Marketing Strategy - Introduction


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Guiding presentation used for the first two sessions of the Marketing Strategy course for Executive MBA in ITM.

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  • 11
  • Peter Drucker: The purpose of any business is to win a customer True for all parts of the organization, i.e., cross-functional coordination The above should result in superior profitability
  • Advantages Promotes listening to the customer Happier customers more likely to be more loyal – good for long term profitability More customer and competitive information is likely to be obtained and used – good for profitability More likely to identify changes in market and competitive conditions – avoid being blindsided If the first two steps are done well, the third should take care of itself Helps employees focus on profit, not sales volume Possible drawbacks May lead the firm to seek to satisfy all customer groups – a possible prescription for disaster Customers may not be able to articulate what they really want and need – and will pay for! Current customers may not be the most attractive target – must avoid tyranny of current customers, if others are more attractive Implies tailoring products to different needs of different segments – may be costly Implies need for research – costs money, may slow reaction to market changes
  • The company : resources, capabilities, and strategies The environmental context : broad trends Current and potential customers : needs, wants, characteristics Competitors : strengths, weaknesses, competitive trends In other words, the 4 Cs
  • Let a vigorous debate flow for a few minutes. Then ask: Can you think of successful goods or services that were developed need first? Idea first? Post-It notes (idea first – an accident). Many hi-tech products (idea first). Gatorade (need first – Florida Gators football team). Ultimately, either starting point is okay. In the end, however, a genuine want or need must be filled or no one will buy.
  • Some of the reasons why firms lack focus on their customers or competitors include: competitive conditions which may allow a company to be successful in the short-run without being particular sensitive to customer needs different level of economic development across industries or countries which may favor different business philosophies strategic inertia whereby marketing strategy does not reflect changes in customers needs and competitive offerings
  • Product decisions: what must be decided here? Pricing decisions: what must be decided here? Promotion decisions: what must be decided here? Place (distribution) decisions: what must be decided here? In other words, the 4 Ps
  • Identify company objectives for the new product Market analysis: to understand market context and customer wants and needs Competitor analysis A marketing strategy: the 4 Ps
  • No: performance targets are often missed, of course. To better ensure delivery of planned performance, a good marketing plan should include: Sales forecasts and pro forma budgets against which to measure results Plan for implementation and control Refer to marketing plan project outline, if assigned
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  • Refer to next slide
  • 5
  • A tool for allocating resources in diversified companies: The BCG Growth Share Matrix Question Marks – High Growth markets but low market share Stars – If question marks become successful, it becomes a star. Market leader in a high growth market Cash Cows – When annual growth rate of the market falls below 10%, Star becomes cash cow. Large market share, low market growth. Brings in high cash flow for the company. Dogs – Weak market shares in low growth markets. Why is the BCG model useful? It analyzes the impact of investing resources in different businesses on the corporation’s future earnings and cash flows. It gives a company a quick glance on where their business units fall in an industry in terms of market share and market growth. This in turn can help generate competitive strategies to improve or maintain a position in the market. What are its limitations? Market growth rate is an inadequate descriptor of overall industry attractiveness. Relative market share is inadequate as a descriptor of overall competitive strength. The outcomes of a growth-share analysis are highly sensitive to variations in how growth and share are measured While the matrix specifies appropriate investment strategies for each business, it provides little guidance on how best to implement those strategies. The model implicitly assumes that all business units are independent of one another except for the flow of cash.
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  • A tool for allocating resources in diversifies companies: The GE Nine-Cell Matrix How would you assess competitive position and industry attractiveness? Factors to assess competitive position Relative share Customer loyalty Margins Distribution Technology Marketing skills Patents Factors to assess industry attractiveness Size Growth Competitive intensity Price levels Profitability Technological sophistication Government regulations
  • 10
  • Mature Market - 14% of the Canadian population often referred to as the WWII cohort
  • McDonalds Maharaja Mac in India. No Beef in India. No pork in Pakistan.
  • Effective Segmentation This CTR relates to the material on pp. 215. Requirements for Effective Segmentation Measurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important. Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer. Substantiality. This refers to the degree to which the segments are large or profitable enough to service. Actionability . This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues.
  • Steps in Segmentation, Targeting, and Positioning Market Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviors that distinguish them from the rest of the market. These segments may require different products and/or separate mixes. Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them. Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy. Market Positioning. Market positioning is the process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer. Discussion Note: The product's position is defined by how consumers view it on important attributes. Steps in Segmentation, Targeting, and Positioning This CTR corresponds to Figure 7-1 on p. 196 and relates to the material on pp. 196.
