Fragrance

November 2007 SMiP Case

V1

©November 2007

Your Objective

To analyse To evaluate To make strategic Decisions

Product DevelopmentLaunchBrand Position

Audit Section

©November 2007

The marketing information system (MkIS)

Marketingintelligenc

e

Marketingresearch

Internalrecords

Informationanalysis

Marketingenvironment• Target markets

• Marketing channels

• Competitors

• Publics

• Macro-environment forces

Marketingmanagers

• Analysis

• Planning

• Implementation

• Organisation

• Control

Developing information

Distributinginformation

Assessinginformation

needs

Marketing information system

Marketing decisions and communications Source: Kotler et al

©November 2007

Audit

Size and Structure of Industry

©November 2007

Understanding the structureof the market

SupplierI

SupplierII

Channel2 Own Label

CustomerA

CustomerC

FIRM

Competitora

Competitorb

CustomerB

Channel1

Adapted from Porter

Suppliers to

industry

Industry players

Customers/

segments

Channels forcommunicati

on & distribution

©November 2007

The organisation’s marketing environment

Theorganisation

The economy

Socialfactors

Culturalforces

Technology

Political structures

Legalstructures

Demography

Suppliers

Distributors & dealersThe

public

CompetitorsCustomers

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Audit

ProductsNature of ProductLife CyclePortfolio

©November 2007

Understanding customers’ expectations

Potential

Augmented

Expected

Core

What thecustomer expects

What the customer buys(functions & benefits)

Where valueis added

©November 2007

Audit

Segmentation IndustryConsumerDMU

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Porter’s industry analysis:The 5 forces model

INDUSTRYCompetitive rivalry

POTENTIALENTRANTS

BUYERSSUPPLIERS

SUBSTITUTES

Threat ofrivalry

Bargainingpower

Threat ofsubstitution

Bargainingpower

Source: Porter

Barriersto entry

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Audit

Distribution and Pricing

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Audit

Major Players - CotyReview and revise SWOT PIMS (Profit impact of market strategy)

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Audit

Minor Player – Scents of Time Value Chain –next slideCreate SWOT

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FIRMS INFRASTRUCTURE - Customer focused, Marketing taken on and understoodat every level, core function - strong internal communications

HR MANAGEMENT - Retain technical and knowledge based employees and recruitmarketing and sales experts - Project/consulting expertise

TECHNOLOGY DEVELOPMENT - Technology leaders, continuous innovation, R&D focused towards buyers needs, strength in R&D relationships I.e. Research institutes

PROCUREMENT - Combined buying power.

INBOUND LOGISTICS

• Intranet• JIT

OPERATIONS• JIT

•Efficientproduction(closely

monitored)

OUTBOUNDLOGISTICS

•Orderhandling

•JIT

MARKETINGAND SALES• Customer/

segmentresearch

•Investmentin Branding

•Relationshipmarketing,

Key Accountmanagement

SERVICE• Total

systemssolution

•Consultancyservices

•Maintenance•Outsourcing,

facilitiesnetworks

MARGIN

MARGIN

SUPPORT ACTIVITIES

PRIMARY FUN CTIONS

©November 2007

Benchmarking to compare with ‘best of breed’

Integration

Price

Growth Quality

SalesR&Dinvestment

ROI Capacityutilisation

Management

Technology

Manufacturing

Marketing

Interpretation:

Outside the circle = better than average

Inside the circle = below average

©November 2007

Extended SWOT

Opportunities

Threats

Strengths Weaknesses

Using existing strengths to capitalise on opportunities

Prevent weaknesses from damaging opportunities

Use existing strengths to limit impact of Threats

Prevent Weaknesses from reinforcing threats

External Review

Internal Review

©November 2007

Conclusion

Critical Factors for Success in the Fragrance Industry

©November 2007

Summary p39

It is clear that the fragrance industry has a significant global presence and a large part of its success is due to carefully targeted marketing. Advertising continues to play a central role in driving up sales in a crowded market place, where the rate of new product launches continues to increase. The European market is currently the largest in the world, but in due course, the growing markets of Asia-Pacific may eclipse Europe’s position in terms of turnover and sales. Competition is likely to intensify over the next decade and growth will be fostered by both innovative product development and intelligent marketing.

