Neven Šerić, Ph. D., Assistant Professor

University of Split, Faculty of Economics

Matice hrvatske 31

21 000 Split

16th January 2006

5th International Conference:An Enterprise Odyssey: Integration or Disintegration

GraduateSchool of Economics & Business

University of Zagreb

Zagreb, Croatia

Neven ŠERIĆ, Ph. D., Assistant Professor

University of Split, Faculty of Economics, Matice hrvatske 31, 21 000 Split,

Srećko FAVRO dipl.ing,

Sworn court marine expert and assessor – Adriatic Expert, Jobova 28, Split

APPLICATION OF BPD (Build Primary Demand) MODEL OF DEVELOPING MARKETING STRATEGY IN THE MARKET IN TRANSITION

Split, 2006

APPLICATION OF BPD (Build Primary Demand) MODEL OF DEVELOPING MARKETING STRATEGY IN THE MARKET IN TRANSITION

Neven ŠERIĆ, Ph. D., Assistant Professor,

University of Split, Faculty of Economics, Matice hrvatske 31, 21 000 Split,

Srećko FAVRO,dipl.ing.

Sworn court marine expert and assessor – Adriatic Expert, Jobova 28, Split

Abstract:
Abstract:

BPD model is an original way of modelling marketing strategies in the market in transition. BPD’s task is to evolve with the evolution of the present market in Croatia. Conditions in Croatia’s market are characterised by the growth of global offer while the global demand is stagnating. Prices are decreasing, although the quality should remain high. Recession and tremendous competition are conditioning the spreading of doing business as necessaries for everyone in the market. Modelling a successful marketing strategy means understanding the strategy to be designed and the selected tactics of its implementation in practice. In such markets companies need to adapttheir marketing strategies to the laws and behaviourof the specific market’s demand. Today, modelling a sustainable marketing strategy in the market in transition requires special consideration for differences between national and global market. BPD model of modelling marketing strategies is just one way towards the success in the market in transition.In the transition market companies need to adapttheir marketing strategies to the laws and behaviourof the specific market’s demand. A successful strategy needs to build primary demand by making potential customers aware of the new product and by stimulating their willingness and ability to buy. The process of building a new strategy in the market in transition needs to accomplish two important tasks: to preserve the market recognisability aimed at maintaining the existing buyers, and also to improve the marketing approach aimed at attracting new buyers who will encounter out products for the first time. It is important to understand the nature of demand in the market in transition, and all its main variables. Our BPD model is just one possibility how to do it.

Keywords: model, marketing, strategy, market, transition.

Introduction

Market regularities and interrelations of subjects of offer and demand in the transition countries markets are specific in comparison with the developed markets of large economic integration. Complex interrelations of offer and demand in transition countries markets are frequently dominated by almostunpredictable consequences for the future business of an enterprise. Repercussions of interrelations of offer and demand here result in extraordinary, and sometimes hardlyexplicable market successes, but also in unexpected losses of market share. On the other hand, in relation to high growth rates which are possible in transition countries markets, business challenge is obvious. Which attitude to take in competitive surroundings in the markets of transition countries? Empirical perceptionsof marketing strategists of those specific markets frequently leave the impression of being at expert level, although the success is a relative matter.

The fact is that the offer, in those specific markets too, has nowadays exceeded the demand, and motivational factors which motivate target consumers are not always transparent or understandable. Changes in market environment are fast, while standards of samples of demand behaviour often follow trendsof the developed markets of large economic integration. Complexity of the facts in business environment opens numerous business dilemmas. How, and in which methodto approach adequately to the potential demand in a transition country market? How to recognise key motivational factors at targeted market segments? Finally, how to create a sustainable marketing strategy in the markets of transition countries?

A transition country market is developing at a particular rate. Its rate of development depends to a large extent on the prevailing market trends in wider surroundings of the transition country, in the global market.Awarenessof regularities and guidelines which determine development directionsof a particular transition country market is the basis on which the market approach should be built. Interactive monitoringof events in the environment should be used as a link with the existing market platforms and in such association createprincipledstrategic approach to the targeted market segments. Interaction of such approach presents the power and the opportunity to fully recognise motivational factors as well. Motivational factors are often atypical in comparison to their counterparts in the global market. Once they are determined, it is necessary to implement them into the general strategic approach, and eventually the targeted market segmentsimplicitly direct to what the enterprise offers to the market.

In practice the aim is to create a marketing strategy which could be formulatedin the form of several different tactics. Such approach creates a competitive advantage, because, if necessary, it is possible to redesign and adapt the marketing strategy to new market conditions.However, one practical problem is that each long-term marketing strategy is gradually becoming more general, so that a greater number of tactics may be applied. In this way the future business activities may easily be predicted by competitors.

