaigns. The company had sought to correct old perceptions and demonstrate what Škoda cars were not. It realised it was now time to say what the brand does stand for. The marketing message for the change was simple. Škoda owners were known to be happy and contented with their cars. The car-buying public and the car industry as a whole needed convincing that Škoda cars were great to own and drive.

Opportunities and Threats


Opportunities occur in the external environment of a business. These include for example, gaps in the market for new products or services. In analysing the external market, Škoda noted that its competitors’ marketing approaches focused on the product itself.

Audi emphasises the technology through its strapline, ‘Vorsprung Durch Technik’ (‘advantage through technology’). BMW promotes ‘the ultimate driving machine’. Many brands place emphasis on the machine and the driving experience. Škoda UK discovered that its customers loved their cars more than owners of competitor brands, such as Renault or Ford.

Information from the SWOT analysis helped Škoda to differentiate its product range. Having a complete understanding of the brand’s weaknesses allowed it to develop a strategy to strengthen the brand and take advantage of the opportunities in the market. It focused on its existing strengths and provided cars focused on the customer experience. The focus on ‘happy Škoda customers’ is an opportunity. It enables Škoda to differentiate the Škoda brand to make it stand out from the competition. This is Škoda’s unique selling proposition (USP) in the motor industry.


Threats come from outside of a business. These involve, for example, a competitor launching cheaper products. A careful analysis of the nature, source and likelihood of these threats is a key part of the

SWOT process.

The UK car market includes 50 different car makers selling 200 models. Within these there are over 2,000 model derivatives. Škoda UK needed to ensure that its messages were powerful enough for customers to hear within such a crowded and competitive environment. If not, potential buyers would overlook Škoda. This posed the threat of a further loss of market share.

Škoda needed a strong product range to compete in the UK and globally. In the UK the Škoda brand is represented by seven different cars. Each one is designed to appeal to different market segments. For example:

  • The Škoda Fabia is sold as a basic but quality ‘city car’
  • The Škoda Superb offers a more luxurious, ‘up-market’ appeal
  • The Škoda Octavia Estate provides a family with a fun drive but also a great big boot.

Pricing reflects the competitive nature of Škoda’s market. Each model range is priced to appeal to different groups within the mainstream car market. The combination of a clear range with competitive pricing has overcome the threat of the crowded market.

The following example illustrates how Škoda responded to another of its threats, namely, the need to respond to EU legal and environmental regulations. Škoda responded by designing products that are environmentally friendly at every stage of their life cycle. This was done by for example:-

  • Recycling as much as possible. Škoda parts are marked for quick and easy identification when the car is taken apart.
  • Using the latest, most environmentally-friendly manufacturing technologies and facilities available. For instance, areas painted to protect against corrosion use lead-free, water based colours.
  • Designing processes to cut fuel consumption and emissions in petrol and diesel engines. These useclighter parts making vehicles as aerodynamic as possible to use less energy.
  • Using technology to design cars with lower noise levels and improved sound quality. Outcomes and benefits of SWOT analysis.

Škoda UK’s SWOT analysis answered some key questions. It discovered that:

  • Škoda car owners were happy about owning a Škoda
  • the brand was no longer seen as a poorer version of competitors’ cars.


  • the brand was still very much within a niche market
  • a change in public perception was vital for Škoda to compete and increase its market share of the mainstream car market.

The challenge was how to build on this and develop the brand so that it was viewed positively. It required a whole new marketing strategy.

Škoda UK has responded with a new marketing strategy based on the confident slogan, ‘the manufacturer of happy drivers.’ The campaign’s promotional activities support the new brand position.

The key messages for the campaign focus on the ‘happy’ customer experience and appeal at an

emotional rather than a practical level. The campaign includes:

  • he ‘Fabia Cake’ TV advert. This showed that the car was ‘full of lovely stuff’ with the happy music (‘Favourite things’) in the background.
  • An improved and redesigned website which is easy and fun to use. This is to appeal to a young audience. It embodies the message ‘experience the happiness of Škoda online’.

Customers are able to book test drives and order brochures online. The result is that potential customers will feel a Škoda is not only a reliable and sensible car to own, it is also ‘lovely’ to own.

Analysing the external opportunities and threats allows Škoda UK to pinpoint precisely how it should target its marketing messages. No other market player has ‘driver happiness’ as its USP. By building on the understanding derived from the SWOT, Škoda UK has given new impetus to its campaign. At the same time, the campaign has addressed the threat of external competition by setting Škoda apart from its rivals.


Škoda is a global brand offering a range of products in a highly competitive and fragmented market. The company must respond positively to internal and external issues to avoid losing sales and market share.