Strategic Options

©November 2007

Strategic choice

DEVELOPMENT

STRATEGIES

GENERIC STRATEGIES

• Cost leadership• Differentiation• Focus

ALTERNATIVEDIRECTIONS

• Do nothing• Consolidation• Market penetration• Product development• Market development• Diversification

ALTERNATIVE METHODS

• Internal development• Acquisition• Joint development

Sourc

e:

Johnso

n &

Sch

ole

s

©November 2007

Evaluating strategic options

Suitability Acceptability Feasibility

Evaluating strategic options

Establishing the rationale

Screening options and criteria

Does it solvethe problem?

Is it acceptableto stakeholders?

Returns Risk Reactions by

stakeholders

Can we deliver?

Cash flow Break-even Resources Competencies

Adapte

d f

rom

Johnso

n &

Sch

ole

s

©November 2007

Porters Strategies

©November 2007

Developing a specific position

Positioning Perceptual map Associations for

positioning (Kotler)

Value proposition Customer benefit Unique Profitable Sustainable

Branding Brand name strategies Brand values and

personality Developing existing

brands

©November 2007

How will the organisation compete in a specific market/segment?

Strategies for pioneers –technical innovation Strategies for market leaders Strategies for market challengers-

market knowledge Market Information Emerging Markets

Strategies for market followers - copier Strategies for nichers – segments

©November 2007

Geographic Choice p51+

Spain Eastern Europe Middle East Latin America Africa China India

©November 2007

Shell directional policy matrixProspects for sector profitability

Bu

sin

ess’

com

peti

tive c

ap

ab

ilit

ies

Str

ong

Weak

Avera

ge

Unattractive Average Attractive

Disinvest

Phasedwithdrawal

Phasedwithdrawal

Custodialgrowth

Cashgeneration

Doubleor quit

Tryharder

LeaderGrowthleader

©November 2007

In which markets/segments will the organisation compete?

(Curr

ent

& p

ote

nti

al co

mpany

stre

ngth

s in

serv

ing s

egm

en

t)

Weak

Avera

ge

Str

on

gMarket/segment attractiveness

Unattractive Average Attractive

Strongly Avoid Possibilities avoid

Avoid Possibilities Secondary

targets

Possibilities Secondary Prime targets targets

Com

peti

tive p

osi

tion

©November 2007

Competitors’ likely response profiles

COMPETITOR’S RESPONSE PROFILE

• Likely response point?• Satisfied with current position?• How expansionist?• Likely moves or strategy shifts?• Where most vulnerable?• What will provoke retaliation?

4 Future GoalsWhat drives the competitor?

1 Current StrategyHow it is currently

competing?

3 AssumptionsAbout itself and industry

2 CapabilitiesStrengths, weaknesses &

level of awareness

Strategic Plan

©November 2007

Objectives

Corporate and Marketing

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Product

Type and Range Branding Packaging Design Portfolio management

©November 2007

New Product Development p 49/50

New Scents Sources p41 and p 43+ Technical innovation Seasonal Style – ie Light Product extensions Licensing to Names Fragrance extension

©November 2007

Promotion

Comms Mix p47+ 50 Celebrity Positioning Timing

©November 2007

Pricing Strategy

Premium Mass market price Promotional offers on new products- gift

packs etc. (Airport duty free) Lower prices for light perfumes e.g. Dolce

& Gabbana (blue packaging)

©November 2007

Distribution

Online Offline Agents, distributors Retail companies Large supermarket chains- Walmart,

Tesco Airports, cruise ships

Measurement and Control

©November 2007

Balanced scorecardFinancial

perspective

Goal Measure

Customer perspectiveGoal Measure Goal Measure

Internal perspective

Goal Measure

Innovation &learning perspective

How do we lookto stakeholders?