In the markets of transition countries battlesare as a rule won at technical levels, due to which fact thesustainability of the strategy depends on thedelicate links of tactical operation programmes with the market. How to recognise which tactics are most suitable for remodelling a marketing strategy? Market practice has already shown that most often it is not the system of tactics, but just one of them. More precisely, it is the tactics which is unique and different in its distinctiveness. The operational tactical programme whose remodelling is most readily accepted by the market is the direction towards the tactics which should be applied for remodelling the strategy.

Studied in principle, the conceptual approach assumes active performance towards the demand in the manner that the reaction of target market segments is also indirectly encouragedby what is offered. The application of BPD model, which the authors developed and applied in their own business practice in the Republic of Croatia, for the purposeof modelling and developing general marketing strategies, has frequently supported realisation of the set business goals.

Marketing strategy in the market in transition

In the markets of transition countries marketing strategies evolve in one of the two current typical ways. The indirect way is automatism which encourages the development of the market. The development of the market requires changes in marketing approach, or in remodelling the existing marketing strategy. The direct approach is the approach which uses a particular model of designing a marketing strategy. The aim and the purpose of both methods are adapting marketing strategy to the modern demand, whichin recent decades has been used to decreasing prices and increasing quality standards of products and services offered in the market. BDP model is a practical model of modelling a marketing strategy which starts from the nature of the need to which a product or service that a company offers are designed.

Observing marketing strategyaimed at the demand in the market of a particular transition country is specific due to historical discontinuity which resulted in changed reactions of the demand for satisfying the needs.[1]The necessity of continuous adapting of marketing strategy to changeable attitudes of demand, because of development processes in these markets, has become standard.Routineapproach which isempiricallybased on business cases from the same business branch can rarely be a guarantee for the success. The variable of time in a transition country market is changeable. Because of that, due to divergenceof particularity of business concept with changed demand position, it often occurs that the selected marketing strategy realises inadequate growth of market share in relation to the invested effort and means.[2]

Transitionmarkets are characterised by numerous unsettled basic economic problems on the one side, and by the challenges of searching for optimal solutions on the other side. It is exactly in the solutions of those collisions thatBPD model, primarily oriented towards the focus of interest[3] of the target consumer, offers the method which mayprovide long-term market acceptance of a product or service.

The needs and models of demand behaviour in transition country markets are rapidly changing.[4]Not respecting the dynamics of those changes is one of the reasons of decreasing of the market share and of weakening of general market position of a company. BPD model requires changes in considerations about marketing strategy of the company, and about standardised marketing approaches to the transition country markets.

Staring points of BPD - model

BPD mode is an original method of creating marketing strategy in a transition country market. It approximates dynamic development of a transition country market from the aspect of response of demand to the continuous growth of the offer. Dynamic growth of offer and competition in such markets is frequent because of high profit rates which may be achieved. At the level of developing a marketing strategy BPD modelpresents approximation of the observed trends of behaviourby recognising the causes which led to it.

It is important to emphasise that in a transition country market the observed trends of behaviour have their origins in the historical model of market development of a particular country. Observing the trends beyond that frame may often lead to wrong conclusions.It is also not desirable to compare experience of markets of other transition countries because causalitiesof similar behaviourare different. The same refers to motivational factors, which also have to be included in the platform of a marketing strategy by applying the BPD model. Developing a successful marketing strategy, which may ensure the leading market position, or target market portion, assumes developing tactical operation programmes and tactics in the platform of comprehending mind-set of demand in a transition country market. BPD modelprojects acceptable market targets and assumes an adequate marketing strategy which may ensure their realisation.

Continuous growth of market share to the target share is a standard in such approach. Creating sustainable marketing strategy in the market of a transition country presumes that special attention is paid to accidental market variables which determine causality in a particular market.

Conditions and relations of the existing demand and offer in transition country markets determine the methods of developing a successful marketing strategy. Understanding causality of a transition market is a presumption of creating an adequate marketing strategy. Specific feature of transition markets is the evident dynamics of their growth and certain skipped stages in their development. Imperfection and non-defined state of a transition market may be observed only when considered from wider aspect.

A successful marketing strategy may be developed on the basis of exact data about the demand, leading trends ofbehaviour and motivational factors.[5]This does not mean that competitive relations have to be excluded from the focus of attention, but the priority of consideration are the needs of a target buyer and causality of the emergence of the need. With such approach motivational factors which encourage people to buy are clearer, and a marketing strategy built on these grounds will be sustainable for a longer period.