  • Marketing Strategy - Introduction

    1. 1. NANDA KISHORE SETHURAMAN ITM NOVEMBER 2011 Introduction to Marketing Strategy
    3. 4. Product Life Cycle
    4. 5. Product Life Cycle
    5. 6. REV Summary of
    6. 7. Objectives for the day <ul><li>Today, we may examine the following questions: </li></ul><ul><ul><li>How is strategic planning carried out at the corporate and division levels? </li></ul></ul><ul><ul><li>How is planning carried out at the business unit level? </li></ul></ul><ul><ul><li>What are the major steps in the marketing process? </li></ul></ul><ul><ul><li>How is planning carried out at the product level? </li></ul></ul><ul><ul><li>What does a marketing plan include? </li></ul></ul><ul><ul><li>Segmenting / Targeting / Positioning </li></ul></ul>
    8. 10. <ul><ul><li>Companies often talk about their strategies. What does strategy mean? </li></ul></ul><ul><ul><li>A fundamental pattern of present and planned objectives, resource deployments, and interactions of an organization with markets, competitors, and other environmental factors. </li></ul></ul>Discussion Question 1-
    9. 11. <ul><li>Scope </li></ul><ul><li>Goals and objectives </li></ul><ul><li>Resource deployments </li></ul><ul><li>Identification of sustainable competitive advantage </li></ul><ul><li>Synergy </li></ul>Components of Strategy 1-
    10. 12. Strategic Planning with a Marketing Focus <ul><li>Strategic marketing plan </li></ul><ul><li>Tactical marketing plan </li></ul><ul><li>Marketing plan </li></ul>
    11. 13. <ul><li>What do marketers mean when they say their firms are market oriented? </li></ul>Discussion Questions 1-
    12. 14. <ul><li>Does having a market orientation make sense? What are the advantages and drawbacks? </li></ul>Discussion Questions 1-
    13. 15. Corporate and Division Strategic Planning <ul><li>All corporate headquarters undertake four planning activities </li></ul><ul><ul><li>Defining the Corporate Mission </li></ul></ul><ul><ul><li>Establishing Strategic Business Units (SBUs) </li></ul></ul><ul><ul><li>Assigning resources to each SBU </li></ul></ul><ul><ul><li>Planning new businesses, downsizing, or terminating older businesses </li></ul></ul>
    14. 16. Defining the Corporate Mission <ul><li>Mission statements define which competitive scopes the company will operate in </li></ul><ul><ul><li>Industry scope </li></ul></ul><ul><ul><li>Products and applications scope </li></ul></ul><ul><ul><li>Competence scope </li></ul></ul><ul><ul><li>Market-segment scope </li></ul></ul><ul><ul><li>Vertical scope </li></ul></ul><ul><ul><li>Geographical scope </li></ul></ul>
    15. 17. Establishing Strategic Business Units (SBUs) <ul><li>Three characteristics of SBUs </li></ul><ul><ul><li>Single business or collection of related businesses that can be planned for separately </li></ul></ul><ul><ul><li>Has its own set of competitors </li></ul></ul><ul><ul><li>Has a manager who is responsible for strategic planning and profit </li></ul></ul><ul><li>The Growth-Share Matrix </li></ul><ul><ul><li>Relative market share </li></ul></ul><ul><ul><ul><li>Four Cells </li></ul></ul></ul><ul><ul><ul><ul><li>Question Marks </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Stars </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cash Cows </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Dogs </li></ul></ul></ul></ul><ul><ul><ul><li>SBU Strategies </li></ul></ul></ul><ul><ul><ul><li>SBU Lifecycle </li></ul></ul></ul>
    16. 18. Resource Planning for SBUs <ul><li>SBU Plan </li></ul><ul><ul><li>Integrative Growth </li></ul></ul><ul><ul><li>Diversification Growth </li></ul></ul><ul><ul><li>Downsizing Older Businesses </li></ul></ul><ul><li>Business Mission </li></ul><ul><ul><li>SWOT Analysis </li></ul></ul><ul><ul><ul><li>External Environment Analysis (Opportunity and Threat Analysis) </li></ul></ul></ul><ul><ul><ul><ul><li>Marketing Opportunity </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Buying opportunity more convenient or efficient </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Meet the need for more information and advice </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Customize an offering that was previously only available in standard form </li></ul></ul></ul></ul></ul>