A SWOT analysis brings order and structure to otherwise random information. The SWOT model helps managers to look internally as well as externally. The information derived from the analysis gives direction to the strategy. It highlights the key internal weaknesses in a business, it focuses on strengths and it alerts managers to opportunities and threats. Škoda was able to identify where it had strengths to compete. The structured review of internal and external factors helped transform Škoda UK’s strategic direction.

The case study shows how Škoda UK transformed its brand image in the eyes of potential customers and build its competitive edge over rivals. By developing a marketing strategy playing on clearly identified strengths of customer happiness, Škoda was able to overcome weaknesses. It turned its previously defensive position of the brand to a positive customer-focused experience. The various awards Škoda has won demonstrate how its communications are reaching customers. Improved sales show that Škoda UK’s new strategy has delivered benefits.

Answer the

1. What was the key weakness that Škoda was able to identify?

2. What strength did Škoda use to turn its brand weakness into an opportunity?

3. How has Škoda strategically addressed external threats?

4. What in your view are the important benefits of using a SWOT analysis




Businesses must respond to change in order to remain competitive. Developing appropriate strategies which allow them to move forward is essential. Wilkinson is a prime example of a business that has responded to changing customer needs throughout its history. It is one of the UK’s long-established retailers of a wide range of food, home, garden, office, health and beauty products.James Kemsey (JK) Wilkinson opened his first Wilkinson Store in Charnwood Street, Leicester in 1930. After the Second World War, the 1950s saw a rise in the use of labour-saving devices and DIY. Wilkinson responded by making this type of product the focus of its sales. In the 1960s customers wanted more convenience shopping. Wilkinson started selling groceries and supermarket goods and created the Wilko brand. In the 1980s Wilkinson extended its range of low-cost products to include quality clothing, toys, toiletries and perfumes. In 1995 it opened a central distribution centre in Workshop, serving stores in the north of England and in 2004, a new distribution centre opened in Wales. In 2005 Wilkinson launched its Internet shopping service, offering over 800,000 product lines for sale online. Wilkinson currently has over 300 stores, which carry an average of 25,000 product lines. 40% of these are Wilko ‘own-brand’ products. The company’s target is to see this element grow and to have over 500 stores by 2012.

Wilkinson’s growth places it in the top 30 retailers in the UK. Recently it has faced increasing challenges from competitors, such as the supermarket sector. Wilkinson needed to combat this and identify new areas for growth. Over two years it conducted extensive market research. This has helped it create a marketing strategy designed to continue growing by targeting a new market segment – the student population. This case study focuses on how Wilkinson created and implemented this strategy, using the findings of its market research to drive the strategy forward.

Marketing strategy aims to communicate to customers the added-value of products and services. This considers the right mix of design, function, image or service to improve customer awareness of the business’ products and ultimately to encourage them to buy. An important tool for helping develop an appropriate marketing strategy is Ansoff’s Matrix. This model looks at the options for developing a marketing strategy and helps to assess the levels of risk involved with each option. Marketing strategies may focus on the development of products or markets. Doing more of what a business already does carries least risk; developing a completely new product for a new audience carries the highest risk both in terms of time and costs.

Based on its research, Wilkinson committed to a market development strategy to sell its products to a new audience of students. This is a medium risk strategy as it requires the business to find and develop new customers. It also carries costs of the marketing campaigns to reach this new group. The main focus of the strategy was to increase awareness of the brand among students and encourage them to shop regularly at Wilkinson stores.

Market research

Market research is vital for collecting data on which to base the strategy. Market research takes one of two main forms – primary research and secondary research. Primary research (also called field research) involves collecting data first hand. This can take many forms, the main ones being interview, questionnaires, panels and observation. Secondary research (also called desk research) involves collecting data which already exists. This includes using information from reports, publications, Internet research and company files.

Both methods have advantages and disadvantages. The advantages of primary research are that it is recent, relevant and designed specifically for the company’s intended strategy. The main disadvantage is that it is more expensive than secondary research and can be biased if not planned well. Secondary research is relatively cheap, can be undertaken quickly and so enables decision-making sooner. However, secondary research can go out-of-date and may not be entirely relevant to the business’ needs.

Wilkinson undertook primary market research using questionnaires from students across the UK and secondary research using government and university admissions data. The statistics revealed that there were three million potential student customers.

They had a combined annual spend of around £9 billion per year. This research confirmed that the choice of focusing on the student market as a means of growth was valid. Wilkinson undertook further research to identify how to reach students and persuade them to start shopping at Wilkinson stores. This information was used to formulate a focus strategy. This was aimed specifically at the needs of the student ‘market segment’.