Practical application of BPD – model aimed at marketing strategy

Developing a successful marketing strategy in the market of a transition country is a complex procedure which starting point is evaluationand performance of target market segments, but also projections of future behaviour of the demand. Understanding those relations and causality of the character of the need for which the product or the service are intended will create the conditions to apply the BDP model ofmodelling a marketing strategy.[6]

BPD model treats the final marketing strategy as an open framefor final adjustment to market surroundings during its application. The adjustment is made by using operational tactical programmes which are a link between the strategy and market surroundings. The programmes go deep under the market surface and by applying cognitive analysis it is possible to redesign the tactics upon which a particular marketing strategy is produced. Modifications, if necessary, will point to the guidelines how to create eventually the marketing strategy in competitive environment.

Selection of tactics for reshaping of the set frame of the marketing strategy by applying the BPD model is based on the competitive forces of the company. The optimal choice is areas in which it is possible to reach high level of efficiency. By applying standard approach as an alternative, long-term marketing strategy of the company will become more general, because broader tactical instruments will be approximated. The aim is to determine the established marketing position from the strategic aspect.

The fact is that in transition country markets duels between the competitors are often won at tactical levels. Due to the fact, also confirmed by the practical experience of the author, sustainability of long-term marketing strategy depends on suitability of tactical operation programmes to the market environment.[7]Final definingand modelling of marketing strategy by using the BPD modelis realised through partial adjustment of tactical operational programmes and tactics. Only those which may be integrated with the set strategy and adjusted to the conditions in the market environment will be selected.

BPD model applied in the practice of a national company in the market of a transition country allows flexibility of the marketing strategy frame. Thus it is possible to make another, sometimes crucial, step which may help to gain advantage over competitors. In practice it is made by modifying operational tactical programmes of a selected tactics. Marketing strategy based on the BPD modelin practical application in the market of a transition country should be focused on the possible increase of sale, but at the same time on operational models of leadingtactical market operations. Sustainable marketing strategy in a transition country market should primarily be oriented towards the product or service, instead of trying to adjust the product or service to the selected standardised strategy. Consumers in the markets of transition countries do not have a long tradition of available wide choice, because of which it is useful to arouse interest in what is offered on such a market.

The efficacy of marketing strategy in a transition country market depends also on its suitability to the surroundings. This primarily refers to the time variable. Besides, it is also important that by way of simulation of planned tactics adequateguarantees for fulfilling the designed market mission may be offered. Each marketing strategy is also a static model which is developing in the dynamics of the environment. Occurrences in the surroundings should be systematically monitored and analysed, so that the strategy may adjust to them in relation to time and space. So a strategy established as a static model, implemented in practice, transforms into an interactive dynamic model.

Developing an efficient marketing strategy assumes the sequence of synchronisedactivities which occur according to the determined dynamics. The dynamics depends on the complexity of competition relationships in the market environment. The more complex the situation is the faster process of strategy application has to be. It is important to monitor constantly the target market segment. After examiningthe needed extent of the marketing strategy rangethe tactics are determined. When the target market segment is determined, and the desired and possible position of the company in the market is evaluated and estimated by means of simulation, the following activity is to elaborate the starting platforms of the marketing strategy.

Optimal marketing strategy is the result of approximation of key parameters in the market environment.[8]The problem is that in a transition country market such parameters are not easily taken as constant. Their changes are affected by a number of factors which drastically change the market image and all events which arise from it.

Basic componentsof a marketing strategy, the selection of a target segment and selected forming of model of variables of marketing mixturein the market of a transition country, in accordance to BPD model, should be realised simultaneously.

It often happens that in the markets of transition countries companies frequently apply only one or two types of analytical marketing strategy. While trying to maintain the strengthening trend and proper position, inadequate attention is paid tothe dynamics of changes of marketing trends which may significantly complicate the reached market position of the company.

Because of that risk the appropriate approach in practice presupposes the divisionof the selected marketing strategy to its components. Such approach to the elaboration of marketing strategy according to BPD model should be establishedon the bases of five basic components:

  • Level of activities,
  • Goals,
  • Available resources for the purpose,
  • Activities aimed at realising competitive advantage, and
  • Synergy.

Because of specific relations in the market of a transition country, it will be wrong if the established strategy is primarily defined through competitive advantage. Such approach neglects crucial and necessary differences in other important components of the marketing strategy. The recommended differences in components of the marketing strategy guarantee competitive advantage at the beginning, but also a better protection from the competitors during the future development of the market.

BPD model is primarily focused on the consumer and the particular need. The practice imposed certain rules which arise from current marketing regularities and typical reaction of the competition, but also from customary behaviour of the demand in the market of a transition country.[9]The purpose is to adapt the efficient strategy to the company potentials, in order to apply more adequate business activities to the given environment, not only in the present, but also respecting the estimated changes in the marketing environment which areyet to come.

BPD model applied in modelling a specific marketing strategy analyses the environment and aspirations on the basis of three main questions: