marketing for made in italy, Appunti di Marketing

Scarica marketing for made in italy e più Appunti in PDF di Marketing solo su Docsity! WHAT MARKETING IS (NOT): WHY DO WE NEED A MARKETING FOR MADE IN ITALY? Italy is important for the luxury industry, even if we are a small country that accounts only for the 1% of the overall population. • Italy ranks at 8th position in the world in term of overall export and at 5th position in term of trade surplus in goods (difference between exports and imports), Italian one accounts for 1/3 of the overall GDP worldwide; • It is among the top 100 luxury goods companies in the world, 24 are based in Italy (first country worldwide). Italian fashion companies produce the 33,9% of the overall added value generated by the fashion industry in Europe, more than the 50% of luxury goods are produced in Italy and sold worldwide; • Italy is the 2nd country in the world for trade surplus in the furniture industry (the first one is China) and 1st for export among European countries; • Italy is the undisputed world leader in certified agri-food productions - with more than 800 geographical indications registered by the EU – and is one of the European leaders in the bioeconomy sector (sustainability, it is the leader in the export of pasta even if we first export machineries for the production of pasta); • Italy is the 5th tourism destination in the world and is world leader in term on number of UNESCO heritage sites. LET’S START FROM WHAT MARKETING IS NOT (IT IS NOT ONLY ADVERTISING AND SELLING): Marketing is the opposite, in fact Peter Drucker (the founder of management as a science), a leading management theorist says that “the aim of marketing is to make advertising superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.” → he concludes that a perfect marketing plan is the plan where you don’t have to spend money on advertising because it means that the product/service that you sell fits so well with the consumer desires that advertising is not necessary to persuade the consumer to buy (e.g. bread). In the luxury industry there isn’t a marketing push strategy because we don’t push people to buy but the customers are attracted by the product itself = PULL STRATEGY. IT’S NOT A MAGIC FORMULA: In marketing there is no a winning formula because it is a way of thinking with the aim of reaching the consumer and create customer value and make profit → Marketing is not a solution to a poorly designed product or service. And in general, there are no “magic formulas” or “rules of thumb” to be successful in marketing. Marketing is not about mathematics! Marketing is a way of thinking your business in relation with the market, it is a process because it is composed by a number of activities to manage for segmentation, targeting, positioning, make your marketing plan. It is a set of principles, a philosophy, a way to see your business, your relationship with your final clients and manage this relationship. IT’S NOT (NECESSARILY) A BUSINESS FUNCTION! Although many companies have a marketing function, increasingly marketing is not done only by the marketing department (typically SMEs but they have a great marketing campaign, relationship between marketing and marketing department: the latest one is the office where all the marketing activities are designed, carried out and applied). Because marketing must affect every aspect of the customer experience, marketers must properly manage all possible touch points (products, pricing, promotion, place). As the late David Packard of Hewlett-Packard observed “Marketing is far too important to leave to the marketing department.” SO… WHAT IS MARKETING? SOME DEFINITIONS: “A societal and managerial process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services or ideas of value with others” (Kotler, 1980) → societal means connecting the company with the external environment, managerial means analysing. The final goal of marketing is to create this value for the final customer. “The process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate satisfying exchange relationships with customers in a dynamic environment” (Pride and Ferrell, 1995) → 4 Ps “An organizational function and a set of processes aiming to create, communicate and deliver value to customers and manage relationships with them for the advantage of the organization and its stakeholders” (Kerin et alii, 2007) → value for customers and the company so to create profitable relationships. ➔ Process = a logical sequence of activities, the so-called marketing management process; inside this process there are 3 main blocks of activities: analysis (analytical marketing: internal and external analysis), strategy (strategic marketing: defining the goals, segmentation and positioning), marketing (operations/marketing mix 4 Ps). SO MARKETING IS: A sequence of activities (process) aiming at creating favourable conditions for an exchange between two or more parties with the purpose of satisfying interests and creating value for all of them by trying to understand the customer’s needs and wants. A BRIEF HISTORY OF MARKETING: Going through the generalist of your business, when we talk about the main goals and activities that determine a successful strategy, we can identify 3 main eras in relationship with market: EXAMPLE - REASONS FOR BUYING LUXURY GOODS IN CHINA IN 2020 BY GENERATION (STATISTA): EXAMPLE – WHY FOREIGN CONSUMERS LOVE ITALIAN PRODUCTS? BECAUSE THEY WANT TO FEEL ITALIANS! Behind there are a set of values, our lifestyle, perception of Italians, our art, history, culture → the reason behind the purchase of Italian products goes beyond the physical characteristics of the products, it is a set of association connected to our products and the desire of being in touch with those associations. FROM A MARKETING PERSPECTIVE WE DON’T SELL PRODUCTS BUT WE SELL BENEFITS THAT SATISFY “NEEDS AND DESIRES” The lesson of this slide is when we think at our company and of the kind of desires we want to satisfy, one of the basic principles of marketing is that people don’t buy products but buy benefits that satisfy their needs and create specific wants. We have to switch from a product- oriented definition of the company’s activities to a marketing-oriented definition in order to identify customers’ needs and create desires to satisfy them → example down below. 2- EXCHANGE – IT IS NOT ALL ABOUT GOODS AND MONEY: When we buy a product we perceive a need, we have a number of alternatives so the marketing affects our desires → I am ready for an exchange. We use marketing to create favourable conditions for an exchange between two parties (a seller and a buyer). The object of the exchange is that seller provides the buyer with goods and services in exchange for money (basic version), from a marketing point of view in the moment of the exchange goods and services are only the way to materially provide benefits that normally come from a certain value that represent the real object of our desire. In a marketing strategy the starting point is the customer’s needs and desires and they are to be known so that the company has to satisfy them, the moment of exchange is fundamental because the company collects information on the characteristics of its customers (the customer relationship management - CRM). ➔ The company (seller) gives customers (buyers) goods/services in exchange for money by also furnishing value. The client in exchange gives money and a set of information that allows the company to better understand him and going to the CRM. 3- MARKETS AND TARGETS: Traditionally, a market was a physical space where buyers and sellers gathered to buy and sell goods. From a marketing perspective, a market can be defined as (1) a group of customers (people and/or organizations) (2) with similar needs or wants and (3) the willingness and (4) ability to buy a product/service in order to satisfy them. The most relevant market categories are consumer markets (B2C), business markets (B2B) and governmental markets. Whitin a market, a market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product or service needs. Therefore, marketers start by dividing the market into segments and then decide which of them present the greatest opportunity. The selected segment(s) is/are called market target(s). Starting from the needs and wants and the exchange, we can define a market. A group of people = business to consumers market, a group of organisations = business to business market. We cannot serve all the available market so we need to analyse the market through the segmentation process = fragment our market in subgroups with more specific similarities and focus the attention on few market segments = target. The undifferentiated market strategy (e.g. Coca Cola) is the strategy where the whole market is served with only one product, it does not consider differences inside the market. MARKET SHARE AND FOREIGN MARKETS OF MADE IN ITALY (MAECI, JAN - OCT 2021): First 5 destinations of our products export are Germany, France, US, Switzerland and Spain. • Europe 27 because firms are SMEs and exporting is much easier (52.6%); • Europe not EU – Russia; • Asia – China 9th market; • North America – US mainly; • Africa – sub-Saharan area; • South America doesn’t account much; • Oceania. THE VALUE CREATION PROCESS: CUSTOMER EQUITY = economic value of customer loyalty. WHEN DO WE FEEL SATISFIED? According to Phillip Kotles satisfaction reflects «a customer’s feeling which results from comparing a product or service’s perceived performance to expectations». Therefore, based on the cognitive theory of Expectancy Disconfirmation proposed by Richard Oliver, satisfaction occurs only when performance meet (zero disconfirmation) or exceed (positive disconfirmation) expectations. This means that: • satisfaction is a «comparative feeling», so it does not depend only on a product