Marketing to students

Wilkinson involved 60 universities in research, using questionnaires distributed to students initially in Years 2 and 3 of a range of universities and then to ‘freshers’ (new students) through the University and Colleges Admission Service. This ensured the widest range of students was included to eliminate bias. It also gave a wide range of responses. From this initial group, students were asked a second set of questions. Participants were rewarded with Amazon vouchers to encourage a good take-up. The research focused on two areas:

  1. Student awareness of the Wilkinson brand and
  2. Reasons why students were currently not using the stores regularly.

The market research enabled Wilkinson to put together its marketing strategy. The aim was to ensure the student population began shopping at Wilkinson stores early in their student experience. This would help to maintain their customer loyalty to Wilkinson throughout their student years and also to develop them as future customers after university. Repeat business is key to sustained growth. Wilkinson wanted to create satisfied customers with their needs met by the Wilkinson range of products. A marketing campaign was launched which focused on a range of promotional tactics, specifically designed to appeal to university students:

  • Wilkinson being present at freshers’ fairs – and giving free goody bags with sample products directly to students
  • direct mail flyers to homes and student halls, prior to students arriving
  • advertisements with fun theme, for example, showing frying pans as tennis racquets
  • web banners
  • offering discounts of 15% with first purchase using the online store
  • gift vouchers
  • free wallplanners.

The challenge was to get students into Wilkinson stores. The opportunity was to capture a new customer group at an early stage and provide essential items all year round. This would lead to a committed customer group and secure repeat business.


Wilkinson wanted to know what would inspire students to shop at Wilkinson more and what factors would help to attract non-customers. The research provided significant primary information to analyse the effects of the campaign. Wilkinson used questionnaires collected from the first year undergraduates to gather qualitative data. In addition, Wilkinson obtained quantitative data from various other sources, including:

  • redemption rates – how many people used the discount vouchers when buying
  • sales analysis – how much extra business did the stores handle
  • footfall in stores analysis – how many extra people went into stores.

This information helped Wilkinson to develop its plans for future marketing campaigns. It identified Motivation factors for the student audience which would help to encourage future purchase. Key factors included products being cheaper than competitors and easy access to stores. 23% of students questioned gave ‘distance from university’ as a reason for not regularly visiting the store. The layout of the store was another major problem affecting repeat visits. These findings have been taken on board by Wilkinson in its future planning of store locations and layouts.

Researching students’ opinions after the campaign showed that:

  • Awareness of Wilkinson brand had significantly risen from 77% to 95% of those interviewed. This brought it in line with Morrison supermarkets, a key competitor.


Wilkinson’s marketing strategy began with its corporate aim to grow and increase stores across the UK. It was facing increased competition from supermarkets and needed to identify an area to focus on. To pursue a growth strategy, Wilkinson used market research to identify new target customers. This enabled it to prepare marketing strategies to fit the audience.

Primary and secondary research was used to find out customer views regarding its brand. Data indicated the student market segment was a significant area to focus on to achieve market development. A marketing campaign using data from a follow-up survey was put in place. The campaign showed significant increase in students’ levels of awareness about Wilkinson and its products. It encouraged them either to shop more or to try Wilkinson for the first time. The campaign helped to achieve many of the business’ aims, creating increased brand awareness and repeat visits. It also helped to inform the company’s future strategies for growth. Market research gathered will help to formulate future plans for new stores. These will be in line with Wilkinson commitment to providing communities with affordable products across the country.

Answer the following questions

1. What is the difference between primary and secondary research? Identify one example of primary and secondary research carried out by Wilkinson.

2. Explain why Wilkinson needed a marketing strategy to help them to grow.

3. Evaluate the benefits of the marketing campaign to Wilkinson.

4. Analyse how effective the marketing campaign was in helping Wilkinson respond to competitive pressures.




Businesses need to set themselves clear aims and objectives if they are going to succeed. The Kellogg Company is the world’s leading producer of breakfast cereals and convenience foods, such as cereal bars, and aims to maintain that position. In 2006, Kellogg had total worldwide sales of almost $11 billion (£5.5 billion). In 2007, it was Britain’s biggest selling grocery brand, with sales of more than £550 million. Product lines include ready-to-eat cereals (i.e. not hot cereals like porridge) and nutritious snacks, such as cereal bars. Kellogg’s brands are household names around the world and include Rice Krispies, Special K and Nutri-Grain, whilst some of its brand characters, like Snap, Crackle and Pop, are amongst the most wellknown in the world.

Kellogg has achieved this position, not only through great brands and great brand value, but through a strong commitment to corporate social responsibility. This means that all of Kellogg’s business aims are set within a particular context or set of ideals. Central to this is Kellogg’s passion for the business, the brands and the food, demonstrated through the promotion of healthy living.

