Marketing Strategy - Introduction

NANDA KISHORE SETHURAMAN ITM NOVEMBER 2011 Introduction to Marketing Strategy

PRODUCT LIFE CYCLE

Product Life Cycle

REV Summary of

Objectives for the day
Today, we may examine the following questions:
How is strategic planning carried out at the corporate and division levels?
How is planning carried out at the business unit level?
What are the major steps in the marketing process?
How is planning carried out at the product level?
What does a marketing plan include?
Segmenting / Targeting / Positioning

MARKET-ORIENTED PERSPECTIVES UNDERLIE SUCCESSFUL CORPORATE, BUSINESS, AND MARKETING STRATEGIES

Companies often talk about their strategies. What does strategy mean?
A fundamental pattern of present and planned objectives, resource deployments, and interactions of an organization with markets, competitors, and other environmental factors.
Discussion Question 1-

Scope
Goals and objectives
Resource deployments
Identification of sustainable competitive advantage
Synergy
Components of Strategy 1-

Strategic Planning with a Marketing Focus
Strategic marketing plan
Tactical marketing plan
Marketing plan

What do marketers mean when they say their firms are market oriented?
Discussion Questions 1-

Does having a market orientation make sense? What are the advantages and drawbacks?

Corporate and Division Strategic Planning
All corporate headquarters undertake four planning activities
Defining the Corporate Mission
Establishing Strategic Business Units (SBUs)
Assigning resources to each SBU
Planning new businesses, downsizing, or terminating older businesses

Defining the Corporate Mission
Mission statements define which competitive scopes the company will operate in
Industry scope
Products and applications scope
Competence scope
Market-segment scope
Vertical scope
Geographical scope

Establishing Strategic Business Units (SBUs)
Three characteristics of SBUs
Single business or collection of related businesses that can be planned for separately
Has its own set of competitors
Has a manager who is responsible for strategic planning and profit
The Growth-Share Matrix
Relative market share
Four Cells
Question Marks
Stars
Cash Cows
Dogs
SBU Strategies
SBU Lifecycle

Resource Planning for SBUs
SBU Plan
Integrative Growth
Diversification Growth
Downsizing Older Businesses
Business Mission
SWOT Analysis
External Environment Analysis (Opportunity and Threat Analysis)
Marketing Opportunity
Buying opportunity more convenient or efficient
Meet the need for more information and advice
Customize an offering that was previously only available in standard form

Strategic Planning for Business Units
Marketing Opportunity Analysis (MOA)
Can the benefits be articulated to a target market?
Can the target market be reached with cost effective media and trade channels?
Does the company have the critical capabilities to deliver the customer benefits?
Can the company deliver these benefits better than any actual or potential competitors?
Will the rate of return meet the required threshold of investment?

What must marketing managers understand to engage in effective marketing practice?

Which should come first – the customer need or the product idea?

Why do some firms lack orientation towards the market?

What sort of decisions must marketing managers make to effectively serve customer needs?

So, if one were to plan the various things to be done to market a new product, what are the basic elements that such a plan would consist of?

Are planned results always delivered in most organizations? What else might you want to include?

The Marketing Process
Steps in the Planning Process
The marketing process
Analyzing Market Opportunities
Developing Marketing Strategies
Planning Marketing Programs
Managing the Marketing Effort
Annual-plan control
Profitability control
Strategic control

The Marketing Process
Classic Model.
Is it valid anymore?
Changing times
Proliferation of new models of distribution
World is flat

Factors Influencing Company Marketing Strategy

Contents of a Marketing Plan
Executive summary
Current situation and trends
Performance review (for an existing good or service only)
Key issues
Objectives
Marketing strategy
Action plans
Projected profit-and-loss statement
Controls
Contingency plans
1-

CORPORATE STRATEGY DECISIONS AND THEIR MARKETING IMPLICATIONS

1. In defining their strategies, should companies pursue broadly or narrowly defined missions?
2. What are the advantages of each approach?

Characteristics of Effective Corporate Mission Statements
Source: Reprinted with permission from p. 43 of Strategy Formulation: Analytical Concepts, by C. W. Hofer and D. Schendel. Copyright © by West Publishing Company. All rights reserved .
Broad Specific Functional Based on customer needs Transportation business Long-distance transportation for large-volume producers of low-value, low-density products Physical Based on existing products or technology Railroad business Long-haul, coal carrying railroad

Ansoff Matrix
Igor Ansoff says there are four strategies for growing a business.
Let’s consider their merits and drawbacks.
2-

Alternative Corporate Growth Strategies 2-
Market penetration strategies
Increase market share
Increase product usage
Increase frequency of use
Increase quantity used
New applications
Product development strategies
Product improvements
Product-line extensions
New products for same
market
Market development strategies
Expand markets for existing products
Geographic expansion
Target new segments
Diversification strategies
Vertical integration
Forward/backward integration
Diversification into related bus (concentric diversification)
Diversification into unrelated businesses (conglomerate diversification)
Current products New products Current markets New markets

The BCG Growth Share Matrix 2- High Low Stars Dogs Question marks 10 0.1 Relative market share Market growth rate (in constant dollars) 10% 1 Source: Adapted from Barry Hedley, “Strategy and the Business Portfolio,” Long Range Planning 10 (February 1977). 5 6 9 8 7 Cash cows 4 10 13 1 2 3 11 12

