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  • 1. 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control Strategic Marketing
  • 2. Strategic Plans Lose Favor Slump Showed Bosses Value of Flexibility, Quick Decisions
    • By JOANN S. LUBLIN and DANA MATTIOLI
    • During the recession, as business forecasts based on seemingly plausible swings in sales smacked up against reality, executives discovered that strategic planning doesn't always work.
    • Some business leaders came away convinced that the new priority was to be able to shift course on the fly. Office Depot Inc., for example, began updating its annual budget every month, starting in early 2009. Other companies started to factor more extreme scenarios into their thinking. A few even set up "situation rooms,'' where staffers glued to computer screens monitored developments affecting sales and finances.
  • 3. Coke Bottle Is Part Plant But It Feels and Functions Like a Regular Plastic Container
    • By CHRIS HERRING
    • Coca-Cola Co., under fire from environmentalists for using plastic bottles, has introduced a new packaging material made partly from plants. The container has "the same weight, the same feel, the same chemistry, and functions exactly the same way" as a regular plastic bottle, a Coke spokeswoman says.
    • Coke isn't the only beverage concern trying to reduce its carbon footprint. Rival PepsiCo Inc. has introduced a compostable bag made from plants for its SunChips snacks. But Coke is the world's biggest drink maker, and Coke Chairman and Chief Executive Muhtar Kent calls the new container, which uses material derived from sugar cane, "the first generation of the bottle of the future."
    • Coke touted its "plantbottle" at the Climate Change Summit in Copenhagen last month, and it plans another push next month at the Winter Olympics in Vancouver, where all the sodas and water it provides will be packaged in the plantbottle. "Preliminary research" shows the new container leaves a smaller carbon footprint than regular plastic bottles, Coke says.
  • 4. Chapter 2 Markets and Competitive Space McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 5. MARKETS AND STRATEGIES
    • The Challenges ―
    • Markets are increasingly complex, turbulent, and interrelated.
    • Importance of a broad view of the market.
    • Essential to develop a vision about how the market is likely to change in the future.
    • Continuous Monitoring is Necessary to:
    • Find promising opportunities
    • Identify shifts in value requirements
    • Understand competitors’ positioning
    • Guide targeting and positioning
    • decisions
  • 6. OPPORTUNITIES OUTSIDE THE COMPETITIVE BOX The Competitive Box Traditional Competitors New Types of Competition New Business Models New Customers New Customers Conventional Value Propositions Existing Customer Base New Customer Base(s)
  • 7.
    • Market changes often require altering strategies
    • Forces of change create both market opportunities and threats
    • Inherent danger in faulty market sensing
    Markets Impact Strategies
  • 8. DEFINING AND ANALYZING PRODUCT-MARKETS Determine the Boundaries and Structure of the Product-Market Form the Product-Market Describe and Analyze End-Users Analyze Competition Forecast Market Size and Rate of Change
  • 9. Matching Needs with Product Benefits
    • A product – market matches people with needs to the product benefits that satisfy those needs
    • “ A product – market is the set of products judged to be substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers.”*
    *Srivastava, et al. (1984) Journal of Marketing , Spring, 32.
  • 10. INNOVATION FEATURE
    • In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for shareholder value creation.
    • The company invents new ways of providing services to save customers time, money and irritation, while often lowering costs at the same time.
    • Loss adjusters are sent to the road accidents rather than working at head office, and they have the power to write checks on the spot.
    • Progressive reduced the time needed to see a damaged automobile from seven days to nine hours.
    • Policy holders’ cars are repaired quicker, and the focus on this central customer need has won much automobile insurance business for Progressive.
    • These initiatives also enable Progressive to reduce its own costs – the cost of storing a damaged automobile for a day is $28, about the same as the profit from a six-month policy.
    Progressive Insurance: Customer Needs at the Center of Strategy Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer , June 12, 14.