The company divides its market into six key segments. Kellogg’s Corn Flakes has been on breakfast tables for over 100 years and represents the ‘Tasty Start’ cereals that people eat to start their day. Other segments include ‘Simply Wholesome’ products that are good for you, such as Kashi Muesli, ‘Shape Management’ products, such as Special K and ‘Inner Health’ lines, such as All-Bran. Children will be most familiar with the ‘Kid Preferred’ brands, such as Frosties, whilst ‘Mum Approved’ brands like Raisin Wheats are recognised by parents as being good for their children.

Each brand has to hold its own in a competitive market. Brand managers monitor the success of brands in terms of market share, growth and performance against the competition. Key decisions have to be made about the future of any brand that is not succeeding. This case study is about Nutri-Grain. It shows how Kellogg recognised there was a problem with the brand and used business tools to reach a solution. The overall aim was to re-launch the brand and return it to growth in its market.

The product life cycle

Each product has its own life cycle. It will be ‘born’, it will ‘develop’, it will ‘grow old’ and, eventually, it will ‘die’. Some products, like Kellogg’s Corn Flakes, have retained their market position for a long time. Others may have their success undermined by falling market share or by competitors. The product life cycle shows how sales of a product change over time. The five typical stages of the life cycle are shown on a graph. However, perhaps the most important stage of a product life cycle happens before this graph starts, namely the

Research and Development (R&D) stage. Here the company designs a product to meet a need in the market. The costs of market research – to identify a gap in the market and of product development to ensure that the product meets the needs of that gap – are called ‘sunk’ or start-up costs. Nutri-Grain was

originally designed to meet the needs of busy people who had missed breakfast. It aimed to provide a healthy cereal breakfast in a portable and convenient format.

  1. Launch – Many products do well when they are first brought out and Nutri-Grain was no exception. From launch (the first stage on the diagram) in 1997 it was immediately successful, gaining almost 50% share of the growing cereal bar market in just two years.
  2. Growth – Nutri-Grain’s sales steadily increased as the product was promoted and became well known. It maintained growth in sales until 2002 through expanding the original product with new developments of flavour and format. This is good for the business, as it does not have to spend money on new machines or equipment for production. The market position of Nutri-Grain also subtly changed from a ‘missed breakfast’ product to an ‘all-day’ healthy snack.
  3. Maturity – Successful products attract other competitor businesses to start selling similar products. This indicates the third stage of the life cycle – maturity. This is the time of maximum profitability, when profits can be used to continue to build the brand. However, competitor brands from both Kellogg itself (e.g. All Bran bars) and other manufacturers (e.g. Alpen bars) offered the same benefits and this slowed down sales and chipped away at Nutri-Grain’s market position. Kellogg continued to support the development of the brand but some products (such as Minis and Twists), struggled in a crowded market. Although Elevenses continued to succeed, this was not enough to offset the overall sales decline. Not all products follow these stages precisely and time periods for each stage will vary widely. Growth, for example, may take place over a few months or, as in the case of Nutri-Grain, over several years.
  4. Saturation – This is the fourth stage of the life cycle and the point when the market is ‘full’. Most people have the product and there are other, better or cheaper competitor products. This is called market saturation and is when sales start to fall. By mid-2004 Nutri-Grain found its sales declining whilst the market continued to grow at a rate of 15%.
  5. Decline – Clearly, at this point, Kellogg had to make a key business decision. Sales were falling, the product was in decline and losing its position. Should Kellogg let the product ‘die’, i.e. withdraw it from the market, or should it try to extend its life?

Strategic use of the product life cycle

When a company recognises that a product has gone into decline or is not performing as well as it should, it has to decide what to do. The decision needs to be made within the context of the overall aims of the business. Kellogg’s aims included the development of great brands, great brand value and the promotion of healthy living. Strategically, Kellogg had a strong position in the market for both healthy foods and convenience foods. Nutri-Grain fitted well with its main aims and objectives and therefore was a product and a brand worth rescuing. Kellogg decided to try to extend the life of the product rather than withdraw it from the market. This meant developing an extension strategy for the product. Ansoff’s matrix is a tool that helps analyse which strategy is appropriate. It shows both market-orientated and product-orientated possibilities.

Extending the Nutri-Grain cycle – identifying the problem

Kellogg had to decide whether the problem with Nutri-Grain was the market, the product or both. The market had grown by over 15% and competitors’ market share had increased whilst Nutri-Grain sales in 2003 had declined. The market in terms of customer tastes had also changed – more people missed breakfast and therefore there was an increased need for such a snack product.