or service’s performance; • setting the right level of expectation (the most important activity that the company has to do) is in many cases more important than managing the performance; • using advertising to overpromise may result in a short-term benefit but in a long-term failure if promises remain unmet. THE MONETARY RETURN OF CUSTOMER SATISFACTION: CUSTOMER LIFETIME VALUE AND CUSTOMER EQUITY The case for maximizing long-term customer profitability is captured in the concept of customer lifetime value (CLV) = it describes the net present value of the stream of future profits expected over the customer’s lifetime purchases. The company must subtract from its expected revenues the expected costs of attracting, selling, and servicing the account of that customer. The concept of customer equity captures the value of potential future revenue generated by all the company's customers in a lifetime. To maximize customer equity companies can use the marketing concept to build long term relationships with their customers (relationship marketing). EXAMPLE - HOW TO MEASURE CUSTOMER LIFETIME VALUE (CLV), A PRACTICAL APPLICATION TO A LUXURY STORE: • average amount spent by an average client per single purchase: 600 euro • average number of purchases per year: 5 • expected “customer lifetime”: 15 years • average profit percentage: 30% CLV = [(600 € x 5) x 0,30] x 15 = 13.500 € Some interesting consideration: • Assuming that a satisfied (and therefore loyal) customer during his lifetime will produce at least two new customers per year through a positive word of mouth (therefore 30 new customers in total) the total value associated with the individual customer rises to 405.000 €. • Assuming that every day on average a shop assistant serves 50 different customers, each employee manages a potential portfolio of 20.250 ml. € in term of lifetime value. • Assuming that the total number of customers who buy at least one product in the store in one year is 2.000 the store’s overall lifetime value of all the store’s customers (customer equity) is about 40.5 bil. € HOW TO MANAGE AND INCREASE CUSTOMER LOYALTY? WE USE CUSTOMER RELATIONSHIP MARKETING (CRM): Customer relationship marketing (CRM) is the process of carefully managing detailed information about customers to maximise loyalty and customise marketing offering, services, programs and messages. Typical CRM activities include: • Customer databases: involve the permanent collection of data from a range of sources like purchases, web and social media analytics. • loyalty and membership programs: frequency programs and club membership programs are designed to reward and engage customers who buy frequently. • customer listening: providing customers with easy ways to reach company staff and express needs, perceptions and complains contribute to increase customers’ knowledge and engagement. THE CUSTOMER VALUE – SATISFACTION – LOYALTY “VIRTUOUS CIRCLE”: SO, LET’ MAKE A SUMMARY OF THE FUNDAMENTAL PRINCIPLES OF MARKETING: Marketing is about creating, communicating and managing customer value. Value creation is not (only) about promotion and communication but it includes also product, pricing and place (4 Ps or marketing mix). The starting point of any marketing strategy is a proper understanding of consumers’ needs and wants, it requires the identification and selection of market segments. A successful marketing strategy aims to create and increase profits through customers’ satisfaction to create long term relationships (customer loyalty). WHAT ARE THE MAIN DIFFERENCES BETWEEN MASS MARKETING AND LUXURY MARKETING? • the value creation process is mostly based on benefits rather than on costs: marketing strategies of luxury companies aims to maximise benefits rather than to minimize costs; • from marketing “push” to marketing “pull”: in fast moving consumer goods brands hunt for consumers. For luxury brands it is just the reverse: consumers are attracted; • rise the price to increase demand: in traditional market model when the price fall, demand rises. With luxury, the relationship is reversed. Therefore, the more is perceived by the client to be a luxury, the higher the price should be; • you are not selling only a product or a brand: Made in Italy is not only about high quality and beautiful products but is about selling the idea of the Italian lifestyle; THE SWOT MATRIX: HOW TO TURN YOUR SWOT ANALYSIS INTO ACTIONABLE GOALS AND MARKETING STRATEGIES: • start from «strength-opportunity strategies»: an opportunity «is» a real opportunity only when it meets your existing or potential strengths. So, the first strategic direction is to identify the company’s strengths that can be used to maximise the opportunities that emerged from the external analysis. • use «strengths-threats strategies» to minimize risks: company’s strengths can also be used to minimize the potential negative impact of external threats or to convert them into opportunities. • use «weaknesses-opportunities strategies» to improve your internal resources and competences: identify and address weaknesses that prevent the company from taking advantage of relevant external opportunities. • avoid relevant «weaknesses-threats» combinations: work to control or minimize weaknesses that are particularly risky because expose the company to relevant external threats. EXAMPLE - GUCCI’S SUCCESSFUL MARKETING STRATEGY IN CHINA ACCORDING TO THE SWOT STRATEGIC FRAME: • «STRENGHT-OPPORTUNITY STRATEGIES»: Gucci has exploited its eccentric and «Italian flavoured» brand image to establish a strong positioning in the huge and fast-growing Chinese luxury market. • «STRENGHTS-THREATS STRATEGIES»: while most luxury brands propose their standard assortment worldwide, Gucci has adapted its product design to the Chinese history, culture and aesthetic values. This product strategy has helped the brand to avoid the risks of growing consumer nationalism and to respond to quest for authenticity. • «WEAKNESSES-OPPORTUNITIES STRATEGIES»: Gucci has established partnerships with Chinese influencers and has designed a specific digital marketing strategy to target and engage the Chinese gen Z and millennials segments. • «WEAKNESSES-THREATHS STRATEGIES»: to avoid the widespread counterfeiting of symbolic luxury brands on the Chinese e-commerce platforms Gucci has decided to sell its products only through the brand’s website and selected web retailers. DEFINING MARKETING OBJECTIVES: Once the company has performed a SWOT analysis it can proceed to goal formulation, developing specific goals for the planning period. Goals are objectives that are specific, with respect to magnitude and time. To be effective, they must meet four criteria: • must be arranged hierarchically, from most to least important; • should be measurable (quantitatively whenever possible) • should be specific, achievable and relevant; • should be timely. ➔ SMART analysis for defining marketing objectives: specific/no generic; measurable (identify specific criteria that allow you to understand if you can achieve them, ability to reach the goals: measure of your performance); achievable (must be realistic, coherent with your internal characteristics and opportunities of your performance); relevant (significant because you invest money on it e.g. level of profitability); timely (identify a specific time to reach your objectives). EXAMPLES OF MARKETING OBJECTIVES: DEFINING YOUR TARGET AND COMPETITIVE POSITIONING: Marketing strategy involves the activities of analysing market segments, selecting one or more target markets on which to focus. There are 3 general strategies for selecting target markets: A firm can appeal to the entire market with one marketing mix (undifferentiated strategy), or it can concentrate on one segment (concentrated strategy), or it can appeal multiple market segments using multiple marketing mixes (differentiated strategy). After the selection of the target market(s), the next step of marketing strategy is to define a specific positioning aiming to make the product/brand occupy a distinct position, compared to the competitors, in the target consumers’ mind. EXAMPLE – SELECT YOUR TARGET AND THEN POSITION YOUR BRAND: PROGRAM FORMULATION AND ACTION PLAN: Once defined the marketing strategy, the firm needs to develop a marketing mix that will produce mutually satisfying exchanges with selected targets. This involves the selection of a unique blend of product, distribution, promotion and pricing strategies aiming to achieve a differential advantage over the competition. In order to make the marketing plan effective, the firm also needs to turn it into action assignments and ensure that these assignments are executed in a way that accomplishes the pan’s objectives. The implementation process may involve detailed job assignments, activity description, timelines, budgets and plenty of communication. SOME (SIMPLE) EXAMPLE OF MARKETING KPIS – KEY PERFORMANCE INDICATORS: • RETURN ON MARKETING INVESTMENT - ROMI (over Y period): [(Sales growth – Marketing costs)/Marketing costs] X 100 • CUSTOMER ACQUISITION COST (over Y period): Marketing costs / number of new clients acquired during the period Y • CUSTOMER RETENTION RATE (over Y period): (Total number of customers at the end of period Y - number of new clients acquired during the period Y) / Total number of customers at the beginning of period Y • BRAND AWARENESS: number of social media followers, web search and website visits, number of e-mail contacts. EXAMPLE - LET’S CONSIDER THE FOLLOWING SCENARIO FOR THE LAUNCH OF A NEW PRODUCT: We can easily calculate our marketing KPIs: • RETURN ON MARKETING INVESTMENT (2020): [(60.000 – 35.000)/(35.000)] X 100 = 71,4% • CUSTOMER ACQUISITION COST (2020): 35.000 / 600 = 58,3 EURO • CUSTOMER RETENTION RATE (2021): (900 - 700) / 600 = 33,3% HOW TO ANALYSE THE MACROENVIRONMENT AND THE INDUSTRY: ONCE YOU GET TO KNOW YOURSELF