  • 11. Product – Market Boundaries and Structure
    • Determining Product-Market Structure
    • Start with the generic need satisfied by the product category of interest to management
    • Identify the product categories (types) that can satisfy the generic need
    • Form the specific product – markets within the generic product – market
  • 12. Illustrative Fast-Food Product-Market Structure FAST-FOOD MARKET SUPER MARKETS MICROWAVE OVENS CONVENIENCE STORES TRADITIONAL RESTAURANTS
  • 13. Extent of Market Complexity
    • Three characteristics of markets:
      • 1. Functions or uses of the product
      • 2. The enabling technology of the product
      • 3. Customer segments in the product-market
  • 14. Illustrative Product – Market Structure
    • Generic Product Class
    • Product Type
    • Variant A
    Regular
    • Variant B
    • Brands
    Food and beverages for breakfast meal Cereals Ready to eat Natural Pre-sweetened Life Nutritional Special K Product 19
  • 15. Identifying and Describing End-Users
    • Illustrative buyer characteristics in consumer markets:
      • Family size, age, income, geographical location, sex, and occupation
    • Illustrative factors in organizational markets:
      • Type of industry
      • Company size
      • Location
      • Type of products
  • 16. How Buyers Make Choices
    • BUYING DECISION PROCESS:
      • Problem recognition
      • Information search
      • Alternative evaluation
      • Purchase decision
      • Post-purchase behavior
  • 17. Environmental Influences
    • External factors influencing buyers’ needs and wants:
      • Government, social change, economic shifts, technology etc.
    • These factors are often non-controllable but can have a major impact on purchasing decisions
  • 18. Building Customer Profiles
    • Start with generic product – market
    • Move next to product- type and variant profiles >> increasingly more specific
    • Customer profiles guide decision making (e.g. targeting, positioning, market segmentation etc.)
  • 19. ANALYZING COMPETITION 1. Define the Competitive Arena for the Generic, Specific, and Variant Product Markets 2. Identify and Describe Key Competitors 4. Identify and Evaluate Potential Competitors 3. Evaluate Key Competitors PRODUCT- MARKET STRUCTURE AND MARKET SEGMENTS
  • 20. Examples of Levels of Competition Diet-Rite Cola Diet Pepsi Diet Coke Product from competition: diet colas Regular colas Diet lemon limes Lemon limes Fruit flavored colas Product category competition: soft drinks Bottle water Wine Beer Coffee Juices Generic competition: beverages Baseball cards Fast Food Video Games Ice Cream Budget competition: food & entertainment
  • 21. Key Competitor Analysis
    • Business scope and objectives
    • Management experience, capabilities, and weaknesses
    • Market position and trends
    • Market target(s) and customer base
    • Marketing program positioning strategy
    • Financial, technical, and operating capabilities
    • Key competitive advantages (e.g., access to resources, patents)
  • 22. Extent of Market Coverage Customer Satisfaction Current Capabilities Past Performance Competitor Evaluation
  • 23. MARKET SIZE ESTIMATION Unrealized Potential Company Sales Forecast Industry Sales Forecast Market Potential Estimate Product-Market Forecast Relationships ( area denotes sales in $’s )
  • 24. 0 100 200 300 400 500 600 700 800 900 Sales (in 1000s of units) 2003 2004 2005 2006 2007 2008 2009 2010 Market Potential Sales Forecast Company XYZ Sales Forecast Product-Market Forecast Relationships for Industrial Painting Units
  • 25. DEVELOPING A STRATEGIC VISION ABOUT THE FUTURE
    • Industry Boundaries Blurring and Evolving
    • Competitive Structure and Players Changing
    • Value Migration Paths
    • Product Versus Business Design Competition
    • Firms are Collaborating to Influence Industry Standards
    Source: C. K. Prahalad, Journal of Marketing , Aug. 1995, vi.
  • 26. 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control Strategic Marketing
  • 27. Chapter 3 Strategic Market Segmentation
  • 28. Strategic market segmentation (1)
    • Levels and types of market segmentation
  • 29. Levels and types of market segmentation Operational Segmentation Managerial Segmentation Strategic Segmentation Vision Strategic intent Product benefits Resource allocation Alignment Planning Marketing programs - Advertising - Sales - Distribution
  • 30. Best Buy segmentation strategy
    • Jill’s - “soccer moms”
    • Barry’s - wealthy professionals
    • Buzz’s - “tech enthusiasts”
    • Ray’s - the family man
    • Mr Storefront - the small business customer
    • Carrie’s - young, single females
    • Helen and Charlie’s - older couples whose children have left home
    • Gov. Palin’s “_________________” moms
  • 31. From Mass Markets to Micro Markets OLD NEW CONSUMERS Passively receive Empowered media users whatever TV control and shape content networks thanks to TiVo, iPod and broadcast Internet ASPIRATIONS To keep up with To standout from the the crowd crowd TV CHOICE Three networks Hundreds of channels plus maybe a plus video on demand PBS station MAGAZINES Age of the big Age of the special interest glossies: Time , magazine for every age Life , Newsweek and affinity group ADS Everyone hums Talking to a group of the Alka-Seltzer one, ads go ever jingle narrower BRANDS Rise of the big, Niche brands, product ubiquitous brands extensions and mass from Coca-Cola customization mean many to Tide product variations Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week , July 12 2004, 58-62
