Market Development, Information, and Bargaining Power

1. Market Development, Information, and Bargaining Power • Reasons for market development • Strategy in market development • Tools and outcomes • Participation in commodities market development • Bargaining power and market “stabilization” • Market information

2. define • Market development involves creating or expanding a market for new or existing products and/or increasing the value of these products • few consumers today are aware of the prickly pear, however, but farmers who grow this cactus plant

4. Promotion: Strategic and Tactical Objectives • Awareness • Trial • Attitude toward the product • Beliefs • Preference • Temporary sales increases Emerging Markets/ New Products Mature markets /established products

5. Marketing Strategy ASSESS AND RE-EVALUATE MARKETING OBJECTIVES What we want to accomplish STRATEGY How to best use available resources to accomplish objectives under circumstances. Make tough choices! TACTICS AND ADAPTATION Implementing strategy as things change. More tough choices! TOOLS Use resources such as distribution, advertising, sales promotion, demonstrations OUTCOME Sales are influenced (e.g., volume, frequency, switching, price sensitivity) CONSUMER/ MARKET RESPONSE Consumers or intermediaries respond ASSESS AND RE-EVALUATE

6. Strategies, Objectives and the Hierarchy of effects • The promotional activities needed for a given product will depend on factors such as its current stage in the product life cycle. • Once more people know, a significant challenge is going to get more people to actually try the product • This may be difficult to accomplish because of the high cost of the product and the vast number of choices of other products that consumers can consume. • There is simply not enough time or money to try everything available.

7. Strategies, Objectives and the Hierarchy of effects • If a product category catches on, emphasis may then need to switch to brand differentiation and the firm may need to work on getting consumers to hold favorable beliefs about their brand. • In later stages of the product life cycle, where most consumers’ opinions have largely been set, temporary sales increases, usually through price promotions, may be the only realistic objective.

8. Market Development: The Objectives GET CURRENT USERS TO USE MORE “Snickers satisfies you!” ● “Ask for A-1 Steak Sauce” ● “A sandwich just isn’t a sandwich without miracle whip” ● “Beef—it’s what’s for dinner” ● “The Incredible, Edible Egg” ● Fast food restaurant advertising GET MORE PEOPLE TO BUY PRODUCT Hungry Man dinners ● Hot Pockets ads ● Variety seeking advertising ● Spam luncheon meets advertising GET PRODUCT USED FOR NEW PURPOSES “Orange juice—it isn’t just for dinner anymore” ● “Beef—it’s what’s for dinner” ● Spam luncheon meets advertising ● Baking soda ads DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDS Kraft cheese ads suggesting that Kraft has more calcium ● Total cereal ads suggesting vitamins ● “Coke is the real thing” ● “The Pepsi generation” ● “The night belongs to Michelob” ● Florida orange juice “Maxwell—it’s good to the last drop” ● Progresso and Campbell’s soup ads DECREASE CONSUMER PRICE SENSITIVITY “Costs a little more, but it’s worth it” ● Zachy farms chicken ads ● Campbell’s soup ads

9. Market Development Issues . “Big picture only”—details not important! DECREASE CONSUMER PRICE SENSITIVITY GET MORE PEOPLE TO BUY PRODUCT ADVERTISING TRIAL DISTRIBUTION ENHANCE- MENT AWARE- NESS INCREASED SALES OF PRODUCT JOINT VENTURES/ CO- BRANDING GET CURRENT USERS TO USE MORE BUYING CON- VENIENCE DEVELOP PREFERENCE RELATIVE TO OTHER PRODUCTS OR BRANDS SALES PROMOTION GET PRODUCT USED FOR NEW PURPOSES

10. Strategy Issues • Deciding on objectives • Realism • Suitability for • Company strengths • Competitor positions • Market structure and change • How much to spend on objectives • Cost of advertising and/or other promotion relative to gains • Most appropriate ways of achieving objectives based on • Cost • Effectiveness • Synergy • Consistency of objectives

11. Advertising Awareness Trial Preference Reminder New uses Distribution Availability in retail stores Quality of placement within retail stores Price/sales promotion Coupons Sales Value Premium Joint ventures/co-branding Demonstrations Product investment Quality Differentiation Packaging Usability convenience Some Tools

12. Setting strategy. • Improving quality, for example, might be achieved either by increased research and development, the use of higher quality materials, or by investing in new manufacturing technology. • The most appropriate choice will depend on factors such as cost and effectiveness, but may also depend on risk.