IT’S TIME TO KNOW YOUR «ENEMY»: The first ever written book about war, basic rules of strategy: “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” (Sun Tzu, The Art of War, V cent. b.C) WHAT IS PEST ANALYSIS? The broad (or macro) environment includes external and uncontrollable factors that influences all businesses and sectors at large. From an analytic point of view the macro environment consists of four main forces (PEST): • Political and legal forces: national and international business regulations, taxation policies, environmental legislation, trade barriers, etc. • Economic forces: economic growth prospects, interest and inflation rates, consumer confidence, disposable incomes, etc. • Social forces: demographics, changing lifestyles, cultural differences, levels of education, etc. • Technological forces: digital transformation, R&D, changing communication and production technologies. etc. A SYNTHETIC FRAME FOR THE PEST ANALYSIS: WHAT IS AN INDUSTRY OR COMPETITIVE ANALYSIS? The aim is to try to understand the 4Ps, once we understand the main opportunities and threats of the macro environment the next step is to apply industry analysis in order to • understand its structural characteristics • forecast industry profitability in the future • assess the state of competition in the industry • position the firm in relation to its competitive forces. Industry analysis includes the following stages: 1. Describing the industry’s structure 2. Evaluating industry’s sources of profitability and attractivity 3. Identifying key success factors and competitive positions FIRST OF ALL, LET’S DEFINE AN “INDUSTRY”: Economists define an industry as a group of firms that supplies a particular market. Typically, industries are identified with relatively broad sectors, whereas markets refer to specific products. Thus, the firms within the luxury industry may compete in many distinct product markets like cars, personal goods, food, hotels, etc. Industries are also defined according to their geographical boundaries. For example, from an economist’s viewpoint, the U.S. luxury industry would denote all companies supplying the U.S. luxury market — irrespective of their location. For the purpose of industry analysis, Grant suggests to define an industry of the basis of the following question: which are the firms that compete to supply a particular product or service in a particular market? THE STRUCTURE OF THE LUXURY INDUSTRY (A PARTICULAR INDUSTRY): AND NOW LET’S UNDERSTAND THE SOURCES OF AN INDUSTRY’S PROFITABILITY: The starting point for industry analysis is a simple question: what determines the level of profit in an industry? An industry is profitable under 2 conditions: 1. The value of the product to customers: value is created when the price the customer is willing to pay for a product exceeds the costs incurred by the firm; 2. The intensity of competition: the surplus of value over cost is distributed between customers and producers by the forces of competition. The stronger competition is among producers, the more of the surplus is received by customers in and the less is the surplus received by producers → profitability can be high (no price competition) or low COMPETITION FROM SUBSTITUTES → The price that customers are willing to pay for a product depends, in part, on the availability of substitute products. According to Porter’s model, substitute products are those products that appear to be different but can satisfy the same need as another product. The existence of close substitutes means that customers will switch to substitutes in response to price increases for the product (demand is elastic with respect to price). The extent to which substitutes depress prices and profits depends on: • Price/performance characteristics of the substitutes: if the substitutes are characterized by a high price/performance ratio, their threat will be higher; • Switching costs: negative costs that a consumer incurs as a result of switching from the original product to the substitutes. Example - The rise of luxury resale: market trends and consumers’ motivations (Source: Altagamma and Bain; McKinsey, 2021) BARGAINING POWER OF BUYERS → (retailers: intermediate buyers; final buyers) In the market for outputs the transactions create value for both buyers and sellers. How this value is shared between them in terms of profitability depends on their relative economic power. The strength of buying power that firms face from their customers or distribution channels is influenced by the following factors: • Buyers’ price sensitivity: the higher is buyers’ sensitivity to price, the higher will be his bargaining power; • Size and concentration of buyers relative to suppliers: the smaller the number of buyers and the bigger their purchases, the higher will be their economic power towards the suppliers; • Buyers’ information: the better-informed buyers are about suppliers and their prices and costs, the better they are able to bargain; • Ability to integrate vertically: the leading brands have increasingly replaced their sellers with directly operated stores (DOS). Example - Revenue share by distribution channel: BURBERRY VS. FERRAGAMO (Source: Statista) BARGAINING POWER OF SUPPLIERS → Analysis of the determinants of relative power between the producers in an industry and their suppliers is precisely analogous to analysis of the relationship between producers and their buyers. The only difference is that it is now the firms in the industry that are the buyers and the producers of inputs that are the suppliers. The key issues are the ease with which the firms in the industry can switch between different input suppliers and the relative bargaining power of each party. Therefore, the higher is the bargaining power of suppliers on producers, the lower will be the industry’s profitability, since a large portion of profits will be absorbed by the industry’s suppliers. Example - Prada and Zegna cooperate to increase vertical integration (Source: Sole24Ore): USING PORTER’S FIVE FORCES MODEL TO EVALUATE AN INDUSTRY’S ATTRACTIVENESS: particular offer. If we want to have a further more precise estimation we need to analyse income and accessibility of the market. 3. The third element is the market demand: is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period. The market demand must be evaluated based on actual size and expected growth rate. It represents the actual value of the market in a specific market and year (generally 2 years before the present year) and it isn’t an estimation; it is expressed in 2 variables: in volume (n° of products) or in value (sales). 4. The fourth one is the market share: the percentage of total sales volume in a market captured by a brand, product, company or country. It is the share of sales on the total sales of that product category in that specific market. It can be calculated/expressed in volume (n° of products on total) or in value (on the basis of the amount of sales). You need also to analyse the TREND that has to be positive! BEHAVIOURAL OR CONSUMER’S BEHAVIOURAL ANALYSIS is how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants. EXAMPLE- THE BASIC STRUCTURE OF CHINESE MARKET FOR PERSONAL LUXURY GOODS: EXAMPLE OF THE TREND – CHINA’S SHARE IN THE GLOBAL PERSONAL LUXURY MARKET (STATISTA 2021): Typical question for the exam is how to calculate a market share: (total personal luxury goods sales in the Chinese market in year X/ total worldwide personal luxury goods sales in the year X) * 100 → total sales in that particular market in that year/total worldwide sale in that year expressed as a percentage term (of that specific sector) UNDERSTANDING CONSUMERS AND CONSUMPTION BEHAVIOR: Consumer behaviour is about how consumers make purchase decisions and how they use and dispose of the goods and services. The study of consumer behaviour also includes the analysis of factors that influence purchase decisions and product use. Consumption behaviour is influenced by several aspects, including: personal and social factors, level of involvement, buying decision process. MOST RELEVANT PERSONAL AND SOCIAL FACTORS AFFECTING CONSUMPTION BEHAVIOR: • demographics, age and stage in the life cycle: people change their consumption patterns across the different stages of their life. • occupation and economic perspectives: it is relevant especially for income-sensitive goods and services. • personality and lifestyles, psychographic segmentation: consumer behaviour is determined by a set of distinguishing human psychological traits that lead to specific responses to marketing stimuli. • reference groups: all the groups that have a direct or indirect influence on their attitudes or behaviour. Social groups we belong to. All the formal and informal groups that influence the buying behaviour of an individual are that person’s reference groups. Reference groups can be categorized as: membership groups (they include all the groups with which people interact regularly on an informal face-to-face basis e.g. family, friends, etc.); aspirational groups (they are groups a person want to join. To join an aspirational group a person must conform to its norms and rules); opinion leaders (reference groups often include individuals known as group leaders, or opinion leaders). Example - When people trust people: using reference groups as a marketing tool: Testimonial (highly respected people who «represent» the product and/or the brand’s identity); brand ambassador (takes a stable and active role in the artistic project of the brand); influencer (engages followers by explaining why to buy a product). • social roles: the individual’s position and role in the society also influences his buying behaviour. ➔ The latest two are social variables. EXAMPLE - PROFILING CHINESE AFFLUENT CONSUMERS ON PERSONAL AND SOCIAL FACTORS: • AGE AND STAGE IN THE LIFE CYCLE: the 74% of China’s