  • 32. Strategic market segmentation (2)
    • Market-driven strategy and segmentation
      • Market segmentation, value opportunities and new market space
      • Market targeting and strategic positioning
  • 33. Segmentation and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY
  • 34. Strategic market segmentation (3)
    • Market-driven strategy and segmentation
      • Market segmentation, value opportunities and new market space
      • Market targeting and strategic positioning
    • Activities and decisions in market segmentation
  • 35. Market Segmentation Activities and Decisions Market to be Segmented Decide How to Segment Form Segments Finer Segmentation Strategies Strategic Analysis of Segments
  • 36. Strategic market segmentation (4)
    • Market-driven strategy and segmentation
      • Market segmentation, value opportunities and new market space
      • Market targeting and strategic positioning
    • Activities and decisions in market segmentation
    • Defining the market to be segmented
  • 37. Strategic market segmentation (5)
    • Identifying market segments
      • Segmentation variables
      • Characteristics of people and organizations
        • Consumer markets
        • Organizational markets
        • Product use situation segmentation
        • Buyers’ needs and preferences
          • Consumer needs
          • Attitudes
          • Perceptions
        • Purchase behavior
  • 38. Purchase Behavior Characteristics of People/ Organizations Use Situation Buyers’ Needs/ Preferences Segmentation Variables
  • 39. Illustrative Segmentation Variables Characteristics of people/ organizations Consumer Markets Industrial/ Organizational Markets Age, gender, income, family size, lifecycle stage, geographic location, lifestyle Type of industry, size, geographic location, corporate culture, stage of development, producer/ intermediary Use situation Occasion, importance of purchase, prior experience with product, user status Application, purchasing Procedure (new task, modified rebuy, straight rebuy Buyers’ needs/ preferences Brand loyalty status, brand preference, benefits sought, quality, proneness to make a deal Performance requirements, brand preferences, desired features, service requirements Purchase behavior Size of purchase, frequency of purchase Volume, frequency of purchase
  • 40. Strategic market segmentation (6)
    • Forming market segments
      • Requirements for segmentation
        • Response differences
        • Identifiable segments
        • Actionable segments
        • Cost/benefits
        • Stability
      • Approaches to segment identification
      • Customer group identification
      • Forming groups based on response differences
  • 41. Miller Brewing’s beer brand targets
    • Miller Genuine Draft - “mainstream sophisticates”
    • Milwaukee’s Best Light - “hardworking men”
    • Pilsner Urquell - “beer afficionados”
    • Miller Icehouse - for “drinking buddies”
  • 42. Requirements for Segmentation Segmentation Requirements Response differences Identifiable segments Actionable segments Favorable cost/benefit Stability over time
  • 43. Approaches to Segment Identification IDENTIFIERS OF CUSTOMER GROUPS CUSTOMER RESPONSE PROFILE
    • Characteristics
    • of People and
    • Organizations
    • Use Situation
    • Buyers Needs
    • and Preferences
    • Purchase
    • Behavior and
    • Loyalty
  • 44. Segment Dimensions for Hotel Lodging Services
  • 45. Illustrative Example: Gasoline Buyers Road Warriors True Blues Generation F3 (Fuel, Food & Fast) Homebodies Price Shoppers Higher-income, middle-aged men, drive 25-50000 miles a year… buy premium with a credit card … purchase sandwiches and drinks from the convenience store… will sometimes use carwash 16% of buyers Men and women with moderate to high incomes, loyal to a brand and sometimes a particular station … frequently buy premium, pay in cash 16% of buyers Upwardly mobile men and women - half under 25 years of age - constantly on the go … drive a lot snack heavily from the convenience store 27% of buyers Usually housewives who shuttle children around during the day and use whatever gas station is based on town or on route of travel 21% of buyers Not loyal to brand or station and rarely buy premium … frequently on tight budgets. 20% of buyers
  • 46. Strategic market segmentation (8)
    • Selecting the segmentation strategy
      • Deciding how to segment
      • Strategic analysis of market segments
        • Customer analysis
        • Competitor analysis
        • Positioning analysis
        • Estimating segment attractiveness
        • Segmentation “fit” and implementation
  • 47. Strategic Analysis of Market Segments Customer Analysis Positioning Analysis Financial and Market Attractiveness Competitor Analysis
  • 48. Segmentation “Fit” for Implementation Segment Attractiveness and Internal Compatibility Internal Compatibility Market Segment Attractiveness High Low High Low Attractive segments that match with company capabilities Attractive segments but with poor match with company capabilities Unattractive segments that do not match with company capabilities Unattractive segments but with match to company capabilities