    17. 19. Strategic Planning for Business Units <ul><li>Marketing Opportunity Analysis (MOA) </li></ul><ul><ul><li>Can the benefits be articulated to a target market? </li></ul></ul><ul><ul><li>Can the target market be reached with cost effective media and trade channels? </li></ul></ul><ul><ul><li>Does the company have the critical capabilities to deliver the customer benefits? </li></ul></ul><ul><ul><li>Can the company deliver these benefits better than any actual or potential competitors? </li></ul></ul><ul><ul><li>Will the rate of return meet the required threshold of investment? </li></ul></ul>
    18. 20. <ul><li>What must marketing managers understand to engage in effective marketing practice? </li></ul>Discussion Questions 1-
    19. 21. <ul><li>Which should come first – the customer need or the product idea? </li></ul>Discussion Questions 1-
    20. 22. <ul><li>Why do some firms lack orientation towards the market? </li></ul>Discussion Questions 1-
    21. 23. <ul><li>What sort of decisions must marketing managers make to effectively serve customer needs? </li></ul>Discussion Questions 1-
    22. 26. <ul><li>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? </li></ul>Discussion Questions 1-
    23. 27. <ul><li>Are planned results always delivered in most organizations? What else might you want to include? </li></ul>Discussion Questions 1-
    24. 28. The Marketing Process <ul><li>Steps in the Planning Process </li></ul><ul><ul><li>The marketing process </li></ul></ul><ul><ul><ul><li>Analyzing Market Opportunities </li></ul></ul></ul><ul><ul><ul><li>Developing Marketing Strategies </li></ul></ul></ul><ul><ul><ul><li>Planning Marketing Programs </li></ul></ul></ul><ul><ul><ul><li>Managing the Marketing Effort </li></ul></ul></ul><ul><ul><ul><ul><li>Annual-plan control </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Profitability control </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Strategic control </li></ul></ul></ul></ul>
    25. 29. The Marketing Process <ul><li>Classic Model. </li></ul><ul><li>Is it valid anymore? </li></ul><ul><ul><li>Changing times </li></ul></ul><ul><ul><li>Proliferation of new models of distribution </li></ul></ul><ul><ul><li>World is flat </li></ul></ul>
    26. 30. Factors Influencing Company Marketing Strategy
    27. 31. Contents of a Marketing Plan <ul><li>Executive summary </li></ul><ul><li>Current situation and trends </li></ul><ul><li>Performance review (for an existing good or service only) </li></ul><ul><li>Key issues </li></ul><ul><li>Objectives </li></ul><ul><li>Marketing strategy </li></ul><ul><li>Action plans </li></ul><ul><li>Projected profit-and-loss statement </li></ul><ul><li>Controls </li></ul><ul><li>Contingency plans </li></ul>1-
    29. 33. <ul><li>1. In defining their strategies, should companies pursue broadly or narrowly defined missions? </li></ul><ul><li>2. What are the advantages of each approach? </li></ul>Discussion Questions 2-
    30. 34. Characteristics of Effective Corporate Mission Statements <ul><ul><li>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 . </li></ul></ul>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
    31. 35. Ansoff Matrix <ul><li>Igor Ansoff says there are four strategies for growing a business. </li></ul><ul><li>Let’s consider their merits and drawbacks. </li></ul>2-
    32. 36. Alternative Corporate Growth Strategies 2- <ul><li>Market penetration strategies </li></ul><ul><li>Increase market share </li></ul><ul><li>Increase product usage </li></ul><ul><li>Increase frequency of use </li></ul><ul><li>Increase quantity used </li></ul><ul><li>New applications </li></ul><ul><li>Product development strategies </li></ul><ul><li>Product improvements </li></ul><ul><li>Product-line extensions </li></ul><ul><li>New products for same </li></ul><ul><li>market </li></ul><ul><li>Market development strategies </li></ul><ul><li>Expand markets for existing products </li></ul><ul><li>Geographic expansion </li></ul><ul><li>Target new segments </li></ul><ul><li>Diversification strategies </li></ul><ul><li>Vertical integration </li></ul><ul><li>Forward/backward integration </li></ul><ul><li>Diversification into related bus (concentric diversification) </li></ul><ul><li>Diversification into unrelated businesses (conglomerate diversification) </li></ul>Current products New products Current markets New markets
