Positioning

Once segments have been selected and targeted, the firm must position its products and services in the minds of its customers. Positioning a product or service involves designing a marketing program, including the product mix that is consistent with how the company wants its products or services to be perceived. The strategy a firm adopts is driven then by the desired positioning. Positioning aims to influence or adjust customer perceptions of a product or brand. An effective position lets a brand occupy a preferred and unique position in the customers’ minds while being consistent with the firm’s overall marketing strategy. As such, positioning involves the selection of target segments and the formulation of product attributes that make up the brand. Recently, Snackwell’s successfully halted dramatically falling sales volume by repositioning itself. This repositioning included product reformulation, an increased marketing budget, and a drastic shift in advertising redirected toward the brand’s new core audience – women. Nabisco is also building its relationship with its primary target market by creating a Web site directed at women and an ongoing direct-mail campaign augmented by women - targeted promotions.

Positioning a new brand requires distinguishing it from other brands. Customers must perceive it as sharing important attributes with other brands in the product category but as being superior on differentiating attributes. Repositioning, called for when a firm wants to shift consumer opinions about an existing brand, requires development of new marketing programs.

Product attributes, price, and image enhancements are major components in positioning. Perceptual maps, spatial representations of consumer perceptions of products or brands, are often used to evaluate brand positions in a market. A brand’s market position can shift. Perceptual maps often show positions for competitors’ brands. They also convey to a company how much it must change consumer perceptions in order to achieve parity with or differentiation from competitors. By combining segmentation and positioning research, a company can learn which segments are attractive and how consumers in specific segments perceive the company’s products relative to competing products and brands.

Comprehension questions:

1. What is positioning?

2. What does positioning involve?

3. What does positioning a new product require?

4. What are perceptual maps?

5. What can company learn by positioning research?

Referring to Unit 6

Marketing Budget

Marketing must contribute to the profitability of a business – how much profit it makes. The marketing budget presents the cost of the marketing plan. It can include the cost of distribution and different marketing actions such as advertising or market research. The annual marketing budget shows what the marketing department is planning to spend over the year. Management may ask the marketing team to justify or modify the budget before giving approval,

There are several approaches to setting the marketing budget – that is, fixing spending on marketing – for example, investment in research or advertising:

• the affordable approach. The company forecasts revenues (predicts the amount of money it expects from sales), deducts costs, and allocate a part of the remaining funds to promotion. Marketing is considered as a cost that can be cut (reduced), depending on what the company can afford – that is, how much money it has left.

• the percentage of sales approach. A percentage of current or anticipated sales (what a company expects to sell) is allocated to marketing actions. Typically, the percent of net sales is spent on promotion.

• the objective-and-task approach. The company costs out, or calculates, the cost of reaching its marketing objectives. For example, new products will need large advertising budget to build awareness.

• competitive parity. Competitor investment is tracked, or monitored, and used as a rule of thumb (a guideline) to set the promotion budget. The objective is to beat (spend more than) or match (spend the same as) the investment of competitors.

Whichever approach is chosen, marketers need to respect the budget – that is, not go over budget (spend more than planned) or be under budget (invest less than planned).

Marketers are accountable for – that is, responsible for – their budget. They must demonstrate that their marketing actins are cost-effective (productive relative to the cost) and not a waste of money. The marketing plan establishes how to measure the return on investment (ROI) or the cost-effectiveness of different marketing actions – the amount of profit made based on the amount of resources needed to make it. Monthly, quarterly and annual reviews of performance against budget measure projected, or forecast, results against real performance – how the company actually performed. Many companies use statistics called marketing metrics to quantify the performance of their marketing activities. They can include items such as market share, advertising spend or response rates for direct marketing.

Comprehension questions:

1. What does marketing budget present?

2. What does the annual marketing budget show?

3. What approaches to selling the marketing budget do you know?

4. What are marketers responsible for?

5. What does the marketing plan establish?