luxury buyers are between 18 and 40 years old (35% between 26-30). • OCCUPATION AND ECONOMIC PERSPECTIVES: compared with average Chinese consumers, wealthy consumers report a much more positive outlook about their future spending. By 2025 wealthy annual consumer expenditure on luxury products is expected to growth of 33% over 2020. • PERSONALITY AND LIFESTYLES: although wealthy Chinese consumers have become more sophisticated, they remain cautious. Moreover, they are allocating more of their income to lifestyle services and experiences. • REFERENCE GROUPS: most Chinese prioritize family and happiness over wealth. • SOCIAL ROLES: educational, economic and social stratifications still remain strong. TYPES OF CONSUMER BUYING DECISIONS AND CONSUMER INVOLVEMENT: Factors determining the level of consumption involvement are: • previous experience: when consumers have had a previous experience with a good or service, the level of involvement typically decreases. • interest: involvement is positively and directly related to the consumer’s interest. • perceived risk of negative consequences: as the perceived risk in purchasing a product increase, so does the consumers’ level of involvement. • situation: sometimes the circumstances of a purchase temporarily transform a low- involvement decision into a high- involvement one. • social visibility: perceived involvement is higher on products and services that affect one individual’s external visibility. • utilitarian value: one reason why consumers buy luxury brands is because of the expected superior quality and usability reflected by the brand name; • self-identity value: it refers to how consumers perceive themselves and it combines the ideal self-image (the way individuals would like to be) with the real self-image (how an individual actually perceives himself or herself). BRAND PERSONALITY TRAITS OF LUXURY BRANDS (HEINE, 2009): • modernity (traditional vs modern): the temporal perspective of the brand, which can either lie more in the past, in the present or in the future. • eccentricity (decent vs eccentric): the level of discrepancy from social norms and expectations that is portrayed by the brand. • opulence (discreet vs opulent): the level of conspicuousness of the symbols of wealth. • elitism (democratic vs elitist): the level of status and exclusivity that is represented by the brand. • strength (soft vs strong): the level of toughness and masculinity that is displayed by the brand. Example – Italian luxury brands: SOCIAL-ORIENTED (EXTERNAL) MOTIVATIONS OF LUXURY CONSUMPTION: • bandwagon effect: it refers to the extent to which the demand for a specific product is increased due to the fact that others are also consuming the same commodity. It represents the desire of people to conform with people they wish to be associated with (e.g. China); • snob effect: it refers to the extent to which the demand for a specific product decrease because of the fact that others are also consuming the same commodity. It represents the desire of people to be exclusive; • Veblen effect: it refers to the phenomenon of conspicuous consumption and expresses the extent to which the demand for a specific product is increased because it bears a higher rather than a lower price. INFORMATION SEARCH: Most important sources of information → 2nd step of the process After recognizing a need or want, consumers search for information about the various alternatives available to satisfy it. An information search is normally based on the following sources: • internal sources: recalling stored information related mainly to past experience with the product; • external non-marketing-controlled information sources: include personal sources (family, friends, experts) and public sources (e.g. Internet, newspapers, magazines); • external marketing-controlled information sources: include mass-media advertising, Internet marketing, in-store communication, salespeople and product packages. The consumer’s information search typically yields a group of brands, called consideration set. EXAMPLE - LEADING INFORMATION SOURCES FOR LUXURY GOODS AMONG CHINESE CONSUMERS (STATISTA, 2021): EVALUATION OF ALTERNATIVES. HOW DO CONSUMERS DECIDE? 3rd step → how do people decide? Expectancy value model EXAMPLE - MOST IMPORTANT FACTORS WHEN CHOOSING A LUXURY BRAND AMONG CHINESE CONSUMERS (STATISTA, 2019): Which option is the best one? Let’s use the purchase enablers to apply the EXPECTANCY- VALUE MODEL: What could CHANEL or PRADA do in this case? They will represent the list of the bases of your positioning an organization’s skills, activities and competencies is named INTERNAL SCANNING = is fundamental for the definition of realistic objectives, for the selection of markets and market targets, for the definition of the organization’s competitive strategy and for the identification of the main sources of competitive advantage towards the competitors. RESOURCES, COMPETENCIES AND STRATEGY: THE RESOURCE-BASED VIEW OF THE FIRM During the 1990s, the management and marketing emphasized the importance of a firm’s resource and competencies as the principal basis for firm strategy and the primary source of competitive advantage (so called «Resource-Based View on the firm»). This shifting in management thinking has been the result of two interrelated factors. First, as external environment has become more unstable, internal resources and capabilities have been viewed as a more secure base for formulating a strategy. Second, it has become increasingly apparent that competitive advantage rather than industry is the primary source of superior profitability. According to the RBV, the assessment of internal resources and competencies provide the basis of the strategy formulation process. A RESOURCE-BASED APPROACH TO INTERNAL ANALYSIS (GRANT, 2001): WHAT IS A RESOURCE? Resources are the productive assets owned by the firm. They can be classified as: • tangible resources: they include the financial resources and the physical assets and are evaluated in the firm’s financial statements; • intangible resources: they do not appear on the firm’s balance sheet but for most companies they are more valuable than tangible resources. Among the most important intangible resources are reputation (brand names and other trademarks) and knowledge; • human resources: they comprise the expertise and effort offered by the employees. For example, in the case of luxury firms the designers play a critical role in the strategy formulation and performances. EXAMPLE - THE BRAND AS INTANGIBLE RESOURCE: 2020 BEST GLOBAL LUXURY BRANDS RANKING WHAT IS A COMPETENCE? Resources are not productive on their own. It is competence that is the essence of superior performance. A competence can be defined as a firm’s capacity to deploy resources for a desired end result. In the marketing field, example of capabilities are product design, brand management, building reputation for quality, speed of distribution and customer service. Hamel and Prahalad coined the term CORE COMPETENCIES to distinguish those capabilities fundamental to a firm’s strategy and performance. Core competencies need to make a significant contribution to perceived customer benefit and they must have applications in a wide variety of markets. TYPICAL CORE COMPETENCIES OF MADE IN ITALY: • design and creativity: many Italian luxury brands are successful thanks to the outstanding design of their products (e.g. Kartell furnishings) • manufacturing and product development: the art of transforming designs into finished products with unique manufacturing and physical features (e.g. Montegrappa pens) • customer experience: the capacity of build and engage customers into emotional and immersive physical experiences (e.g. Eataly) • brand identity and image: the ability to develop a unique brand positioning based on a powerful identity and image (e.g. Armani) • heritage and culture: the ability to manage the brand over time and to connect it with the firm’s history and the place of origin’s cultural heritage (e.g. Cantine Antinori) WHAT DOES IT MEAN COMPETITIVE ADVANTAGE? Core competencies are usually at the core of a firm’s competitive advantage. According to Michael Porter “competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of values”. Porter has suggested 3 general types of strategies to achieve competitive advantage: • cost leadership: it is achieved by providing the same product to the lowest price (typical of accessible luxury brands); • differentiation: it is achieved by providing a unique product and requesting a premium price (typical of aspirational luxury brands); • focus: it is achieved by focusing on a few target segments (typical of absolute luxury brands). FROM CORE COMPETENCIES TO COMPETITIVE ADVANTAGE: THE VRIO MODEL (BARNEY, 1991) For a resource or capabilities to establish a sustainable competitive advantage, 4 conditions must be present: 1- Valuable: a resource or capability must enable a firm to exploit opportunities or to defend against threats and/or it must increase the perceived customer value; 2- Rare: if a resource or capability is widely available within the industry, then it may be essential to possess it in order to compete, but it will not be a sufficient basis for competitive advantage; 3- Costly to imitate: some resources are not easily imitated or transferred — either they are entirely firm specific or their value depreciates on transfer; 4- Organized: a resource itself does not confer any advantage for a company if it’s not organized to capture the value from it. A STRATEGIC TOOL FOR THE ANALYSIS OF INTERNAL RESOURCES AND COMPETENCES: PORTER’S VALUE CHAIN • Step 3 – assess relative strengths and weaknesses: you can use the benchmarking to appraise objectively the comparative strengths and weaknesses of your company’s resources and capabilities relative to competitors; • Step 4 – develop strategy