    33. 37. 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
    34. 38. 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
    35. 39. 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
    36. 40. Factors Affecting the Creation of Shareholder Value 2- Creating shareholder value <ul><li>Shareholder return </li></ul><ul><li>Dividends </li></ul><ul><li>Capital gains </li></ul>Corporate objective <ul><li>Sales growth </li></ul><ul><li>Operating profit margin </li></ul><ul><li>Income tax rate </li></ul>Discount rate Debt Operating Cash flow from operations Investment Financing <ul><li>Working capital investment </li></ul><ul><li>Fixed capital investment </li></ul><ul><li>Cost of capital </li></ul><ul><li>Value growth duration </li></ul>Valuation components Value drivers Management decisions <ul><ul><li>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. </li></ul></ul>2-11
    37. 41. Marketing Strategy <ul><li>Should cover the following points. </li></ul><ul><ul><li>Positioning </li></ul></ul><ul><ul><li>Product Management </li></ul></ul><ul><ul><li>Pricing </li></ul></ul><ul><ul><li>Distribution </li></ul></ul><ul><ul><li>Marketing Communications </li></ul></ul><ul><ul><li>Marketing Research </li></ul></ul>
    38. 42. Segmentation, Targeting & Positioning
    39. 44. Segmentation , Targeting, Positioning
    40. 45. Learning Goals <ul><li>Learn the three steps of target marketing, market segmentation, target marketing, and market positioning </li></ul><ul><li>Understand the major bases for segmenting consumer and business marketing strategy </li></ul><ul><li>Know how companies identify attractive market segments and choose target marketing strategy </li></ul><ul><li>Realize how companies position their products for maximum competitive advantage in the marketplace </li></ul>7 -
    41. 46. <ul><li>Sells multiple brands within the same product category for a variety of products </li></ul><ul><li>Brands feature a different mix of benefits and appeal to different segments </li></ul><ul><li>Has also identified different niches within certain segments </li></ul><ul><li>Product modifications are useful: Tide offers seven different product formulations to serve different niches’ needs </li></ul>Case Study - Procter & Gamble 7 -
    42. 47. <ul><li>Market Segmentation </li></ul><ul><ul><li>Identify bases for segmenting the market </li></ul></ul><ul><ul><li>Develop segment profiles </li></ul></ul><ul><li>Target Marketing </li></ul><ul><ul><li>Develop measure of segment attractiveness </li></ul></ul><ul><ul><li>Select target segments </li></ul></ul><ul><li>Market Positioning </li></ul><ul><ul><li>Develop positioning for target segments </li></ul></ul><ul><ul><li>Develop a marketing mix for each segment </li></ul></ul>Steps in market segmentation, targeting and positioning 7 -
    43. 48. Segmentation
    44. 49. In other words… <ul><li>A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. </li></ul><ul><ul><li>it is distinct from other segments (heterogeneity across segments) </li></ul></ul><ul><ul><li>it is homogeneous within the segment (exhibits common attributes) </li></ul></ul><ul><ul><li>it responds similarly to a market stimuli </li></ul></ul><ul><ul><li>it can be reached by a market intervention </li></ul></ul>
    45. 51. <ul><li>Increase marketing efficiency by focusing marketing efforts to a particular group </li></ul><ul><li>Maximize scarce marketing resources </li></ul><ul><li>Find a market with limited competition </li></ul><ul><li>Select the most profitable segment </li></ul>Purpose
    46. 52.
    47. 53. Linking Market Need to a Marketing Program
    48. 54. Segmentation Bases
    49. 55. Geographic Segmentation
    50. 56. Blank
    51. 57. Demographic Segmentation
    52. 58. Demographics - Marketing across Generations 1945 1965 1976 1994 Baby Boomers Generation X Generation Y Mature Market
    53. 60. Mature Market
    54. 61. Generation X
    55. 62. Generation Y
    56. 63. Behavioral Segmentation
    57. 64. Psychographic Segmentation
    58. 65.