13. Tactics and implementation. • If a decision as been made to position a product as a premium brand through advertising, specific ads must be developed and tested and appropriate media and advertising schedules should be resolved. • When implementation begins, results need to be monitored.

14. Consumer adoption of new food products. • One way to spread new foods is through massive advertising. This strategy has been used in marketing the Hot Pockets® convenience products. Many foods also spread as some groups of consumers “imitate” others they see consuming them, and some are encouraged to try new foods based on word-of-mouth communication.

15. Consumer Adoptions of New Foods or New Food Uses PROMOTION TRIAL ADOPTION BY LIMITED GROUP INCREASING ADOPTION/ ADAPTATION WORD OF MOUTH TRIAL OBSERVATION MEDIA COVERAGE

16. Levels of market development. • Development efforts may center at several different levels. • Florida orange growers—may want to promote their food, hoping that preference will be developed relative to other food categories • Alternatively, development efforts can focus on a branded product (e.g., Diet Coke®), a brand (e.g., all Coca Cola ® branded products),

17. Commodities Market Development Programs • Typically regional—e.g., Florida orange juice; Idaho potatoes; Hawaiian sugar cane; Washington Apples; Texas beef • Intention is to differentiate • Compulsory participation in advertising programs • Development is not worthwhile for the individual farmer • The individual farmer is assumed to benefit from overall campaign

18. Level of Market Development • Levels • Commodity • Differentiation from competing commodities • Increase in demand for commodity • Corporate product category (e.g., Coca Cola drinks, including Dasani) • Product category brand—e.g., Kraft American cheese slices • Brand (product line)—e.g., Kraft foods

19. Effects and Outcomes AWARENESS TRIAL SALES Volumes Prices REPEAT PURCHASES PREFERENCE REDUCED PRICE SENSITIVITY USED IN MORE SITUATIONS USE BY MORE PEOPLE USED MORE FREQUENTLY

20. Definitions Innovation: “An idea, practice, or product perceived to be new by the relevant individual or group.” Diffusion process: “The manner in which innovations spread through the market.”

21. To Adopt or Not to Adopt: How Will Consumers Answer the Question? • Some causes of resistance to adoption • Perceived risk--financial and social • Self image • Effort to implement and/or learn to use the product • Incompatibility • Inertia/overwhelming existing choices

22. Types of Innovations • Fashions—tastes go back and forth over time—e.g., food fat content • Fads—product is “in” for a short time and then fades (e.g., ostrich meat) • Trends—consumption of a food product either increases or decreases consistently over time

23. Innovators and Imitators: The Lifecycle of A Product

24. One Diffusion Pattern--Nicely Balanced... 100% adoption orsaturation point

25. Implications for Foods • Many substitutes and individual tastes • Trying new foods for variety is common • Social opportunities for trial • Food tastes tend to be “learned” early in life • Best opportunities for spread are with younger consumers

26. Influences on the Speed of Diffusion • Risk to expected benefit ratio (relative advantage)—usually not an issue for foods • Observability—is the product consumed in public • Product pricing—scarce foods are “rationed” through cost • Trialability—usually easy for foods • Switching difficulties and learning requirements/ ease of use—not a problem for foods eaten out but may be for foods to be produced at home

27. Pioneering Advantage • Consumer expectations are usually shaped by the first encountered brand • Satisfying and awareness by consumers • Order of entry vs. pioneering advantage • Positioning of existing pioneer vs. strategy of first entry

28. Impact Price Conditions Returns Time of payment Interest or finance charges Quality or other adjustments Transportation or other services Sources Size, number, and concentration of firms Supply control Unequal information Diversification (?) Product differentiation Control of resources Financial resources Ratio of fixed to variable costs Bargaining Power

29. Marketing Orders and Agreements • Mandates intended to “stabilize” markets • Types of issues • Grades, size • Packaging • Market allocation (quotas) • Minimum prices • Contributions to research • Advertising (market development)

30. Some issues Crop forecasts Demand forecasts—quantity and prices Government information programs Problems Price specification (comparability of location, time, and other factors) Net vs. gross prices (allowances and discounts) Cost vs. accuracy of information Changing market orientation and scope of market (proportion of buyers and sellers involved in open markets) Voluntary cooperation Market Information