The choice of extension strategy indicated by the matrix was either product development or diversification. Diversification carries much higher costs and risks. Kellogg decided that it needed to focus on changing the product to meet the changing market needs.

Research showed that there were several issues to address:

  1. The brand message was not strong enough in the face of competition. Consumers were not impressed enough by the product to choose it over competitors.
  2. Some of the other Kellogg products (e.g. Minis) had taken the focus away from the core business.
  3. The core products of Nutri-Grain Soft Bake and Elevenses between them represented over 80% of sales but received a small proportion of advertising and promotion budgets.
  4. Those sales that were taking place were being driven by promotional pricing (i.e discounted pricing) rather than the underlying strength of the brand.

Implementing the extension strategy for Nutri-Grain having recognised the problems, Kellogg then developed solutions to re-brand and re-launch the product in 2005.

  1. Fundamental to the re-launch was the renewal of the brand image. Kellogg looked at the core features that made the brand different and modelled the new brand image on these. Nutri-Grain is unique as it is the only product of this kind that is baked. This provided two benefits:
  • the healthy grains were soft rather than gritty
  • the eating experience is closer to the more indulgent foods that people could be eating (cakes and biscuits, for example). The unique selling point, hence the focus of the brand, needed to be the ‘soft bake’.
  1. Researchers also found that a key part of the market was a group termed ‘realistic snackers’. These are people who want to snack on healthy foods, but still crave a great tasting snack. The re-launched Nutri-Grain product needed to help this key group fulfil both of these desires.
  2. Kellogg decided to re-focus investment on the core products of Soft Bake Bars and Elevenses as these had maintained their growth (accounting for 61% of Soft Bake Bar sales). Three existing Soft Bake Bar product were improved, three new ranges introduced and poorly performing ranges (such as Minis) were withdrawn.
  3. New packaging was introduced to unify the brand image.
  4. An improved pricing structure for stores and supermarkets was developed.

Using this information, the re-launch focused on the four parts of the marketing mix:

  • Product – improvements to the recipe and a wider range of flavours, repositioning the brand as ‘healthy and tasty’, not a substitute for a missed breakfast
  • Promotion – a new and clearer brand image to cover all the products in the range along with advertising and point-of-sale materials
  • Place – better offers and materials to stores that sold the product
  • Price – new price levels were agreed that did not rely on promotional pricing. This improved revenue for both Kellogg and the stores.

As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth, with Elevenses sales increasing by almost 50%. The Nutri-Grain brand achieved a retail sales growth rate of almost three times that of the market and most importantly, growth was maintained after the initial re-launch.


Successful businesses use all the tools at their disposal to stay at theSuccessful businesses use all the tools at their disposal to stay at the top of their chosen market. Kellogg was able to use a number of business tools in order to successfully re-launch the Nutri-Grain brand. These tools included the product life cycle, Ansoff’s matrix and the marketing mix. Such tools are useful when used properly.

Kellogg was able to see that although Nutri-Grain fitted its strategic profile – a healthy, convenient cereal product – it was underperforming in the market. This information was used, along with the aims and objectives of the business, to develop a strategy for continuing success. Finally, when Kellogg checked the growth of the re-launched product against its own objectives, it had met all its aims to:

  • re-position the brand through the use of the marketing mix
  • return the brand to growth
  • improve the frequency of purchase
  • introduce new customers to the brand.

Nutri-Grain remains a growing brand and product within the Kellogg product family.

Answer the following questions:

1. Using current products familiar to you, draw and label a product life cycle diagram, showing which stage each product is at.

2. Suggest appropriate aims and objectives for a small, medium and large business.

3. Consider the decision taken by Kellogg to opt for product development. Suggest a way in which it could have diversified instead. Justify your answer.

Business Marketing Management

29 Jun

A) Discuss Various Marketing Research Instruments .Give suitable examples (one example /instrument)?

B) Describe following in context of new product development (NPD)?

1. The new product development decision process

2. Risk factors hindering new product development

C) Illustrate the marketing mix for any two of the following?

1. Cafe Coffee Day

2. Dr. Batra’s clinic

3. Lux Soap

4. HP( Hewlett Packard)

D) Illustrate with examples, the differences between Product marketing & Services marketing?

E) Illustrate with examples, the methods/ways of evaluating advertising effectiveness?

F) Discuss the factors which contribute in deciding the “price” of the product? Discuss various pricing methods?

G) “Laco Industries “has planned to introduce new baby shampoo in the kids market. The company conducted a research in selected tier II cities in India to know the demand & successfully launched its product. In this context, discuss the characteristics of the good research?