Cash Flows Across Businesses in the BCG Portfolio Model 2- Growth rate (cash use) High Low Stars Cash cows Dogs Question marks High Low Relative market share Desired direction of business development Cash Flows

The GE Nine-Cell Matrix 2- 1 Invest/grow 2 Selective investment/ maintain position 3 Harvest/divest Business’s competitive position High Low Medium Industry attractiveness High Medium Low 1 1 2 1 2 3 2 3 3

Factors Affecting the Creation of Shareholder Value 2- Creating shareholder value
Shareholder return
Dividends
Capital gains
Corporate objective
Sales growth
Operating profit margin
Income tax rate
Discount rate Debt Operating Cash flow from operations Investment Financing
Working capital investment
Fixed capital investment
Cost of capital
Value growth duration
Valuation components Value drivers Management decisions
Source: Reprinted with permission of The Free Press, A Division of Macmillan, Inc., from Crating Shareholder Value by Alfred Rappaport. Copyright © 1986 by Alfred Rappaport.
2-11

Marketing Strategy
Should cover the following points.
Positioning
Product Management
Pricing
Distribution
Marketing Communications
Marketing Research

Segmentation, Targeting & Positioning

Segmentation , Targeting, Positioning

Learning Goals
Learn the three steps of target marketing, market segmentation, target marketing, and market positioning
Understand the major bases for segmenting consumer and business marketing strategy
Know how companies identify attractive market segments and choose target marketing strategy
Realize how companies position their products for maximum competitive advantage in the marketplace
7 -

Sells multiple brands within the same product category for a variety of products
Brands feature a different mix of benefits and appeal to different segments
Has also identified different niches within certain segments
Product modifications are useful: Tide offers seven different product formulations to serve different niches’ needs
Case Study - Procter & Gamble 7 -

Market Segmentation
Identify bases for segmenting the market
Develop segment profiles
Target Marketing
Develop measure of segment attractiveness
Select target segments
Market Positioning
Develop positioning for target segments
Develop a marketing mix for each segment
Steps in market segmentation, targeting and positioning 7 -

Segmentation

In other words…
A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.
it is distinct from other segments (heterogeneity across segments)
it is homogeneous within the segment (exhibits common attributes)
it responds similarly to a market stimuli
it can be reached by a market intervention

Increase marketing efficiency by focusing marketing efforts to a particular group
Maximize scarce marketing resources
Find a market with limited competition
Select the most profitable segment
Purpose

Linking Market Need to a Marketing Program

Segmentation Bases

Geographic Segmentation

Demographic Segmentation

Demographics - Marketing across Generations 1945 1965 1976 1994 Baby Boomers Generation X Generation Y Mature Market

Mature Market

Generation X

Generation Y

Behavioral Segmentation

Psychographic Segmentation

Segmenting International Markets

Dell, across the globe

Requirements for Effective Segmentation
Size, purchasing power, profiles
of segments can be measured.
Segments must be effectively
reached and served.
Segments must be large or profitable enough to serve.
Measurable Accessible Substantial Differential Actionable
Segments must respond differently to different marketing mix elements & actions.
Must be able to attract and serve the segments.

Market Segmentation Process
Determine the characteristics of segments in the target market & separate these segments in the market based on these characteristics.
Verify the market segments size if adequate enough to support the organization's product.
Develop a marketing strategy to target this market.

Segmentation, Targeting, Positioning

Target Market

Evaluating Segment Attractiveness

Let’s sell to segments with big eyes and lips

Factors driving a Target Marketing Strategy

Selling Ice Cream to Eskimos

Target Marketing Strategies Broad

Target Marketing
Socially Responsible Targeting
Some segments, especially children, are at special risk
Many potential abuses on the Internet, including fraud Internet shoppers
Controversy occurs when the methods used are questionable
7 -

Segmentation, Targeting, Positioning

Positioning
Positioning:
The place the product occupies in consumers’ minds relative to competing products.
Typically defined by consumers on the basis of important attributes.
Involves implanting the brand’s unique benefits and differentiation in the customer’s mind.
Positioning maps that plot perceptions of brands are commonly used.
7 -

Identifying possible competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Differentiation can be based on
Products
Services
Channels
People
Image
Choosing a Positioning Strategy 7 - Topics

How many differences to promote?
Unique selling proposition
Several benefits
Which differences to promote? Criteria include:
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable

Value propositions represent the full positioning of the brand
Possible value propositions:
More for More
More for the Same
More for Less
The Same for Less
Less for Much Less

Positioning statements summarize the company or brand positioning
EXAMPLE: To (target segment and need) our (brand) is (concept) that (point-of-difference)
Developing a Positioning Statement 7 -

Companies must be certain to DELIVER their value propositions.
Positions must be monitored and adapted over time.
Communicating the Positioning 7 -

Market Segmentation Process 1. Identify Bases for Segmenting the Market 2. Develop Profiles of Resulting Segments 3. Develop Measures of Segment Attractiveness 4. Select Target Segment(s) 5. Develop Positioning for Each Target Segment 6. Develop Marketing Mix for Each Target Segment Market Positioning Market Targeting Market Segmentation

END OF DAY 1

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Marketing Strategy - Introduction

by Nanda Kishore Sethuraman on Nov 27, 2011

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