implications: having identified resources and capabilities that provide the bases of your competitive advantage, the key task is to formulate a strategy to ensure that these resources are developed to the greatest effect. USING THE BENCHMARKING TO ASSESS RELATIVE STRENGTHS AND WEAKNESSES: HOW TO FIND INFORMATION ABOUT YOUR COMPETITORS? YOU CAN USE THE COMPETITIVE INTELLIGENCE: Competitive intelligence (or CI), involves the legal collection of information on competitors and the overall business environment. The knowledge gained from this information is then used for benchmarking. Basic information sources to be used in the competitive intelligence process include: • Competitors’ websites and social media • Website comparison and «sentiment» services (e.g. Website grader, Google alert, Talkwalker, etc.) • Product rating websites (e.g. Amazon customer review, Trustpilot, Tripadvisor, etc.) • Business profiles, professional reports and sectorial journals (e.g. Pambianco news, etc.) • Salespeople USE AN IMPORTANCE-PERFORMANCE MATRIX TO DEVELOP MARKETING IMPLICATIONS: UNDERSTANDING THE CUSTOMERS THROUGH MARKETING RESEARCH: WHAT IS A MARKETING RESEARCH? Marketing research can be defined as the systematic and objective identification, collection, analysis, dissemination and use of information for the purpose of improving decision making related to the identification and solution of problems and opportunities in marketing. A marketing research can be based on secondary data, primary data, or both: • Secondary data are data that were collected for another purpose and already exist somewhere (i.e. databases, statistical bureau, etc.). • Primary data are new data freshly gathered for a specific purpose or for a specific research project. HOW TO EVALUATE THE QUALITY AND RELIABILITY OF SECONDARY DATA? • Currency: time leg between collection and publication, frequency of updates • Methodology and accuracy: i.e. research design, sampling, data collection, response rate • Objective and nature: key variables, units of measurement, relationship examined • Dependability: expertise, reputation and trustworthiness of the source. MAIN SOURCES OF (FREE) SECONDARY DATA FOR INTERNATIONAL MARKETS ANALYSIS: • Statista; international economic institutions (e.g. International Monetary Fund, World Trade Organization, World Bank, etc.); international statistics offices (e.g. Eurostat); national statistics bureau and «invest in» offices (for example in USA the Bureau of Economic Analysis and Select USA); universities and research centres (for example the Global Edge by Michigan State University). • Made in Italy: annuario “commercio estero e attivita’ internazionali delle imprese” (Ice-Istat); new export webportal «export.gov.it»; rapporto annuale “evoluzione del commercio con l’estero per aree e settori” (Ice-Prometeia); official statistics on foreign trade provided by the ministero degli affari esteri e della cooperazione internazionale; rapporto Annuale “esportare la dolce vita” (Confindustria-Prometeia). • The luxury goods market: annual report “true luxury global consumer Insights” (Boston Consulting Group and Altagamma); annual report “worldwide luxury market monitor” (Bain and Altagamma); Pambianco magazine; Mckinsey quarterly insights. MARKETING RESEARCH SUPPLIERS AND SERVICES: THE MARKETING RESEARCH PROCESS: HOW TO UNDERSTAND THE MANAGEMENT PROBLEM: BASIC QUESTIONS • What kind of product/service is the object of the research? • What is the current state of information about the management problem? Does the company have conducted previous research on the same or on a similar topic? • What kind of actions will be undertaken on the basis of research results? What are the main constraints the company is operating under? • Who will be the final user of the research? FROM THE MANAGEMENT DECISION PROBLEM TO THE MARKETING RESEARCH PROBLEM: Buy the entire research SURVEY: The survey method involves a structured questionnaire given to respondents and designed to elicit specific information. Thus, this method of obtaining information is based on the questioning of respondents. It may be used to assess behaviours, attitudes, awareness, motivations and demographic and lifestyle characteristics. Typically, the questioning is structured; in this case a formal questionnaire is prepared and the questions are asked in prearranged order. HOW TO DESIGN A QUESTIONNAIRE: A questionnaire is a formalized set of questions for obtaining information from respondents. Any questionnaire has three main specific objectives: 1- it must translate the information needed in a set of specific questions that respondents can and will answer; 2- it must motivate and encourage respondents to become involved in the interview, to cooperate and to complete the interview; 3- it should minimize response error. The most important steps of questionnaire design are the followings: 1- development of a conceptual frame; 2- choice of the questions’ structure and wording; 3- preliminary test of the questionnaire. Wrong ways to ask questions: 1- information that are not related; 2- you suggest the answer yet; 3- contextualize the answer; 4- missing the association of time. Guidelines for questionnaire design: • use ordinary and unambiguous words: when choosing words, keep in mind that the average person has a high school, not a university education. • choose the proper order of questions: difficult questions, or questions that are sensitive, embarrassing or complex should be placed late in the sequence. • avoid leading or biasing questions: a leading question is one that clues the respondent to what answer is desired or leads the respondent to answer in a certain way. • logical order and branching questions: questions should be asked in a logical order. All the questions that deal with a particular topic should be asked before beginning a new topic. Branching questions should be carefully designed. HOW TO SELECT THE RIGHT SAMPLE: THE SAMPLING DESIGN PROCESS Primary data collection requires the choice of a sample of the group to be interviewed. The most important decisions of the sampling design process are the followings: • who will be interviewed: sampling design begins by specifying the target population; • how many individuals must be interviewed: determining the sample size is complex and involves several qualitative and quantitative techniques; • how to choose who will be interviewed: selecting a sampling technique involves several decisions. Within a market, a market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The process of dividing a market into meaningful, relatively similar, and identifiable segments or groups is named market segmentation. The purpose of market segmentation is to: 1. identify and profile distinct groups of buyers who differ in their needs and wants; 2. select one or more market segments to enter (market targeting); 3. for each target segment, establish and communicate the distinctive benefit(s) of the company’s market offering (market positioning). STEPS IN SEGMENTING A MARKET ARE: 1- identify the bases for segmentation; 2- select segmentation descriptors; 3- profile and analyse market segments; 4- select target segments; 5- define the unique value proposition (UVP) and positioning. • SELECTING THE BASES FOR SEGMENTATION: EXAMPLE DEMOGRAPHIC segmentation of Chinese luxury consumers: GEOGRAPHIC segmentation of Chinese luxury consumers: PSYCHOGRAPHIC segmentation of Chinese luxury consumers: BEHAVIORAL segmentation of Chinese luxury consumers: • SELECT SEGMENTATION DESCRIPTORS: Once we understand the most relevant quantitative and qualitative criteria for market segmentation, the next step is to select the segmentation descriptors. Descriptors identify the specific segmentation variables to use. In order to select segmentation descriptors, we can adopt the following procedures: • multistage segmentation: in this case different segmentation descriptors are ordered or combined in a multi- stage logical sequence; • clustering techniques: clustering statistical techniques are used to group customers in a few segments so that descriptors within any segment are similar while data across segments are different. EXAMPLE - HOW TO COMBINE DIFFERENT SEGMENTATION VARIABLES: WHERE DID YOU BUY YOUR LAST LUXURY PRODUCT? • DEFINING THE UNIQUE VALUE PROPOSITION (UVP) AND POSITIONING: Once the marketer has selected the right target segment/segments the next step is to craft the product/brand positioning. Positioning is the act of designing a company’s offering and image to occupy a distinctive place in the minds of the target market. The main goal of positioning is to locate the product/brand in the minds of consumers to maximize the potential benefit to the firm. The result of positioning is the successful creation and communication of a customer-focused unique value proposition (UVP), a cogent reason why the target market should buy the product. A good brand positioning helps guide the actual and perspective marketing strategy by clarifying the product/brand’s core benefits, identifying the goals it helps the consumer achieve, and showing how it does so in a unique way. The main steps for selecting and building a positioning strategy are: • determining a “frame of reference”: it defines which other products and brands compete on the same target/targets and therefore which products/brands should be the focus of competitive analysis; • identifying the right points of parity (POP) and points of difference (POD): point-of-parity are associations that are not necessarily unique but that consumers view as being necessary to a legitimate and credible offering withing a specific category. Points-of- difference are those associations unique to your product/brand that are strongly held and are desirable to the target consumers. • define and communicate the unique value proposition (UVP): selected points