    59. 66. Segmenting International Markets
    60. 67. Dell, across the globe
    61. 68. Requirements for Effective Segmentation <ul><li>Size, purchasing power, profiles </li></ul><ul><li>of segments can be measured. </li></ul><ul><li>Segments must be effectively </li></ul><ul><li>reached and served. </li></ul><ul><li>Segments must be large or profitable enough to serve. </li></ul>Measurable Accessible Substantial Differential Actionable <ul><li>Segments must respond differently to different marketing mix elements & actions. </li></ul><ul><li>Must be able to attract and serve the segments. </li></ul>
    62. 69. Market Segmentation Process <ul><li>Determine the characteristics of segments in the target market & separate these segments in the market based on these characteristics. </li></ul><ul><li>Verify the market segments size if adequate enough to support the organization's product. </li></ul><ul><li>Develop a marketing strategy to target this market. </li></ul>
    63. 70. Segmentation, Targeting, Positioning
    64. 71. Target Market
    65. 72.
    66. 73. Evaluating Segment Attractiveness
    67. 74. Let’s sell to segments with big eyes and lips
    68. 75. Factors driving a Target Marketing Strategy
    69. 76. Selling Ice Cream to Eskimos
    70. 78. Target Marketing Strategies Broad
    71. 79. Target Marketing <ul><li>Socially Responsible Targeting </li></ul><ul><ul><li>Some segments, especially children, are at special risk </li></ul></ul><ul><ul><li>Many potential abuses on the Internet, including fraud Internet shoppers </li></ul></ul><ul><ul><li>Controversy occurs when the methods used are questionable </li></ul></ul>7 -
    72. 80. Segmentation, Targeting, Positioning
    73. 81. Positioning <ul><li>Positioning: </li></ul><ul><ul><li>The place the product occupies in consumers’ minds relative to competing products. </li></ul></ul><ul><ul><li>Typically defined by consumers on the basis of important attributes. </li></ul></ul><ul><ul><li>Involves implanting the brand’s unique benefits and differentiation in the customer’s mind. </li></ul></ul><ul><ul><li>Positioning maps that plot perceptions of brands are commonly used. </li></ul></ul>7 -
    74. 83. <ul><li>Identifying possible competitive advantages </li></ul><ul><li>Choosing the right competitive advantage </li></ul><ul><li>Choosing a positioning strategy </li></ul><ul><li>Differentiation can be based on </li></ul><ul><ul><li>Products </li></ul></ul><ul><ul><li>Services </li></ul></ul><ul><ul><li>Channels </li></ul></ul><ul><ul><li>People </li></ul></ul><ul><ul><li>Image </li></ul></ul>Choosing a Positioning Strategy 7 - Topics
    75. 84. <ul><li>How many differences to promote? </li></ul><ul><ul><li>Unique selling proposition </li></ul></ul><ul><ul><li>Several benefits </li></ul></ul><ul><li>Which differences to promote? Criteria include: </li></ul><ul><ul><li>Important </li></ul></ul><ul><ul><li>Distinctive </li></ul></ul><ul><ul><li>Superior </li></ul></ul><ul><ul><li>Communicable </li></ul></ul><ul><ul><li>Preemptive </li></ul></ul><ul><ul><li>Affordable </li></ul></ul><ul><ul><li>Profitable </li></ul></ul><ul><li>Identifying possible competitive advantages </li></ul><ul><li>Choosing the right competitive advantage </li></ul><ul><li>Choosing a positioning strategy </li></ul>Choosing a Positioning Strategy 7 - Topics
    76. 85. <ul><li>Value propositions represent the full positioning of the brand </li></ul><ul><li>Possible value propositions: </li></ul><ul><ul><li>More for More </li></ul></ul><ul><ul><li>More for the Same </li></ul></ul><ul><ul><li>More for Less </li></ul></ul><ul><ul><li>The Same for Less </li></ul></ul><ul><ul><li>Less for Much Less </li></ul></ul><ul><li>Identifying possible competitive advantages </li></ul><ul><li>Choosing the right competitive advantage </li></ul><ul><li>Choosing a positioning strategy </li></ul>Choosing a Positioning Strategy 7 - Topics
    77. 86. <ul><li>Positioning statements summarize the company or brand positioning </li></ul><ul><ul><li>EXAMPLE: To (target segment and need) our (brand) is (concept) that (point-of-difference) </li></ul></ul>Developing a Positioning Statement 7 -
    78. 87. <ul><li>Companies must be certain to DELIVER their value propositions. </li></ul><ul><li>Positions must be monitored and adapted over time. </li></ul>Communicating the Positioning 7 -
    79. 88. 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
    80. 89. END OF DAY 1