How do customerssee us?

How can we continue toimprove and create value?

What must weexcel at?

Source:Harvard Business Review

©November 2007

The marketing information system (MkIS)

Marketingintelligenc

e

Marketingresearch

Internalrecords

Informationanalysis

Marketingenvironment• Target markets

• Marketing channels

• Competitors

• Publics

• Macro-environment forces

Marketingmanagers

• Analysis

• Planning

• Implementation

• Organisation

• Control

Developing information

Distributinginformation

Assessinginformation

needs

Marketing information system

Marketing decisions and communications Source: Kotler et al

©November 2007

Control Control: Monitors and corrects current performance. Import for the

Marketing department to monitor and control the effort. Performance can be monitored: 1. Market performance: - Sales : - Using the Mkis system to identify Key performance indicators:- Measure Sales targets for each agent - sales team have to generate X sales and measuring the retention rates for

repeat business generated by the account management team.- Measuring sales V targets- Market share: against objectives set- customer attitudes: Satisfaction surveys- Loyalty:- Need to Monitor changes in these over a specific time period e.g every

month/ 6 months/ 12 months and relate these back to our original objectives.

©November 2007

2. Financial Performance

- Turnover Targets- Profit Targets- Return on Investment

Must be careful that our marketing objectives and financial objectives do not conflict. For example our longer term Marketing objectives are not to the detriment of short term financial performance may arise.

3. Efficiency of Strategy can be monitored through a detailed evaluation of the elements of the Marketing Mix. We would benefit from regular, independent Marketing audited (McDonald, 1984, Brownlie, 1996).

Should provide an objective, external evaluation of both the effectiveness and efficiency of our marketing operations.

©November 2007

4. Contingency Planning

Responses to competitor product launches: Poor Investment performances: if The company does not meet

its performance targets: Marketing and financial what are the fall back options.

Forecasting competitive reactions Scenario planning

How do we know we have got there?- Implement a control system to measure and monitor CRM

Programme- Targeted marketing campaigns: PR and email marketing etc..

Measured by customer enquiries, and use of the web site- Account managers and sales staff to be measured by sales

performance- Any control process should include a mechanism for taking

corrective action.

©November 2007

Marketing Control systems

Set Marketing Objectives

Set specific targets

Assign responsibility

Evaluate performance against standards

Review and take action as required

Measure Performance

Management action

Adjust Mktg Objectives

Adjust Targets

Control systems can operate simple feedback loops. These pre-empt problems by anticipating the effect of inputs on overall performance e.g our objective to reinvest 12% of turnover on R&D would be assigned to the MD and performance would be evaluated against actual performance. The system can be adjusted by the relevant management action and objectives altered to reflect this, keeping the system flexible.

©November 2007

Control of Marketing activity

Product

Market Share

Sales

Sales by market

NPD

ROI

Repeat purchases

Price

Profit margin

Price comparisons

Market very price sensitive ?

Place

Channel costs

Channel volume

Channel growth

Delivery time

Stock levels

Promotion

Media Coverage: PR, exhibitions

Sales per person/agent

Awareness levels

Visits to the website and enquiries

©November 2007

Effective Control systems

Involvement: Encouraging all members of staff to contribute in target setting. E.g getting the sales teams and account management teams and finance teams to aid in the setting of targets.

Target Setting: Target material should be measurable and achievable, this needs to be communicated internally throughout the company: Internal briefings and newsletters.

Effectiveness: Measurement should be accurate, valid and consistent

Management by exception: Attention from management needs to be directed to areas of need if targets are not met.

Action: Good control systems promote action and solve problems, therefore extra resources should be made available-contingency plans.

©November 2007

Benchmarking

Need to compare SoT UK ltd. Performance against competitors to maintain current position against forecasted position and implement continuous improvement (Learning organisation).

Best Practice Performance standards