of difference must be summarized in a unique selling proposition. The UVP is a clear statement that describes the core benefits of the offer. The UVP must be desirable for customers, deliverable by the company and differentiating from competitors. EXAMPLE - A PROPOSED ANALYTICAL POSITIONING FRAME OR AN ALTERNATIVE POSITIONING MAP: ITALIAN EXAMPLES OF SUCCESSFUL UNIQUE VALUE PROPOSITION (UVP): COUNTRY OF ORIGIN EFFECT AND PERCEPTION OF ITALY AND MADE IN ITALY IN THE EMERGING MARKETS: DOES ITALIAN IMAGE REPRESENT A SOURCE OF COMPETITIVE ADVANTAGE? INSIGHTS FROM OUR RECENT STUDY DOES ITALIAN COUNTRY OF ORIGIN MATTER FOR LUXURY PRODUCTS? INSIGHTS FROM BCG: GENERAL COUNTRY IMAGE – PERCEPTION OF ITALY AS A COUNTRY: ITALIANS AS “COUNTRY AMBASSADORS”: THE CASE OF #D&GLOVES NAPLES PERCEPTION OF THE ITALIAN CULTURAL HERITAGE: USING CULTURAL HERITAGE IN THE PRODUCT STRATEGY: PRODUCT COUNTRY IMAGE: PERCEPTION OF MADE IN ITALY THE MOST PREFERRED ITALIAN PRODUCTS: MAIN FACTORS AFFECTING COUNTRY OF ORIGIN EVALUATIONS: • Socio-demographic characteristics: young, highly educated, females and travel-oriented consumers are more willing to include country of origin evaluation in their consumption processes; • product familiarity: the influence of country-of-origin effect varies depending on consumers’ level of familiarity with the product and the country; • ethnocentrism and nationalism: nationalistic populations are less willing to prefer local products rather than foreign ones; • country animosity: previous politic and economic conflicts with foreign nations may negatively affect evaluation and acceptance of their national products. “MADE IN “OR “DESIGNED IN”? THE CASE OF “HYBRID PRODUCTS”: DECOMPOSING COUNTRY OF ORIGIN: WHERE DOES THE PRODUCT REALLY COME FROM? • country of design (COD): the country in which either a part or the entire finished product is engineered or designed; • country of manufacturing (COM): the country whose name appears on the “made in label”. It is usually the country where final production takes place; • country of parts (COP): the country that is the source of identified key parts or components; • country of assembly (COA): the country where the final assembly took place; • brand origin (BO): the country which a consumer associates with a certain product based on the “brand sounding”, regardless where the product actually come from. BRANDING can be defined as the process of creating a differentiated name and/or symbol and of delivering and managing a specific set of tangible and intangible features and values consistent to the target buyers. BASIC DEFINITIONS AND DISTINCTIONS: • brand name (or product brand): it represents a specific product or set of products or services (e.g. Nutella) • trade name (or corporate brand): it identifies and promotes a company or its division (e.g. Ferrero) • brand mark: it identifies a unique symbol, lettering or design element (e.g. the famous Gucci’s double G logo); • trademark: a distinctive symbol, word, or words legally registered or established by use as representing a company or product; • brand character: it represents a special type of brand symbol that takes on human or real-life characteristics (e.g. Capitan Findus) WHAT IS BRAND EQUITY? “Brand equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firm’s customers”. • the management of brand equity involves investments to create and enhance assets; • brand equity is linked to the name and symbol of the brand • brand equity creates value for the customer as well as the firm EXAMPLE - SIMILAR BAG, VERY DIFFERENT BRANDS: CUSTOMER-BASED ASSETS OF BRAND EQUITY: Marketers and researchers use various perspectives to study brand equity. From a customer- based perspective, the major asset categories of brand equity are: • brand name awareness: it refers to the strength of a brand’s presence in the consumer’s mind and can be measured through brand recognition and brand recall; • perceived quality: the extent to which a brand is considered to provide good quality products; • brand loyalty: the extent to which people are loyal to a brand is expressed by the reduced level of price sensitivity; • brand associations: the extent to which associations triggered by a brand are able to differentiate the brand from the competitors. HOW TO CREATE BRAND EQUITY? WE NEED AN “IDENTITY”! Brand identity is a unique set of brand associations that the brand strategist aspires to create or maintain. These associations represent what the brand stands for and imply a promise to customers from the organization members. Therefore, brand identity is different from brand image, which is how consumers perceive the brand. Brand identity should help establish a unique relationship between the brand and the customer by generating a value proposition involving functional, emotional or self-expressive benefits. THE BRAND IDENTITY PLANNING MODEL 1- STRATEGIC BRAND ANALYSIS → The development of a brand identity is a strategic decision. Therefore, a strategic perspective is needed. The primary objective of strategic brand analysis is to improve strategic decisions by integrating three different perspectives: • customer analysis: it involves an analysis of customer trends, customer motivations towards the brand, segmentation trends and unmet needs; • competitor analysis: it involves the analysis of customers’ perception of competitive brands, competitors’ image and positioning and competitors’ strengths and vulnerabilities; • self-analysis of the brand: areas of inquiry include the current brand image, the brand heritage, the brand’s strengths and weaknesses, the “soul” of the brand and the links to other brands. 2- DEFINING THE BRAND IDENTITY SYSTEM → and stronger business entities. The most common ways to leverage a luxury brand are the followings: • line extensions: different versions of the product within the same product class (vertical expansion). Many apparel high-end brands have created, beyond their prestige first line, a second or even a third line within the same product class, each one at a lower price point (trading down). Examples are Armani Exchange, D&G, Zegna, etc. Line extensions aims to expand the user base, provide variety, energize the brand, manage innovation or inhibit competitors. In the luxury industry, line extension strategies are usually driven by the creation of specific sub- brands, that distinguish a part of the product line within the brand system. The main risk of sub-branding strategy is cannibalization, that refers to reduction in sales of one main brand as result of the introduction of a new sub-brand by the same firm. Most common sub-branding options are: ➢ descriptor sub-brand: a sub-brand fulfilling the descriptor role communicates the product class (e.g. Armani Hotels), a feature (e.g. Ermenegildo Zegna su misura), a target segment (e.g. Roberto Cavalli Junior), or a function of the brand (e.g. Zegna Sport); ➢ endorsed sub-brand: the sub-brand is still independent but it is endorsed by the mother brand (usually the corporate brand) in order to provide credibility and substance to the offering (e.g. Polo by Ralph Lauren); ➢ linked name: it is an endorsement variant where a name with common elements is used to communicate an implicit or implied endorser (e.g. Versus); ➢ silver bullet sub-brand: it is a sub-brand that is employed as a strategic vehicle for changing or supporting the brand image of the main brand (e.g. the 500 brand for FIAT) • brand extensions: the brand is used to enter and create advantage in another product category. A large number of luxury firms have decided to leverage their most valuable asset by introducing a host of new products under their strongest brand names. For example, former dealers in fine leather moved into footwear and then into ready-to-wear (Gucci) or from haute couture to ready-to wear and then into accessories and perfumes (Chanel, Dior). Brand extension strategies allow consumers to enter the brand universe through many new doors, more accessible than that of the core business. Two main advantages of brand extensions are that they can facilitate new-product acceptance and that they help to exploit the overall identity and experience of the brand (lifestyle brand). The main risk of brand extension is brand dilution, which occurs when consumers no longer associate the brand with a specific product category. “Pyramid” or “galaxy”? The Italian vs French model of brand stretching: The two main sources of luxury culture in the world – Italy and France – have nevertheless followed two opposite paths for the expansion of their brands: ➢ the “pyramid” model: Italian luxury brands have mostly adopted a “pyramid” model, thus creating many labels and sub-labels: Zegna has 4 sub-brands, Roberto Cavalli has 7. The brand may move downwards (for example Armani Exchange) but also upwards (Ermenegildo Zegna Couture). Each label has its own price point, its own distribution strategy and competitors, with a large use of licensing and wholesales. ➢ the “galaxy” model: French luxury brands have cautiously enacted brand extensions as long as they were able to respect the strict rules of the luxury strategy: downward and upward integration. For example, Chanel makes its own watches in its own factory in Switzerland. All the extension of the brand are differentiated expressions of the brand values and brand strategy orbits around a centre (the core brand) and all brands sell their products in their owned single branded store. • cobranding: it provides another solution to enter a new product class by combining two different brands. A brand can also be leveraged by entering another product class not by brand extension, but by cobranding. Cobranding occurs when two or more brands are combined to promote an existing or new product. Possible cobranding strategies in the realm of luxury include: ➢ ingredient branding: for example, the Italian brand Loro Piana provides its top-ends textiles to the most prestigious luxury clothing brands; ➢ cobranding in the same product class: for example, Versace has designed a specific collection for the fast fashion brand H&M; ➢ cobranding in a new product class: for example, to celebrate Gucci’s 90th anniversary and 150 years of Italian unification, Gucci worked together with Fiat to design the luxurious “500 by Gucci”. INTEGRATED MARKETING COMMMUNICATION: WHAT IS MARKETING COMMUNICATION? Modern marketing calls for more than developing a good product, pricing it attractively and making it accessible. You must COMMUNICATE with present and POTENTIAL STAKEHOLDERS and the general public. For most marketers, therefore, the question is not whether to communicate but rather WHAT TO SAY, HOW AND WHEN TO SAY IT, TO WHOM AND HOW OFTEN. MARKETING COMMUNICATIONS are the means by which firms attempt to INFORM, PERSUADE AND REMIND consumers – directly or indirectly- about the products and brands they sell. To effectively reach and influence target markets, holistic marketers creatively employ multiple forms of communications. WHAT ARE THE ROLES OF MARKETING COMMUNICATIONS? • voice: they represent the voice of the company and its brands; • dialogue & relationship management: they are a means by which the firm can establish a dialogue and build relationships with consumers; • guidance: showing consumers how and why a product is used, by whom, where and when; • linkages: allow companies to link their brands to other people, places, event, brands, experiences, feeling and things; • learning opportunity: consumers can learn who makes the product and what the company and brand stand for, and they can become motivated to try or use it; • brand equity: establishing the brand in memory and creating a brand image; • sales impetus: drive sales and even affect shareholder value. WHAT ARE THE VARIOUS MEANS OF MARKETING COMMUNICATION? • advertising: any paid form of non-personal presentation by a sponsor; • personal selling: personal presentations by a firm’s sales force; • sales promotion: short-term incentives to encourage sales; • public relations: building good relations with various publics; • direct marketing: use of mail, telephone, fax, e-mail or Internet to communicate directly with; • events and experiences: company-sponsored activities and programs designed to create daily or special brand-related interactions with consumers, including sports, arts, entertainment. • Online and social media marketing: online activities and programs designed to engage customers or prospects and directly or indirectly raise awareness, improve image. MARKETING COMMUNICATION PROCESS MODEL: • Direct & Interactive: customized, up-to-date, interactive • Word-of-Mouth: influential, personal, timely • Sales Force: personal interaction, cultivation, response STEP 1: IDENTIFYING TARGET AUDIENCE In developing an advertising program, marketing managers must always start by identifying the TARGET MARKET AD BUYER MOTIVES. The audience can be users or potential buyers, those who make the buying decision or those who influence it. Behind every purchase is a buying motive. BUYER MOTIVES are the set of psychological factors behind a consumer’s decision to make a particular purchase, they may include: NEED, ACCEPTANCE, FEAR, HEALTH, IMPULSE, PLEASURE, FINANCIAL, GAIN, ASPIRATION. STEP 2: DETERMINING THE OBJECTIVES An ADVERTISING OBJECTIVE (or goal) is a specific communications task and achievement level to be accomplished with a SPECIFIC AUDIENCE in a SPECIFIC PERIOD OF TIME. Advertising objectives must flow from earlier decisions about TARGET MARKET, BRAND POSITIONING, and the MARKETING PROGRAM. Advertising objectives are very idiosyncratic, but should never include “to increase sales”. WHY? Example: to increase among 30 million homemakers who own automatic washers the number who identify brand X as a low- sudsing detergent, and who are persuaded that it gets clothes cleaner, from 10% to 40% in one year. Would this example be okay or poor? Why? “Increase the level of awareness by 10% over the next 4 months”. OBJECTIVES: AN ACRONYM TI REMEMBER HOW THEY SHOULD BE STEP 3: DESIGN THE MESSAGE WITH THE AIDA MODEL When putting a message together, the marketing communicator must decide what to say (message content) and how to say it (message structure and format). STEP 4: METHODS FOR ADVERTISING BUDGET Although advertising is treated as a current expense, part of it is really an investment in building brand equity and customer loyalty. BUDGET: EXAMPLE OF AN OUTPUT STEP 5: DECIDE ON MEDIA MIX MEDIA SELECTION is finding the most cost-effective media to deliver the desired number and type of exposures to the target audience. KPIS: A FOCUS THE EXPOSURE is the response from the target audience, for example, a target level of product trial. This level depends on, among other things, level of brand awareness. The effect of exposures on audience awareness depends on the exposures’ reach, frequency, and impact: • Reach (R): the number of different persons or households exposed to a particular media schedule at least once during a specific time period; • Frequency (F): the number of times within the specified time period that an average person or household is exposed to the message; • Impact (I): the qualitative value of an exposure through a given medium. ➔ Total number of exposures (E): this is the reach times the average frequency = E = R * F, also called the GROSS RATING POINTS (GRP); ➔ Weighted number of exposures (WE): this is reach times average frequency times average impact = WE = R*F*I. KPIS: SALES-EFFECTS RESEARCH METHODS • Share of expenditure (SOE): it is the relationship between the advertising investment of a company (or a brand or product) and the overall investment of the market, sector or product category of reference. A company’s share of advertising expenditures produces a share of voice. SOE = your advertising expenditure/total advertising of the market or sector. • Share of voice (SOV): is a measure of the market your brand owns compared to your competitors. Proportion of company advertising of that product to all advertising of that product. SOV = your brand’s total spend/total market spend. • Share of consumer’s mind and heart: it is the consumer perception of a particular brand or product compared to their rivals as measured by the amount of talk or mentions generated by the public or the media. The share of voice earns a share of consumers’ minds and hearts. • Share of market (SOM): brand’s percent of total sales for the new category for the same timeframe. SOM = (your brand’s revenue from X time period) / (industry revenue from X time period). STEP 6. INTEGRATED MARKETING COMMUNICATION The American Marketing Association defines integrated marketing communications (IMC) as “a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.” This planning process evaluates the strategic roles of a variety of communications disciplines— for example, general advertising, direct response, sales promotion, and public relations—and skilfully combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of messages. MANAGING INTEGRATED MARKETING COMMUNICATION: A MEDIA NEUTRAL IDEA is consistently, seamlessly and coherently declined in several ways and spread all OVER the TOUCHPOINTS of a company, on OWNED (website, social networks), PAID (TV) and EARNED (WOM, viral buzz on social etc.) TRANSMEDIA STORYTELLING represents a process where integral elements of a story (or an ADV) get dispersed systematically across multiple delivery channels for the purpose of creating a unified and coordinated entertainment experience. Ideally, each medium makes its own unique contribution to the unfolding of the story. • Different content in different and multiple channels • Coordinated and synchronized narrative experience • Each medium has unique contribution to the story In IMC, it is important to use STORYTELLING in order to evoke emotions associated with our CONTENT STRATEGY. Good stories evoke emotions, are entertaining, refer to our own experiences, anchor information. Storytelling is a tribal activity – realizing social “linking” value stories are important because they speak to our primitive brain (emotion), that is why we should measure them with NEUROMARKETING. NEW TECHNOLOGIES FOR ASSESSING ADV: NEW TYPES OF ADV: BRANDED CONTENT ADAPTING COMMUNICATION REGISTER TO TYPE OF LUXURY: ADVERTISING ETHICS: To break through CLUTTER, some advertisers believe they have to push the boundaries of what advertising consumers are used to seeing. However, don’t overstep social and legal norms or offend the general public or ethnic, racial or special-interest group. AN ETHICAL AD is the one which: UNETHICAL AD can: doesn’t lie Send wrong signal about products and service doesn’t make false claims Destroy brand’s reputation and image doesn’t use false demonstration Lead to legal problem doesn’t create ads with the capacity to deceive Destroy customer trust and loyalty SOME UNETHICAL ADVERTISING PRACTICES TO AVOID: • Don’t omit key information (e.g. side effect of products, significant conditions to an offer); • Don’t exaggerate the capability or performance of a product; • Have the evidence to back up your claims (e.g. health, beauty or slimming claims robust need clinical trials); • Be careful or claims in product names; • Don’t criticize or underestimate rival products; • Beware of cultural appropriation (e.g. Gucci in India); • Don’t discriminate people of different races, age, sex or religion; • Don’t “plagiarize” the marketing message of rivals. PRODUCT MANAGEMENT STRATEGIES: INTRODUCTION: MARKETING MIX = marketing activities related to 4 main pillars that have a tight connection between themselves; however, packaging is transversal to the promotion strategy/advertising related to issues such as sustainability. Even if packaging is included in the product pillar, it is becoming a stand-alone activity. ATTRACTIVENESS OF THE MARKET OFFERING: At the heart of a great brand is a great product. Product is a key element in the market offering. To achieve market leadership, firms must offer products and services of superior quality that provide unsurpassed customer value. Marketing planning begins with formulating an offering to meet target customers’ needs or wants. The customer will judge the offering by three basic elements: product features & quality, services mix & quality, price. WHAT IS A PRODUCT? A product is anything that can be offered to a market to satisfy a specific want or need, including physical goods, services, experiences, places and ideas (sometimes: product= product + service). In planning the product strategy, marketers should consider that consumers perceive a product at different levels: • core benefit: the benefit the consumers are really buying (i.e. «feeling cool» or «saving time»); • basic product: the basic product or service that consumers materially buy (i.e. a luxury item or a delivery service); • expected product: a set of attributes and conditions that buyers normally expect (i.e. design, materials, etc.); • augmented product: the possible features and characteristics that increase consumers’ perceived value and establish a competitive differentiation. • potential product: encompasses all the possible augmentations and transformations the product or offering might undergo in the future. (e.g. iPhone and its possible software updates). EXAMPLES OF AUGMENTED PRODUCTS: • Apple TV → Apple launched its video and TV streaming service in 2019. To boost awareness of the new product and increase sagging iPhone sales, the company created an add-on or augmentation for anyone purchasing a device as stated below from the company's website. «Starting today, customers who purchase any iPhone, iPad, Apple TV, iPod touch or Mac can enjoy one year of Apple TV+ for free». • Discounts and Freebies → A discount coupon for a future purchase is a product augmentation, as is an offer of a refund if the customer is dissatisfied. A free recipe book offered with the purchase of a kitchen appliance such as a crockpot creates an augmented product. • Service Sells → A retail store that sells cooking supplies might offer free cooking classes with each purchase. Apple offers teaching and guidance for how to use their products through their retail locations. PRODUCTS CLASSIFICATION AND MARKETING IMPLICATIONS: Consumer products usually fall in three groups on the basis of shopping habits: • convenience goods: products that consumers purchase frequently, immediately and with minimal effort (e.g., soft drinks, soaps, basic food). For those convenience goods the placement is the most critical component of the marketing mix, since they require intense distribution and strong retail relationships to support the product with visible in-store display; • shopping goods: are those the consumers usually compare on bases such as suitability, quality, price and style (e.g. clothing, furniture). Shopping goods usually require selected retailers with a recognizable reputation and a wide assortment of products to satisfy individual tastes; • specialty goods: they hold unique product and/or brand characteristics for which customers are willing to make a special purchasing effort in term of timing and price (e.g. cars, luxury items). Specialty goods require significant product augmentation, exclusive distribution and high brand image advertising. • unsought goods: The ones that consumers do not expect to buy (life insurance, gravestones etc.). PRODUCT MIX PRICING: • product line pricing: Companies normally develop product lines rather than single products and introduce price steps. • optional-feature pricing: Many companies offer optional products, features, and services with their main product. • captive-product pricing: Some products require the use of ancillary or captive products. • two-part pricing: Service firms engage in two-part pricing, consisting of a fixed fee plus a variable usage fee. • by-product pricing: The production of certain goods (meats, petroleum products, and other chemicals) often results in by-products that should be priced on their value. • product-bundling pricing: Pure bundling occurs when a firm offers its products only as a bundle. In mixed bundling, the seller offers goods both individually and in bundles, normally charging less for the bundle than if the items were purchased separately. PRODUCT MAP/LINE ANALYSIS: The product line manager must review how the line is positioned against competitors’ lines. Consider paper company X with a paperboard product line. Two paperboard attributes are weight and finish quality. Paper is usually offered at standard levels of 90, 120, 150, and 180 weights. Finish quality is offered at low, medium, and high levels. The figure shows the location of the various product line items of company X and four competitors, A, B, C, and D. Competitor A sells two product items in the extra-high weight class ranging from medium to low finish quality. Competitor B sells four items that vary in weight and finish quality. Competitor C sells three items in which the greater the weight, the greater the finish quality. Competitor D sells three items, all lightweight but varying in finish quality. Company X offers three items that vary in weight and finish quality. The product map shows which competitors’ items are competing against company X’s items. For example, company X’s low-weight, medium-quality paper competes against competitor D’s and B’s papers, but its high-weight, medium-quality paper has no direct competitor. The map also reveals possible locations for new items. No manufacturer offers a high-weight, low-quality paper. If company X estimates a strong unmet demand and can produce and price this paper at low cost, it could consider adding this item to its line. Another benefit of product mapping is that it identifies market segments. The figure shows the types of paper, by weight and quality, preferred by the general printing industry, the point-of-purchase display industry, and the office supply industry. The map shows that company X is well positioned to serve the needs of the general printing industry but less effective in serving the other two industries. Product line analysis provides information for two key decision areas: product line length and product mix pricing. PRODUCT LINE STRETCHING: Line stretching occurs when a company lengthens its product line beyond its current range, whether down-market, up-market, or both ways: • Downward stretch by introducing lower range of the products (e.g. In 1989 the Shangri- La, a chain of deluxe hotels and resorts in Asia established the Traders Hotels, a sister brand to deliver high value, mid-range, quality accommodation to the business travellers; Mercedes introduced the “baby Merz” to cater to the upper class mid-sized range of the market). • Upward stretch by entering the high end of the market (e.g. Toyota introduced the Lexus and Nissan introduced the Infiniti). • Two-way stretch by filling the whole line (e.g. Toyota has the Starlet at the lower end; the Corolla in the executive range; the Camry in the upper-management range and the Lexus in the luxury range). MANAGING THE PRODUCT PORTFOLIO USING THE BCG MATRIX: The application in marketing of the BCG matrix is used for the classification of the different products or different segments in which the company operates. The BCG matrix provides additional details about each stage of the product lifecycle (there are strong similarities between phases and combinations). The parameters used for classification are: Market growth rate on the vertical axis; it is a measure of market attractiveness. Relative market share on the horizontal axis; measures the strength of the enterprise in that market. From the combination of these two elements, you can identify 4 categories: Question Mark: The term indicates a strategic area of business that is located in an expanding market, without however possessing a significant share of this market. The uncertainty about the possibility of increasing one's market share means that this type of business bears the name of question mark because they generally require massive investments in order to increase market share. They are risky products identified by low market share in high-growth markets. For this reason, they do not generate an intense incoming cash flow and require considerable investments in order to grow and become stars. The recommended behaviour for management is to develop. Stars: are products/activities characterized by a high market share in high-growth markets. They require investments to continue to grow, and then turn into cash cows. The recommended behaviour for management is to maintain. Cash Cow: it is a joking etymology term because it more or less recalls the Italian cow to be milked and indicates a series of very lucrative transactions. It is a strategic area of business that leads to high cash flows, obtained at the price of few investments in new technologies and with a high profit margin. By definition, a cash cow is not a star, so it is not a new strategic area of expanding business, but a type of business now established although still very profitable. Cash Cows are products/assets with a high market share in low-growth markets. In short, they can be considered successful activities, which require less investment, more than anything else "defensive" → They are "cows" from which to "milk" money to finance other activities. The behaviour recommended to management is to realize. Dog: are products/assets with a low share in a low-growth market. They can generate profits barely enough to break even, or even losses, so management may decide to divest.